The macroeconomics of electricity tariffs


https://www.thenews.com.pk/print/1190204-the-macroeconomics-of-elec...

The macroeconomic landscape and power tariffs in Pakistan undergo quarterly adjustments, driven by a medley of factors. For instance, data from the Sahiwal coal power plant illustrates how these variables impact electricity generation costs and, consequently, power tariffs. Exchange rates are a linchpin in the power tariff equation, affecting the cost of imported fuels for power generation. From a reference period of 2016 and the exchange rate of Rs104.594/USD, the rupee has depreciated sharply to Rs278.500/USD in the April-June 2024 quarter. The tariff has been indexed to the US dollar and it reflects increases in various costs: fixed operating and maintenance costs have risen by 235 per cent, return on equity has increased by 184 per cent, debt repayment has gone up by 169 per cent, and interest charges have surged by 343 per cent.

Interest rates, both domestic and international, also bear heavily on power tariffs. The three-month KIBOR (Karachi Interbank Offered Rate) surged from 6.150 per cent to 21.990 per cent, while the three-month LIBOR (London Interbank Offered Rate) climbed from 1.380 per cent to 5.560 per cent. These higher rates inflate the cost of borrowing for power generation companies, with the cost of working capital soaring from Rs0.1541/kWh to Rs1.2568/kWh. The interest charge component of the tariff similarly rose from Rs0.3458/kWh to Rs1.5314/kWh, reflecting the escalating costs of servicing local and foreign debt.

Inflation weaves its influence through every aspect of power generation costs. The US CPI (Consumer Price Index) increased from 246.819 to 310.326, while Pakistan’s N-CPI (National CPI) surged from 131.010 to 260.010. These inflationary pressures push up prices for goods and services necessary for power plant operation and maintenance. For instance, fixed O&M (Operations and Maintenance) costs for foreign components rose from Rs0.1601/kWh to Rs0.5360/kWh, and for local components, from Rs0.1976/kWh to Rs0.3922/kWh.

This dramatic slide has skyrocketed the cost of imported coal from Rs13,605 per ton to Rs73,901.55 per ton. The ripple effect of this spike in import costs is a steep increase in power generation costs, inevitably passed on to consumers through higher tariffs.

Fluctuating global coal prices and calorific values further compound the issue. The weighted average price of imported coal has shot up, driving overall energy production costs higher. This is reflected in variable O&M costs for foreign components, which rose from Rs0.0763/kWh to Rs0.2554/kWh, and for local components, from Rs0.0628/kWh to Rs0.1246/kWh. The combined effect of these macroeconomic factors is a significant rise in power tariff components. The total capacity charge escalated from Rs3.2696/kWh in the reference period to Rs10.3445/kWh for the April-June 2024 quarter. The variable component of energy purchase price similarly climbed from Rs0.1391/kWh to Rs0.3800/kWh showing 173 per cent increase.

Solar energy is the only viable option amid skyrocketing electricity bills and after Punjab and Sindh, the government of Khyber Pakhtunkhwa is also planning to distribute solar panels among the needy ones.

https://pakobserver.net/kp-govt-solar-scheme-2024-check-eligibility...

The provincial government of KP now came up with program to distribute free solar panels among 1lac households in the region. CM Gandapur’s advisor on Finance, Muzammil Aslam, revealed this initiative.

Muzammil said each household will receive a complete 2-kilowatt solar setup, batteries, DC fans, and inverters. He explained that government is looking to equip 1lac households with these complimentary solar panel systems.

He also highlighted KP’s existing infrastructure of over 90 power plants that produce electricity at rates between Rs 6 to Rs 7 per unit, contrasting sharply with the Rs 27 per unit charged by the Water and Power Development Authority (WAPDA).



KP Solar Scheme
In the first phase, only protected consumers will be able to apply for government funded solar scheme.

Solar Scheme 2024
Punjab CM Maryam Nawaz and Sindh CM Murad Ali Shah announced electricity to over 200,000 households in partnership with the World Bank. Each household will receive complete solar system for Rs 7,000, encompassing solar panels, charge controllers, and batteries to power one fan and three LED bulbs.

