ISLAMABAD:
Despite sharp criticism from several quarters, Energy Minister Awais Leghari announced on Wednesday that the government would not seek a review to reverse the recent changes in solar policy for new consumers, citing a goal of saving non-solar consumers from an additional Rs2.87 per unit impact.
The National Electric Power Regulatory Authority (Nepra) on Monday significantly revised the contract terms for all existing and future net-metered solar consumers – or prosumers – in a bid to manage rising solar penetration and protect an expensive and inefficient state-owned power grid.
However, Rs2.87 per unit savings for the 39 million non-solar consumers 391% lower than the financial burden borne by high-consumer households subsidizing low-consumer users on behalf of the government. According to a Power Division official, the government collects Rs7 to Rs12 per unit from residential customers who use 700 units a month to fund subsidy for households consuming below 300 units.
Speaking to reporters, Leghari said the government would file a notification with Nepra only to maintain the existing net metering conditions for the 466,506 current solar panel owners. “No notification will be filed to reverse changes for new solar panel consumers; they can solarize their homes under the new terms,” he said.
The minister added that the policy change only affects 1% of consumers, but could not provide a clear explanation as to why this small group was prioritized over systemic problems such as electricity theft, low recovery rates, high line losses, idle capacity payments and cross-subsidisation.
Leghari’s statement came hours after Prime Minister Shehbaz Sharif directed the Power Division to appeal to Nepra to review the new rules aimed at protecting existing contracts of current solar users.
Nepra’s revised policy does away with netting of sold and purchased units, introducing separate rates for electricity sold and purchased by solar panel owners. Under the new terms, solar owners will sell electricity at Rs8.13 per unit but buy it at prices as high as Rs60 per unit.
A Power Division official noted that these changes will reduce the expected output per unit on non-solar consumers from Rs2.87 to Rs2 this year – a nominal benefit of 87 paisa per unit, achieved at the cost of public backlash and reduced government credibility.
Last year, non-solar users paid Rs 223 billion (Rs 2.44 per unit) due to net metering, which was expected to rise to Rs 2.87 per unit. unit in this financial year. However, this increase is far less than the Rs12 per unit that high-consumption households pay to cross-subsidize low-consumption households, and Rs4-5 per unit. device lost due to theft and system inefficiency.
The official acknowledged that the government continues to charge Rs7-12 per unit as cross-subsidy, while another Rs4-5 per unit is lost due to theft and heavy line losses, highlighting persistent structural problems in the power system.
The Express Pakinomist was the first newspaper to report on 19 May 2024 that the government had informed the International Monetary Fund of its plan to end the net metering policy. The Minister of Power had then rejected the report, which eventually turned out to be correct.
The Energy Minister insisted that the costs of theft and inefficiency were not built into the tariffs and were paid by the Treasury as a subsidy. But these subsidies are paid for by taxpayers in the form of 38.5% income tax on the salaried class. The salaried class paid Rs606 billion in income tax last year.
Leghari insisted that the government address these issues as well, but argued that tackling the Rs2.44 per quintal was more urgent. unit impact due to solarization.
To a question about ending undue burden of up to Rs12 per unit due to cross-subsidisation, Leghari said it had an annual impact of Rs93 billion and the government did not have the fiscal space to end cross-subsidisation of private customers.
However, the government lost Rs 497 billion. during the last fiscal year due to theft and few recoveries, the minister admitted.
Leghari said 466,506 existing consumers produced 6,975 megawatts of electricity and applications for another 1,161 megawatts by over 15,000 users were awaiting connections.
The government suddenly came under widespread criticism from politicians, former government officials and energy experts, who claim it will hamper the use of rooftop solar and exacerbate inefficiencies in the electricity sector.
At present, the buy-back rate for net solar generation is Rs25.3 per unit, which is reduced to Rs8.13 per unit. The contract period has been reduced from seven to five years. The burden of capacity payments is being shifted to solar consumers now. The government, at one time, reduced the benefits by Rs17 per unit or 67% for the existing and new solar panel users.
The minister said that out of the total 466,000 consumers, 82% were concentrated in 11 cities. A quarter of them were in Lahore, 11% in Multan, 9% in Rawalpindi, 7% in Karachi, 6% in Faisalabad, 5% each in Gujranwala, Bahawalpur and Islamabad and 4% in Peshawar.
He disclosed that another 14,000 MW equal solar users were off grid and the government cannot do anything about them as they are not connected to the national grid.
The minister said there was mushrooming in solar penetration in the past three years as the total installed capacity increased from 1,085 MW to 6,975 MW in this financial year.
The Power Division official also claimed that there would be a marginal impact on the owners after the revision of benefits and they would be able to recover their investment within three years and seven months. However, the government’s assumption was flawed as it claimed that the residents sold 60% of their units to the government.
We have to make arrangements on the national grid to supply 8,136 MW of electricity during non-solar times and the government invested Rs 270 billion last year to meet these needs, claimed the power department official.
However, his claim was not substantiated as the country already has surplus electricity and consumers pay about Rs 2 trillion annually in idle charges.
Under Nepra’s direct regulatory and licensing authority, the new rules apply to systems with a capacity of one kilowatt to one megawatt.
Instead of addressing the fundamental flaws, the net billing scheme shifts responsibility for inefficiencies in the electricity sector onto compliant solar consumers, said the Policy Research Institute of Market Economy (PRIME) – an independent think tank.
Pakistan’s power sector crisis stems from elevated transmission and distribution losses, demand-supply mismatch, delays in tariff adjustments and persistent governance issues.
Pakistan has committed to source 60% of its energy mix from renewables by 2030 and to reduce emissions under its updated NDCs by 2030, Awais Leghari said. He said the government has already increased the share of clean energy to 55%, bringing the end goal within reach.
Rooftop solar has been one of Pakistan’s market-driven successes in expanding renewable energy, PRIME said. By dismantling net metering without a credible transitional framework, the new scheme risks pushing compliant solar users towards off-grid systems and weakening alignment with global energy transition trends that actively encourage distributed generation, PRIME added.
