During recent discussions with the International Monetary Fund (IMF), Pakistani authorities announced plans to phase out the current net metering policy for rooftop solar panels. This policy, which allows users to offset their grid electricity consumption with power generated from their solar panels, will be replaced with a gross metering system aimed at increasing the use of grid electricity, despite its higher cost.
This change is part of broader negotiations as Pakistan seeks further engagement with the IMF, including a proposed $15.4 billion energy debt restructuring with China. The Ministry of Energy has informed the IMF about these upcoming policy changes, which have traditionally helped consumers reduce their reliance on expensive grid electricity.
Under the new gross metering policy, solar energy generated by rooftops will be fed directly into the national grid. Homeowners will then draw their electricity solely from the grid, potentially leading to higher costs as they lose the financial benefits of generating their own power.
This system will require two separate meters at homes: one to measure electricity fed into the grid and another to measure consumption, replacing the current bidirectional meter system.
The government’s rationale for this policy shift is to boost the revenues of power distribution companies, which have been negatively impacted by the increasing popularity of in-house solar power generation among Pakistan’s middle-to-upper class. This demographic has turned to solar power as grid electricity prices have soared due to inefficient power systems and unfavorable power purchase agreements.
Currently, the average base tariff in Pakistan is Rs29.79 per unit, but with additional charges, consumers can pay up to Rs62 per unit. The IMF has been informed that a significant increase in electricity prices is expected in July, adding to consumers’ financial burden.
The rapid adoption of solar power has reduced demand for grid electricity, exacerbating the issue of idle capacity payments. These payments, made to power plant owners regardless of electricity production, significantly contribute to the high cost of electricity.
The Ministry of Energy also expressed concerns that the net metering policy allows some solar panel users to fall into the ‘protected consumers’ category, benefiting from lower electricity rates. The introduction of gross metering would eliminate these benefits, aligning more consumers with standard tariff rates.
As part of its financial strategy, Pakistan is also discussing renegotiating capacity payments with power producers under the China-Pakistan Economic Corridor (CPEC) and other agreements to alleviate financial pressures. However, these negotiations have been challenging, particularly with CPEC-related projects, due to resistance from the Chinese side.
The proposed changes and ongoing financial negotiations highlight the complex challenges Pakistan faces in balancing energy costs, consumer interests, and the financial health of its power sector.
