Pakistan’s energy landscape is undergoing a significant shift, with rooftop solar adoption surging and the government implementing a revised solar policy aimed at balancing grid stability and consumer benefits. Energy Minister Awais Khan Leghari recently shed light on these developments, outlining key changes and dispelling prevalent rumors.
No Tax on Solar Generation, But Grid Power is Subject to Standard Tax
Leghari clarified that under the newly approved solar policy, rooftop solar panel users will not be taxed on the electricity they generate and export to the national grid. However, the standard 18 percent tax will remain applicable to power drawn from the grid. This distinction aims to encourage solar adoption while maintaining revenue streams for grid maintenance.
Significant Electricity Tariff Reductions on the Horizon
Prime Minister Shehbaz Sharif is expected to announce a substantial reduction in electricity rates soon, thanks to the government’s efforts in renegotiating IPP contracts. Leghari revealed that these renegotiations have resulted in savings of approximately Rs. 1,400 billion, with annual savings of Rs. 400 billion directly benefiting consumers through lower tariffs. The reduction will also reflect the benefits of lowering the power sector loan discount rate to 12 percent.
Buyback Rate Remains at Rs. 10 Per Unit
Dispelling rumors of a reduced buyback rate, Leghari affirmed that the rate for solar-generated electricity remains firmly set at Rs. 10 per unit under the new policy. This ensures a reasonable return for solar users while aligning with the government’s goal of grid stability.
Net Billing System and Investment Recovery
The revised policy introduces a net billing system with five-year contracts, allowing consumers with a 15 percent plant factor to recover their investment within 3.5-4 years. This contrasts with existing net metering customers who enjoy a Rs. 27 per unit rate, allowing them to recoup costs in just 18 months. Leghari emphasized that this adjustment was necessary to address the financial burden placed on traditional grid customers due to the rapid growth of residential solar installations.
Addressing Grid Stability and Consumer Equity
Pakistan has witnessed a remarkable surge in rooftop solar installations, adding 1,500-2,000 megawatts of capacity in the past 18 months. This growth, while positive for renewable energy adoption, has created a Rs. 150 billion burden on traditional grid customers who have faced tariff increases to subsidize grid storage facilities for net metering users. The new policy aims to rationalize this imbalance by introducing a net billing system with a more sustainable buyback rate.
Increased Industrial Demand and Rationalized Power Projects
Leghari expressed optimism that the forthcoming tariff reduction would stimulate industrial electricity demand. He also highlighted the government’s decision to cancel previously committed power projects totaling 10,000 megawatts, citing excessive costs associated with the proposed electricity generation.
Pakistan’s revised solar policy represents a significant step towards balancing renewable energy adoption with grid stability and consumer equity. As the nation continues to embrace solar power, these policy adjustments will play a crucial role in shaping the future of its energy sector.
ALSO READ: Solar Net-Metering Shake-Up: What the Government Isn’t Telling You!
