Source：solarquarter

As solar panel prices in Pakistan reach unprecedented lows, the rapid increase in rooftop solar installations has sparked debates over the nation’s energy policies. A new report from the Institute for Energy Economics and Financial Analysis (IEEFA) explores the potential impacts of various policy changes, proposing strategies that could benefit both energy consumers and power distribution companies (DISCOs).

Haneea Isaad, an Energy Finance Specialist at IEEFA, highlights the growing cost-effectiveness of distributed solar photovoltaic (PV) systems in Pakistan. “With rapidly decreasing solar panel costs and rising consumer electricity tariffs, distributed solar PV systems in Pakistan are becoming increasingly cost-effective,” Isaad noted.

However, the surge in net-metered rooftop solar PV capacity has raised concerns among DISCOs about system reliability and increased capacity payments for non-net-metered consumers. In response, the government is considering several policy adjustments, including reducing buyback rates and transitioning from net metering to net billing. Other proposed measures include creating a separate tariff category for net-metered consumers and limiting the system size allowance.

The IEEFA report suggests that a moderate reduction in buyback rates could provide relief to DISCOs while still encouraging self-consumption. Syed Faizan Ali Shah, co-author of the report and an energy expert, emphasized the importance of selecting an appropriate system size to maximize returns on investment. “We recommend that consumers select the appropriate system size for their consumption needs, as this can significantly impact their return on investment,” said Shah.

The report also delves into the potential impact of shifting from the current net metering policy to a net billing mechanism, where separate tariffs would apply for electricity imports and exports. This change could extend payback periods for consumers with higher self-consumption ratios but might also incentivize the installation of oversized systems.

In addition, the report examines the implications of reducing the system size for distributed generators to 80% of the sanctioned load. While this could lengthen payback periods, especially under a net billing scheme, it might encourage a shift towards battery-based hybrid systems, offering greater autonomy from the grid and increased self-reliance.

Pakistan’s current net metering regulations, adopted in 2015, have supported the successful adoption of distributed renewable energy, with approximately 2.2 gigawatts (GW) of net-metered rooftop solar PV capacity connected to the grid by June 2024. The lucrative buyback rates and favorable payback periods have driven solar PV growth, particularly among more affluent consumers.

However, the concentration of solar adoption among wealthier segments of society has led to concerns about the equitable distribution of solarization. “This concentration of surplus power adjustment in a few distribution transformers increases the risk of overloading. Restricting system size could ensure a more equitable distribution of solarization and protect the distribution infrastructure,” Isaad explained.

The report also draws on case studies from Vietnam and Australia, noting that gradually phasing out incentives is a common approach to integrating new technologies. In Vietnam, for example, a new net metering scheme proposes a reduced tariff for surplus solar power, effectively curtailing incentives for oversized installations.

In the long term, the IEEFA report recommends greater investment in performance monitoring systems to enhance real-time oversight of the distribution infrastructure. As policy incentives for net metering are gradually phased out, the report advocates for a shift towards battery energy storage solutions, enabling consumers to achieve self-sufficiency in electricity generation.