Stakeholders in energy sector including Senator Sherry Rehman have raised concerns over the government’s decision to slash the buyback rate for net-metering electricity to Rs10 per unit from the previous Rs27 per unit.
The Economic Coordination Committee (ECC), under the chair of Finance Minister Muhammad Aurangzeb, on Thursday attributed the decision to a “significant increase in the number of solar net-metering consumers, with associated financial implications for grid consumers”.
As per ECC, the number of solar metering customers increased from 226,440 in October 2024 to 283,000 by December 2024, reflecting an increase of nearly 25% in only two months.
The rapid expansion of solar adoption has unsettled policymakers in Islamabad, who have been scrambling their heads to curb the exponential rise in solar consumption.
Moreover, this isn’t the first attempt by the government to rein in solar users. Just last month, the Federal Tax Ombudsman (FTO) ordered that solar net metering consumers in Pakistan pay an 18% sales tax.
And as expected, the government’s latest decision has sparked concern and criticism from the stakeholders.
“Solar customers are now going to pay the costs for a dirty power system that has become unsustainable both financially and otherwise,” Senator Sherry Rehman, who serves as Chair of the Standing Committee on Climate Change, told Business Recorder.
“Not to mention the costs imposed by an ageing, leaky inefficient grid,” she added.
The senator was of the view that “because solar energy is not a toxin, this can’t be just a financial calculus”.
“There is a substantial qualitative difference between dirty captive power and solar captive power. We need to see real reforms to the dirty fuel power grid that has locked us into huge debt and inefficiencies that are growing,” Rehman said.
According to government figures, the total installed solar capacity has grown exponentially from 321MW in 2021 to 4,124MW by December 2024.
Whereas, as of December 2024, solar net-metering consumers had transferred a burden of Rs159 billion to grid consumers, a figure which the government believes is expected to rise to Rs4,240 billion by 2034 without timely amendments.
The government fears that if more customers move towards solar, the burden of capacity payments will fall more disproportionately on non-solar customers, Rao Aamir, energy analyst at Arif Habib Limited (AHL) told Business Recorder.
The energy expert said that in recent years a lot of customers have moved away from the national grid, leading to a decline in grid consumption.
While the government eyeing to control the financial strain on the grid, some experts warn that reducing the buyback rate could push consumers further off-grid.
“If you see in the long term horizon, this decrease would encourage the net-metering consumers to go completely off-grid, keeping the declining prices of batteries in mind, and reduce their reliance on the national grid,” Dr Khalid Waleed, Research Fellow, Sustainable Development Policy Institute, told Business Recorder.
Dr Waleed was of the view that solarisation would not be curbed or decreased with the latest measure.
“On the contrary, this might lead to an increase in solarisation,” he said.
“At present, there is an excess supply of solar panels in the market, if with this measure the demand for solar panels decreases, it may lower their prices further making it more affordable for those who could previously not invest in them.
“More importantly, this will not solve Pakistan’s excess capacity issue,” he said. “You will need to adopt a different approach for this e.g. increasing the industrial demand, which will be only possible if the government rationalize the tariff.”
The energy expert urged the government for early retirement of power plants “which have been underutilized, particularly the imported coal power plants”.
Meanwhile, Aamir from AHL stated that the grid consumption would improve following the rate cut.
“People will still invest in solar, just in a different way, as the price of electricity remains elevated. They may move towards installing solar systems with lower capacity to meet their energy needs and avoid net-metering,” he said.
Comments