Understanding net metering, gross metering, and net billing: Pakistan needs sustainable practices

The recent buzz around gross metering has reignited discussions on renewable energy, a crucial subject as the world increasingly shifts towards sustainable power sources. With the global commitment to tripling renewable energy pledged at COP28, adopting renewable energy is paramount for sustainable development, particularly in Pakistan.

Our nation grapples with energy shortages and pressing environmental concerns, with renewable energy currently making up only 5% of our energy mix (excluding hydropower).

Pakistan has also set an ambitious target to achieve 60% renewable energy in its energy mix by 2030 to reach net zero emissions.

As of June 30th, 2023, the total number of net-metering consumers in Pakistan surged to around 56,000, marking a 50% increase compared to the previous year (NEPRA + RF calculations).

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Additionally, in fiscal year 2022-23, net metering generated 482 gigawatt-hours, highlighting an impressive 220% year-on-year growth. This figure does not even account for those who are completely off-grid and whose contributions go unmeasured.

To understand the intricacies of our renewable energy landscape, let us break down the three primary metering mechanisms: net metering, gross metering, and net billing.

Net metering allows consumers to utilise the electricity generated by their in-house solar systems.

Any surplus electricity is sent to the grid, and consumers receive credits or monetary compensation at an agreed-upon rate (currently Rs19.32/kWh).

This system offers higher savings, simplified billing, and energy independence. However, it impacts utility revenue and comes with significant infrastructure costs.

Gross metering mandates that consumers sell all the electricity they generate to the grid at a predetermined tariff while buying all their electricity from the grid at the retail rate.

These two transactions (selling and buying) are separate, with no offsetting of generation against consumption.

Consumers are paid a fixed rate for their electricity production but purchase their required electricity at a higher standard rate.

This diminishes the economic benefits of installing renewable energy systems, as the lack of immediate reduction in electricity bills makes the financial payback period longer and less attractive.

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Managing separate transactions for energy sales and purchases can be complex and introduce uncertainties, especially with fluctuating tariffs and regulatory changes.

This complexity can deter individuals and small businesses from investing in renewable energy, leading to potentially higher overall consumption and less emphasis on energy-saving measures.

Net billing is like net metering but values the excess electricity sent to the grid differently. Under net billing, the energy exported to the grid is credited at a price different from the retail rate, often lower.

The consumer’s bill is then calculated based on net consumption, but the credits are applied at a separate rate.

Net metering has significantly shaped Pakistan’s renewable energy landscape. It incentivises individual investments in solar panels, allowing consumers to reduce their electricity bills and promote a shift to renewable energy.

This approach has not only made solar power more attractive but also helped alleviate the energy crisis by adding more distributed generation capacity to the grid.

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The adoption of net metering has encouraged private investment in renewable energy, fostering a market essential for long-term sustainability.

Conversely, gross metering, while guaranteeing a steady income for the electricity generated, disincentivizes energy conservation since consumers buy all their energy at retail rates.

This system can be less appealing to potential investors because it does not provide the direct benefit of reduced energy bills, making the return on investment longer and less predictable.

For Pakistan to effectively transition to renewable energy, policies, and mechanisms must strongly incentivize private and individual investments instead of subsidizing thermal energy.

A recent study claims just that. Policymakers need to carefully consider the implications of these metering systems rather than pressuring people to shift completely off-grid.

If households can afford to install solar panels, they might also invest in batteries to go entirely off-grid.

Policymakers aim to reduce the cost of buying solar energy from consumers, potentially applying such tactics to push them to agree to these terms.

Ensuring support rather than hindrance of renewable energy growth in Pakistan is crucial, considering the international landscape, maintaining stability in the energy market while avoiding further burdens on consumers is essential for a sustainable energy future in Pakistan.

The article does not necessarily reflect the opinion of Business Recorder or its owners