Going Solar

Public sector entities going for net-metering in offices

Karachi: The Trading Corporation of Pakistan (TCP), a state-owned commercial organisation, working under the administrative control of the Ministry of Commerce, and Alternate Energy Development Board (AEDB), have decided to go solar.

The public sector entities plan to install net-metering-based solar systems on all its offices and properties.

The solar installations have been a success story for the last few years because of the significant reduction in the prices of the solar panels during the last decade, steep escalation in electricity tariffs and net-metering.

This has made the solar installations one of the best investments, with a payback of fewer than four years, while providing an excellent hedge against inflation and tariff escalation.

Although several industries and businesses have opted for alternative energy sources, primarily solar, the TCP and AEDB are the first commercial organisations to adopt net-metering-based solar generation.

As per the National Electric Power Regulatory Authority (Nepra) annual reports, more than 20,000 net-metering licences were issued by the end of 2021/22, adding 450MW to the system.

According to Nepra, the total units generated and exported by the net-metering consumers in all the distribution companies are around 150.67MW.

This energy has avoided the cost of power generation from the costliest power plants of around Rs30/kWh and above. Further, this generation helped the distribution companies to improve voltage in respective areas, reduction in the transmission and distribution losses and transformer overloading, earning revenues by selling these units to their neighbouring consumers and providing flexibility in investments for augmentation or development of the distribution facilities.

According to the Institute for Energy Economics and Financial Analysis (IEEFA), imported fossil-fuel-dependent South Asian economies, India, Bangladesh and Pakistan, have not been able to escape the perils of volatile and elevated prices of oil, gas and coal in the international energy market.

“The high energy prices have impacted various sectors, from power to industries, to varying degrees across the three countries,” it added.

Unaffordable fuel prices have also impacted the economic scenarios with the rising inflation and depleting foreign exchange reserves, resulting in reactionary measures from the respective countries. However, the government interventions appear to be insufficient to some extent.

“As the external shocks drive these impacts, renewable energy promises to ensure affordable energy and shield the foreign currency reserves of South Asian countries,” the IEEFA noted.

Pakistan faced massive electricity shortfalls in the last summer, amid high energy prices. As the government drastically increased the electricity tariffs for industries, many of them were reportedly on the brink of closure.

Further, the increase in coal prices left the cement and steel industries with no other option but to suspend operations or continue at lower capacities.

Without any immediate solution, Pakistan opted for energy conservation measures for shopping malls and government offices and diverted the saved energy for other useful purposes. However, these measures appear to fall short in addressing the challenges.

With the forex reserves barely sufficient to meet one month’s imports, Pakistan cannot increase the energy imports drastically. As such, a daunting summer seems ahead for the country.

Moreover, lowered credit rating due to political and banking risks make it difficult to secure medium- to long-term liquefied natural gas (LNG) contracts for the country.

While eliminating dependence on the imported fossil fuels may not happen in the short-term, the renewable energy expansion could shield from massive price volatilities in the international energy markets and reduce energy security and the current account risks.

Meanwhile, the cost of fuel for electricity generation in January went up 59 per cent to Rs11.20/unit from a month ago, according to the data recently released by the National Electric Power Regulatory Authority.

The share of hydel in the power generation mix slid to 9.4 per cent in January from 20.4 per cent in December 2022. The drop in the contribution of hydel led to the spike in the overall average cost, since electricity obtained from the dams carries zero fuel cost.

Similarly, the share of nuclear power dropped to 22 per cent in January from 27.1 per cent in the preceding month. The fuel cost for the nuclear power generation is only Rs1.07/unit, lowest of all the sources except renewables.

The per-unit cost of coal-generated power increased to Rs16.05/unit in January, up 39.6 per cent from the preceding month. Thar coal is not benchmarked to the international prices and is; therefore, significantly cheaper than its imported counterpart.

However, Pakistan still burns imported coal to produce electricity, partly because of limited supplies from the Thar fields. The share of coal in the power mix last month was the largest at 28.7 per cent against 18.1 per cent in December.

The average cost of the regasified liquefied natural gas (RLNG) increased 8.4 per cent on a monthly basis to Rs21.91/unit, which contributed to the overall cost of fuel for electricity generation in January.