Land of the unclear

AT the time of writing, the contractual status of net-metered solar connections remains unclear. New regulations from Nepra, backed by the Power Division, converted all new and existing customers to a net-billing scheme, drastically reducing the buyback rate. Shortly after, though, the prime minister entered the fray and asked the same Power Division to challenge the regulator’s decision. Passionate adherents of the sitting government who were lauding Nepra’s boldness in taking on 470,000 ‘elites’ then promptly lauded the PM’s attentiveness to their tears. In some eyes, the government simply can’t lose. On the larger issue at hand, there are a few things that can be conceded from the outset. The first is that the official position on net-metering is, narrowly and technically, correct. The marginal price of electricity during the day has fallen, but net-metered connections, amounting to around 7,000 MW of installed capacity, are able to offset their exported units at the average grid price. In this way, they accrue a benefit that is not available to households who do not have grid-connected solar. And yes, the gap between the two (ie, the benefit) is indirectly paid for by non-net-metered consumers via the distribution companies. The second point of concession is that the generous incentive offered by net-metering certainly encouraged solar adoption, but this adoption forms a comparatively small part of Pakistan’s ongoing solar revolution. The vast bulk of solar adoption, totalling more than 14,000 MW of capacity, is off-grid, and has shifted demand away from the national grid because of the latter’s lack of reliability, high price, and in many places, complete absence. As census and HIES (Household Integrated Economic Survey) numbers both confirm, more than 10 per cent of Pakistan’s households now rely on solar as their primary form of electricity. This figure masks considerable variation, with rates being much higher in rural Balochistan and KP compared to urban and rural Punjab. This variation maps on to population density, poverty, and most importantly, grid access and reliability, which explain why the percentage of rural households connected to the national grid has fallen by nearly 6pc in the last decade. The government’s fixation on net-metering is a red herring. The environment that encouraged this adoption is marked by a perennial state of exhaustion with the state’s expensive provision of electricity, as well as sales tax concessions, credit subsidy, and import relaxations that allowed a glut of panels and inverters to enter and take over the Pakistani market in the first place. With the retail, distribution and human resource system of solar now firmly in place, this pattern is unlikely to reverse, even as the concessions are gradually rolled back. Proof of concept is well beyond the point of being established. Given these two points taken in narrow isolation, one can concede that the government is right: that net-metering represents a cross-subsidy to mostly upper-income households from the rest, and that reversing it does little to harm the country’s rapidly progressing and very decentralised green energy transition, which is driven by other policy measures anyway. But the problem has to be contextualised and broadened beyond this very narrow turf. The government claims that it is changing this policy for the benefit of the common consumer, who doesn’t have the resources or the roof space to instal an expensive net-metered connection. Embedded in this claim is the notion that shifting net-metering to net-billing, ie, getting rid of the subsidy, will reduce cost pressures on the tariff, thus benefiting the masses. To date, there is no figure indicating what this reduction entails or by how many paisas or rupees it will reduce the domestic tariff. We are simply expected to go along with the government’s claim that this is a pro-poor proposal that will reap (unclear) dividends in the medium term. There is a second, associated issue at hand as well. The government’s fixation on net-metering is a red herring. The cross-subsidy to net-metered consumers is not responsible for the higher price of electricity being paid by the masses. At least not in any meaningful way. The reasons for that higher price lie elsewhere — in the generation mix, in the underinvestment in infrastructure, in the line losses and poor governance of distribution companies, and most pertinently, in the take-or-pay contracts signed with independent power producers (IPPs). Looking past this sleight of hand, we get an indication of the battles the government is willing to fight and the ones it chooses not to. Net-metered customers are told that the government is not obligated to buy electricity from them at the same rate (or on the same principle) forever. They are told that the purchase rate should reflect the market rate of electricity during the hours of sale. This is a fair enough assertion. But what then of...

Land of the unclear

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Land of the unclear

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