It led to a lot of trouble for the policymakers when the provinces introduced their initiatives on giving free or subsidized solar Panel systems to low-income households combined with people’s extensive use of solar panels across Pakistan. The fact that this country already has an annual burden of more than Rs. 2 trillion in capacity payments to power producers means it has to face such effect of solarization now.
As reported by Business Recorder, it was during a recent power sector meeting that the issue was raised to the Prime Minister. The provincial governments have intimidating plans of giving solar panels: 200,000 customers in Sindh, 100,000 in Punjab and Khyber Pakhtunkhwa each, and 50,000 in Balochistan.
The rich consumers, such as industrial and agricultural users, are now moving to solar to reduce their dependence on the expensive electricity tariffs. Many residential customers are also putting up rooftop solar systems thus reducing their load on the grid. Even though provincial programs are aimed chiefly at lifeline consumers, who represent only 4 percent of the entire consumers, there are also protected consumers under the use of electricity from 0 to 200 units a month, who account for about 48 percent of overall consumers.
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It is unverified but believed that already, domestic consumers already have solar systems installed that add up to about 2,500 MW in total. This has been one of the major issues in the public hearings of the National Electric Power Regulatory Authority and serves as a window into the present state of solarization.
Power division raises the alarm: The more the consumers actually go to solar power, the likely heavier the load of capacity payment on consumers still connected to the national grid. Then at this rate of adoption, by 2034, it is said that the increased electricity tariffs for grid-connected consumers would amount to Rs. 2.50 per unit to pay capacity payments to power producers.
Solar power has already cut grid energy sales and demand by percentages between 8 and 10 mainly during daylight hours. This was because of increased penetration into the solar system. A typical example of such an increase is a normal net-metering system of 10 kW through which consumers can avoid fixed costs at the grid, valued around Rs. 20 per unit, by depending more on solar input. The average amount of absolute and fixed costs avoided is Rs. 7 per unit.
Rs. 200 billion in fixed costs for the grid for the FY 2023-24 went straight into the cost burden of non-solar consumers, who had a tariff increase of Rs. 2 per kWh. Continuing with solar imports leads to a further expected decline of the grid demand levels well beyond the 10% reduction that can yield a base tariff increase of 17%.
For the current fiscal year, a 5% reduction in grid demand due to solar integration is expected to shift Rs. 131 billion in costs to non-solar consumers annually. If this imposition carries to 10%, the cost burden of non-solar users may rise to Rs. 261 billion a year.