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At the macro level this government is trying to promote solar power generation by planning to install 10,000MW – mainly in IPP mode. And on the other hand, at the micro level, this government is disincentivizing net metering of the solar connection (mainly) at homes. The government is running a top-bottom approach in an industry which is best operated using bottom-up approach.

In bigger solar projects, the connectivity to the grid is complex and expensive. It has intermittent supply which varies with sunshine. Sudden drop of load could have cascading impact on the grid and to mitigate the risk grids need to be upgraded and spinning reserves (mainly on oil, gas, and coal) have to be in pipeline to replace solar within seconds of drop. All these add to the cost and reduce the viability of big solar projects.

Solar is best operated at distributed levels. Losses are minimum. And the risk is to be assumed by smaller consumers. This was well supported in Pakistan. SBP had offered a subsidized financing scheme for solar plants at home. Then the regulator (NEPRA) allowed the net metering at a lucrative rate (Rs13/unit). The pay-back period was short. And many had moved towards solar net-metering.

Now with recent increase in the base tariff and growing fuel cost, the electricity bills have increased substantially. And increasingly people are thinking towards moving to solar with net-metering option. The government, rightly so, fears that the load from the grid shall reduce while the grid has to cater to the peak load in non-solar generation hours without any compensation. This shall increase the stranded cost for discos and will have to be passed on to the non-solar consumers.

Since solar option is mostly used by upper middleclass and rich households while the cost of capacity and other assets that are being also deployed for solar clients are to be paid by middle and lower classes. According to a tweet thread by the secretary power division, almost all the three phase meter consumers to move towards net metering with 3.600 MW while annual additional cost of Rs100 billion (by 2027) has to be paid by the rest (mostly by single phase consumers).

The power secretary is right on the stranded cost and on passing on the impact to poorer consumers, but has conveniently ignored that these supposedly rich three phase consumers are already cross subsidizing the one-phased consumers. The government official just demonized the net-metered consumer without giving weight to the cost of inefficiency that consumer is paying.

There are higher AT&C losses that these three-phase meter consumers are paying. On every 100 units of electricity produced, discos are recovering mere 72. 18 units are transmission and distribution losses, while 10 units being billed are not recovered. On the logic of not giving undue benefit to net-metered consumers, they should not also bear the cost of discos inefficiencies, thefts by non-complaint consumers and subsidy for poorer consumers. The one-way logic doesn’t add up.

Anyhow, NEPRA is proposing to reduce the payment of net-metering to Rs9/unit from existing Rs13/unit. The Rs13/unit calculation was done when the base-tariff was around Rs18, and now it has increased to around Rs24, and the solar net-metering rate was supposed to increase to Rs19/unit. However, now NEPRA is proposing to reduce to Rs9/unit. There is double impact on net-metering. Then SBP is no more offering concessionary finance. It’s a double jeopardy and would discourage conversion to solar and it’s net-metering.

Discos never liked net-metering. They always resisted it. People had to wait for months to get net-meter. Similarly, discos never liked the idea of direct wheeling by bulk consumers. They ask for higher wheeling charges to compensate for other factors. In case of net-metered consumers, the rationale for lowering net metering rates is to implicitly charge higher wheeling charges.

The net-metered person is called prosumer. He is effectively a consumer who is producing. The idea is to lower its cost of electricity. The investment is made to reduce cost. This is not for profit taking. In that case he should come in IPP mode where the structure is totally different. There are two models to work. One is net-metering – where the prosumer gets credit for net energy. The other is net-billing, where based on timing of loads being supplied and consumed different rates are applied and bill is netted. NEPRA is also mulling the option to shift from net-metering to net-billing.

That is the story of NEPRA, discos and government and their rationale. There is a different side to the consumer. The cost of electricity on grid is growing. The reliability of grid is questionable. There is no political will to privatize or corporatize discos to lower the inefficiencies. The consumer who can afford solar and has space to install panels may think to move more out of the grid i.e., defect.

Right now, most consumers are not investing in batteries for storage, as they supply the excess to the grid. And in case of no net-metering (or consumer is waiting for approval), precious excess energy is just being wasted. Some would now think of investing in batteries and store the energy for hours in which solar is not producing. The payback today is around 6-7 years. The pay-back for net-metering is increasing and rationale for battery storage is increasing.

