ISLAMABAD: Pakistan’s shift from net metering to net billing could significantly reduce the financial impact of rooftop solar exports on electricity distribution companies (DISCOs), but it is unlikely to resolve the broader operational and financial challenges facing the power sector, according to a new report by the Pakistan Institute of Development Economics (PIDE).
The study found that net billing could lower distribution companies’ revenue exposure from rooftop solar exports to Rs21.97 billion from Rs52.93 billion. However, researchers said losses, weak bill recoveries, electricity theft and tariff distortions remain the primary causes of stress within the distribution sector.
According to the PIDE Knowledge Brief, net-metered electricity exports reached 1,997.33 gigawatt-hours (GWh) during FY2024-25. Under the previous net-metering framework, surplus solar electricity exported to the grid was credited at retail-equivalent tariff rates, creating a revenue exposure of Rs52.93 billion for DISCOs.
Under the new net billing system, exported electricity will be purchased at the National Average Energy Purchase Price, estimated at around Rs10 to Rs11 per unit. The report estimates that this would reduce revenue exposure to Rs21.97 billion, resulting in a reduction of nearly Rs31 billion.
Impact On Rooftop Solar Consumers
The policy change is expected to affect returns for rooftop solar users across Pakistan.
Under net metering, consumers received credits of approximately Rs25 to Rs26 per unit for surplus electricity supplied to the grid, allowing them to offset electricity consumption at near retail rates.
Under the Prosumer Regulations 2026, exported electricity will be compensated at a lower rate of around Rs10 to Rs11 per unit.
The report estimates that a typical 10-kilowatt residential solar system previously achieved a payback period of four to five years. Under net billing, that payback period could extend to seven to nine years for households that remain dependent on grid electricity and consume around 60 percent of their solar generation.
Rooftop Solar Growth Continues
Researchers noted that rooftop solar adoption has expanded rapidly in recent years as consumers sought protection from rising electricity tariffs and power supply concerns.
According to the report, net-metered solar capacity has surpassed 5 gigawatts, while total distributed solar capacity is considerably higher when off-grid and behind-the-meter installations are included.
Retail electricity tariffs in several urban consumer categories have reached between Rs35 and Rs40 per unit, making solar energy an increasingly attractive option for households and businesses.
Distribution Sector Stress Extends Beyond Solar
The study cautioned against attributing distribution-sector challenges solely to rooftop solar expansion.
Using a composite DISCO Stress Index that measures energy losses, recovery performance and net-metering penetration, researchers found that the most severe financial stress exists in utilities with longstanding operational weaknesses.
QESCO recorded the highest stress index at 2.21, followed by HESCO at 1.52, SEPCO at 1.42 and PESCO at 1.31.
Although LESCO reported the highest level of net-metered electricity exports at 840.34 GWh, its stress index remained lower at 1.17, indicating that solar penetration alone does not explain financial difficulties.
According to the report, the main drivers of distribution-company stress remain transmission and distribution losses, electricity theft, poor recoveries, deferred infrastructure investment and tariff distortions.
Need For Broader Power Sector Reforms
The report noted that lower compensation for exported solar electricity may encourage consumers to invest in batteries and hybrid systems to maximize self-consumption rather than sending excess electricity to the grid.
Researchers recommended reducing DISCO losses and recovery gaps alongside solar-sector reforms, implementing a transparent export-pricing mechanism under net billing, and integrating rooftop solar expansion with network upgrades and battery-storage planning.
The study, titled “From Net Metering to Net Billing: Tariff Design and Distribution-Sector Stress in Pakistan,” was authored by Dr Rubina Ilyas, Research Economist at PIDE, and Bilal Aftab, Staff Economist at the institute.
The report concludes that while net billing may provide short-term financial relief for distribution companies, long-term improvement in the power sector will depend on addressing governance issues, energy losses, recovery performance and fixed-cost recovery challenges.
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