• By Best Solar Company PK
  • 03 Sep, 2026
  • Solar Policy
  • 7 min read

Pakistan's power sector is finally moving. In a set of decisions that began in October 2024, the government pushed five Independent Power Producers (IPPs) — including Atlas Power, HUBCO, Lalpir Power, Saba Power and Rousch Power — to tear up their power-purchase agreements years ahead of schedule. With 11 more IPP contracts set to expire by 2030, the question for every homeowner and business is simple: with these **IPP contracts ending** early, will the dreaded capacity payments finally shrink your electricity bill — or should you stop waiting on grid reform and go solar in 2026?

Here's the honest answer, backed by the numbers.

What actually happened with the 5 IPPs

The five early terminations were formalised through Negotiated Settlement Agreements (NSAs). Atlas Power, originally contracted until 2034, agreed to walk away early. Together the five plants (about 2,463 MW of capacity) will save the government roughly **Rs411 billion** in future payments, including around **Rs70 billion a year** in avoided capacity charges. The IPPs also waived close to Rs40 billion in interest.

A second phase followed in January 2025: revised deals with 14 more IPPs, trimming an estimated **Rs802 billion** in costs and profits, with lifetime savings projected near **Rs1.4 trillion**. Separately, 18 IPPs are being shifted from a "take-or-pay" to a "take-and-pay" model — meaning the state only pays for electricity the grid actually uses, not for idle capacity.

The reform is real — but capacity payments still make up the single largest slice of your per-unit tariff.

Why capacity payments matter so much

Capacity payments are fixed charges the government owes IPPs whether or not their plants generate a single unit. In 2024 they ballooned to about **Rs2.1 trillion**, driven by a weak rupee, dollar-indexed contracts and falling grid demand as consumers left for solar.

Break down a typical Rs45 per-unit bill and the problem is obvious:

| Bill component | Approx. Rs/unit | Share | |---|---|---| | Capacity payments | 17.01 | ~38% | | Taxes & surcharges | 15.28 | ~34% | | Energy (fuel) cost | ~9.67 | ~21% | | Distribution margin | 3.10 | ~7% |

Nearly 4 out of every 10 rupees you pay covers capacity, not the electricity you actually use.

So will your electricity bill actually drop?

A little — and slowly. Lower capacity payments were the main reason NEPRA cut the national average base tariff by **Rs1.14 per unit** for FY2025-26 (from Rs32.73 to Rs31.59/kWh), with a further ~**Rs0.62/kWh** reduction flagged for 2026.

That's welcome, but keep it in perspective:

  • The savings are measured in paisas and a rupee or two per unit, not a wholesale collapse in bills.
  • Taxes, surcharges and monthly fuel adjustments can wipe out the gains in a single billing cycle.
  • The full benefit of the 11 contracts expiring by 2030 arrives over years, not months.

In short, grid reform is a marathon. If you're waiting for it to make electricity cheap, you'll be waiting a long time.

The catch: net metering just got worse

While the IPP news is good, the rooftop-solar rules moved the other way. From **9 February 2026**, NEPRA replaced net metering with **net billing** for new solar consumers:

  • Exported units are now bought back at roughly **Rs10–11 per unit**, down from the old ~Rs21–27 national average rate.
  • The buyback agreement period was cut from 7 years to 5.
  • Existing net-metered consumers under the 2015 regulations keep their old rates until their agreements expire.

The takeaway: exporting surplus power to the grid is far less lucrative than it was 18 months ago. That changes the maths — but not the conclusion.

Why going solar still wins in 2026

Here's the point most headlines miss: even with a lower buyback rate, solar economics have quietly *improved*, because panel prices have crashed.

  • Tier-1 N-type panels now sell for about **Rs43–48 per watt**, with budget tiers as low as Rs29–42/watt.
  • A 10kW on-grid system runs roughly **Rs900,000–1,050,000**; a 10kW hybrid system with batteries is about **Rs13.5–15.5 lakh**.

The strategy has simply shifted from "export everything" to **self-consumption**. Every unit you generate and use yourself offsets a Rs45+ grid unit — versus the Rs10–11 you'd earn exporting it. So a right-sized hybrid system that powers your home through the day and stores the surplus is now smarter than an oversized, export-heavy setup.

For a household offsetting most of its daytime load, payback still lands around **3–5 years** for self-consumption-focused systems, even if export-heavy designs now stretch to 8–12 years. Compare that with two decades of paying capacity charges on someone else's idle turbine.

For a deeper cost breakdown, see our guide to the 10kW solar system price in Pakistan and how to choose between hybrid and on-grid solar. To understand the new rules, our explainer on the NEPRA net-billing changes walks through the numbers.

The bottom line

IPP contracts ending early is genuine progress, and the 11 expiries by 2030 will keep chipping away at capacity payments. But the relief reaching your bill is a trickle, not a flood — a rupee here, 60 paisa there, often swallowed by taxes. Solar, by contrast, puts control in your hands today. Design for self-consumption, size the system to your load, and you stop renting the grid's most expensive problem.

Frequently Asked Questions

**Which 5 IPPs ended their contracts early, and is Atlas Power one of them?** Yes. The five are Atlas Power, HUBCO, Lalpir Power, Saba Power and Rousch Power. Atlas Power was contracted until 2034 but agreed to an early Negotiated Settlement Agreement in 2024.

**Will these IPP contracts ending actually lower my electricity bill?** Modestly. Lower capacity payments helped cut the base tariff by about Rs1.14/unit for FY2025-26, with more reductions expected through 2026. But capacity charges still make up ~38% of a typical bill, so relief is gradual.

**What is the new net billing buyback rate for solar in 2026?** From 9 February 2026, new solar consumers are paid roughly Rs10–11 per exported unit under net billing, down from the old ~Rs21–27 national average. Existing net-metered users keep their original rates until their agreements end.

**Should I wait for grid reform or install solar now?** If your goal is a lower bill, going solar now — designed around self-consumption — usually beats waiting. Capacity-payment reform will take years to fully reflect in tariffs, while a well-sized solar system starts saving you money from the first sunny day.

Best Solar Company PK designs and installs reliable solar systems in Rawalpindi, Islamabad, Lahore, Multan, Taunsa Sharif and Karachi. Contact us for a free survey and the best advice for your home or business.