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

In large solar projects, grid connectivity is complex and expensive. It has an intermittent supply which varies with sunshine. A sudden drop in load could have a cascading impact on the network and to mitigate the risk, networks need to be upgraded and spinning reserves (primarily on oil, gas and coal) need to be in pipeline to replace the sun a few seconds after the fall. All of this increases the cost and reduces the viability of large solar projects.

Solar is best harnessed at distributed levels. Losses are minimal. And the risk must be borne by small consumers. This was well supported in Pakistan. SBP had offered a subsidized financing program for home solar power plants. Then the regulator (NEPRA) authorized net metering at a lucrative rate (Rs13/unit). The repayment period was short. And many had switched to solar net metering.

Now, with the recent base rate increase and the rising cost of fuel, electricity bills have increased significantly. And more and more people are considering going solar with a net metering option. The government rightly fears that the grid load will drop as the grid has to meet peak load during non-solar generation hours without any compensation. This will increase the stranded cost for nightclubs and will have to be passed on to non-solar consumers.

Since the solar option is mainly used by the upper middle class and wealthy households, the cost of capacity and other assets also deployed for solar customers must be paid by the middle and lower classes. According to a tweet thread from the Secretary’s Electricity Division, almost all three-phase meter consumers will switch to net metering with 3,600 MW while the additional annual cost of Rs 100 billion (by 2027) has to be paid. by the rest (mainly by single-phase consumers).

The ruling secretary is right about the stranded cost and the pass-through of the impact to poorer consumers, but conveniently ignored that these supposedly wealthy three-phase consumers are already subsidizing single-phase consumers. The representative of the government has just demonized the consumer at the net meter without taking into account the cost of inefficiency that the consumer pays.

There are higher AT&C losses that these three-phase meter consumers pay. Out of 100 units of electricity produced, discotheques only recover 72. 18 units are transmission and distribution losses, while 10 billed units are not recovered. In the logic of not giving undue advantages to net-metered consumers, they should also not bear the cost of the inefficiencies of nightclubs, thefts by unclaimed consumers and subsidies for the poorest consumers. One-way logic does not add up.

Anyway, NEPRA proposes to reduce the net-metering payment to Rs9/unit instead of the existing Rs13/unit. The calculation of Rs13/unit was made when the base tariff was around Rs18, and now it has risen to around Rs24, and the net solar metering rate was supposed to increase to Rs19/unit. However, now NEPRA is offering to reduce to Rs9/unit. There is a double impact on net metering. So SBP no longer offers concessional financing. This is a double hazard and would discourage conversion to solar and net metering.

Nightclubs have never liked net metering. They have always resisted it. People had to wait months to get a net meter. Similarly, discotheques have never liked the idea of ​​direct turnover by heavy consumers. They ask for higher shipping costs to compensate for other factors. In the case of net-metered consumers, the rationale for lowering net-metered tariffs is to implicitly charge higher transmission costs.

The person who subscribes to the net is called a prosumer. He is effectively a consumer who produces. The idea is to lower the cost of electricity. The investment is made to reduce costs. It’s not for profit. In this case it should come in IPP mode where the structure is totally different. There are two models to work with. One is net metering – where the prosumer gets credit for net energy. The other is net metering, where depending on when loads are delivered and consumed, different rates are applied and the bill is net. NEPRA is also considering the possibility of moving from net metering to net metering.

This is the story of NEPRA, discos and government and their raison d’être. There is another facet of the consumer. The cost of electricity on the grid is increasing. The reliability of the network is questionable. There is no political will to privatize or corporatize nightclubs to reduce inefficiencies. The consumer who can afford solar power and has space to install panels may think of getting more off the grid, i.e. default.

Currently, most consumers do not invest in storage batteries, as they supply the excess to the grid. And if there is no net metering (or the consumer is waiting for approval), precious excess energy is simply wasted. Some would now consider investing in batteries and storing energy for hours when solar power is not producing. The return on investment today is around 6-7 years. The ROI of net metering increases and the justification for battery storage increases.

The cost of solar panels has come down significantly over the past 5-7 years and that is why more and more people are moving. Battery technology develops with a 5-7 year lag compared to solar power and in the coming years the cost of batteries is expected to decrease and the return on investment will also decrease. And without bringing efficiencies to the grid, more and more consumers would exit the grid relying more on self-production and consumption. In the case of the companies, they would be working on a combination of captive hydrocarbon power plant complemented by solar. Once the exclusivity ends, the bargaining power of the government (discotheques) will decrease.

The concept of micro-grids will develop. The national grid and nightclubs would largely supply subsidized consumers and bad (non-paying) consumers. And then the government would have to live with the stranded cost and nothing can be billed to the good consumers who would be completely (or substantially) cut off from the grid. This is why NEPRA and the government should think of a middle way. One option is to keep the net-metering unchanged at Rs13/unit.