Guides · Faisalabad, Lahore, Punjab
From Captive Gas Power to Solar: What Factories Should Know
Short answer
Since 2025, gas used by industrial captive power plants in Pakistan carries an off-grid levy that has risen in steps, which has made running your own gas engines far less attractive than it used to be. For most factories the practical replacement is a grid connection with on-site solar, with the gas engines kept as backup or run alongside solar, and battery storage added only where the numbers justify it. Solar alone cannot carry a factory day and night, so the decision is about the right mix, not a straight swap.
This guide summarises the policy changes as reported up to October 2026, and the engineering questions a factory should answer before moving away from captive gas. Policy here changes often, so check the current position before you decide.
What changed for captive power
The levy. Parliament passed the Off the Grid (Captive Power Plants) Levy Bill, 2025, and it was signed into law in June 2025. It places a levy on natural gas and RLNG consumed by captive power plants, based on the gap between the industrial grid tariff and the cost of self-generation. Reported proceeds are meant to lower grid power tariffs for other consumers.
The schedule. As reported, the levy started at 5% in early 2025, rose to 10% in mid-2025 and 15% in February 2026, with 20% scheduled from August 2026. In March 2026, it was reported that the IMF declined Pakistan's request to freeze the levy at 15%.
The formula. In April 2026, the reported levy per MMBtu was raised again, and later that month The News reported that the IMF had agreed to calculate the levy on the average of peak and off-peak B-3 industrial tariffs rather than peak rates alone, which was expected to reduce the levy per MMBtu substantially.
The effect. By January 2026, reporting described a steep fall in gas use by export industries' captive plants on both the SNGPL and SSGC networks, as factories moved load to the grid. The government's stated aim is to move industry onto grid electricity.
We have deliberately not quoted gas prices here. They have changed several times, and your own supplier's invoice is the only reliable figure.
From captive gas to solar
Gas gensets
Fuel cost and supply limits
Solar
Daytime units without fuel
Hybrid
Solar with grid and gensets
What this means in practice
For many factories, the old pattern was: gas engines as the main supply, grid as backup (or no grid at all). The new pattern is increasingly the reverse:
| Old pattern | Emerging pattern | |
|---|---|---|
| Main daytime supply | Captive gas engines | Grid plus on-site solar |
| Night supply | Captive gas engines | Grid |
| Outage backup | Grid, or nothing | Gas engines, sometimes with BESS |
| Waste heat (steam, hot water) | From engine exhaust and jackets, where recovered | Needs another source, such as boilers |
That last row is easy to miss. If your gas engines feed waste heat into boilers, dryers or absorption chillers, moving to grid power means you lose that heat and must replace it. Include it in the comparison.
The grid connection comes first
Solar works best in parallel with a strong grid connection. Before planning solar, check:
- Sanctioned load. Is your sanctioned load enough to run the factory on the grid? Raising it takes an application, possibly a new transformer or 11 kV supply, and time. See increasing sanctioned load.
- Tariff category and MDI. Moving your whole load to the grid will set new maximum demand charges. Understand MDI before you size anything.
- Power factor. Gas engines often supplied the factory's reactive power. On the grid, your capacitor bank must hold power factor above the tariff limit, and solar lowers measured power factor further. See power factor and solar.
- Feeder reliability. Industrial feeders vary. Your outage hours decide how much backup you still need.
Where solar fits
Daytime energy
A factory that has moved its load to the grid uses almost every solar unit on site during working hours. Under net billing, self-used units save your full grid tariff, while exported units earn a much lower credit. That makes daytime self-use the core of the business case. Net billing also limits the plant to your sanctioned load, with an overall cap of 1 MW per facility; see our net billing guide and NEPRA licence guide.
Space
A large factory's load can run to several megawatts, while roofs may hold only a fraction of that in panels. Spare land helps; see ground-mounted solar for factories.
Larger plants and wheeling
For consumers above 1 MW, buying renewable power from a separate plant and wheeling it through the grid is being developed under the competitive market framework. In September 2026, NEPRA was reported to have set use-of-system charges for B-3 and B-4 consumers that industry says affect whether this is viable. For most Punjab factories today, on-site solar is the simpler first step.
Keep the gas engines working for you
You do not have to scrap existing engines. Common roles after the switch:
- Backup during outages, with solar running alongside through a hybrid controller that prevents reverse power and keeps the engine above its safe minimum load. Gas engines, like diesel sets, have minimum loading limits. See solar and generator hybrid systems.
