A blog by Husnain Fateh Ahmad, Ayesha Ali, Robyn Christine Meeks, Zhenxuan Wang, Javed Younas
As electricity prices across Pakistan soar, the Punjab government is testing a novel alternative to traditional subsidies: providing free solar panels to nearly 100,000 low-income households. A new evaluation examines the impact of this programme on electricity access and household outcomes, to determine whether distributed renewable energy can ensure affordable energy access while reducing fiscal burdens.
Chronic electricity shortages and rising fuel costs have made it difficult for Pakistan to ensure its people have basic electricity access. The country has historically relied on lifeline tariffs to subsidise electricity access for poor households.
These subsidies target formal customers who use less than 200 kilowatt-hours (kWh) per month, effectively keeping their electricity bills low through increasing block tariffs. However, as costs rise and utilities struggle with electricity theft and non-payment of bills, this approach has become increasingly expensive and difficult to sustain.
In 2024, Punjab’s provincial government launched a programme to provide free solar panels and inverters to nearly 100,000 low-income households. The timing is opportune: solar photovoltaic costs have declined rapidly in recent years, making distributed renewable energy an increasingly viable alternative to grid-based subsidies.
The question is whether this approach can provide a cost-effective way to ensure basic electricity access while reducing the fiscal burden on government budgets.
Evaluating Punjab’s solar panel programme for low-income households
Ongoing research supported by the International Growth Centre evaluates this programme to understand its socio-economic impacts and whether subsidising distributed renewable energy can effectively replace traditional electricity subsidies in grid-connected communities.
The programme’s design enables a rigorous causal evaluation. When applications opened in late 2024, demand far exceeded supply – 361,074 eligible households applied for the 100,000 available solar panel systems. To allocate these systems fairly, the government conducted computerised balloting to randomly select consumers from the pool of eligible applicants.
Each district in Punjab was pre-assigned a selection quota proportional to its share of the total number of consumers in two consumption brackets: those using 0-100 units and those using 101-200 units of electricity per month. Consumers in the first group were eligible to receive 550W panels, while those in the second group were eligible to receive 1100W panels, systems sized to meet approximately a third of their baseline consumption.
How were solar power beneficiaries selected?
Due to costs exceeding the allocated budget, a total of 94,483 households were randomly drawn to receive the two types of solar panel systems – less than the planned 100,000. The highest number of treated households belonged to the eastern and central districts, representing the largest share of the consumer base in the targeted consumption brackets.
This random selection of beneficiaries is crucial for research purposes. It creates two comparable groups: households randomly selected to receive solar panels (the treatment group) and eligible applicants who were not selected (the control group). By comparing these groups, we can isolate the causal effects of receiving solar panels, separate from other factors that might influence electricity use or household welfare.
Analysis of billing data from June 2024 shows that the mean consumption levels were comparable between treatment and control groups prior to the intervention, confirming that the random selection process successfully created balanced groups.
The figure below shows the complete programme timeline. Eligible households – formal electricity consumers using less than 200 kWh per month as of the baseline reference month of June 2024 – could apply to be part of the programme. Applications could be submitted via SMS or an online portal between December 2024 and January 2025. The government performed computerised balloting to randomly select beneficiaries in March 2025.
Between March and June 2025, district government teams conducted physical verification of the balloted customers to verify applicants’ identities, geo-tag locations, and ensure that households did not have multiple electricity meters installed at their premises.
Consumers approved after physical verification were cleared for system installation. In July 2025, private contractors hired by the government began installing solar panels. As of December 2025, the installation process was still ongoing.
Measuring the impact of solar panel installation on electricity usage
The evaluation combines multiple data sources to capture the programme’s effects. First, we draw on administrative billing records covering all eligible applicants, tracking monthly grid electricity consumption, billed units, and bill payments. This allows us to observe changes in grid electricity use at scale, and any resulting impact on the subsidy burden.
However, administrative data alone cannot tell us about total electricity consumption. Households with solar panels may use less grid electricity but consume more electricity overall by relying on their solar systems. To address this gap, we are installing monitoring devices on 1,500 solar units to directly measure off-grid solar consumption.
This combination of grid and solar data will reveal whether solar panels substitute for grid electricity or enable greater overall electricity consumption.
Beyond electricity: Understanding household welfare impacts
In November 2025, we launched first survey of 2,000 households across three districts of Punjab: Lahore, Multan, and Sahiwal. These districts were selected to capture both urban and rural contexts, with sample sizes proportional to each district’s programme participation.
The survey was designed to elicit measures of multiple dimensions of household welfare – including energy usage and expenditure, appliance ownership and use patterns, educational outcomes, time use (particularly for women and children), and overall satisfaction with energy services. These modules will help us estimate the effects of the programme beyond energy use and speak to its broader impacts on quality of life.
A second survey, planned for November 2026, will revisit the same households approximately one year after most installations are complete. This follow-up will reveal whether initial changes in energy use patterns persist and whether anticipated welfare improvements materialise.
Policy implications for renewable energy subsidies
This evaluation comes at a critical juncture for energy policy in developing countries. Many governments face three simultaneous challenges: expanding energy access, while also managing tight fiscal constraints and meeting climate commitments.
Traditional approaches to subsidising electricity – lifeline tariffs, consumption subsidies, and direct transfers – place ongoing burdens on public budgets and utility finances.
Distributed renewable energy offers a potential alternative. By providing a one-time capital investment rather than ongoing subsidies, governments might reduce long-term fiscal exposure whilst expanding energy access.
However, this approach raises important questions about cost-effectiveness, targeting, and sustainability.
The findings will inform these trade-offs by comparing the upfront capital costs of solar home systems against the present value of forgone lifeline tariff subsidies. We will also examine whether such programmes successfully reach and benefit the intended poor households, or whether design features might need adjustment.
As solar costs continue to decline and grid electricity prices rise in many developing contexts, Punjab’s experiment offers valuable lessons. Whether this model proves successful could influence how governments across South Asia and beyond approach the fundamental challenge of ensuring affordable, reliable electricity access for all.
This blog has been sourced from the official website of International Growth Centre (IGC) and can be accessed here