Maryam Nawaz also sanctioned distribution of 1-kilowatt solar systems to thousands of families. This decision was made during a meeting chaired by CM Maryam Nawaz to evaluate energy projects. The solar systems will be provided to low-consumption electricity users, including two solar panels, batteries, an inverter, and associated wiring.

Punjab Govt bringing solar system for 45 lakh consumers: Maryam

Chief Minister of Punjab Maryam Nawaz Sharif, chairing the 11th meeting of the provincial cabinet on Tuesday, said that they were bringing solar system for 45 lakh consumers who spend up to 500 units. She said, ”Due to increase in electricity bills, there is anxiety among the public, together with my team, have found a … Continue reading Punjab Govt bringing solar system for 45 lakh consumers: Maryam

Dr Gohar Ejaz
@Gohar_Ejaz1
I'm sharing data from NEPRA for Jan 24 to March 24 showing a capacity payment of 150 billion PKR per month. Please note how this amount is distributed to various IPPs, with half running below 10% capacity. Four power plants are receiving 1000 crores per month each with #zero power supply.* This money, our halal income, is being given to 40 families under the guise of capacity charges. These plants should be declared merchant plants, where payments are made only for electricity produced, and we should buy from the cheapest suppliers. The government should not do business at the expense of the people of Pakistan. NEPRA must include representation from all large consumers in its distribution and management. This exploitation must end.
#Pakistan #ElectricityBill #IPPs

https://x.com/Gohar_Ejaz1/status/1814597980629966990

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Pakistan faces a 70% electricity price hike due to hidden charges - Profit by Pakistan Today

https://profit.pakistantoday.com.pk/2024/07/11/pakistan-faces-a-70-...

During the seminar organized by the Centre for Economic and Energy Journalists (CEEF) in collaboration with SDPI, Dr. Waleed noted alarming increases in capacity payments, citing a 216% surge over five years in the capacity charges of an imported coal-fired power plant in Punjab. He attributed this escalation to factors like US dollar indexation and interest payments on circular debt, which now constitute 70% of the overall tariff.

Dr. Waleed underscored that the burden of these costs is disproportionately higher on smaller consumers, terming the current tariff structure as regressive. He urged the government to renegotiate IPP contracts, echoing past efforts that successfully ended US dollar indexation for some plants.

Ahad Nazir, another SDPI energy expert, pointed out that declining grid consumption, coupled with substantial investments in power generation without commensurate upgrades in transmission infrastructure, has led to excessive capacity and inflated capacity payments.

Efforts are underway to decentralize tariff structures at distribution companies to promote competitive pricing, although significant changes are not expected in the near term.

In conclusion, the escalating hidden costs embedded in Pakistan’s electricity tariffs are exacerbating affordability challenges for consumers and necessitate immediate policy interventions to stabilize

‘Sky-high power tariffs hindering exports’ - Business


https://www.dawn.com/news/1846800

“We are all sinking under the present Rs2 trillion capacity payments to 40 owners of these closed and partially operational IPPs,” Mr Ejaz told Dawn on Friday. He said that rising energy prices have affected industrial expansion, particularly in textiles and garments.

Mr Ejaz said that 53 IPPs are completely closed, but still receiving regular capacity payments from the government for not producing a single unit. He questioned the justification for such payments, which are collected from consumers and businesses.

In 2015, 13,000MW was consumed, and the capacity fee was Rs200bn with an installed capacity of 20,000MW. Mr Ejaz said that the current capacity payment was Rs2tr and that the consumption in 2024 still remains at 13,000 MW, with an installed capacity of 43,400 MW.

Mr Ejaz claimed that the same consumer is being charged ten times the capacity charges for the same units. He went on to claim that power is generated at Rs35 (including fuel charges of Rs10.60 and Rs24 in capacity charges) and distributed by Discos to paying domestic consumers at Rs60, yet the government still loses trillions of rupees.

