ISLAMABAD:
Despite heavy criticism from several quarters, Energy Minister Awais Leghari on Wednesday announced that the government would not seek a review to roll back recent changes to the solar policy for new consumers, citing the aim of sparing non-solar consumers from an additional impact of Rs 2.87 per unit.
The National Electric Power Regulatory Authority (Nepra) on Monday significantly revised contract terms for all existing and future net-metered solar consumers – or prosumers – in a bid to manage growing solar penetration and protect a costly and inefficient public power grid.
However, the savings of Rs 2.87 per unit for the 39 million non-solar consumers is 391% less than the financial burden borne by high-consumption households, who subsidize low-consumption users on behalf of the government. According to a Power division official, the government collects Rs 7-12 per unit from residential consumers using 700 units per month to fund subsidies for households consuming less than 300 units.
Speaking to reporters, Leghari said the government would file a review request with Nepra only to maintain the existing net metering conditions for the current 466,506 solar panel owners. “No revision will be filed to reverse the changes for new solar panel consumers; they can solarize their homes under the new conditions,” he said.
The minister added that the policy change only affects 1% of consumers, but he could not provide a clear explanation as to why this small group was prioritized over systemic issues such as electricity theft, low recovery rates, high line losses, unused capacity payments and cross-subsidies.
Leghari’s statement comes hours after Prime Minister Shehbaz Sharif asked the Energy Division to call on Nepra to review new regulations, aimed at protecting existing contracts for existing solar energy users.
Nepra’s revised policy removes compensation for units sold and purchased, introducing separate tariffs for electricity sold and purchased by solar panel owners. Under the new conditions, solar power owners will sell electricity at Rs 8.13 per unit but buy it at rates of up to Rs 60 per unit.
A Power division official noted that these changes would reduce the projected per-unit impact on non-solar consumers from Rs2.87 to Rs2 this year – a nominal benefit of 87 paisa per unit, achieved at the cost of public backlash and loss of government credibility.
Last year, non-solar users paid Rs 223 billion (Rs 2.44 per unit) due to net metering, which is expected to reach Rs 2.87 per unit this fiscal. However, this increase is much lower than the Rs 12 per unit that high-consumption households pay to subsidize small users and the Rs 4-5 per unit lost due to theft and inefficiency of the system.
The official admitted that the government continues to charge Rs 7-12 per unit as cross subsidy, while another Rs 4-5 per unit is lost due to theft and high line losses, highlighting persistent structural problems in the power system.
The Express PK Press Club was the first newspaper to report, on May 19, 2024, that the government had informed the International Monetary Fund of its intention to end the net metering policy. The Minister of Energy then denied this information, which ultimately turned out to be accurate.
The energy minister insisted that the cost of theft and inefficiencies was not built into tariffs and was paid for by the finance ministry in the form of grants. But these subsidies are paid for by taxpayers in the form of a 38.5% income tax on the salaried class. Last year, the salaried class paid Rs 606 billion in income tax.
Leghari insisted that the government was also tackling these issues, but argued that it was more urgent to tackle the impact of Rs 2.44 per unit due to solarisation.
To a question on ending undue burden of up to Rs 12 per unit due to cross-subsidies, Leghari said it had an annual impact of Rs 93 billion and the government had no fiscal space to end cross-subsidies of residential consumers.
However, the government lost Rs497 billion in the last financial year due to theft and low collections, the minister admitted.
Leghari said 466,506 existing consumers were generating 6,975 megawatts of electricity and connection requests for an additional 1,161 megawatts from more than 15,000 users were pending.
The government has suddenly been exposed to widespread criticism from politicians, former officials and energy experts, who say it would deter the adoption of rooftop solar and worsen inefficiencies in the power sector.
Currently, the feed-in rate for net solar generation is Rs 25.3 per unit, which has been reduced to Rs 8.13 per unit. The duration of the contract was reduced from seven to five years. The burden of capacity payments is now shifted to solar consumers. The government has, in one fell swoop, slashed profits by Rs 17 per unit, or 67 per cent, for users of existing and new solar panels.
The minister indicated that out of a total of 466,000 consumers, 82% were concentrated in 11 cities. A quarter of them were in Lahore, 11% in Multan, 9% in Rawalpindi, 7% in Karachi, 6% in Faisalabad, 5% each in Gujranwala, Bahawalpur and Islamabad and 4% in Peshawar.
It revealed that another 14,000 MW of equal solar users were off-grid and the government could do nothing about them because they are not connected to the national grid.
The minister said there has been tremendous growth in solar penetration over the last three years, with the total installed capacity increasing from 1,085 MW to 6,975 MW this financial year.
The Power Division official also claimed that there would be a marginal impact on the owners after the profit revision and they would be able to recover their investment within three years and seven months. However, the government’s assumption was incorrect, as it claimed that residential users sold 60% of their homes to the government.
We need to make arrangements on the national grid for supplying 8,136 MW of electricity during non-solar periods and the government invested Rs 270 billion last year to meet these needs, the power division official asserted.
However, his claim was unfounded as the country already has surplus electricity and consumers pay around Rs 2 trillion annually in payments for unused capacity.
Under the direct regulatory and licensing authority of Nepra, the new rules are applicable to systems with a capacity of one kilowatt to one megawatt.
Instead of addressing fundamental flaws, the net metering regime shifts the blame for power sector inefficiencies onto compliant solar consumers, said the Institute for Policy Research on Market Economy (PRIME), an independent think tank.
Pakistan’s power sector crisis stems from high transmission and distribution losses, demand-supply mismatch, delays in tariff adjustments and persistent governance issues.
Pakistan has committed to producing 60% of its energy mix from renewable energy by 2030 and reducing emissions under its updated NDCs by 2030, Awais Leghari said. He said the government had already increased the share of clean energy to 55%, making the final target within reach.
Rooftop solar power has been one of Pakistan’s market success stories in renewable energy development, PRIME said. By dismantling net metering without a credible transition framework, the new regime risks pushing compliant solar users onto off-grid systems and weakening alignment with global energy transition trends that actively encourage distributed generation, PRIME added.
