Over the last decade, supply-side constraints have resulted in widespread electricity shortage in Pakistan. At its peak, this amounted to over a 7 GW supply-demand gap and caused the electricity grid to be offline for vast swathes of population for many hours daily. Despite major supply-side investments acute shortages persist and a large percentage of relatively affluent households, estimated in millions, have countered this by investing in self generation and battery storage technologies (usually lead-acid batteries because of their low cost). This paper summarizes the impact of this backup technology on the broader energy system in terms of efficiency losses for households and contribution to low-voltage grid congestion. Research findings suggest that the low efficiency of these backup systems has caused annual losses of around 3-4 TWh for the electric grid in Pakistan as well as overloading of transformers and frequent supply-demand imbalances. However, the mass adoption of these backup systems has also created an entire ecosystem which can enable massive demand side management and provide the framework for a future smart grid in Pakistan. Besides evaluating the opportunities, possible policy measures the government should undertake to enable this transition are also discussed.