Solar Energy Sector Faces Hurdles with New Net Metering Policy
The changes in the net metering policy are expected to increase the payback period for consumers who have installed or planned to install oversized solar systems, but the falling solar panel and equipment prices will keep the payback period short for those with just enough capacity for self-consumption, ultimately affecting the growth of the solar energy sector in Pakistan.
The business community has expressed concern over the abrupt changes in the net metering policy, which reduces the power purchase price for solar panel owners from Rs 27 per unit to Rs 10 per unit, a 63% cut that could discourage new investment in the sector.
The revised policy, introduced by Pakistan's energy ministry, aims to promote energy price equity for all consumers by addressing issues such as surplus power production, the impact of affluent urban net-metered households on average electricity cost, and the risk of infrastructure failure due to high penetration of distributed solar. The changes apply to new distributed solar or net-metered consumers, while existing beneficiaries will shift to the new framework after the expiry of their seven-year contracts.
Traders argue that the new policy is unfair and unacceptable, as it forces solar energy consumers to buy electricity from the national grid at a 550% markup. They urge the government to review its decision and consult with the business community and stakeholders to frame a balanced and comprehensive energy policy that promotes the renewable energy sector and protects the interests of power consumers.
Federal Minister for Energy Awais Leghari stated that the government has saved Rs1,400 billion in the remaining years of revised contracts of independent power producers (IPPs), which will be reflected in the reduced power tariff. The minister also announced that there will be no tax on units generated by roof solar panel consumers and sold to the grid, but they will have to pay the 18% tax on electricity from the grid.
The new solar policy has introduced a net billing system with a buyback rate of Rs10 per unit for a five-year contract period, which is expected to reduce the payback period for roof solar panel consumers from 18 months to 3.5-4 years. However, critics argue that the alterations in incentives will discourage rooftop solarisation, despite the energy ministry's belief that solar power is still cheaper than the grid and becoming more cost-effective as technology improves.