Solar panels free of charge: Provincial govts’ move leaves policymakers scrambling

ISLAMABAD: The rampant import and installation of solar panels in the country, which is paying over Rs 2 trillion as capacity payment to power producers, has left the policymakers scrambling, especially after the announcement of provincial governments to distribute panels to low-income consumers free of cost or at a very cheap price.

The whole scenario has also been brought to the notice of Prime Minister at a meeting on power sector held last week.

According to reports, Sindh government has announced to give solar panels to 200,000 households, followed by Punjab and Khyber Pakhtunkhwa envisaging 100,000 to each household and Balochistan 50,000.

No intention to tax imported solar panels, says Leghari

In addition, rich consumers are also installing solar PV panels on their rooftops, whereas agriculture consumers are shifting from grid to solar. Likewise, industries and commercial consumers are also opting for solar systems due to high electricity tariffs.

Provincial governments are targeting lifeline consumers, who are 4 per cent of total number of consumers, protected consumers using 0-200 units per month comprising 48 per cent of total consumers.

Unconfirmed reports suggest that solar systems of about 2500 MW have already been installed by domestic consumers.

This issue also came under heated discussion during public hearings at NEPRA wherein the current status of solarization was presented before the Authority.

According to Power Division, if the number of existing consumers decline then the burden of capacity payments would fall on those remaining on the national grid.

Power Division further stated that if the current growth in solarization of houses and factories continues the tariff of remaining consumers will increase by Rs 2.50 per unit by 2034to ensure capacity payment to the power producers.

Energy sales and demand from the grid have decreased by approximately 8% to 10%, primarily during daylight hours, indicating that this reduction is due to the increased penetration of solar energy.

In a typical scenario, a 10 kW net-metering system allows consumers to avoid the grid’s fixed cost of 20 PKR per unit by relying less on grid electricity.

The fixed costs avoided by behind-the-meter installations vary with solar capacity penetration, averaging around 7 PKR per unit.

In FY 2023-24, approximately Rs 200 billion in grid fixed costs were shifted to non-solar consumers, leading to a tariff increase of around Rs 2 per kWh for these users. With substantial solar imports this year, it is anticipated that grid demand will decline by more than 10%, with estimates suggesting a 15% reduction; however, the exact numbers for behind-the-meter installations remains unclear. This shift is expected to result in a 17% increase in the base tariff.

For current fiscal year, a 5% reduction in grid demand through solar integration will result in a shift of Rs 131 billion in costs to non-solar consumers annually. Doubling this reduction to 10% will shift an even larger cost of PKR 261 billion to consumers without solar energy.

Copyright Business Recorder, 2024