Pakistan's Shift from Net Metering to Net Billing: What Does It Mean for Consumers?
Pakistan has witnessed a remarkable rise in rooftop solar installations over the past few years. Driven by factors like frequent power outages and declining solar panel prices, this surge, however, cannot be principally understood without recognising the sharp increase in electricity prices. The average electricity tariff has risen from approximately Rs. 11.72 per kWh to more than Rs. 34 per kWh since 2008, more than tripling over the period (1). Therefore, for many households, solar investment has become more of a financial necessity than an environmentally sustainable choice. This rapid growth in solar adoption has prompted the government to reform the existing regulatory framework by replacing the long-standing net metering system with a new net billing mechanism, a decision that has sparked widespread debate. While policymakers argue that the reforms are necessary to ensure the financial sustainability of the national electricity grid, many consumers fear that the changes will reduce the financial attractiveness of investing in solar energy.
Net metering, introduced under the NEPRA (Alternative & Renewable Energy Distributed Generation and Net Metering) Regulations, 2015, allowed consumers who generated electricity through rooftop solar systems to export excess electricity to the national grid. In return, they received credits that offset the electricity they consumed from the grid. This system significantly reduced electricity bills and encouraged investment in renewable energy.
The popularity of rooftop solar has grown rapidly in recent years, making the cumulative rooftop solar capacity increase from approximately 4.9 gigawatts (GW) at the end of 2024 to 6.1 GW by mid-2025, representing an increase of about 1.2 GW in just six months (2). Not only this remarkable growth reflects the increasing public preference for renewable energy solutions, but it also exposes deeper structural weaknesses within Pakistan’s electricity sector. Susceptibilities closely linked to longstanding financial imbalances, particularly the accumulation of circular debt, which exceeded approximately Rs. 1.85 trillion by early 2026. The rise in rooftop solar occurred alongside this accumulation, although the two developments should be understood as coinciding trends rather than evidence of a direct causal relationship. (3).
Recognising the rapid expansion of distributed solar generation, the National Electric Power Regulatory Authority (NEPRA) introduced the Prosumer Regulations 2026, replacing traditional net metering with a net billing mechanism for new consumers. Under the new framework, electricity exported to the grid is no longer credited on a one-to-one basis. Instead, consumers sell surplus electricity to the grid at a lower purchase price while continuing to buy electricity at the prevailing retail tariff. Existing consumers who signed agreements before the regulations took effect are generally allowed to continue under their existing contracts until those agreements expire (4).
The government argues that the previous system placed an increasing financial burden on electricity distribution companies (DISCOs), while these reforms ease these pressures. Rooftop solar reduces grid electricity consumption while these costs remain unchanged, policymakers contend that the burden on distribution companies and non-solar consumers increases. Since solar consumers purchased fewer electricity units while still relying on the grid for backup supply, utilities recovered less revenue to cover infrastructure maintenance and capacity costs. Policymakers also contend that the rapid increase in rooftop solar adoption shifted some grid costs onto non-solar consumers, raising concerns about fairness and financial sustainability within the electricity market. A significant share of consumer tariffs still consists of fixed capacity payments to Independent Power Producers (IPPs) where power plants are paid for maintaining generation capacity regardless of whether electricity is actually dispatched. These payments are more of contractual obligations rather than the direct cost of generating electricity. (6).
Despite these justifications, critics argue that the policy may discourage future investment in renewable energy. Pakistan’s electricity sector faces deeper structural problems, including capacity payment obligations, transmission losses, and growing circular debt, rather than challenges caused by rooftop solar. They contend that reducing solar incentives addresses the symptoms rather than the underlying causes of the sector’s financial difficulties (7). Under net billing, the financial return on installing rooftop solar is expected to decline because consumers receive considerably less compensation for surplus electricity. Industry analysts estimate that the payback period for residential solar systems may increase from approximately 3–4 years under the previous framework to around 5–7 years under the new system (8). Consequently, some households may reconsider investing in solar energy despite its long-term environmental and economic benefits.
The reforms should also be viewed within Pakistan’s broader legal and policy framework for sustainable energy. The National Energy Efficiency and Conservation Act, 2016 (NEEC Act) established Pakistan’s national framework for promoting energy efficiency and conservation (9). Although the Act primarily focuses on improving energy efficiency rather than regulating rooftop solar generation, it reflects Pakistan’s commitment to reducing energy waste and encouraging more sustainable patterns of energy consumption. In this context, future solar policies should complement the objectives of the NEEC Act by promoting renewable energy while ensuring that the electricity grid remains financially and operationally sustainable.
The policy also raises broader environmental concerns. Pakistan remains one of the countries most vulnerable to climate change and has repeatedly emphasised its commitment to increasing the share of renewable energy in its energy mix. Rooftop solar generation contributes to reducing greenhouse gas emissions, decreases dependence on imported fossil fuels, and improves energy security. Consequently, many experts believe that policies should continue to encourage household investment in clean energy while simultaneously addressing concerns regarding grid stability through complementary reforms rather than reducing incentives for renewable energy adoption.
At the same time, it is important to recognise that the reforms do not eliminate the benefits of rooftop solar altogether. Consumers can still substantially reduce their electricity bills by using the electricity they generate during daylight hours. Greater emphasis on self-consumption may encourage households to adopt battery storage systems and adjust electricity usage patterns to maximise savings. Although exporting electricity has become less profitable, producing and consuming one’s own electricity remains economically beneficial, particularly as retail electricity tariffs continue to rise.
Ultimately, Pakistan’s transition from net metering to net billing represents a significant shift in the country’s renewable energy policy. Recent efforts to renegotiate IPP agreements acknowledge the need for structural reform. However, lasting solutions will also require reducing losses, improving bill recovery, and strengthening the electricity sector’s financial sustainability. The reforms seek to balance consumer incentives with the financial sustainability of the national electricity system, yet they also introduce uncertainty for future solar investments. Going forward, policymakers must ensure that regulatory reforms remain consistent with Pakistan’s broader commitment to energy efficiency, renewable energy development, and environmental sustainability. Achieving this balance will require transparent regulation, stakeholder consultation, and continued investment in clean energy technologies. If managed effectively, Pakistan can continue expanding renewable energy while maintaining a reliable and financially sustainable electricity grid. However, if the new policy substantially reduces public confidence in rooftop solar, it may slow the country’s progress towards a cleaner, more resilient, and sustainable energy future.
By Khadija Waqas
References
(1) Pakistan Institute of Development Economics (PIDE), Research Brief on Circular Debt in Pakistan’s Power Sector, November 2025.
(2) Renewables First, Pakistan’s cumulative rooftop solar capacity reaches 6.1 GW, as reported by PV Magazine, December 2025.
(3) Ministry of Energy (Power Division), Power Sector Circular Debt Statistics, June 2026.
(4) National Electric Power Regulatory Authority (NEPRA), Prosumer Regulations, 2026, regarding the transition from net metering to net billing for new consumers.
(5) PV Magazine, Pakistan blocks retroactive export rate cut in net billing shift, February 2026.
(6) Institute for Energy Economics and Financial Analysis (IEEFA), Pakistan Power Sector Reform and IPP Contracts, December 2024.
(7) NEPRA / State of Industry Reports, 2025–2026 (capacity payments and tariff composition).
(8) Net-Meterings.com, Industry analysis of Pakistan’s net billing framework, 2026.
(9) Government of Pakistan, National Energy Efficiency and Conservation Act, 2016 (Act No. XII of 2016).