The cost of solar panels has reduced significantly in the past 5-7 years and that is why more and more people are shifting. The battery technology is growing at a lag of 5-7 years from solar and in years to come battery cost is expected to reduce and the pay-back shall lower as well. And without bringing efficiencies to the grid, more and more consumers would go out of the grid with higher reliance on self-generation and consumption. In case of businesses, they would work on a combination of captive plant on hydrocarbon complemented by solar. Once the exclusivity is over, the government (discos) bargaining power will diminish.

The concept of micro grids will grow. National grid and discos would largely be supplying to subsidized consumer and bad (non-paying) consumer. And then the government would have to live with the stranded cost and nothing can be charged from good consumers who would be completely (or substantially) divorced from the grid. That is why NEPRA and government should think of a midway solution. One option is to keep net-metering unchanged at Rs13/unit.

Comments

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MalikSaabSays Sep 20, 2022 09:10am
Your analysis of ultimate outcome assumes everyone has the space available for installing solar panels, which is not correct. Also not all loads can be balanced by solar output. Industries and commercial enterprises conusme a lot more than what their roof/ground space can cover; they will remain users of grid electricity. Also the trend of high-rise residential is on the...rise. They have no option but to use grid electricity. Likewise, the electric mobility revolution is almost here (in Pakistan). Those are heavy loads. They can never be powered through consumer grid-tie solar alone. Grids will continue to play a key role in electricity transmission and distribution. Already net-metering distributed generators are getting half the rate for supplying electricity. Dont kill the golden goose for want of its eggs.
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Abid Hussain Sep 20, 2022 12:49pm
Brilliant analysis. This inefficient and criminal bureaucracy always put all its burden to end consumers. They can fail every successful project like this.
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Junaid Sep 20, 2022 01:34pm
1. One wishes consumers go to court or protest severely, in case the above is just to test the water by gov/nepra checking how much they can get away with. Prev gov already got away with removing exemptions on solar products which were reversed later. 2. Perhaps this discussion to reduce rates has been to proactively kill the debate of increasing the rates for net consumers as a bullying tactic at the start of negotiations, to lead to the outcome you have proposed. Such is expected in an unfair country where the buying power of discos is much more than the selling power of bullying discos and desperate gov trying to save each penny, where ever they can get away with it. One can expect all stakeholders in the chain to be complicit in this highway robbery, as usually happens. 3. It may not be possible for residential consumers to totally get rid of disco via own production, since twice the investment will be required (assuming roof space is also available) to be self sufficient in summers (unless there is a an energy efficient alternative invented to replace ACs). And battery storage is usually for a few hours, while the excess energy produced in summers would be wasted or would need to be saved for a few months in absence of net metering.
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Saqib Ur Rehman Mughal Sep 20, 2022 04:54pm
The payback of the consumers will substantially be increased and might not remain a cost economic proposition. It will replicate the failed PV model that happened in Spain. Also, it will discourage the installers and consumers equally. It will disturb the economic activity and the output of associated SMEs related to this business. It is the very same logic to facilitate subjected to numerous constraints. How the new efforts will result in a level playing field for both commercial and residential distributors when the business model will not remain viable and results in further uncertainty across future extensions? Even if the unit prices will substantially increase amid load-shedding, then overall units sold to net-metering consumers will reduce and the sort of price NEPRA is asking is 3 times less for normal unit tariff and four times less for peak unit tariff. The overall balance of payments might not be in favor of the consumer and will surely result in an increase in payback periods and possibly no further extension of generation licenses will further complicate the situation many folds.
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Sajjad Ali Sep 20, 2022 05:12pm
Prosumers are victims of Nepra. They are charging very heavy taxes by A. Adjustments, I. Tax and FPA. They are looting upto 33% excess amount other than normal billing to the net metering exporters. Their incoming and outgoing charges and peak and off peak rates are not justified either for us. They charged very heavily in August September 2022. Moreover SDO told me that government taking prosumers as luxury produce and service, they charge luxury tax also. This is cruel governance system pushing us back
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Imran Sep 20, 2022 06:05pm
I wisely installed 10kv system last year with hybrid inverter but no batteries attached to it. I am planning to move to battery option so I can use battery power during peak hrs and till it discharges. Next day batteries will charge again. Less power will go to grid and I will buy less peak units from disco's.
