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Solar power generation: SBP for household investment

The State Bank of Pakistan (SBP) has suggested households' investment in the solar power, one of the solutions to address power shortage in the country. However, the SBP said that, despite NEPRA's advice, Discos have not taken any initiative to encourage the household's participation in solar power generation. The SBP in its recent report has briefly discussed "Promotion of Solar Energy" and said that despite having enormous potential for solar power, generation capacity in Pakistan is almost non-existent and the use of solar energy is still in its evolutionary stage.

Germany, which receives almost one-third less sunshine in a given year compared to Pakistan, generated almost 37,780 Gwh using solar power in 2013, which was equivalent to 43 percent of the total power produced in Pakistan in FY15. "Looking at the EU experience, it was their political will that led to the adoption of the climate and the energy agenda in 2008, thus paving way for supportive policies for increasing the household and industrial investments in the renewable energy. As a result, most of the European countries witnessed a rapid increase in the renewable energy production, with Germany climbing to the top of the ladder to become global leader in the solar power generation," it added.

Pakistan has announced various policy initiatives, in line with the Independent Power Producers (IPPs), to attract investments in the renewable energy sectors. However, there is almost no effort to attract residential investors, who have a potential to change the energy landscape of this country.

The SBP said that it is easier to encourage household to invest in solar energy. Not only that the installation and maintenance of residential solar panels involve low cost, the Solar Photovoltaic (PV) technology mostly used by households for generation of solar energy, is more efficient in utilising space.

One disadvantage with solar panels is that they are only effective during daylight hours, as storing electricity is not an efficient process. Instead of managing two different power circuits, it is efficient for a photovoltaic panel user to be coupled with the grid. This would allow users to supply the excess power to the main grid during the day, and switch to grid source at night when the solar output is not available.

"Most of the advanced economies, where solar energy witnessed a rapid growth in recent years, incentivised households through "feed in tariff", under which anyone who installs an eligible solar system will receive a guaranteed fixed payment for all the electricity they generate for a certain period. Besides, these small producers also receive an additional payment for any surplus electricity that they feed back into the power grid. This tariff incentive attracted residential investment in the solar power and provided a boost to the economy," the SBP maintained.

In Pakistan, though NEPRA has announced "Net Metering Regime" to encourage the alternate energy generation at smaller level, and allowed consumers to sell surplus electricity (maximum of 1 MW) to Discos. "Households' investment in the solar power is one of the solutions to address power shortage in the country as it will release power units for the industrial sector from household consumption," the SBP suggested.

The SBP has already allowed refinancing facility to power plant units using renewable energy, however the absence of financing scheme for household's investment in solar panel and the lack of standards for solar instruments still need attention. Furthermore, despite NEPRA's advice, Discos have not taken any initiative to encourage the household's participation in solar power generation, it concluded.

Copyright Business Recorder, 2015