Solar without net metering

A REVISION to the solar home systems regulations is the right policy direction. This should have been done much earlier. The net metering policy for solar installations was announced in 2015, when solar PV was three times the price it is today. Solar PV installation at homes was not financially attractive. The policy enabled customers to install grid-connected solar systems and to supply excess electricity to the grid under a net metering scheme. Under this arrangement, the imported and exported units are netted off before billing. Net metering, as a policy tool, was not a suitable mechanism when the government introduced it in 2015. Net-metering schemes were introduced in the 1980s, and by 2010, most countries had moved away from them. These schemes were short-term and used to promote renewable energy when the costs of wind and solar systems were prohibitive. Introducing a net-metering scheme when technology costs were declining while the projected electricity costs were rising (due to CPEC power projects, rupee devaluation, inflation, etc) was a foreseeable disaster. The policy should have been based on gross metering, in which import and export units are metered and billed separately. This is referred to as net billing in the revised regulation. This arrangement allows the regulator to adjust the solar electricity buyback rate as needed. The price of solar PV panels has dropped significantly over the years. The global average price of solar PV modules was $0.72 per watt in 2015 and has since dropped to $0.24 in 2024 (Our World in Data: Solar PV Module Price). Whereas the cost of grid electricity in the country continued to increase in this period. The national average electricity sale price increased from Rs9 per kWh in 2015 to Rs44 per kWh in 2024 (State of Industry Report 2015 and 2025). Netting off units means the grid pays a higher price each year for buying electricity from the same solar installation. The escalating returns on solar home systems have resulted in a direct subsidy mechanism for upper-income households. Introducing a net-metering scheme when technology costs were declining while the projected electricity costs were rising was a foreseeable disaster. Another drawback of the policy was the allowance of solar installations 1.5 times a consumer’s sanctioned load. This led many consumers to install oversized systems that far exceeded their own power demand. They export significant surplus electricity to the grid as power producers. The purpose of solar home systems is to supplement household load and reduce grid consumption. The policy encouraged them to act as IPPs and incentivised them to maximise their solar system size to increase the rents they receive as a subsidy. These installations shift the burden of fixed-grid costs to other consumers or increase the government’s subsidy requirement. It was both a policy failure and a regulatory failure. Nepra did not account for basic projections and played to the gallery. It yielded to political expediency, resulting in pernicious policies and regulations. One may also note that the policy under discussion only applies to customers with three-phase meters. These three-phase customers account for two per cent of the total residential customer base, according to the latest government filing with Nepra. Of those, about half have net-metering connections. Most residential customers have a single-phase connection and are ineligible for net metering. Many of them have installed stand-alone solar systems to match their load, without exporting to the grid. This is where the actual solar revolution happened. Today, solar PV installations are a financially attractive proposition without government subsidies. Solar penetration will continue to increase, and battery storage will also become more affordable over time. The policy change is the right decision, and the opposition is unreasonable. It addresses the fundamental flaws in the previous policy. It does not discourage or curtail solar installations; it merely shrinks the unfair subsidy provided to upper-income households. It is still possible that the government, lacking legitimacy and political capital, will buckle again and reverse these changes. The regulatory challenge is to set a buyback rate that does not incentivise battery storage. If a significant number of households opt for local storage, low-quality batteries will flood the market. This can pose a serious safety hazard to households and create an environmental burden due to its poor recyclability. Electricity is expensive in Pakistan. The power sector faces structural issues across its generation, transmission and distribution value chains. The governance of the electricity sector is abysmal. The ministry’s bureaucratic operational management of the power sector has failed. The regulator is ineffective and lacks competence. The electricity tariff structure is laden with cross-subsidies and stranded costs. It does not...

Solar without net metering

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Solar without net metering

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