He said the solution was to increase growth and invest in export-oriented industries, regretting that exports were not conceivable given the current high energy prices.

Huasun Celebrates Successful Delivery of 100MW+ HJT Solar Modules to Pakistan - SolarQuarter


https://solarquarter.com/2024/08/01/huasun-celebrates-successful-de...

Leveraging its leading HJT technology, Huasun has been actively engaging in the development of Pakistan’s solar industry. The company has partnered with several local factory owners and EPC companies, including E-Group, DSG, and ESL. Notably, in September 2023, Huasun signed a Memorandum of Understanding (MOU) exceeding 100MW with its strategic EPC partner E Group. Additionally, in early 2024, Huasun established an exclusive strategic distribution partnership with AE Power, a prominent local solar company, to ensure a steady supply of high-efficiency HJT products to Pakistan.

Huasun’s HJT products have been successfully integrated into multiple solar projects across Pakistan. Notable installations include industrial rooftops at the 5MW Tayyab Textile Mill, the 3MW Sarfraz Textile Mill, and the 3MW Nisar Spinning Textile Mill. Importantly, Huasun has delivered a substantial number of HJT modules with power outputs exceeding 720W to the region, demonstrating the company’s leadership in both power and efficiency of the commercial solar panels.


“As more projects are successfully completed and local customers continue to recognize and trust Huasun’s products, the company’s reputation and influence in Pakistan are steadily increasing. Surpassing 100MW in shipments makes Pakistan one of the most prominent regions in Huasun’s global journey.” Said Rana Farhan, Director- Middle East & Pakistan at Huasun.

Pakistan, located on the South Asian subcontinent, enjoys excellent solar conditions with nearly 3,000 hours of sunshine annually. However, the region also faces hot and dry climates, high electricity demand, and substantial electricity costs. In response, the local government has introduced a series of incentive policies and long-term plans for renewable energy, significantly promoting the rapid development of the photovoltaic industry. Consequently, residential and commercial solar installations in Pakistan have seen a notable increase.

Huasun’s HJT products are manufactured using advanced technology and reliable materials. By optimizing cell technology and encapsulation processes, the company has improved the photoelectric conversion efficiency and reliability of its products. With an impressive temperature coefficient of -0.24%/℃, HJT modules perform exceptionally well in high-temperature environments. Compared to conventional modules, they offer higher power and efficiency, making them a particularly reliable choice for the Pakistani market.

Layne Qiu, Sales Director of MEA & South Asia at Huasun, remarked, “Achieving 100MW shipment milestone to Pakistan is a crucial step for Huasun in the South Asian market. This accomplishment not only highlights the exceptional performance of Huasun’s HJT technology but also underscores the immense market potential of our products. We are confident that in the near future, we will expand our delivery to gigawatt-scale high-efficiency HJT products across South Asia, the Middle East and Africa, significantly advancing the local energy industry’s transformation and sustainable development.”

Faseeh Mangi
@FaseehMangi
Pakistan’s market for solar power is booming, propelled by a surge in imports from China, according to BloombergNEF.

The country imported some 13 gigawatts of solar modules so far the year, making it the third-largest destination for Chinese exporters

https://x.com/FaseehMangi/status/1821855549396279766

Solar is gaining traction in the South Asian nation following hikes in power prices over the past few years, with the latest increase in July triggering widespread protests. Pakistan's market for solar power is booming, propelled by a surge in imports from China, according to BloombergNEF.

https://www.bloomberg.com/news/articles/2024-08-09/pakistan-sees-so...

Pakistan Sees Solar Boom as Chinese Imports Surge, BNEF Says – BNN Bloomberg


https://www.bloomberg.com/news/articles/2024-08-09/pakistan-sees-so...


