Moin M Fudda

Delivering a powerful speech at a closing Plenary- Rejuvenating Growth of the World Economic Forum on 29th April 2024, Prime Minister Muhammad Shahbaz Sharif said that country is under a debt trap and its Power Sector is in shambles. He vowed to fix it to regain the confidence of foreign investors. Undoubtedly, the Prime Minister must be concerned about huge Capacity Payments to IPPs even when plants are idle, and demand for electricity is less. In this context though the Committee formed in 2019 on Power Sector Audit headed by former Chairman SECP (Securities and Exchange Commission of Pakistan) and until recently caretaker Energy Minister had successfully re-negotiated the revised tariff with Private Power Producers, but unfortunately Power Division has not made any headway to renegotiate the terms with Solar IPPs. Therefore, these IPPs continue to receive quarterly increase in tariff and only this year from 12th February to 26th April as given below, Government is purchasing power from seven IPPs as high as Rs. 50 kwh and that too in equivalent in US$.

The orders placed on power regulator NEPRA’s website show that each of the above IPP receives O&M Local and Foreign, Return on Equity, Debt Servicing and on the top of it under the head of Sinosure, the Government is also reimbursing insurance cost to foreign IPPs. All these IPPs have been given licence for the period of 25 years whereas contrary to that, Roof-Top Solar Generators do not have any financial reimbursement component in their licence and are granted 7-year licence to be renewed for a further period of 7 years. Additionally, though they are entitled for a quarterly determination of National Average Power Purchase Price (NAPPP) as per the requirement of Sub Section (1) of Section 31 of Act XL of 1997, form notification of Net Metering Regulations 2015 only five revisions have taken place.

Given that the NAPPP to Roof-TOP Solar Generators is well below the average tariff of Solar IPPs, instead of renegotiating the lucrative terms agreed with these Solar IPPs, Power Division in its tweet clarified that on one hand there was no plan to levy tax on solar panels, but on the other it was considering reducing the buyback price from present Rs. 22 to Rs, 11 kwh. Justifying such a move, officials of Power Division are presenting an analogy that the surge in Roof-Top solar Generators having net metering licenses, are causing annual burden of Rs. 110 billion on those who are on Grid- Consumers having no net metering and that Government is compelled to offer Rs. 1.90 per unit subsidy. They also talk of recovery of investment in 18 months by Roof-Top Solar installers whereas only last year Nepra had mentioned the recovery period of 5 years. If this argument was to be accepted then will Cabinet Members ask the Power Division to provide recovery period of investment by Solar IPPs, some of whom must have already recovered their investment and at the same time will officials explain as to how much burden the Solar IPPs have caused to the on-Grid Consumers and to the Government by way of subsidy? Certainly, the number will be in trillions of Rupees.

This is not the first time that an attempt is being made to discourage renewable energy through Roof Top Solar Generators. In mid-2022, NEPRA through a public notice invited comment on its proposal of replacing the terms National Average Power Purchase Price (NAPPP) with National Average Energy Purchase Price (NAEPP). Though, it was the responsibility of the Authority to educate the people about the implications this change would have made on their investment, it remained quiet. On the other hand, country’s prominent think tank Pakistan Institute of Development Economics took the initiative by hosting a Webinar prior to NEPRA’s hearing, which was led by its Dr Nadeem ul Haq, Vice Chancellor of and former Deputy Chair of the Planning Commission. This writer together with experts Engineer Tahir Bashart Cheema, former MD PEPCP, Waqas Bin Najib, Member Energy Planning and Development, Imtiaz Husain Balouch DG NEPRA, Chartered Accountant Syed Feisal Ali, and Engineer Abdul Jabbar representing FPCC&I, talked about the ills and impediments in Power Policy, wrong location of Solar IPPs such as Quaid-e-Azam Solar Power and benefit of Net Metering and its continuity to meet the AEDB’s vision of 2030.

Participants of the Webinar were fully prepared to resist the Nepra’s move and on 27th of September 2022, Authority was surprised to see highest ever attendance both physical and via Zoom. This writer supported by a couple of lawyers advised that the Roof-Top Solar Generators have been given license for a period of 7 years based on Net Metering Regulations 2015 and therefore any move of changing the terms will be challenged in the courts. It was shocking that team of Nepra had overlooked this point and the then Chairman realising the gravity of the situation said that Authority will take a legal opinion on this point.

After months of delay, finally on 10th of February 2023, acknowledging the economic benefits of net metering without involvement of foreign exchange as it is being incurred for payment to IPPs and minimal line loss and more importantly the share of Roof-Top Solar Generators in total Generation being less than 1%, the Authority through an order signed by four of its members decided against any amendment in Net Metering Regulations.

