Devastating news for solar users under new policy

Islamabad has officially slashed solar buyback rates by over 60 percent. As per credible reports, the federal government has also eliminated the process of net billing and reduced the buyback rate to a measly 10 rupees per unit.

This decision was taken by officials at a Cabinet meeting of the Economic Coordination Committee (ECC) to stifle the growth of solar net metering connections. This is because net metering has been proven to cause significant financial strain on the national grid, resulting in higher electricity bills for non-net meter users.

The Power division reported how solar panel owners with net meters are inducing a 9 paisa per unit increase in average electricity costs. While net meter owners are often met with zero or very low electricity bills, the national grid and its users have to collectively bear a cost of 101 billion rupees.

If left unchecked, this financial burden could have ballooned to a staggering 545 billion rupees by 2034. A financial burden of such a magnitude would have resulted in non-net meter users bearing an additional cost of 3.6 rupees per unit. As such, authorities decided to take action before the situation deteriorated any further.

Finance Minister Muhammad Aurangzeb presided over the ECC meeting during which power companies were directed to sell grid electricity at 42 rupees per unit while charging 48 rupees per unit for ‘peak’ electricity. These prices are exclusive of duties and taxes and vary as per consumption.

However, reports have revealed that the policy is applicable only to new net-metering users. Moreover, new users will not be allowed to install solar capacity in excess of their approved usage. Previously, users were allowed to install solar capacity that exceeded their approved load by 50 percent, but this rate has now been revised downward to just 10 percent.

Users who already have net meters may not feel the impact of the policy change immediately, as reports claim that they will fall under this framework only when their seven-year contracts end. However, many believe that net-meter users have been handed the short end of the stick.

A senior official reportedly outlined how, after taxes and duties, net meter users will be forced to purchase electricity at an extortionate 70 rupees per unit during peak hours – a stark contrast with the new buyback rate of 10 rupees per unit. Another alternative that analysts have highlighted for net meter owners is to purchase high-capacity batteries and sever ties with the national grid.

Currently, taxes have not been levied on off-grid solar installations. However, many fear that it is only a matter of time before these installations are in the crosshairs of the Federal Board of Revenue (FBR).

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