Enhancing grid consumption need of the hour

There are efforts and actions being taken to reduce power tariffs and make the grid sustainable. These include negotiations with the IPPs, forcing industry to move from captive power generation by raising gas tariffs exorbitantly, shifts in the solar net-metering policy, and higher taxes on petroleum products to lower grid prices.

The prime focus of tariff reforms should be to make industry competitive. Whatever fiscal and other space the government is creating should go to the industry.

The objective should be to bring the industrial tariff to 9 cents to make it regionally competitive. Industrial growth should be facilitated by bringing employment and business opportunities for domestic users. This will help households afford electricity and other goods and services.

There are talks about an Rs8 per unit reduction in power tariffs. Well, these numbers are grossly exaggerated, and getting even half of this is going to be a decent achievement.

The share of domestic consumers is double the industrial load on the grid. Thus, lower fiscal support is required to reduce industrial tariffs, and it would have a larger impact on the overall economy, which is in the quest of economic activity.

Unfortunately, media space and so-called experts’ attention are given more to the solar net-metering issue than to broad-based energy reforms. Solar net-metering is a red herring. It is the issue of the elite (such as residents of higher income neighborhoods), and not even a middle-class problem. The government had a favorable policy, and it has now changed it. There are no violations of contracts. What is the fuss about?

Many countries have changed their solar net-metering policies over time. Pakistan’s policy was much better than what existed in California or South Australia. And even after the revision, the payback period for Pakistani consumers was much lower than in those countries. In other countries, there are two to three forms of charges, including upfront connectivity, capacity, and distribution charges.

There are talks about revising the net-metering policy from 2022-23. It should have been done earlier. The net-metered consumers on NTDC doubled (from 141k to 283k) in the last six months or so. The pace should have been decelerated earlier. With fewer stakeholders, the media hype could have been lower.

According to renewable energy expert Faizan Ali, by June 2024, net-metering capacity was roughly 3GW (including KE) out of 14-15GW total installed capacity — it was at 20 percent. Today, net-metering is at 4.5GW out of 17-18GW installed capacity. Still, net-metering is around 26 percent of total solar consumption.

Thus, net-metering is a fraction of total solar capacity and not the primary reason for the falling reliance on the grid. However, non-net-metered consumers are not adding any cost or burden to the grid. And last year, the government had already increased the capacity charge on them. But there was nothing on the net-metered consumers.

The real issue is the grid, which is becoming irrelevant and needs to be transformed and modernized. The solar influx is a global problem; it is not a Pakistan-specific issue. The problem here is that renewable capacity addition is outpacing base-load production growth. The grid needs to adapt. We should be looking forward to this, as the real solution lies in reforming the distribution companies.

There is no media space allotted to them. No one is doing press conferences. This is akin to talking about the current account balance without addressing the underlying factors related to low national savings and investment — the other side of the identity.

The national electricity grid is on a death spiral. This must be rescued. That simply cannot be done by tweaking tariffs. It must be revived by enhancing industrial consumption. The domestic three-phase net-metered users’ reliance on the grid continues to decline, as they may start adopting battery solutions.

Many battery vendors have entered the Pakistan market. Experts estimate that BESS imports have doubled in 2024, and this is only going to grow with improvements in battery technology and the revised net-metering policy.

Thus, the government must focus on bringing industry back onto the grid. Many industrial players are shifting from captive gas but are looking for alternative avenues. Making grid prices cheaper and reliable can bring them back. For that, a wheeling policy at reasonable rates is imperative.

The point is that energy reforms are required, and enhancing grid consumption is the need of the hour. That cannot happen by focusing on domestic consumers. Base-load utilization must rely on industrial users. This is where policymakers must focus — or risk watching the grid collapse under its own weight.

Copyright Business Recorder, 2025