There is a buzz in the market that the government authorities are finally considering revising the buyback rates of solar power net-metered rooftop generation. News reports suggest the government is mulling cutting the buyback rate down from the current Rs21/unit to anywhere between Rs7.5-11/unit. Apparently, the proposed move has the IMF’s backing, although, the Fund has not made any suggestions around the solar pricing part of its program modalities with Pakistan.
Be that as it may, the status quo is about to change after months of deliberation, and the most important words came from the Power Minister himself who hinted at altering the rooftop net metering regulations, in an interview with Bloomberg. Whatever happens remains to be seen but the pace of solar induction in Pakistan, especially in the last 12 to 18 months merited a response – and it could well be a multifaceted response, not necessarily confined to net-metering pricing.
Hard facts first. Pakistan’s solar panel imports for 2024 (Jan-Dec) are slated to surpass $2 billion, up from $1.37 billion in 2023. On FY basis, FY23 already saw solar panel imports exceed $2.1 billion, equating to nearly 15000 MW of generation capacity, as per data from Ember Energy.
In unit terms, Pakistan’s solar panel imports in 2024 to date alone equate to 17 GW of solar PVs. Consider that the already deployed on-grid solar 2.9 GW has created a sizeable demand in grid demand, where average daily demand in typical summer and winter days has gone down by 5 percent and more during 2024. The total solar PV deployment was estimated at 1.5 GW in 2023 and the drop in demand was around 2 percent.
Of the 17 GW of PVs already imported this year – even if one-third of it gets deployed in the same year, that stands to significantly disrupt demand patterns, more so during winters. If demand growth scenarios as projected in the Integrated Generation and Capacity Expansion Plan 2024-34 are considered as a benchmark, the deployment of the remaining two-thirds of the 17 GW over the next five years could lead to a double-digit average daily demand drop even on a typical summer day.
Can the transition to distributed solar be stopped? No. And that is not desirable either. But Pakistan’s energy sector landscape demands preemptive steps to slow down the induction, or else face greater challenges in the not-so-distant future. Sky-high tariffs in the past two years have exacerbated solar induction, aided by a nearly 50 percent drop in solar PV prices in the same timeframe.
One damning piece of the statistic shows how rapidly consumers, who could afford, transitioned to solar solutions, whether opting for net-metering or using storage staying non-metered. As per Power Information Technology Company data, 10 percent of domestic consumers had an average monthly demand of 400 units in FY20. That number went down to a mere 1 percent in FY24. Those with less than 200 units of consumption now have an 89 percent share versus 57 percent in FY20. The resultant increase in sector subsidies is for everyone to see. But a bigger concern is the best-paying consumer, cross-subsiding electricity has mostly moved out of the grid.
Net metering has helped for sure, given the rather lucrative policies that allow installation of up to 1.5 times the sanctioned loads while ensuring a healthy buyback rate, that too on a net import basis. The payback period in most cases is a world-beating 2-4 years. This is not to say that moving to net billing, gross metering, and having more restrictions on installation load will make solar unattractive all of a sudden, but it will certainly reduce the pace of transition as the payback period goes up and will offer valuable time for the government to take corrective actions.
As renewable share is going to increase in the next capacity addition cycle both at grid and distributed levels, Pakistan must enhance grid resilience and ensure the implementation of a Competitive Trading Bilateral Contract Market (CTBCM) for electricity. As battery prices have gone down ten times in the last 13 years, even non-net metered consumers will have enough incentive to solarize generation, leaving the grid with more problems.
Mind you, a sizeable quantity of imported PVs is believed to have been stockpiled and could flood the market anytime – multiplying the problems at hand. As more and more solar-distributed generators are a certainty in the near future, the authorities must waste no time in looking to invest in storage solutions and implementing a functioning CTBCM to keep the grid viable and afloat.
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