Pakistan’s rooftop solar revolution has become one of the most celebrated developments in the country’s energy sector.

Business Recorder    19/8/26

Pakistan’s rooftop solar revolution has become one of the most celebrated developments in the country’s energy sector. Many commentators credit it with mitigating the impact of soaring electricity prices and reducing dependence on an increasingly fragile power system. The government, too, has embraced this narrative, portraying the rapid adoption of rooftop solar as a policy success. Ironically, some of the very voices that once criticised the misuse of the net-metering regime now hail it as the cornerstone of Pakistan’s energy transition.

Lost in this polarised debate is the need for an objective assessment. Rooftop solar has undoubtedly delivered significant benefits to consumers and the national economy. At the same time, its extraordinary growth has exposed structural weaknesses in Pakistan’s electricity pricing framework, regulatory oversight, and distribution network. The issue, therefore, is not whether rooftop solar is desirable, but whether the policy framework governing its expansion has kept pace with its unprecedented growth.

Energy experts estimate that Pakistan’s installed rooftop solar capacity now exceeds 34,000 megawatts (MW), out of which about 7,000 MW is formally connected under the net-metering regime, 19,000 MW of such capacity is non-net-metered, while 8,000 MW is simply off-grid – basically, clustered in the rural areas of Pakistan. This figure also confirms such computation by the Private Power & Infrastructure Board (PPIB).

Given the scale of this transformation, there is an urgent need for an independently verified survey to establish the actual installed capacity, consumer demographics, geographical distribution, and the quantum of electricity being injected into the national grid. Sound policy cannot be built on estimates alone.

Available evidence suggests that rooftop solar remains concentrated among affluent residential, commercial, and industrial consumers. Nearly 39% of high-end urban residential consumers are estimated to have installed rooftop photovoltaic systems, and almost 80% of them are operating under net metering. Similarly, approximately 29% of commercial consumers in the higher tariff categories have adopted rooftop solar. In many cases, these establishments could have met virtually all of their electricity requirements through solar generation had rooftop space permitted further expansion.

The industrial sector presents a similar picture. Around 30% of large industrial consumers have installed solar power systems, both net-metered and independent of the grid. Their rate of adoption appears to be constrained more by the availability of installation space than by economics. With investment payback periods reportedly below two years, rooftop solar has become one of the most attractive capital investments available to large electricity consumers.

This emphasis on high-end consumers is deliberate. These consumers occupy a pivotal position in Pakistan’s electricity economy because they finance a substantial portion of the cross-subsidies embedded within the country’s tariff structure. Their importance extends well beyond electricity consumption; they effectively underpin a pricing system that enables lower-income households and subsidised agricultural consumers to receive electricity below its actual cost of supply.

To appreciate the significance of this development, one must first understand the architecture of Pakistan’s electricity tariff. The existing structure is largely a legacy of policies introduced during the 1960s, when conservation of electricity was the overriding objective. Instead of reflecting the actual cost of supplying electricity to different consumer categories, tariffs rise progressively with higher levels of consumption. Over time, this evolved into an extensive cross-subsidy mechanism in which higher-paying residential, commercial, and industrial consumers effectively finance subsidised tariffs for households consuming fewer than 300 units per month and for agricultural tube-wells.

While this framework has served successive governments as an instrument of social policy, it has also made the financial health of the electricity sector heavily dependent upon continued consumption by higher-paying customers. As long as these consumers remained reliant on grid electricity, the model remained broadly sustainable. Rooftop solar has fundamentally altered that equation.

Affluent households and businesses are increasingly generating a substantial share of their electricity requirements from their own rooftop systems. Consequently, their purchases from the grid have declined, reducing their contribution towards the cross-subsidy mechanism while they continue to depend upon the grid for backup supply, nighttime consumption, and seasonal balancing. The fixed costs of maintaining the transmission and distribution network, however, remain largely unchanged. As electricity sales to premium consumers decline, these costs must inevitably be recovered from a shrinking pool of conventional consumers.

The financial implications are becoming increasingly evident. The burden is gradually shifting to three stakeholders: those high-end consumers who remain fully dependent on the grid, lower-income consumers through higher electricity tariffs, and the federal government through increased subsidy requirements.

Given Pakistan’s difficult fiscal position and its commitments under the IMF programme, substantially increasing electricity subsidies is neither practical nor sustainable. Equally, further tariff increases risk accelerating the migration of even more consumers towards self-generation, thereby deepening the underlying problem.

The obvious question is how this situation emerged. In the author’s view, the principal cause lies in the unrestricted expansion of rooftop solar under an open-ended net-metering regime. While international practices differ considerably, most jurisdictions seek to ensure that consumers primarily offset their own electricity demand and export only genuine surplus generation to the grid.

Pakistan’s framework, however, evolved with comparatively few safeguards. The result has been the installation of increasingly large rooftop systems by many affluent consumers, allowing them not only to eliminate their electricity bills but, in some cases, to accumulate significant credits with electricity distribution companies.

Equally concerning are reports that the generating capacity installed at some premises substantially exceeds the capacity approved under distributed generation licenses issued by distribution companies (DISCOs) and the National Electric Power Regulatory Authority (NEPRA). If these reports are accurate, they point to a significant gap between regulatory approvals and actual installations, undermining both the intent and the integrity of the existing framework. Such issues warrant careful investigation, not to discourage rooftop solar, but to ensure that its future growth remains equitable, financially sustainable, and consistent with the long-term stability of Pakistan’s power sector.

The second part of this article examines these regulatory shortcomings in greater detail, together with their implications for grid stability, equipment standards, distribution networks, and the policy reforms required to ensure that Pakistan’s rooftop solar revolution strengthens rather than weakens the country’s electricity sector.

