Snapshot PAKISTAN
Pakistan's rooftop solar boom – a consumer-led energy transition
For decades, Pakistan's electricity sector has been marred by chronic supply shortages, low electrification rates, unreliable power supply and significant transmission and distribution (T&D) losses. These structural weaknesses led to frequent power outages and stunted economic activity. In the early 1990s, the Government of Pakistan took a major policy step to address the issue by opening up the generation sector to private investors under the 1994 Independent Power Producer (IPP) Policy. This policy initiated the first wave of private-sector power generation in the country.
However, load-shedding re-emerged in 2007 and became more severe in subsequent years, hampering productivity and increasing public dissatisfaction. In response, in 2015 the government embarked on an aggressive generation expansion campaign under the China-Pakistan Economic Corridor (CPEC). Several large-scale power plants were constructed, driven by the assumption that electricity availability would catalyse economic growth, which in turn would boost electricity demand.
The anticipated surge in electricity demand, driven by economic growth, failed to materialise. A combination of persistent political instability, macroeconomic uncertainty and the COVID-19 pandemic severely constrained economic activity. As a result, electricity consumption declined steadily. Between 2023 and 2024, total electricity sales to the national grid fell by 3% compared to the previous year.
Electricity demand, which stood at 124,628 GWh in 2021–22, dropped to 112,902 GWh in 2022–23 and further declined to 109,707 GWh in 2023–24. Pakistan's power sector is governed by a single-buyer model under which the Central Power Purchasing Agency (CPPA), acting on behalf of the federal government, enters into long-term power purchase agreements (PPAs) with generators. These contracts are typically based on a two-part tariff: a fixed capacity charge and a variable energy charge. Even when plants remain underutilised due to suppressed demand, the government remains liable for fixed payments to generators. Consequently, as capacity utilisation fell, capacity payments per unit of power delivered surged, driving up electricity tariffs. Pakistan had also initiated an International Monetary Fund (IMF) programme, which required strict fiscal discipline, including energy tariff rationalisation and subsidy reductions. This resulted in a significant hike in consumer electricity bills, nearly doubling tariffs for many consumers within a short period.
In recognition of these structural inefficiencies, efforts to liberalise the electricity market are now underway. These reforms aim to move away from the single-buyer model towards a Competitive Trading Bilateral Contracts Market (CTBCM) model that enables direct contracting between generators and large consumers, with the ultimate goal of improving efficiency and promoting competition in the market.
Amid surging grid electricity costs, rooftop solar emerged as a financially viable alternative for many Pakistani households, particularly in the middle and upper classes. Coinciding with the local energy price spike, global photovoltaic (PV) module prices began to plummet due to a supply glut. Together, these dynamics created a perfect storm and unleashed an unprecedented consumer response.
According to the National Electric Power Regulatory Authority (NEPRA)'s State of Industry Report 2024, Pakistan added 583 MW of net-metered rooftop solar capacity in 2022–23. In 2023–24, this more than doubled to 1,181 MW. By April 2025, rooftop solar installations had surged to 2.8 GW in just the first 10 months of the fiscal year 2024–25, bringing the cumulative national total to 5.3 GW, a nearly tenfold increase in just two years. It was projected that the country would end the fiscal year 2024–25 with 6.3 GW of net-metered rooftop solar capacity.
17GW solar PV imports in 2024.
Pakistan's rooftop solar boom is also evident in its import data. Over the past four to five years, the country has imported nearly 45 GW of solar panels – roughly equivalent to the total installed generation capacity of the national grid. According to multiple sources, Pakistan imported 17 GW of solar panels in 2024 alone, twice the volume imported in 2023. This indicates that a large number of installations remain off-grid and are not captured in official net-metering statistics.
While the consumer-led solar transition has been hailed as a success story of energy democratisation, it has also exposed underlying issues of energy equity and market sustainability. Rooftop solar adoption has been concentrated among affluent households with the capital to invest in PV systems. These consumers, once major contributors to electricity sales, now offset a significant portion of their consumption through self-generation, thereby reducing their contribution to fixed grid costs. As a result, a larger share of these fixed costs is now borne by lower-income households, which cannot afford solar installations. By December 2024, the government estimated that the net-metered consumers shifted a burden of USD 563 million (PKR 159 billion) to other consumers. It is further estimated that if the net metering framework is left unamended, the regressive cost shifting will grow to USD 48.34 billion (PKR 4.24 trillion) by 2034.
This regressive cost shifting has alarmed policymakers and regulators. In response, the government is considering reducing the buyback tariff for surplus solar energy exported to the grid under the net-metering regime – from USD 9 cents/kWh to USD 3.5 cents/kWh (PKR 27/kWh to PKR 10/kWh). If implemented, this would significantly extend the average payback period for rooftop solar systems.
Additionally, the federal government, in its most recent budget, imposed a 10% General Sales Tax (GST) on imported solar panels, arguing that it aims to incentivise domestic manufacturing. This tax increased the per-watt cost of imported panels from USD 10.6 cents to USD 11.6 cents (PKR 30 to PKR 33) – slightly raising project costs for new adopters.
Even with the looming reduction in buyback rates and the imposition of taxes on solar panels, the pace of rooftop solar deployment in Pakistan shows no signs of slowing down. Electricity from the grid remains significantly more expensive than self-generated solar power. Moreover, the ongoing reform agenda aimed at improving the power sector's financial and operational performance is unlikely to yield immediate benefits for consumers. Households and businesses, driven by cost considerations as well as a desire for energy independence and a reliable supply, are continuing to shift to solar.
Pakistan's rooftop solar boom is an extraordinary case of market-driven transformation in a legacy energy system. What began as a response to high tariffs and unreliable service has rapidly evolved into a large-scale energy transition, led not by utilities or regulators but by consumers themselves. While this transition has delivered immediate cost relief to many, it has also triggered complex regulatory, financial and equity challenges that the government must now navigate.
Snapshot Pakistan from the following sources: Tribune, “New net-metering policy: How long will it take to recover the solar system cost?”, 14 March 2025, https://tribune.com.pk/story/2534262/new-net-metering-policy-how-long-will-it-take-to-recover-the-solar-system-cost. Beth Gardiner, “Pakistan's Solar Revolution is Bringing Power to the People, YaleEnvironment360, 9 July 2025, https://e360.yale.edu/features/pakistan-solar-boom. Naveed Butt and Zulfiqar Ahmad, “GST on imported solar panels reduced to 10pc”, Business Recorder, 19 June 2025, https://www.brecorder.com/news/40368547. Euan Graham, Nicolas Fulghum and Katye Altieri, “Global Electricity Review 2025”, Ember Energy, 8 April 2025, https://ember-energy.org/app/uploads/2025/04/Report-Global-Electricity-Review-2025.pdf. NEPRA, “State of the Industry Report 2024”, 2024, https://www.nepra.org.pk/publications/State%20of%20Industry%20Reports/State%20of%20Industry%20Report%202024.pdf.