- Peak support where grid capacity is limited while a sanctioned-load increase is pending.
- Critical process supply for loads that cannot tolerate interruption.
Solar Works Pakistan no longer sells generators, but we integrate existing gas and diesel sets into hybrid designs.
Where battery storage fits
A BESS can store midday solar for the evening, cover short outages without starting engines, reduce peak demand, and steady the supply while engines start. It does not replace a captive plant for long outages or night running at full load. Whether it pays depends on your outage pattern, demand charges and the share of solar you would otherwise export. See BESS for factories.
A step-by-step plan
- Collect data. Gas invoices, engine running hours and output, 12 months of electricity bills, outage log and waste heat use. Our energy audit guide lists what to measure.
- Compare three costs per unit for your own site: captive gas generation including the levy, grid supply including fixed charges, and solar (installed cost spread over its life). Use current figures from your invoices.
- Secure the grid connection you need, including any sanctioned load increase.
- Size solar for daytime self-use, within net billing limits.
- Decide the role of the engines and add hybrid controls.
- Test the case for BESS with your outage and demand data.
- Phase the project if budget or approvals require it; see planning a phased solar rollout and industrial solar financing.
Export-oriented units may also want the solar plant's data for buyer reporting; see green compliance for textile exporters.
How Solar Works Pakistan helps
Industrial EPC, hybrid systems and BESS are our specialist areas. Our power-generation heritage goes back to the 1980s through our founder, Akram Ullah Khan, whose career includes WAPDA and Saudi Electricity Company, followed by the family's generator-import business from 2014 to 2021, before Solar Works Pakistan was founded in 2021. We have served 50+ industrial clients, and our engineers do load analysis, feasibility and design in-house. Larger projects follow a project-specific schedule agreed in the quotation. See our industrial and commercial solar page.
Get today's price or a free site survey
Send us your gas invoices, engine details and 12 months of electricity bills.
- WhatsApp or call: 0336 666 4321
- Email: info@solarworks.pk
- Head office: Main Boulevard, Sargodha Rd, Block F FDA City, Faisalabad (Faisalabad page)
- Lahore branch: 2nd Floor, Jeff Heights, Gulberg, Lahore (Lahore page)
- Hours: 9:00 AM to 6:00 PM, daily
We serve factories throughout Punjab, and site surveys are normally free. You can also contact us online.
Frequently asked questions
What is the off-grid levy on captive power?
It is a levy under a 2025 law on natural gas and RLNG used by industrial captive power plants. It has been raised in steps since early 2025, with 20% scheduled from August 2026. Check the current rate before making decisions.
Can solar replace a captive gas power plant?
Not on its own. Solar supplies daytime energy only. Most factories move their main supply to the grid, add solar for daytime self-use, and keep gas engines or batteries for backup.
Should we scrap our gas engines?
Usually not. They can serve as backup or peak support, and run alongside solar through a hybrid controller. Selling or retiring them is a separate commercial decision.
What about the waste heat our engines supply?
If engine heat feeds boilers or dryers, moving to grid power removes that heat source. Include the cost of replacing it in your comparison.
How big can our solar plant be?
Under net billing, the plant cannot exceed your sanctioned load, with an overall cap of 1 MW per facility, and roof or land space often sets a lower limit. Check the current rules with your DISCO.
Is battery storage needed when moving off captive power?
Not always. A BESS helps with short outages, evening use of solar and demand peaks. Whether it pays depends on your outage hours, tariff and load profile.
Sources
- Profit (Pakistan Today), President approves Off the Grid Levy Bill (16 June 2025)
- The News, off-grid levy and gas utilities' losses (26 January 2026)
- ProPakistani, IMF turns down levy relief request (17 March 2026)
- ARY News, gas levy on captive power plants increased (8 April 2026)
- The News, IMF revises gas captive levy formula (30 April 2026)
- The Express Tribune, competitiveness and energy for industry, including NEPRA use-of-system charges (5 October 2026)
- Net billing facts are carried over from our net metering and net billing guide, which lists its own sources, including the NEPRA (Prosumer) Regulations, 2026, SRO 251(I)/2026: https://ke.com.pk/wp-content/uploads/2026/04/8.-NEPRA-Prosumer-Regulations-SRO-251I2026-09-02-26.pdf