Pakistan’s shift from net metering to net billing could help address financial pressures in the country’s power sector but deeper structural problems facing the grid remain, according to new research.

Pakistan officially transitioned to a net billing system in February, replacing net metering rules introduced in 2015 and lowering the buyback rate for surplus solar energy fed into the grid. Muhammad Uzair Yousuf, Assistant Professor at the NED University of Engineering and Technology in Karachi, conducted research into the implications of this policy change within Pakistan’s power sector.

Yousuf’s work combined a regulatory document review, examination of comparative international evidence and an illustrative sensitivity analysis using Pakistan-specific tariff data. His findings are presented in the research paper From net metering to net billing: Insights from Pakistan’s 2026 prosumer regulatory reform, available in the journal Next Energy.

Yousuf told pv magazine that while Pakistan’s transition to net billing is understandable given the financial pressures facing the power sector, his research suggests that net billing alone cannot resolve the country’s broader structural power sector challenges.

“Electricity theft, high aggregate technical and commercial (AT&C) losses, weak bill recovery, and the persistent underperformance of several [public-sector electricity distribution companies] DISCOs represent much larger structural issues than the growth of prosumers,” he said. 

“These challenges need to be addressed in parallel through stronger loss-reduction and anti-theft measures, performance-based accountability for DISCOs, and, where feasible, a review of legacy IPP capacity obligations.”

Yousuf cited consumers’ behavioural response to the policy change as another issue, explaining that they may increasingly seek to minimize their purchases from the grid.

The research paper explains that residential customers are divided into two categories in Pakistan – protected and unprotected – based on consumption levels that determine eligibility for government subsidies and lower tariff rates. Yousuf said net billing could incentivize prosumers to reduce grid consumption in order to qualify for the lower tariff categories.

“One possible [resolution] would be to avoid determining protected-consumer status solely on the basis of post-solar grid consumption,” he added. “Instead, the system could incorporate a mechanism that preserves targeted subsidies for genuinely eligible low-income households without creating incentives for higher-income consumers to enter protected categories simply because of behind-the-meter generation.”

Analysis from the research paper indicates that, for a representative residential prosumer using a baseline presumption of 40% self-consumption and 60% export, the transition to net billing has reduced the blended value of rooftop solar generation by approximately 44-49%.

The paper says this findings suggests the economic impact of net billing therefore depends primarily on the degree of self-consumption, with prosumers who consume a larger proportion of their generation less financially affected by the transition. This incentivizes measures that increase on-site utilization, such as battery energy storage systems, demand-side management, load shifting and electric vehicle charging.

Yousuf recommended reducing the upfront financing barrier of installing a battery, through methods such as targeted concessional financing or tax relief for certified solar-plus-storage systems, rather than introducing a large blanket subsidy for batteries.

“Incentives need to be designed carefully to avoid encouraging complete grid defection. If batteries primarily enable higher-consuming customers to eliminate their grid purchases, DISCOs could lose customers while still having to recover the fixed costs associated with maintaining the network,” he told pv magazine. “The policy objective should therefore be to encourage solar-plus-storage systems that remain grid-connected and provide value to the wider electricity system, rather than creating batteries as a pathway towards widespread disconnection from the grid.”

Yousuf also suggested the net billing mechanism could move away from a single flat export compensation rate towards a time-differentiated mechanism that better reflects the system value of electricity.

“For example, electricity exported during periods of substantial daytime solar surplus could receive a lower compensation rate, while exports during periods of higher system demand could receive a higher rate,” he explained. “This could narrow the current disparity between the value of electricity purchased from the grid and the value credited for export electricity.”

He also emphasized that policy stability and regulatory predictability are equally important for the continued development of Pakistan’s solar market. 

“Rooftop solar has expanded rapidly, and frequent or unexpected changes to the rules can undermine consumer and investor confidence,” Yousuf said. “A stable and transparent policy framework would therefore be important for sustaining investment while allowing the government to adapt the market as system conditions evolve.”

Recent analysis from the Pakistan Solar Association found distributed solar supplied 27% of Pakistan’s electricity in 2025 while the think tank Renewables First estimated the country’s operational solar fleet at around 51 GW as of March this year.