Solar Power Incentives Face Potential Cuts

The National Electric Power Regulatory Authority (Nepra) has announced a public hearing to deliberate proposed changes that would significantly scale back incentives for solar net-metering consumers, commonly known as prosumers. The move comes amid growing concerns that high electricity tariffs and persistent inefficiencies are eroding the financial viability of power distribution utilities.

The regulator has scheduled the hearing for February 6 after receiving feedback from a wide range of stakeholders, including government ministries, departments, power utilities, representative bodies and members of the general public. In a public notice, Nepra invited all interested parties to attend the hearing and present their views.

Nepra has already circulated draft regulations proposing reductions in the size, tenure and compensation rates of net-metering arrangements. These proposals follow repeated policy reversals by the government on solar power reforms after strong public backlash. Previously, the Economic Coordination Committee (ECC) had approved similar measures at the request of the Power Division, but the cabinet — led by the prime minister — halted their implementation amid public criticism.

Rising electricity costs, coupled with unreliable and inefficient utility services, have altered consumption patterns. Daytime demand from distribution companies has failed to keep pace with growing night-time consumption, creating operational challenges for the grid. This imbalance forces power producers to sharply ramp up generation after sunset and scale it back during the day, straining grid stability and intensifying financial pressures on the system.

Under the proposed Prosumer Regulations 2025, Nepra plans to repeal the Alternative and Renewable Energy Distributed Generation and Net Metering Regulations of 2015. The revised framework aims to strike what the regulator describes as a “balance” between consumer relief and utility sustainability — allowing households to shield themselves from unaffordable tariffs without turning net metering into a profit-making venture.

A key proposal would restrict prosumers from installing solar systems exceeding their sanctioned load, effectively cutting allowable capacity by up to 50 per cent. For example, a consumer with a sanctioned load of 10 kilowatts would be limited to installing a 10kW solar system. Currently, prosumers are permitted to install up to 150 per cent of their sanctioned load, enabling a 10kW consumer to deploy a 15kW system. Existing net-metering consumers would remain unaffected until the expiry of their current seven-year agreements, after which the new rules would apply.

The revised regulations would cover installations ranging from one kilowatt to one megawatt, bringing all such systems under Nepra’s direct regulatory and licensing authority. At present, systems below 25kW are licensed by distribution companies.

Another proposed change would shorten the duration of net-metering contracts from seven years to five, with any renewal for an additional five-year term subject to mutual consent between the consumer and the distribution company, without any binding obligation.

Significant revisions are also planned for compensation of surplus electricity supplied to the grid. Instead of the current rate of approximately Rs26 per kilowatt-hour, prosumers would be paid the national average energy purchase price — estimated at around Rs13 per unit.

Additionally, the billing mechanism would transition from net metering to net billing. Electricity imported from the grid would be charged at the applicable consumer tariff, while exported electricity would be credited at the national average energy purchase price. Any excess credits could be carried forward or settled on a quarterly basis.

These proposals come despite Nepra’s own acknowledgment that the quality of service provided by distribution companies remains below acceptable standards. The regulator has noted that heavy taxes, levies and surcharges have inflated electricity prices, driving consumers towards decentralised and off-grid energy solutions and weakening demand for grid-supplied power. According to Nepra, on-grid solar installations have surpassed 6,000 megawatts, while total solar capacity — including off-grid systems — has crossed 13,000MW.

The draft regulations also seek to introduce clearer procedures, stricter technical standards and a revised billing methodology to better integrate small-scale renewable generation into the national grid while maintaining overall system stability.