Why did Pakistan overhaul its rooftop solar rules?

Pakistan’s decision to phase out its solar net metering regime and replace it with a net billing system has sparked controversy, with critics warning the move could slow rooftop solar adoption, while government officials say it is necessary to protect the national power grid and contain mounting financial losses in the energy sector.

The National Electric Power Regulatory Authority, or NEPRA, has notified the NEPRA (Prosumer) Regulations, 2026, which fundamentally change how rooftop solar and other small-scale power producers are compensated.

Under the new rules, the buyback rate for excess electricity generated by consumers has been cut to around PKR 11 per unit, down from about PKR 25.9 per unit under the previous net metering framework. The standard contract period has also been reduced to five years from seven.

“This decision is aimed at addressing the growing burden of capacity payments to independent power producers and ensuring the sustainability of the grid,” a senior government official said, speaking on condition of anonymity because they were not authorized to comment publicly. “The rapid increase in rooftop solar has significantly reduced revenues for distribution companies, while fixed costs have remained high.”

What has changed?

Under the previous system, solar users could offset their electricity bills on a one-to-one basis by exporting surplus power to the grid. The new net billing model ends that arrangement.

Utilities will now purchase surplus electricity from prosumers — households, businesses and industries — at the national average energy purchase price and sell electricity back to them at the applicable consumer tariff.

Power sector officials said the changes are designed to stabilize the grid as solar adoption accelerates. “Uncontrolled penetration of distributed generation was creating technical and financial challenges for the system,” a Power Division official said. “Net billing introduces a more balanced and transparent mechanism.”

The new regulations apply to solar, wind and biogas systems ranging from 1 kilowatt to 1 megawatt, replacing the NEPRA Alternative & Renewable Energy Distributed Generation and Net Metering Regulations, 2015.

Existing prosumers will continue under their current agreements until expiry, but officials acknowledged that all renewals and new connections will fall under the new net billing structure.

Under the revised framework, consumers will be billed separately for electricity imported from distribution companies at rates ranging from about PKR 37 to PKR 55 per unit, excluding taxes and surcharges, depending on usage slabs. Surplus electricity exported to the grid will be credited at roughly PKR 11 per unit for new prosumers, while existing consumers will continue to receive credits under their current terms until contracts expire.

The financial burden has also shifted toward prosumers, who must now bear all interconnection costs, including meters and grid upgrades. NEPRA has introduced a nonrefundable concurrence fee of PKR 1,000 per kilowatt.

'Equitable distribution of costs'

Government officials said the policy also seeks to address the impact of idle and underutilized power plants. “Capacity payments are a reality of our power sector contracts,” the senior official said. “The new mechanism ensures these costs are distributed more equitably instead of being concentrated on non-solar consumers.”

Critics, however, argue the move undermines incentives for clean energy. Industry representatives warn that sharply lower buyback rates could discourage new solar installations and push consumers toward off-grid systems, further weakening demand for grid-based electricity. Some analysts have also cautioned that the policy could increase solar panel imports, potentially adding close to $1 billion annually to the import bill.

NEPRA and the Power Division have blamed grid challenges partly on consumers installing solar systems beyond their approved capacity and on the growth of non-metered, off-grid installations. The power minister has said on-grid solar capacity has reached about 7,000 megawatts, while off-grid capacity exceeds 13,000 megawatts, creating strain on the system.

Despite the criticism, the government has defended the reforms as unavoidable. “These regulations provide clearer procedures, stricter technical requirements and a billing structure that supports grid stability,” NEPRA said in a recent statement, adding that the changes are necessary to integrate distributed generation into the national power system without jeopardizing its financial viability.

The shift to net billing marks one of the most significant reversals in Pakistan’s renewable energy policy in recent years, reshaping the economics of rooftop solar as authorities grapple with rising energy costs and a fragile power sector.