(Bloomberg) -- Pakistan’s market for solar power is booming, propelled by a surge in imports from China, according to BloombergNEF.The country imported some 13 gigawatts of solar modules in the first six months of the year, making it the third-largest destination for Chinese exporters, according to a report by BNEF analyst Jenny Chase. Pakistan’s installed capacity to generate power is just 50 gigawatts. China is the world’s biggest producer of solar equipment.Solar is gaining traction in the South Asian nation following hikes in power prices over the past few years, with the latest increase in July triggering widespread protests. Higher rates have seen grid electricity consumption drop to the lowest in four years as many people switch to independent solar. “Pakistan’s market has the potential to continue to be very large,” said Chase. “If solar is solving the market’s power problems, there is no reason to expect a crash any time soon.”BNEF expects that the country will add between 10 gigawatts and 15 gigawatts of solar this year, mostly on homes and factories, making Pakistan the sixth-largest market in the world. Given the surge in imports, that figure could end up being far higher — or growth could stall if the grid situation improves, prices fall, or the market of middle-class people who can afford solar panels on their roofs saturates, according to the report.
There are other complications in accurately assessing the market and its prospects, said Chase. Those include wide discrepancies between official data on installations and imports, as well as claims last year that solar imports were used in money laundering schemes.

China adopted classic cutthroat pricing to shift a record 120,427 megawatts (MW) of solar module capacity exports in the first half of 2024, with Pakistan being Asia's largest single market, accounting for 10,450 MW.

Key to the strong export flow was a steep cut in module prices, which averaged 13.7 cents per megawatt over the first half of 2024, compared to an average of 18 cents/MW for the whole of 2023.

https://mettisglobal.news/pakistan-emerges-as-largest-asian-buyer-i...

The Netherlands remained the top country market for China's modules, taking in 23,421 MW of capacity during the opening half of the year.

Brazil was China's second largest market during the first half of the year, snapping up 10,511 MW of capacity.

Pakistan was the world's third and Asia's largest single market, accounting for 10,450 MW.

Meanwhile, India snapped up 8,324 MW.

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Key Markets

Europe was the top destination for China's solar modules, accounting for 43% of the total, or 52,158 MW.

That total was down 20% from the same period in 2023, as high interest rates, economic growth concerns and trade tensions with China stifled solar installation demand across the continent.

Nonetheless, Europe's purchase total was the second highest tally for a half-year period behind the first half of 2023.

The Netherlands remained the top country market for China's modules, taking in 23,421 MW of capacity during the opening half of the year.

While that total was 25% less than during the opening half of 2023, The Netherlands' purchases were still more than twice the size of any other nation during the first half of the year.

Spain, Germany and Italy were also notable buyers in Europe, but all also showed steep year-on year contractions in purchase volumes, Ember data shows.

Brazil was China's second largest market during the first half of the year, snapping up 10,511 MW of capacity.

That total was up 10% from the same period in 2023, and contrasts with a slight contraction in imports by the Latin American region as a whole during the first half of the year.

Growth Areas

Asia was the second largest regional destination for China's solar parts, accounting for a record 32,109 MW of capacity, or around 27% of the total.

That total was 86% more than during the first half of 2023, and was driven mainly by strong growth in South Asia. Meanwhile, India snapped up 8,324 MW.

Both markets recorded more than 200% jumps in solar imports from the same period in 2023, and represent key growth markets for China in the future.

The Middle East was another key destination for China so far this year, with exports to the region topping 13,000 MW for the first half of the year to account for a record 11% share of China's total solar panel and parts exports.

That compares to 6,228 MW during the first half of 2023, and was driven in large part by strong purchases by Saudi Arabia (7,649 MW), United Arab Emirates (1,892 MW) and Oman (1,396 MW).

Elsewhere, North America remained a tiny market for Chinese panels and parts due to the ongoing trade spat between China and the United States, while Africa's purchases shrank by around 9% from the first half of 2023, and accounted for only 4.3% of China's total sales

Scatec starts operating 150MW solar projects in Pakistan - PV Tech

Norwegian renewable energy developer Scatec has started commercial operation of 150MW solar PV plants in Pakistan.

The solar PV projects boast an annual generation capacity of 300GWh. Scatec signed a 25-year power purchase agreement (PPA) with the Central Power Purchasing Agency of Pakistan to supply energy in the South Asian country.

