The rooftop solar penetration is increasing at a rapid pace due to falling prices for solar plates as well as equipment as grid power tariffs rise. It’s a good problem to have and should be resolved amicably without creating unnecessary controversies.
In the last decade, globally, many countries pushed for solar penetration by offering incentives and subsidies; and now with growing penetration, to fund the additional cost on a grid to manage high variable supply and other stranded costs, they are rolling back the promoted policies and devising new strategies (some examples in the infographic). Pakistan should do the same.
First, let’s take stock of the situation. There are currently around 113,000 net metering licenses being issued with a capacity of 1,550 MW. These include residential, commercial, and industrial, and an educated guess is that 60 percent of that supply is from residential.
Industrial consumers supply almost none go back to the grid, and contribution from commercial is negligible as they consume what they produce. The story is different for residential areas where the demand is usually during the evening and nighttime while solar energy supply is a daytime phenomenon. And the residential contribution to the grid is not alarming by any means.
The overall supply of wind and solar combined is currently at 4.5 percent capacity (load is 3%). At this rate, there is no significant investment in grid infrastructure required to manage the variable renewable load. According to a WorldBank-funded study, which is with the Power Ministry, there is no meaningful investment needed to upgrade the grid till the renewable mix reaches 10 percent. And major investment undertaking is required at 15 percent which can push the system to absorb 20-25 percent of the capacity.
We have a long way to go. Even at accelerated pace of solarization, it would take another 3-4 years from combined solar and wind to reach 10 percent of capacity. However, that doesn’t mean that the utility companies should relax and wait for the crisis to come. They must start planning at investment and policy level today to take the growing variable load without any hiccups. KE is doing it. The rest should be privatized to ensure the requisite planning and investment.
According to Chinese vendors, in FY24 Pakistan solar panel imports (in quantity) from Chinawouldstand at 10,000-11,000 MW. Out of it, around 4,000-5,000 MW is being smuggled out to Iran and Afghanistan. The solar panel import is duty-free. Traders import from China and then they smuggle it out partially. The are using Pakistan’s precious foreign exchange to feed the demand of others. There are infamous blue trucks (Zambad) that smuggle in the diesel from Iran to Pakistan, and take solar panels on their way back.
Nonetheless, around 6,000 MW solar panels this year are being imported and used in Pakistan. That is a big number. Not all the solar being installed is used in net metering. Many industrial players do not apply for net metering, as they consume all in-house. Then small households are using it for domestic direct use as well.
Net metering ought to grow. There are 33 million total electricity connections -within it 113k are on solar net metering. The number is doubling every year, and the government expects that in four years the capacity will increase from the existing 1,550 MW to 7,000 MW. That makes them worry.
The payback period on solar panel installation used to be 10-12 years when net metering started. And to push, SBP offered subsidized loans. Now the subsidy is over, but still, the payback is reduced to 1.5-2 years. This is flooding the roofs with solar panels. This means that the government can change the net metering rate or move to gross metering without compromising the growing rooftop penetration – the idea is to slow down the transformation.
The government has legal challenges in altering the already awarded net metering contracts. And the mix of rooftop solar feeding back to the grid is far from alarming levels where significant investment undertaking is warranted. However, the pace of solarization should be decelerated and that can be done by redesigning the contract for new connections. And the government should serve the existing till they expire in 5-6 years.
Having said that, a delicate balance is required. If the government completely takes the incentive for new and existing net metering consumers, then people may start moving towards hybrid solution by storing energy produced in the daytime for use in the evening, and convert vehicles to EV and charge these at home.
The math is not working today, as battery prices are high. The biggest lithium-ionbatteryChinese producer (CATL) claims that battery prices will slash to half in three years. If that happens, time is not far, when payback period of off-grid solutions becomes 2-3 years. Some entrepreneurs are smelling this and planning to have battery production in Pakistan. This would also speed up the conversion of vehicles to EV.
The government must have a balanced policy to encourage solar penetration whilst not compromising the power transmission and distribution business.
Comments