A further concern relates to the manner in which some rooftop solar installations are reportedly configured. In a number of cases, high-end consumers are alleged to have installed separate solar systems to meet most of their own electricity requirements while maintaining independently licensed net-metered systems that export electricity directly to the distribution companies. If such arrangements exist, they would effectively allow consumers to maximise exports while minimising their own dependence on the grid, thereby generating financial gains beyond the original intent of the net-metering policy.

The underlying principle of net metering is straightforward: consumers should primarily generate electricity for their own use and export only genuine surplus energy to the grid. Where installations are deliberately configured to maximise commercial exports rather than self-consumption, they depart from the spirit – if not the letter – of the policy. Reports suggest that similar practices may also exist within the industrial sector, where larger installations further amplify their financial implications.

This raises an important policy question. Neither the original net-metering framework nor the recently introduced net-billing regime should be extended to consumers who install generating capacities beyond those permitted under NEPRA regulations or whose installations are designed primarily to generate commercial returns rather than offset their own electricity consumption. Rooftop solar should remain an instrument for reducing electricity costs and improving energy efficiency – not a mechanism for earning risk-free profits at the expense of other consumers.

There are reports that several DISCOs have begun auditing net-metered installations and have identified significant irregularities. If these findings are confirmed, they should be addressed through transparent regulatory enforcement rather than selective action. Effective regulation ultimately depends upon the consistent application of rules, irrespective of the economic or political influence of those affected.

Viewed from this perspective, the issue extends beyond individual consumers and points to broader weaknesses in policy design and implementation. The existing framework has enabled some well-resourced consumers to derive benefits that were never envisaged when distributed generation was first introduced. Meanwhile, many continue to regard unrestricted access to the national grid as an inherent right, treating it as a publicly funded backup system while contributing progressively less towards its maintenance. In effect, the grid functions as a large-scale energy storage facility without consumers paying the full cost of that service.

It is perhaps for this reason that NEPRA’s recently notified prosumer regulations have generated such strong opposition. Although the revised framework represents a step towards correcting some of the distortions created under the earlier regime, it stops short of addressing several fundamental issues. It does not establish clear limits on rooftop generating capacity, nor does it adequately prevent consumers from installing additional behind-the-meter generation that could undermine the objectives of the revised policy.

Beyond tariff design and regulatory oversight lies another equally important concern: the quality of equipment entering Pakistan’s rapidly expanding solar market. Industry experts have repeatedly warned that inadequate quality control, weak enforcement of technical standards, and possible under-invoicing or evasion of customs duties have created an environment in which substandard solar panels, inverters, and associated equipment can enter the market with relative ease. There are also concerns that some products marketed as imported equipment are in fact assembled locally and sold under misleading branding, although these claims require verification through effective regulatory oversight.

The consequences extend well beyond consumer protection. Substandard equipment typically exhibits lower conversion efficiencies, shorter operating lives, and higher failure rates, reducing the long-term economic benefits of rooftop solar. More importantly, poorly manufactured inverters and inadequate power-conditioning equipment can inject harmonics and other power-quality disturbances into the distribution network, affecting neighboring consumers and increasing stress on distribution transformers and other grid assets. As the penetration of distributed solar generation continues to grow, these technical issues are likely to become increasingly significant.

The challenge is therefore no longer confined to individual consumers or electricity bills; it has become a broader issue of power-system planning. It is unlikely that policymakers originally envisaged a situation in which the cumulative impact of thousands of distributed generators would fundamentally alter grid operations. Yet this is precisely the challenge now confronting electricity utilities.

One manifestation of this phenomenon is the emergence of the so-called “duck curve” – a sharp decline in daytime grid demand followed by a steep increase in demand during the evening as solar generation rapidly diminishes. For system operators, this creates significant operational challenges, requiring conventional power plants to ramp output rapidly within relatively short periods. Unless properly managed, these fluctuations increase operating costs, reduce generating efficiency, and place additional stress on the electricity system.

Taken together, these developments suggest that Pakistan’s rooftop solar revolution has outgrown the policy framework under which it was originally introduced. The objective should not be to discourage investment in renewable energy but to ensure that its continued expansion remains technically sound, financially sustainable, and equitable for all electricity consumers.

Achieving this objective requires a comprehensive review of the entire value chain. Greater scrutiny is needed at the point of import to ensure compliance with customs regulations and technical standards. Domestic assembly and manufacturing should be subject to effective certification and quality assurance, while regulatory agencies –including PSQCA, NEECA, NEPRA, and the distribution companies – must establish coordinated inspection and compliance mechanisms. Consideration should also be given to reasonable limits on rooftop system capacities, mandatory compliance audits, improved power-quality standards, and appropriate network charges that fairly compensate utilities for providing backup and balancing services.

The industrial sector warrants particular attention. Any practice that enables industrial consumers to export electricity beyond legitimate surplus generation should be investigated and, where necessary, corrected. Likewise, the rapid expansion of solar-powered agricultural pumping has created a separate policy challenge. While solar energy has reduced operating costs for farmers, unrestricted groundwater extraction poses serious long-term environmental risks that require parallel regulatory oversight.

Pakistan’s transition towards renewable energy is both necessary and desirable. However, every successful energy transition depends upon sound regulation, effective enforcement, and policies that distribute both benefits and costs fairly across society. Rooftop solar should strengthen–not undermine – the financial sustainability of the electricity sector. Achieving that balance requires regulatory discipline, improved governance, and a willingness to adapt policies to changing realities. Without such reforms, today’s success story risks creating tomorrow’s structural challenge – not because solar energy has failed, but because the framework governing its deployment has failed to evolve alongside it.