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In a first, women engineers set up 24 kW solar system in Pakistan
Five exceptional female engineers, trained at NED University, became first women to participate in the project

https://tribune.com.pk/story/2487267/in-a-first-women-engineers-set...

KARACHI:
Female engineers have successfully installed a 24-kilowatt solar system on the roof of Karachi's Hussaini Orphanage for the first time in Pakistan's history.

With hands-on support from KfW DEG Impuls and Develop, five exceptional Ladies Fund engineers—Areeba Rashid, Iman Batool, Farhan Anjum, Muskan Iqbal, and Rahemeen Haider Ali—completed the installation, becoming the first women in Pakistan’s history to be paid for solar roof work. They are now recognized as official installers for Ladies Fund Energy.

This achievement was part of the Ladies Fund Energy initiative, aimed at empowering female engineers in Pakistan. Certified female engineers trained at NED University completed the installation, which included six lithium batteries, marking the first-ever solar roof installation by women in the country.

The project, led by Dawood Global Foundation (DGF) in partnership with Ladies Fund Energy Pvt. Ltd., was designed to integrate women into the energy sector. The training of 28 female engineers from NED University was supported by KfW and Develop, with the female team taking on roles as both interns and installers to complete the solar installation at the orphanage.

Dr. Mohsin Aman provided internationally recognized "Solar Roof Installation" training at NED University, while Ladies Fund Energy designed a high-quality solar roof specifically for the orphanage. The success of this project was met with overwhelming interest, as 86 female engineers were waitlisted for the course. DGF plans to extend this training to girls from interior Sindh in the next phase.

Tara Azra Dawood, CEO of Ladies Fund Energy, highlighted the initiative’s dual purpose of training and recruiting female engineers for the Ladies Fund, while also positioning them as key players in the broader energy sector. She encouraged greater participation to enhance women’s representation in the field and contribute to a greener Pakistan, expressing gratitude to Hussaini Orphanage for entrusting the female engineers with this important task.

Karachi Mayor Murtaza Wahab, who attended the ceremony as the chief guest, expressed pride in the dynamic female engineers of Karachi, recognizing them as the pioneering installers of Ladies Fund Energy. He also promised to provide land and funds for training 100 female engineers at NED University through DGF, in collaboration with the government and KMC and granted Ladies Fund Energy the opportunity to pitch their tender for the solarization of KMC buildings.

Giving A Fair Deal To Distributed Solar In Pakistan

The author is a freelance contributor interested in sustainable energy and power sector policy, planning, and development. He can be reached at: msrahim@hotmail.com

https://thefridaytimes.com/18-Aug-2024/giving-a-fair-deal-to-distri...


Distributed solar needs a level-playing field to compete with conventional options. Government should provide an enabling legal, regulatory umbrella and an equitable decision-making framework to objectively evaluate every option

For much of its history, the electric supply industry (ESI) in Pakistan has enjoyed the status of being the most stable business and a favourite of investors. This was mainly due to "economies of scale" in generation, extended distances between load centres and good generation sites (especially, hydro), and the benefits that interconnecting isolated systems offered by way of reserve sharing, energy trading, and reliability. Alas, no more!

The advent of small gas-fired combined cycle power plants has ended the golden era of the large, central-station supply systems. Distributed energy generation technologies, particularly solar photovoltaic (PV), have dealt the proverbial death blow to the unchallenged reign of the traditional way of governing the ESI — using a central-station portfolio of mega-sized generation projects and delivering electricity produced by them to loads located far away.

Distributed solar technologies—located behind-the-metre or anywhere else in the distribution system—have been making rapid inroads into power grids across the world. Pakistan is no exception.

Pakistan did show an interest in solar technologies, but this has remained focused on their deployment in the power grid. Though important, it's not the only or even the best avenue for their uptake. The only initiative from the government to promote distributed solar has been its net metering schemeintroduced in 2015. Most other behind-the-metre solar PV systems have not merited any incentive from our governments.

