ISLAMABAD:
Despite facing harsh criticism from multiple quarters, Energy Minister Awais Leghari on Wednesday announced that the government would not seek a review to reverse recent changes in solar policy for new consumers, citing the aim of saving non-solar consumers from an additional hit of Rs 2.87 per unit.
The National Electric Power Regulatory Authority (Nepra) on Monday significantly revised contract terms for all existing and future net metered solar consumers (or prosumers), in an effort to manage the growing penetration of solar energy and protect a costly and inefficient state power grid.
However, the saving of Rs 2.87 per unit for the 39 million non-solar consumers is 391% less than the financial burden borne by high-consumption households, which subsidize low-consumption users on behalf of the government. According to a Power Division official, the government collects Rs 7-12 per unit from residential consumers using 700 units monthly to fund subsidies for households consuming less than 300 units.
Speaking to reporters, Leghari said the government would file a review with Nepra just to maintain the existing net metering terms for the current 466,506 solar panel owners. “No review will be introduced to reverse the changes for new solar panel consumers; they can solarize their homes under the new conditions,” he said.
The minister added that the policy change affects only 1% of consumers, but could not give a clear explanation as to why this small group was given priority over systemic issues such as electricity theft, low recovery rates, high line losses, payments for idle capacity and cross-subsidies.
Leghari’s statement came hours after Prime Minister Shehbaz Sharif directed the Power Division to appeal to Nepra to review the new regulations, with the aim of protecting existing contracts for existing solar users.
Nepra’s revised policy abolishes compensation for units sold and purchased, introducing separate tariffs for electricity sold and purchased by solar panel owners. Under the new terms, solar owners will sell electricity at Rs 8.13 per unit, but will buy it at prices of up to Rs 60 per unit.
A Power Division official said these changes will reduce the projected per unit impact on non-solar consumers from Rs 2.87 to Rs 2 this year, a nominal benefit of 87 paise per unit, achieved at the cost of public backlash and lower government credibility.
Last year, non-solar users paid Rs 223 billion (Rs 2.44 per unit) due to net metering, which was projected to increase to Rs 2.87 per unit this fiscal year. However, this increase is much less than the Rs 12 per unit that high-consuming households pay to subsidize low-level users and the Rs 4 to Rs 5 per unit lost due to theft and system inefficiencies.
The official acknowledged that the government continues to charge Rs 7-12 per unit as cross-subsidy, while an additional Rs 4-5 per unit is lost due to theft and heavy losses on the lines, highlighting the persistent structural problems in the power system.
The Express PAkGazette was the first newspaper to report on May 19, 2024, that the government had informed the International Monetary Fund about its plan to end the net metering policy. The Minister of Energy later denied the report, which ultimately turned out to be correct.
The Minister of Energy insisted that the cost of the theft and inefficiencies was not included in the tariffs and was paid by the Ministry of Finance in the form of subsidies. But these subsidies are paid by taxpayers in the form of a 38.5% income tax for the salaried class. Last year, the salaried class paid Rs 606 billion in income taxes.
Leghari insisted that the government was also addressing these issues, but argued that it was more urgent to address the Rs 2.44 per unit impact due to solarization.
To a question on ending undue burden of up to Rs 12 per unit due to cross-subsidy, Leghari said it had an annual impact of Rs 93 billion and the government had no fiscal space to end cross-subsidy of residential consumers.
However, the government lost Rs 497 billion during the last fiscal year due to theft and low recoveries, the minister admitted.
Leghari said 466,506 existing consumers were producing 6,975 megawatts of electricity and connection requests for another 1,161 megawatts from over 15,000 users were pending.
The government has suddenly found itself exposed to widespread criticism from politicians, former civil servants and energy experts, who argue that it will discourage the adoption of rooftop solar and worsen inefficiencies in the energy sector.
Currently, the net solar generation buyback rate is Rs 25.3 per unit, which has been reduced to Rs 8.13 per unit. The duration of the contract has been reduced from seven to five years. The burden of capacity payments is now shifting to solar consumers. The government, in one go, reduced the benefits by Rs 17 per unit or 67% for new and existing users of solar panels.
The minister said that of the total of 466,000 consumers, 82% are concentrated in 11 cities. A quarter of them were in Lahore, 11% in Multan, 9% in Rawalpindi, 7% in Karachi, 6% in Faisalabad, 5% in Gujranwala, Bahawalpur and Islamabad and 4% in Peshawar.
He revealed that another 14,000 MW of equivalent solar energy users were off the grid and the government cannot do anything about it because they are not connected to the national grid.
The minister said there has been skyrocketing growth in solar penetration in the last three years as the total installed capacity jumped from 1,085 MW to 6,975 MW in this fiscal year.
The Power Division official also stated that there would be a marginal impact on the owners after the review of benefits and they would be able to recover their investment within three years and seven months. However, the government’s assumption was wrong as it claimed that residential users were selling 60% of their units to the government.
We have to make arrangements in the national grid for supply of 8,136 MW of electricity during non-solar times and the government made an investment of Rs 270 billion last year to meet these needs, the power division official said.
However, his claim was unsubstantiated as the country already has surplus electricity and consumers pay around Rs 2 trillion a year in payments for idle capacity.
Under Nepra’s direct regulatory and licensing authority, the new rules are applicable to systems with a capacity of one kilowatt to one megawatt.
Instead of addressing fundamental flaws, the net billing regime shifts responsibility for energy sector inefficiencies to compliant solar consumers, said the Policy Research Institute of Market Economics (PRIME), an independent think tank.
The crisis in Pakistan’s power sector is due to high transmission and distribution losses, supply-demand mismatch, delays in tariff adjustments and persistent governance issues.
Pakistan has committed to sourcing 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 proportion of clean energy to 55%, putting the ultimate goal within reach.
Rooftop solar has been one of Pakistan’s market-driven successes in the expansion of renewable energy, PRIME stated. By dismantling net metering without a credible transition framework, the new regime risks pushing compliant solar users toward off-grid systems and weakening alignment with global energy transition trends that actively incentivize distributed generation, PRIME added.
