By Asif Niaz Meo, Managing Director, SNM Solutions · Updated September 2026
IPPs and capacity payments: the short version
Most of what you pay for electricity is not fuel. In NEPRA’s power purchase price for calendar year 2026, capacity and use-of-system charges are Rs 2,163.3 billion out of Rs 3,185.97 billion, about 68 percent of the total, and the capacity part alone works out at Rs 17.19 per unit. That cost is paid to power plants for being available, whether or not they run. It is inside your tariff, not a separate line on your bill. It is not something an individual consumer can negotiate. The only part you control is how many units you buy from the grid at all — which is exactly what your own solar system changes.
What an IPP capacity payment is, in plain terms
Pakistan buys a large share of its electricity from private power plants, the Independent Power Producers, under long-term contracts. Those contracts are “take-or-pay”: the plant is paid a fixed amount for keeping capacity available for the grid, plus a separate payment for the fuel it actually burns. The fixed part is the capacity payment.
It is a normal way to finance power plants. The problem is what happens when the plants are not needed. NEPRA’s State of Industry Report 2025 records that thermal plants, including nuclear, ran at 38.82 percent utilisation in 2024-25, and Dawn’s report on the same document (17 January 2026) notes that underutilised capacity becomes “a persistent financial burden in the form of capacity payments for idle plants”. The bill for availability is paid either way, and it is divided over fewer units, so every unit that is sold carries more of it.
Capacity charges in the regulator’s own determination
NEPRA’s power purchase price forecast for calendar year 2026, decided on 7 January 2026, breaks down like this:
| Component of the CY 2026 power purchase price | Amount |
|---|---|
| Capacity and use-of-system charges | Rs 2,163.316 billion |
| Fuel | Rs 973.58 billion |
| Variable O&M | Rs 49.075 billion |
| Total | Rs 3,185.97 billion |
On the regulator’s own arithmetic that makes capacity charges roughly 68 percent of the projected power purchase price, against about 32 percent for energy, and the capacity component works out at Rs 17.19 per unit for CY 2026, up from the Rs 16.32 per unit projected for the first half of FY 2025-26. Those figures were reported from the NEPRA decision by The Nation on 10 January 2026.
The trend is not new, and the reforms so far have not reversed it per unit. Renewables First’s Pakistan Electricity Review 2025 recorded capacity payments rising 46 percent in one year to about PKR 1.9 trillion in FY24. Its 2026 edition, working from NEPRA’s State of Industry data, records what came next: the government terminated 6 IPP contracts and renegotiated 18 others, 4.6 GW of generation capacity left the system in FY25, and total power purchase cost fell 4.4 percent, to about PKR 2.9 trillion.
At the national level that is real relief. Per unit, it is not. New hydel, coal and RLNG capacity and debt repayments kept fixed costs high while electricity generation fell 9 percent between FY22 and FY25, so the capacity cost carried by each unit kept climbing, from PKR 10.11 per kWh in FY23 to PKR 14.21 in FY25. Capacity payments made up 61 percent of the power purchase cost in FY25. (Those are generation-level figures for a past year; the Rs 17.19 above is NEPRA’s forward projection for 2026 on its own basis, so the two are not directly comparable.)
Why using less electricity does not lower capacity charges
This is the part that surprises people. If the country consumes fewer units, the fixed capacity bill does not shrink with it. It is spread over a smaller number of units, so the cost per unit rises. NEPRA’s 2025 report also records the other pressures in the same direction: transmission and distribution losses of 17.4 percent, a recovery shortfall of Rs 132.5 billion, and weak distribution-company performance that added about Rs 397 billion to circular debt in FY25.
So a household that carefully cuts its consumption still faces a tariff built on fixed costs incurred across the whole system. Conservation helps your own bill, but it does not touch the structure underneath it. Generating your own units does, and we put figures on it in how much solar will save you in Pakistan.
What your own rooftop solar system actually changes
An independent system changes the one number you control: how many units you buy from the grid.
Every unit your roof produces and your house consumes in the same moment is a unit you do not import. Under the tariffs in force since 9 February 2026, a self-consumed unit saves you roughly Rs 55 to 65, because it replaces a unit you would otherwise buy at your slab rate — capacity charge, fuel, losses, surcharges and all. A unit you export earns about Rs 11 under net billing. The gap between those two numbers is the whole economics of rooftop solar today, and we explain it in detail in our guide to net metering and net billing in 2026.
That is also why the design question matters more than the panel brand. A system sized to your daytime load, or a hybrid system that stores midday surplus for the evening, keeps more of your production inside the house. Our comparison of on-grid and hybrid systems works through that choice with a 10 kW example, and solar versus a generator covers the backup side of it.
You are not alone in making this move. The Pakistan Electricity Review 2026 records net-metered capacity at 6.8 GW at the end of FY25 and 8.3 GW by December 2025, dominated by domestic consumers and by systems under 25 kW. It also estimates total solar deployment, including systems that are not net-metered, at almost 38 GW by June 2025 — far more than official grid statistics show.
How independent from the grid do you want to be?