Precise statistics for distributed solar in the country are not available from official sources but a recent report by "pv magazine" terms it "booming" as the import of PV panels saw a rise from 2.8 GigaWatt (GW) in 2022 to 5 GW in 2023 and may reach 12 GW in 2024. By June 2023, the total number of net metering connections had reached 63,703 with a cumulative capacity of 1,505 MW. The annual addition of new consumers to this list was around 1,596, with a cumulative capacity of 221 MW in 2023.
These statistics indicate that the number of net metering connections and their magnitude are still low, but electricity consumers in Pakistan are opting for non-grid interactive systems in rapid strides to reduce their electricity bills which have become unaffordable.

The rigid mindset of power sector functionaries, from top to bottom, is directly responsible for this alarming trend. They have treated consumers as captives to the grid and have used them to dump all the misgovernance costs. They are still not willing to wake up to the new reality that the consumers now have multiple choices. Distributed solar is just one of these and is destined to grow even more if the grid supply remains unreliable and expensive.

Distributed solar offers many benefits. It can avoid investments in the grid and reduce losses, help manage demand, support grid operation, avoid environmental pollution, spur local industrialisation, promote employment, reduce reliance on imported fuels, and enhance national security and sustainability.

Their presence in the grid does pose some technical challenges. In addition to the two-way flow of power, they add to issues like loss of frequency and voltage control, risks of backfeed to the upstream transmission systems, and impair the power quality.

K-Electric to Double Pakistan's Solar Energy Capacity in Next 2 Years

https://propakistani.pk/2024/08/19/k-electric-to-double-pakistans-s...

K-Electric Limited plans to add 640 megawatts of clean energy to its portfolio within the next two years which would double Pakistan’s solar energy capacity, reported Bloomberg.

Chief Strategy Officer Shahab Qader Khan said the bidding process for this begins on August 19 (today) and will close next month. The projects will include 200 megawatts of hybrid solar wind generation.

Solar energy makes up just 1 percent of the national energy mix, and K-Electric wants to alleviate some of the prevalent burden of electricity bills on residential consumers by reducing the country’s dependence on expensive fuel imports.

Looking ahead, K-Electric plans to add 1,200 megawatts of renewable energy over the next five years, while scaling back on costly energy sources like liquefied natural gas and fuel oil.

Pakistan currently faces high electricity costs due to heavy reliance on fossil fuel imports. It is pertinent to mention that monthly power bills have surged by 155 percent since 2021 and now exceed rent expenses for many households across the country.

Solar projects receive lowest-ever tariff bid

Bid of Rs11.2 per unit marks pivotal shift in renewable energy sector

https://tribune.com.pk/story/2489390/solar-projects-receive-lowest-...

KARACHI:
In a landmark development, K-Electric's (KE) 150-megawatt solar energy projects in Balochistan have achieved the country's lowest-ever tariff bid, setting a new industry benchmark and marking a pivotal shift in the renewable energy sector.

A bid of Rs11.2 per unit, revealed during a ceremony, underscores the trust in private sector-led initiatives, particularly in the context of Pakistan's ongoing economic challenges. Earlier, Bloomberg News highlighted KE's endeavours to nearly double Pakistan's solar capacity by adding 640MW of clean energy to its portfolio in the next two years.

It was revealed that the bidding process for those projects began in August and would conclude in September 2024. The portfolio, which includes 200MW of hybrid solar-wind generation, is also a critical component of KE's strategy to reduce reliance on expensive fossil fuels and lower the country's overall import bill.

The 640MW of projects, currently in the pipeline, have been divided into three tranches: 150MW solar projects in Balochistan, a 270MW project in Sindh and a 220MW site-neutral project that will be the first hybrid solar and wind energy venture. These projects are expected to significantly increase the share of renewable energy.

Pakistan has long been plagued by high electricity prices, driven by its dependence on costly fossil fuel imports. With monthly electricity bills having risen 155% since 2021, often surpassing rent costs for many families, the shift towards more affordable and sustainable energy sources is both urgent and necessary.

