Potential change in Pakistan's solar net metering policy

Potential change in Pakistan's solar net metering policy

By: Communicators - Business Team (July 23, 2024)

Potential change by Pakistan government to the Solar Net-Metering Policy involves two main adjustments:

Adjusting the Buyback Rate at which excess solar energy is sold back to the grid, will be modified to align with the average energy cost. This means that instead of receiving a potentially higher or lower fixed rate, solar energy producers will be compensated based on the fluctuating average cost of energy. This can have several implications including Incentive Impact that may reduce the financial incentive for new solar installations if the average energy cost is lower than the current fixed buyback rate and Market Reflection that ensures that the compensation more accurately reflects the current market conditions, potentially leading to more fair and balanced energy pricing.

Second adjustment deals with Increasing the Payback Period for solar installations, that will be extended from three to five years. The payback period is the time it takes for the savings and earnings from a solar installation to cover the initial investment. Extending this period can have several effects like Longer Investment Recovery for solar panel owners to recoup their initial investment, which could be a deterrent for some potential solar adopters and Stability in Investment as longer payback period could also indicate a move towards more stable and sustainable long-term investments in solar energy.

These changes may influence both current and prospective solar energy producers' decisions and could impact the overall adoption rate of solar energy. The policy adjustment is likely aimed at balancing the financial viability of solar energy with the overall energy market dynamics.

The current policy of carrying forward excess energy units from net-metered systems for three months before converting them to monetary value and adjusting against peak consumption is designed to benefit consumers by providing them with a buffer period to maximize the use of their generated energy. However, there are arguments for reducing this carry-forward period to one month:

Benefits of Reducing the Carry-Forward Period:

1. Promotion of Self-Consumption:

   • By limiting the carry-forward period, consumers are encouraged to use their generated energy more efficiently and promptly, fostering a culture of self-consumption.

2. Prevention of Oversizing:

   • Reducing the period discourages the installation of oversized solar systems that produce more energy than needed. This helps in maintaining a balance between generation and consumption, avoiding unnecessary strain on the grid.

3. Grid Stability:

   • A shorter carry-forward period can lead to more stable grid management, as it reduces the likelihood of large surges of excess energy being fed back into the grid over extended periods.

Establishing a Central Cell within Distribution Companies:

1. Net Metering Oversight:

   • A central cell would streamline the management of net metering activities, ensuring consistent and efficient handling of applications, approvals, and monitoring.

2. Integration of Rooftop Solar Systems:

   • This cell would facilitate the seamless integration of rooftop solar systems into the grid, addressing technical and regulatory challenges more effectively.

3. Hosting Capacity Analysis:

   • Conducting regular hosting capacity analysis helps determine the maximum amount of distributed generation that can be accommodated without compromising grid stability. This ensures that the grid can safely handle the influx of solar energy from multiple sources.

Recommendations for Implementation:

1. Stakeholder Consultation:

   • Engaging with stakeholders, including consumers, solar industry representatives, and regulatory bodies, to understand the impacts and gather feedback.

2. Pilot Programs:

   • Implementing pilot programs to test the feasibility and impact of reducing the carry-forward period in selected regions before a full-scale rollout.

3. Public Awareness Campaigns:

   • Educating consumers about the benefits of self-consumption and the potential changes in net metering policies to ensure a smooth transition.

4. Technical Support and Training:

   • Providing technical support and training to both consumers and distribution company personnel to handle the new processes and technologies involved in net metering and solar integration.

By adopting these measures, the transition towards a more efficient and self-sustaining solar energy system can be achieved, benefiting both consumers and the overall energy grid

Financial and technical challenges must also be addressed for net metering and explored solutions to create a balanced approach for the government, the solar industry, and consumers. Pakistan has installed 2,000 MW of net-metered capacity by April 2024, with over 130,000 systems generating 3 TWh of energy annually. However, technical issues such as high consumer voltage, distribution transformer overloads, and increased reverse power flow due to unauthorized rooftop solar installations have been highlighted as significant challenges.

Proposed solution includes reducing the net metering capacity limit to match the sanctioned load, to prevent transformer overloads. Smart meters and enhanced network monitoring are needed to manage the impact of net metering systems more effectively. Distribution companies should conduct hosting capacity analysis using GIS mapping to provide transparent information about their network’s capability to integrate solar PV. A suitable tariff mechanism should also be suggested, along with fixed charges for all consumers.