ISLAMABAD: Pakistan’s grid electricity sales have declined by 11 per cent over the past three years as consumers increasingly shift to solar power systems, according to the Pakistan Electricity Review 2026.
The annual report, published by Renewables First, an Islamabad-based energy and environment think tank, said grid electricity sales fell from 125 terawatt-hours (TWh) in the fiscal year 2022 to 111 TWh in the fiscal year 2025. While the decline is often interpreted as weakening electricity demand, the report argued that overall consumption is rising, driven largely by distributed solar generation.
While official figures place installed generation capacity at 41 Gigawatt (GW), once the 38 GW of deployed distributed solar is included, the true capacity stands at 79 GW, pointing towards consumer-driven solarised electrification.
Consumer energy resources (CERs), primarily distributed solar, generated an estimated 51 TWh of electricity in FY25, nearly half (46 percent) of total grid electricity sales. Despite a shift of this magnitude, most of this generation is not captured in official electricity data, leading to a significant misreading of Pakistan’s power sector, the report said.
The power sector has reached an “inflection point”, with rapid solar adoption reshaping demand patterns while the national grid struggles to adapt. In the fiscal year 2025, grid electricity demand grew just 1.7 per cent despite the 5.3 per cent consumer growth, reflecting a clear shift towards decentralised energy adoption.
The report added that while distributed solar has begun reshaping demand patterns, shifting peak loads and reducing reliance on centralised generation, the legacy system design has not adapted. Transmission bottlenecks, underutilised capacity and a volumetric revenue model continue to drive inefficiencies and rising costs. The power system is no longer generation-constrained, but structurally misaligned, requiring a transition towards flexibility, grid enhancement and planning frameworks that account for a bi-directional, decentralised energy system.
Behind-the-meter and off-grid solar deployment rose from 7 GW in FY2022 to 31 GW in FY2025, while net-metering capacity, including K-Electric, increased from 0.7 GW to 6.8 GW over the same period, which the report said was fuelled by falling panel costs.
The report projected CER electricity generation could rise to around 68 TWh in the first nine months of FY2026, equivalent to 61 per cent of FY2025 grid sales.
CER electricity generation, the report said, is quietly reshaping the country’s dependence on imported fossil fuels. “The rapid rise of distributed solar has provided a hedge against ongoing geopolitical disruptions in the Middle East, reducing Pakistan’s vulnerability to fuel supply shocks and price volatility. While solar has offered resilience against global supply chain disruptions, structural issues within the power sector continue to mount financial stress on the system, with circular debt still standing at Rs1.8 trillion as of February 2026,” the report highlighted.
The report warned that incomplete data could result in flawed policymaking and inadequate planning, increasing the risk of system failures.
It recommended urgent reforms to integrate distributed solar into official planning frameworks and said battery storage and smart grid technologies could help manage peak demand, reduce congestion and improve system flexibility.
The report also indicated that integrating batteries and smart storage can further strengthen system adaptability by allowing the grid to store low-cost renewable energy, ease congestion, reduce reliance on imported fossil fuels and manage peak demand in a system increasingly shaped by distributed energy resources (DERs).
If managed effectively, this consumer-driven shift towards solarised electrification could become one of Pakistan’s strongest safeguards against external energy and economic shocks, it highlighted.
“We are making billion-rupee decisions about generation, transmission and tariffs based on data that misses nearly half of what is happening on the ground. Until distributed solar is systematically counted and integrated into official frameworks, Pakistan’s power sector will continue planning for a system that no longer exists,” Nabiya Imran, a senior associate at Renewables First and a contributor to the report said. She added that the power sector, built around a centralised system, is struggling to adapt to a rapidly decentralising energy landscape.
Huma Naveed, senior associate and data scientist at the organisation said that distributed solar generation is expected to continue rising “not by policy design, but because millions of ordinary consumers, tired of waiting, chose a reliable and affordable energy resource over a grid that struggles to deliver efficiently.”