Currently, solar energy accounts for just 1% of the energy mix, with a total capacity of 630MW. Doubling this capacity could provide much-needed economic relief to consumers and help stabilise the energy sector.

The recent financial bid opening event in Karachi was attended by representatives from both international and local entities, including JCM Power Group and Hecate Global Renewables from North America, and Pakistani companies such as Atlas Power, Hub Power Holding Co and Sapphire Electric Co.

Future of Net-Metered Solar Power in Pakistan

https://ieefa.org/resources/future-net-metered-solar-power-pakistan

Pakistan's current Distributed Generation and Net Metering Regulations offer incentives such as high buyback rates, fixed long-term generation licenses, and generous allowances for installed capacity. These have resulted in ideal payback periods, leading to a surge in net-metered rooftop solar photovoltaic (PV) capacity across the country.

The current policy offers 2-4 year payback periods for 5-25 kilowatt (kW) net-metered solar PV systems. Power utilities are concerned that higher penetration of distributed solar could place the distribution infrastructure at risk of failure and increase capacity payments on non-net-metered consumers.

The government is considering reducing buyback rates and a shift to net billing from net metering, which could increase payback periods for consumers with a higher self-consumption ratio but may incentivize oversized systems. A net billing scheme would therefore need to limit system size. Despite all policy shifts, the payback periods remain under 5 years

For the government, while maintaining or improving buyback rates can encourage more renewable energy adoption, this must be combined with grid optimization and digitization. For consumers, choosing the right system size for their consumption profile can significantly impact their return on investment.

Rationalizing Incentives for Solar Photovoltaic (PV) in Pakistan

https://ieefa.org/sites/default/files/2024-08/IEEFA%20Fact%20Sheet_...

The recent surge in rooftop solarization in Pakistan has raised concerns among power distribution companies about
system reliability and increased capacity payments.
The government is considering several changes to current energy policies, including reducing buyback rates,
limiting system sizes, and transitioning from net metering to net billing.
However, even with the proposed changes, the payback period for 5-25 kilowatt (kW) distributed solar PV systems
remains below the 5-year threshold


A mere 50 megawatts (MW) of netmetered solar capacity was added
between 2016 and 2019. However,
consistently high electricity tariffs
and a substantial decline in solar
panel prices have led to a recent
surge in solar PV additions.
Pakistan’s abundant
solar potential offers
specific yields of 3.8
kilowatt-hours per
kilowatt peak (kWh/
kWp) to 6kWh/kWp.
Since 2022, net-metered solar PV
installations have nearly doubled, with
764MW installed in 2023.
In June 2024, Pakistan’s
on-grid net-metered solar PV
capacity was approximately
2200MW.

The recent surge in rooftop solarization in Pakistan has raised concerns among power distribution companies about
system reliability and increased capacity payments.
The government is considering several changes to current energy policies, including reducing buyback rates,
limiting system sizes, and transitioning from net metering to net billing.
However, even with the proposed changes, the payback period for 5-25 kilowatt (kW) distributed solar PV systems
remains below the 5-year threshold



Under the current mechanism, which offers the prevailing National Average Power Purchase Price (NAPPP) of PKR 27 per
kilowatt hour (kWh) as the buyback rate, the relatively higher per kW cost of smaller 5kW and 7.5kW systems results in
extended payback periods ranging between 2.4-4 years. As the system size increases, the payback period decreases, with
a 25kW system recording the shortest payback period of 1.74 years.
• Reducing the buyback rate to the National Average Energy Purchase Price (NAEPP) of PKR 9.69/kWh could lead to a
10%–56% increase in the payback period, depending on the level of consumption and system size. Consumers with smaller
installations and lower consumption experience longer payback periods.
• Reducing the buyback rate to PKR 15/kWh would only result in a 6% increase in the payback period for consumers with
100% self-consumption, while for lower-consumption profiles it may increase by 25%.
• Shifting to a net billing mechanism would increase the payback period for consumers with a higher self-consumption ratio
but could incentivize the installation of oversized systems.