ISLAMABAD: The growing installation of solar panels across the country, where over Rs 2 trillion is being paid annually in capacity payments to power producers, has put policymakers on edge.
This situation escalated after provincial governments announced plans to distribute solar panels either for free or at highly subsidized rates to low-income consumers.
The issue was discussed at a recent meeting on the power sector chaired by the Prime Minister. Reports indicate that the Sindh government plans to provide solar panels to 200,000 households, while Punjab and Khyber Pakhtunkhwa have targeted 100,000 each, and Balochistan aims to distribute 50,000 units.
Provincial initiatives primarily target lifeline consumers, who represent 4% of total power users, and protected consumers using 0-200 units per month, accounting for 48% of the consumer base. Unofficial reports suggest domestic consumers have already installed solar systems with a cumulative capacity of 2,500 MW.
The matter was also highlighted during NEPRA’s public hearings, where the current pace of solarization was presented. According to the Power Division, as domestic consumers, agricultural users, and commercial and industrial sectors are increasingly adopting solar PV systems to reduce reliance on grid electricity amid rising tariffs, the burden of capacity payments will fall on those still reliant on the national grid.
The Power Division estimates that continued residential and industrial solar adoption growth could increase tariffs for grid users by Rs 2.50 per unit by 2034. Grid energy sales have already dropped by 8-10% during daylight hours, driven by higher solar energy usage.
For context, a typical 10 kW net-metering solar system enables consumers to avoid paying grid-fixed costs of Rs 20 per unit by reducing their dependence on grid electricity. The avoided fixed cost varies but averages around Rs 7 per unit depending on solar capacity penetration.
In FY 2023-24, approximately Rs 200 billion in grid fixed costs were shifted to non-solar consumers, resulting in a tariff increase of about Rs 2 per kWh. This year’s significant solar imports are expected to further reduce grid demand by over 10%, with projections reaching a 15% decline. This shift could push the base tariff up by 17%.
A 5% reduction in grid demand due to solar integration for the current fiscal year will transfer Rs 131 billion annually in costs to non-solar consumers. If grid demand reduces by 10%, this burden will rise to Rs 261 billion, further straining non-solar electricity users.
