Net metering billing: Who pays the price for Pakistan’s new solar regime? |
Net metering billing: Who pays the price for Pakistan’s new solar regime?
In a sudden move, the government recently terminated the existing net-metering regime for all existing and future net-metered solar consumers, known as prosumers, and replaced it with a net-billing regime for all.
The stated rationale behind this development — which could mean longer payback periods and lower overnight returns — is the need to address the technical, financial and equity concerns that have emerged from the mushrooming growth of solar power in Pakistan over the last couple of years. Under the changes, the buyback rate for electricity exported to the grid by solarised consumers has been reduced from the existing Rs26 per unit to Rs11 per unit. The new export rate broadly reflects the national average energy purchase price at which the government purchases electricity from power plants.
At first glance, this price reform appears overdue. Like most electricity tariff interventions, however, it is not merely a technical adjustment but carries significant long-term implications for consumers, electricity utility companies, and the power sector as a whole.
To understand these implications, we first need to have a look at Pakistan’s solarisation map. A study conducted by the Policy Research Institute for Equitable Development (PRIED) shows that solar deployment in the country has now surpassed 33 gigawatts (GW). While only a smaller portion of this deployment, around 6GW, is net-metered — that is, connected to the national grid — its much larger portion, around 27GW, is off-grid or behind the meter.
The net-metered deployment is mostly concentrated in urban communities, among higher-income households, and among commercial users. This rapid solar adoption has provided relief to hundreds of thousands of grid-connected consumers from high electricity tariffs, giving them greater energy independence and transforming them from ‘consumers’ to ‘prosumers’.
Besides that, as more people generate and consume electricity from solar power, it has greatly reduced daytime grid electricity sales, giving rise to the well-known “duck curve” in electricity demand and supply. This, in turn, results in underutilisation of the national grid.
Net billing vs net metering
Net-billing is being introduced as a key driver to tackle two concerns: (i) increase demand for grid-provider electricity (to address the duck curve phenomenon) and encourage self-consumption by grid-connected solarised consumers; (ii) reduce the cost-shifting impact of solarisation on non-solarised consumers.
This cost-shifting phenomenon occurs when a utility company — for example, a........