By Nawal Aslam
The Pakistani government has been proactive in implementing solar energy initiatives under the Framework Guidelines for Fast-Track Solar PV Initiatives 2022. Initially approved on October 18, 2022, and subsequently amended on May 24, 2023, and August 9, 2023, these guidelines aimed to promote the solarisation of public sector buildings. However, recent developments and challenges have highlighted the need for further adjustments to the solar policy framework.
In a recent cabinet meeting, the Ministry of Energy Power Division raised concerns regarding Section 2.3.2 of the Framework Guidelines. This section mandates the Alternative Energy Development Board (AEDB), now merged with the Private Power & Infrastructure Board (PPIB), to prepare standard bidding documents and contract agreements, conducting competitive bidding on behalf of public sector entities. This centralized approach aimed to streamline the solarisation process, yet it faced significant resistance from procuring agencies.
The Ministry of Power detailed the steps taken by PPIB, which included preparing standard Request for Proposal (RFP) documents and contract agreements for the solarisation of public sector buildings and undertaking technical designs for around 250 buildings. Despite these efforts, the centralized bidding process encountered hurdles, including reluctance from procuring agencies and regulatory complications from the Public Procurement Regulatory Authority (PPRA).
To address these challenges, the Ministry of Power proposed allowing public sector entities to independently conduct competitive bidding for net-metering-based solar PV systems, using model documents prepared by PPIB. The cabinet, emphasizing the need for PPRA recommendations, approved the proposal to amend Section 2.3.2, permitting PPIB to support entities as needed.
Amid these procedural adjustments, a significant policy shift looms on the horizon with the government’s announcement to transition from net metering to gross metering for rooftop solar panels. This change, driven by financial challenges in the energy sector, aims to alter how consumers are compensated for the electricity they generate, potentially discouraging the use of rooftop solar panels.
Under the current net metering system, consumers can offset their electricity consumption with power generated by their solar panels, benefiting from reduced electricity bills and promoting energy independence. However, gross metering requires consumers to sell all generated electricity to the grid at a fixed Feed-in-Tariff (FiT) and then buy back electricity at retail rates, significantly reducing financial incentives for solar investments.
The proposed shift to gross metering could have severe economic repercussions for both residential consumers and industries. Residential consumers currently benefit from lower electricity bills, but under gross metering, they would face higher costs, making solar investments financially unviable. Industries relying on captive solar power generation would also see increased operational costs, potentially reducing their competitiveness.
Moreover, this policy change could undermine Pakistan’s renewable energy goals and increase reliance on fossil fuels. The current net metering system has facilitated a rapid increase in rooftop solar installations, contributing to a diversified energy mix. Discouraging solar adoption could stall progress toward renewable energy targets and climate commitments.
Addressing these challenges requires a balanced approach. Maintaining net metering for smaller residential consumers while implementing gross metering for larger commercial installations could ensure continued solar investment benefits while addressing power distribution companies’ financial concerns. Additionally, renegotiating capacity payments with Independent Power Producers (IPPs), particularly under the China-Pakistan Economic Corridor (CPEC), could reduce electricity costs.
Offering subsidies or tax incentives for solar installations could further encourage solar investments, easing the transition to gross metering while maintaining momentum toward renewable energy goals. By adopting a balanced, forward-thinking approach, Pakistan can navigate its solar panel reforms to promote sustainable energy and economic stability.
References:
Bhutta, Z. (2023, November 15). Reforms in solar initiatives approved. The Express Tribune.
Saeed, A. (2024, April 26). Demand for solar power rises in Pakistan as import glut crashes panel prices. Arab News Pakistan.