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Muhammad Akhtar Hussain Sep 20, 2022 08:25pm
Absolutely a balanced analysis to promote home solar panel installation.
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Muhammad Akhtar Hussain Sep 20, 2022 08:30pm
Agreed
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Muhammad Akhtar Hussain Sep 20, 2022 08:45pm
Agreed
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Moin Fudda Sep 20, 2022 09:08pm
Excellent article, biggest issue that day time surplus in off peak hours exported at Rs.19 is being sold back at Rs. 33 during peak hours. In case export price will reduce to Rs. 9 then huge difference will encourage buying of batteries which Writer has already mentioned and NEPRA has not considered the outflow of foreign exchange on that account. Thus, NEPRA should consider netting of peak vs off peak with a wheeling charge of upto 10%
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ATIF Sep 20, 2022 09:36pm
Total disaster. I also don't understand why it should be Rs 13 fixed while DISCOs keep on increasing price at their end? If its 19 then so be it. Why should prosumers pay for incompetence of these id***? Ideally, the cost payable to prosumers should be same as cost being charged from them.
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Tariq Zia Sep 20, 2022 09:40pm
While discussing the issue keep in mind that prosumer Or net metered person in supplying the excess capacity during non peak hour at much cheaper rate and then then during peak hour he is purchasing the same unit from discos at much much higher rates . For each unit consumed during peak hour the consumer has to pay at average 65 Rs or he has to deposit 7 units to discos, which is at all not feasible option.
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Fazal ur Rahman Sep 21, 2022 06:20am
100 % agree with your analysis and conclusion.
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zahid askar Sep 21, 2022 06:25am
This is untrue. A lot of poor ppl are also installing solar systems just bexause of the ludicrous amount of taxs. A very baised article wrote by a clerk. This govt is going backwards leaving a lot to be desired
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Ajmal Sep 21, 2022 08:55am
After reading this article, it appears that solar panel installers would eventually go into loss. Therefore, solar companies should come up with a suitable counter-strategy for their customers. This strategy could be in the form of measures like mentioning best practices on how to use energy in most economical ways, and recommendations for adoption of modern hardware/ storage to mitigate this risk
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Banaras Khan Sep 21, 2022 09:18am
WAPDA employees and probably NEPRA policy makers enjoy free use of electricity and some unscrupulous employees even sell it to their neighbors as well. With the popularity of net metering they are foreseeing danger to their free wheeling. Moreover, planning to set up huge solar plant is to benefit the son of PM, typical robbing tactics of corrupt politicians.
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Zia Sep 21, 2022 09:39am
Great article, we need solar & politics and disco short term gains shouldn't come in the way of that Our infrastructure can't go everywhere & can't continue to meet increasing demands Our biggest import remains fossil fuels for energy production Our agreements with IPPs are not consumer centric Demonitizing net metering at this stage is essentially stabbing the people who made heavy investment in past few years in the back & shaking up everyone's trust in fledging solar industry Yes people eventually will install solar off-grid to try to reduce bill as well but the momentum of solar growth will break higher capacity panels mean much less space requirements and we are already at double capacity from 3 years ago.
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Wiki Sep 21, 2022 12:20pm
I don't understand the reason of peak hours. Where the electricity is produced from the same sources and same fuel which cost same all month. They want free units to feed disco. Better stop doing net metering. So people start investing in storage and backup's
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Atif Sep 21, 2022 06:08pm
100 % agree with your analysis and conclusion
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Atif Sep 21, 2022 06:08pm
100 % agree with your analysis and conclusion
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Farhan Sep 21, 2022 06:14pm
There is an upper limit to what the grid can absorb from net metering. The inverters are known as grid following and can't go above 15 percent beoynd which grid stops picking up electricity from inverters. Meanwhile rich people have turned it into a business and invested into solar to make money. People should solarize their houses but not to make money but to reduce dependence on the grid
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Azhar Sep 21, 2022 10:18pm
Good pakistan need solar
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Maqbool Sep 22, 2022 01:47pm
Highly professional article on solar net metering and its viability. Complex yet should be seen keeping future in mind, when other sources of power generation shl be available.
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Orion Sep 22, 2022 03:57pm
Super. Well written. The ending of the write up is what will be the future. A future DISCOs neither see nor wish for.
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