Unfortunately, the mental relief of Root-Top Solar Generators was short lived since the news of reduction in buyback rate surfaced in August 2023 that this time some officials in the Power Division were contemplating to reduce the buyback rate to Rs. 9. The Caretaker Energy Minister Muhammad Ali being familiar with the subject, his attention was drawn to a table presented by officials of Nepra’s in one of its hearings whereby total capacity payment made to the industry in year 2022 was Rs. 721 billion, including Rs. 3.2 billion on account of net- metering and for that too more than two-third was adjusted for off peak versus peak hours leaving balance of only less than Rs. one billion or 0.4% of the total capacity payment. Hence, Minster Muhammad Ali did not pay any heed to the proposal and on 11th of September speaking at the Governor’s House categorically said that there is no proposal for reduction in buyback rate and government will continue to encourage green energy also through Roof-Top Solar Generators.

On 9th May 2024 at a Public Hearing called by Nepra on K-Electric‘s request in respect of FCA for the period from July 2023 to February 2024, in response to a query about Roof Top Solar Generation, Nepra official said that till date Authority has issued licences for installations of 900mgw and based on the permissions granted by Discos, the country’s total installation is estimated at 2000mgw of both residentials and commercials. According to a source in Nepra through from these installations on an average 500mgw is supplied to DISCOS since almost three fourth is self-consumed. Thus, based on the current capacity factor of 17%, only 85mgw is a surplus from Net Metering which is 0.3% of the total lowest transmission of 28,000mgw to the National Grid. Hence Nepra’s decision of 10th February 2023 that Roof-Top Solar Generators share of less than 1% in the country’s total energy output is still valid.

But despite this meagre figure, regrettably in total disregard to Nepra’s decision and the huge positive impact on environment and Prime Minister Shehbaz Sharif earlier directive of solarization of government buildings, Power Division has prevailed upon the Prime Minister, who as reported in the media on 16th of May, has directed NEPRA to amend Net Metering Regulation, which compromises the independence of the Authority. Surprisingly Ministry of Climate which was ably led by the then Minister Sherry Rehman is silent on the subject. It is hoped that the members of the Cabinet will understand that this move of Power Division is to cover its continued failure to address the core issue of capacity payment and increase the demand of electricity. In this respect, writer would like to make following proposal:

• For Renewable Energy, Power Division must not take decisions at its discretion based one financials, instead it must engage with the Ministry of Climate for its positive impact on the environment and reducing of Co2 emissions.

• To increase the demand, it is necessary to do away with TOU with a flat rate which will discourage use of batteries being unfriendly for the environment and at the same time government will save foreign exchange through reduced imports of batteries. At the same time, Industries be offered power at a reduced rate from 11 p.m. to 7 a.m.

• To address the Power Divison’s concern for poor people, Net Metering Regulations be amended to also provide an option to carry forward of the units till end of the year and Solar Generators be permitted to donate their surplus units to the Mosques etc. through DISCOS’ applications and/or allow them to apply the left-over units to the bills of lifeline consumers in localities where they are being subjected to loadshedding for not being able to pay their bills. Moreover, those Solar Generators opting to donate their units be charged GST on Net amount of their bills as opposed to Gross amount.

• To help small household to install Solar system NEPRA on the one hand direct DISCOS to allow Net Metering on Single Phase Meter and on the other Provinces across the country should facilitate financing of solar infrastructure of up to 3klw.

• A sound long-term policy free from flawed as seen in previous power policies be introduced for manufacturing of Solar Panels and Inverters through joint ventures. Countries such as Türkiye, India and Bangladesh are ahead of us, and we need to learn from their experiences.

In conclusion, it is expected that when matter is referred to the NEPRA, instead of bowing before the Power Division, its members will hear all the stakeholders and decide the amendments, if any prospectively. This would save the net metering licence holders from the hassle of going for litigation, after all our courts are already loaded with millions of cases.





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Last Tariff Tariff Exchange

MW Solar IPPs Revision Approved Rate

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100 Crest Energy Pakistan Limited 12-Feb-24 Rs. 50.01 282.4

100 Best Green Energy Pakistan Limited (BGEPL) 12-Feb-24 Rs. 49.69 282.4

100 Apollo Solar Development Pakistan Limited 12-Feb-24 Rs. 47.03 282.4

100 Harappa Solar (Private) Limited 16-Feb-24 Rs. 30.00 282.4

50 Oursun Pakistan Limited 01-Mar-24 Rs. 33.49 282.4

50 AJ Power (Private) Limited (AJPPL) 01-Mar-24 Rs. 28.71 282.4

100 Quaid-e-Azam Solar Power Limited (QASPL) 26-April-24 Rs. 31.23 278.5

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Average Tariff Rs. 38.59

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Roof-Top Solar Generators 14-July-23 Rs. 22.95

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