In a significant move to address the financial sustainability of Pakistan’s power sector, Prime Minister Shehbaz Sharif has instructed the National Electric Power Regulatory Authority (NEPRA) and the Power Division to overhaul the current net metering regulations.
This directive aims to adjust the buyback rates of electricity to more rational levels, as disclosed by well-informed sources to Business Recorder.
The decision emerged from a recent high-level meeting on the power sector chaired by the Prime Minister, with senior officials from relevant authorities in attendance.
The discussion focused on the growing trend of solar energy adoption among consumers, particularly the affluent, who are increasingly turning to solar solutions in response to persistent load shedding and the high cost of electricity. This shift is not only prevalent among residential consumers but also within the industrial and commercial sectors.
The burgeoning adoption of net metering, which allows solar panel users to sell surplus power back to the grid, has significantly impacted the revenue streams of the Power Distribution Companies (Discos).
Concerns about these financial implications have been discussed at various forums, including with international bodies like the World Bank, the Asian Development Bank (ADB), and the International Monetary Fund (IMF), all of which have emphasised the need for full cost recovery in the electricity sector.
In a recent aide-memoire, the ADB highlighted the Power Division’s concerns about the increasing number of net metering projects and their potential adverse effects on Discos’ financial health. The ADB noted that while its programs would mainly target off-grid areas, it would continue to consult with the Power Division as plans evolve.
According to a report by Business Recorder, the Power Division presented a detailed case to the Prime Minister, illustrating the severe financial impact of widespread net metering on the revenues of Discos, which are already below the expected targets. In response, the Power Division has proposed new buyback rates ranging from Rs11 to Rs12 per unit, a significant reduction from the current rates of Rs21 to Rs22 per unit.
Additionally, the meeting touched upon the massive import of solar panels, notably 6,000 MW worth during the first nine months of the current fiscal year, predominantly from China due to their cost-effectiveness.
Moreover, the Sindh Energy Department has also sought ADB’s support for various initiatives, including mini-grid solutions for rural areas, a new solarization drive for Sindh’s most remote regions, and solarization of reconstructed homes in flood-hit areas, aligning well with the Second Access to Clean Energy Investment Program’s objectives.
The meeting concluded with several key resolutions to rationalize the net metering framework. These include transitioning from the existing net metering regime to a gross billing system with separate rates for the import and export of power units, creating a distinct tariff category, revising buyback rates, amending net metering regulations, and implementing a dynamic formula to determine reasonable payback periods.
Following the discussion, Prime Minister Shehbaz Sharif directed NEPRA and the Power Division to fast-track the approval of these amendments. The Power Division is set to finalize the recommendations by May 31, 2024.
