Amid frequent power breakdowns and staggering electricity bills, the trend for installing solar panels saw a sharp rise this summer. This was largely an urban phenomenon limited mostly to posh localities. Related to this is the concept of net metering, which means that you can sell the surplus energy you’re producing — at home or at a small-scale industrial or commercial unit — to the national grid.

Such on-site (decentralised) power generation can help support the delivery of clean, reliable energy to additional consumers and reduce losses along transmission and distribution lines.

Early this year, the National Electric Power Regulatory Authority (NEPRA) proposed to reduce tariff on the solar net-metering sales. This was seen by many as a huge disincentive to renewable energy producers.

Grid-connected power generation, also known as a distributed energy resource (DER) can yield comparatively low-cost energy.

The power regulators and managers must not forget that distributed generation systems are typically more reliable than centralised generation systems because multiple small units are less likely to fail simultaneously compared to a single large unit. Additionally, the consequences of failure are much less significant for a small unit than a large unit.

Apart from reliability, distributed generation may lower environmental impacts of emissions and improve energy security. DER may also help reduce the cost of power system augmentation, thereby reducing the overall cost of supply.

Under the proposed amendment, the tariff for solar net metering distributor generators would be revised downward to about Rs 9 per unit. It has recently hovered around Rs 19.32 per unit following the recent rebasing of the tariff.

In terms of dollars, power purchased through solar net metering will thus fetch around $ 0.04. If the NEPRA lowers the tariff on sale of excess energy through net metering, the tariff would be reduced by half when the impact of fuel cost on basket prices is rationalised in the near future together with a gradual reduction in fuel prices.

On the other hand, the cost of setting up solar plants has risen owing to several factors. Thus, even if the capital cost of establishing a solar net metering system has increased by around a fourth, the selling power tariff would be halved. This will clearly discourage investors.

The power regulators and managers must remember that distributed generation systems are far more reliable than centralised generation systems because multiple small units are less likely to fail simultaneously compared to a single large unit. Additionally, the consequences of failure are much less significant for a small unit compared to a large unit.

As per NEPRA’s State of Industry Report, 2022, transmission and distribution losses for the power distribution companies (DISCOs) in Pakistan are hovering north of 17 percent. Such ballooning of losses together with low recovery rates makes end-consumer tariff costlier. A consumer has to pay additional cost on each unit they consume on account of transmission and distribution losses and low recovery.

The report says that electricity transmission losses at the National Transmission and Despatch Company (NTDC) in FY 2022 have been higher than permissible, putting an additional financial loss of Rs 72 billion. Apart from the transmission losses, the average distribution losses in FY 2022 were 17.13 percent as compared to the permissible 13.41 percent. This resulted in a financial impact of Rs 113 billion. Additionally, NEPRA, in its determinations assumes 100 percent recoveries by DISCOs against the billed amount to consumers. But the recoveries are always lower. In FY 2022, DISCOs were able to recover 90.51 percent against the billed amount; thus, incurring a loss of Rs 230 billion. These figures should suffice to highlight the importance of promoting distributed energy resources to reduce grid losses.

It must be pointed out that net-metering generation requires no new investment on the part of the government, as consumers raise the capital for setting up solar plants on their own land — mostly rooftops.

NEPRA has tried to calm the frayed nerves of the consumers with regard to the proposed amendment in Net-Metering Regulations, by stating that no such move had been made thus far, and that only feedback had been solicited from the general public.

It further said, in a press statement, that the proposed changes only impact the 20,700 consumers across Pakistan who had been allowed net metering under the regulations approved by NEPRA.

The authority also claimed that the proposed amendment would have no impact on self-consumption or netting off of the units. The units would be netted off as per the mechanism approved already. The amendment in the regulations only applies to the excess units sold by net metering consumers, it said. Further, the impact of the high prices paid on excess units would be shared by the rest of the consumers of the grid.

Talking to TNS, the chief executive of LESCO, Chaudhry Muhammad Amin, echoed similar sentiments. He said that there would be no change in power tariff for solar net-metering.

He said that he too had installed a solar net metering system at his home and enjoyed the benefits of the renewable power resource.

At the distribution level, the LESCO is a pioneer in the country as it introduced solar net-metering, launching this vital distributed grid system as early as in 2016. Calling the utility a great success, Amin says that the installation of bidirectional solar meters had facilitated the purchase and sale of energy. “We’re seeing an exponential growth of net metering in LESCO, with the installation of 11,478 connections till date, producing 176 MW of clean and cheap electricity. From processing only a few hundred connections a month, we’re going to be seeing a monthly installation of over 5,000 connections very soon.”

In the final analysis, despite NEPRA and LESCO denying proceeding with the regulatory authority’s proposed amendment, the situation on ground remains unclear. Rumour is rife that NEPRA is still weighing its options.

The writer is a senior reporter at The News