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KARACHI: Pakistan’s shift to net billing is creating fresh challenges for solar financing, pushing consumers to smaller systems and battery storage amid lower returns on excess electricity and higher borrowing and insurance costs, bankers and analysts said.
The regulatory transition from ‘net metering’ to ‘net billing’ has changed the economics of the country’s rapidly expanding rooftop solar market. Under the new framework introduced by the National Electric Power Regulatory Authority in February, consumers continue to pay full tariffs for electricity drawn from the grid while receiving a lower, market-linked rate for surplus power supplied to the grid.
“Reduced buyback rates for exported electricity lengthen the payback period for consumers”, said Imtiaz Khalid, country head for SME at JS Bank. “This forces users to either downsize their systems or invest in costly battery storage to keep power local”.
“Higher commercial interest rates make monthly instalments steeper, making it harder for fixed-income households to qualify under standard debt-burden limits”, he added.Demand for solar had surged in Pakistan as rising utility tariffs and grid instability pushed households and businesses to seek alternatives to expensive grid power, Khalid said.
While banks have the liquidity to lend, the expiry of the State Bank’s subsidised refinance scheme means solar loans are now linked to commercial KIBOR rates, making borrowing costs a key factor shaping the pace of market growth, he added.
JS Bank, one of Pakistan’s fastest-growing lenders, has established a dedicated green banking framework and a structured renewable energy financing portfolio, offering specialised products for solar projects in the residential, commercial and agricultural sectors. The bank has financed hundreds of solar installations across the country.
Rooftop installations face severe physical risks in Pakistan, including panel damage from stray aerial firing during celebrations, localised hail, heavy rainfall and storms, according to Khalid. Solar equipment is hypothecated as bank collateral, and comprehensive insurance is mandatory, he said. A high frequency of damage claims drives up insurance premiums, adding administrative strain and extra long-term costs for both lenders and borrowers.
Ensuring customers buy certified panels and use qualified installers requires strict vetting to protect both the consumer’s investment and the bank’s asset, he added.It is difficult to determine how much bank lending specifically finances household solar and wind installations because residential renewable-energy loans are generally recorded under broader consumer-finance categories, including home improvement, renovation and green-energy lending.
Overall consumer lending rose to Rs1.19 trillion at the end of July from Rs1.14 trillion a month earlier and Rs928.9 billion a year ago, according to State Bank of Pakistan data. Housing loans increased to Rs285.9 billion in July from Rs267 billion in June and Rs208.4 billion a year earlier, while housing finance reached Rs307 billion by mid-August, official data showed. Personal loans rose to Rs298.19 billion in July from Rs283 billion in June and Rs263.27 billion a year earlier.
Meanwhile, bank lending to solar power producers rose to Rs16.4 billion in July from Rs15.41 billion in June and Rs13.51 billion a year earlier. Lending to wind power producers, however, fell to Rs33.79 billion from Rs35.45 billion in June and Rs42.11 billion a year earlier.
Solar power accounted for about 1.0 per cent of grid electricity generation, excluding net-metered systems, whose generation is estimated to be more than twice that of on-grid solar, according to energy experts.
“Wind contributes nearly 3.5 per cent of the total grid generation of 128,701 GWh in FY26, while it remained around 3.0 per cent from FY22 to FY25”, said Awais Ashraf, director of research at AKD Securities.
“Overall generation from renewables contributes 35 per cent to the overall grid generation given higher reliance on hydel”, he said. “This contribution from renewables is slightly better than the global share of renewables of 32.5 per cent, as per IEA data”.
Pakistan’s growing reliance on renewable energy comes as the country faces a large financing requirement to address climate-related risks. The country is estimated to need $331 billion in climate finance by 2030 to strengthen resilience and limit potential economic losses from climate change. The SBP has been encouraging lenders to expand sustainable finance and direct more capital towards environmentally sustainable projects.
Meezan Bank, the country’s largest Islamic lender, has expanded its green financing, offering a Shariah-compliant residential solar product structured under Musawamah. The financing ranges from Rs100,000 to Rs2.5 million, with tenures of one to five years.
“Since the launch of the offering, Meezan Bank has facilitated more than Rs1 billion in residential solar financing, with over 1,000 financing cases processed and disbursed to date”, the bank said in written responses to questions sent by The News.
The bank added that these figures relate specifically to its residential solar programme and do not include commercial, SME, agriculture or wind-energy financing.The bank’s disclosures also show financing for wind-turbine and biomass-energy projects through its commercial banking business, demonstrating its ability to structure Shariah-compliant financing for a broader range of renewable-energy projects
“In agriculture, renewable energy forms part of a broader shift towards climate-smart financing”, the bank said. “Meezan Bank has scaled up solar tube-well financing, helping farmers adopt renewable energy, reduce irrigation costs and improve resource efficiency”, it added.
Meezan Bank reported Rs108 billion in total agriculture financing in 2025, with climate-smart agriculture accounting for more than 20 per cent of its agriculture finance portfolio. The bank does not separately disclose the amount specifically allocated to solar tube wells.
The bank believes broadening access to solar financing would require more than simply making credit available. Financing needs to remain affordable, systems must be appropriately sized for customers’ electricity consumption, and monthly repayments must be aligned with borrowers’ ability to pay.
The transition from net metering to net billing changes the economics of rooftop solar, but it does not remove its underlying value for customers, according to the bank. The emphasis is increasingly shifting from generating surplus electricity for sale to the grid to maximising the use of solar-generated electricity within the home.
“Solar, consequently, remains relevant even as the regulatory framework evolves”, Meezan Bank said. “Under net billing, however, the proposition increasingly rests on how efficiently customers use the electricity they generate themselves, rather than on the value of surplus electricity exported to the grid”, said the bank. “For banks, this creates an opportunity to broaden solar financing responsibly by placing affordability, appropriate system sizing and customer cash flows at the centre of the financing decision”, it added.
Analysts said net billing does not hinder solar adoption; rather, it specifically slows the adoption of grid-connected solar systems, which is a distinct issue.“When the spread between what you pay for a unit and what you are paid for a unit widens to four or five times, the rational consumer response is not to abandon solar. It is to stop exporting altogether and buy a battery”, said Saad Hanif, the head of research at Ismail Iqbal Securities.
“That takes the load fully behind the metre, where the distribution company earns nothing at all”, Hanif said. “Under net metering, the DISCO [the power distribution companies] at least retain the customer relationship and the nighttime load. Net billing risks converting partial defection into full defection”, he added.
Pakistan bundles a largely fixed cost structure into a variable per-unit tariff, according to Hanif. Capacity payments do not fall when a consumer solarises, but the revenue that services them does. Until the tariff separates a network and capacity charge from an energy charge, he explained, every distributed generation policy will transfer costs to whoever is left on the grid. Repricing exports does not fix that arithmetic. It only changes who exits first.
“Solar in Pakistan was never a climate decision or a policy success”, Hanif said, describing rooftop adoption as largely an economic response to high electricity prices.He also said the most common misreading of the grid data is that electricity demand in Pakistan is stagnant. It is not. Demand has grown and it has migrated. Utility sales look flat because the increment is being served behind the metre. Anyone modelling the power sector off-grid sales alone is modelling a shrinking share of a growing market.
“The households and small businesses least able to absorb rising tariffs are precisely the ones who cannot raise the upfront capital to escape them”, he said.“Unless financing reaches that segment, Pakistan will end up with a cheap, clean, resilient power system for those who could afford to build it and an expensive, deteriorating one for everybody else”.