“Independent” is a spectrum, and the honest answer for most homes is the middle one.
| Design | What it does about capacity charges | 10 kW installed (approx) |
|---|---|---|
| On-grid | Cuts your daytime imports. Evening use still comes from the grid at full tariff | Rs 850,000 |
| Hybrid with lithium | Moves midday surplus into the evening, so fewer units are bought at any hour. Keeps the grid as backup | Rs 1,500,000 with 5 kWh, Rs 1,700,000 with 10 kWh |
| Off-grid | No connection, so no tariff at all. Needs a much larger battery, accepts no grid fallback, and surrendering a live connection is a formal DISCO process | Sized case by case |
Prices are approximate, installed, and exclude WAPDA / LESCO net-billing charges. A 12 kW system or larger follows the same logic at a bigger scale, and the full ladder is on our price page for every size.
What solar does not change — stated plainly
- You still have a bill. Meter rent, fixed and minimum charges and taxes stay as long as you keep the connection. Solar reduces units, not the existence of the account.
- Exports are paid at about Rs 11 per unit, not at your tariff. Building a system to sell to the grid is no longer the way to make it pay.
- Your old agreement can be lost. If you are on a pre-February-2026 net-metering agreement, extending your sanctioned load or changing the name on the connection can move the whole connection on to net billing at the new rates. Ask your DISCO in writing before you change anything.
- Going fully off-grid is expensive, and leaving the grid is a formal step. The battery needed to carry a house through a cloudy week costs several times as much as the one that carries it through an evening. A live connection also has to be surrendered through your DISCO in writing; it cannot simply be abandoned, or the account keeps billing.
- Nothing you install changes national capacity payments. It changes how many units you buy that carry them.
Where to start: size solar to your daytime units
Take your last twelve bills and separate two things: your total units, and how much of your use is in daylight. Size the system to the daytime figure, not to your roof and not to your monthly total. Our solar calculator turns a bill into a size, a price and a monthly saving, and a site survey confirms the roof, the sanctioned load and the meter position before anything is ordered.
Capacity payments and solar: frequently asked questions
What are capacity payments in Pakistan’s electricity bills?
They are fixed payments made to power plants for keeping capacity available for the grid, whether or not the plant runs. They are not shown separately on your bill; they sit inside the tariff. In NEPRA’s power purchase price for calendar year 2026 they account for about 68 percent of the total, at Rs 17.19 per unit.
Do capacity payments go down if I use less electricity?
Not by themselves. The payment is fixed, so if the country buys fewer units the same cost is spread over a smaller number of units and the per-unit charge rises. Cutting your own consumption lowers your bill, but it does not remove the fixed cost from the tariff.
Does a solar system let me avoid capacity charges?
Only on the units you no longer buy. Each unit you generate and use yourself avoids the whole imported tariff, worth roughly Rs 55 to 65 today. As long as you keep a grid connection you still pay meter rent, fixed charges and taxes.
Is it better to export solar to the grid or use it at home?
Use it at home. Under net billing an exported unit earns about Rs 11, while a self-consumed unit saves roughly Rs 55 to 65. That is why daytime load shifting and battery storage matter more than simply adding panels.
Are IPP contracts being renegotiated?
Yes, and some have ended. The Pakistan Electricity Review 2026 by Renewables First records the termination of 6 IPP contracts and the renegotiation of 18 others under take-and-pay terms, with 4.6 GW of capacity leaving the system in FY25. That lowered the national power purchase cost by 4.4 percent, but capacity cost per unit still rose. None of it changes what you pay this month.
How much of Pakistan’s generation capacity sits idle?
NEPRA’s State of Industry Report 2025 records thermal plants, including nuclear, running at 38.82 percent utilisation in 2024-25, with Thar coal plants at 67.23 percent. Low utilisation is what turns capacity payments into a per-unit burden.
Capacity payment: Roman Urdu mein aam sawalat
Capacity payment kya hoti hai?
Ye woh fixed raqam hai jo power plants ko sirf available rehne par milti hai, chahe wo bijli banayen ya na banayen. Ye aap ke bill mein alag se nahi likhi hoti, tariff ke andar shamil hoti hai. NEPRA ke calendar year 2026 ke hisaab se ye kul power purchase price ka taqreeban 68 percent hai, yaani Rs 17.19 per unit.
Kya solar lagane se capacity charges khatam ho jate hain?
Sirf un units par jo aap grid se kharidna band kar dete hain. Jo unit aap khud bana kar khud use karte hain, us par poora tariff bachta hai, taqreeban Rs 55 se 65. Lekin jab tak connection hai, meter rent, fixed charges aur taxes phir bhi dene hote hain.
Bijli grid ko bechna behtar hai ya khud use karna?
Khud use karna behtar hai. Net billing mein grid ko bheji gayi unit taqreeban Rs 11 deti hai, jabke khud use ki gayi unit Rs 55 se 65 bachati hai. Isi liye din ka load shift karna aur battery rakhna zyada faida deta hai.
Sources
- NEPRA, power purchase price determination for calendar year 2026, decided 7 January 2026, as reported by The Nation, 10 January 2026.
- NEPRA, State of Industry Report 2025, as reported by Business Recorder and Profit by Pakistan Today (16 January 2026) and Dawn (17 January 2026).
- Pakistan Electricity Review 2025 and Pakistan Electricity Review 2026, Renewables First, using NEPRA State of Industry data.
- System prices and net-billing rates: SNM Solutions’ own published rates, September 2026.
Want to know what your own bill would look like?
Send us your last bill and we will size the system to your daytime use, quote it from our published rates, and handle the LESCO net-billing paperwork.