Govt discusses reductions in solar net metering rates with IMF

In a bid to alleviate the financial burden of citizens purchasing electricity from the national grid, Islamabad continues its crackdown against individuals with solar panels and net meter installations. According to reports, the federal government has proposed a plan to the International Monetary Fund (IMF), which may significantly reduce the benefit net meter owners currently enjoy.

Islamabad has suggested to the IMF that electricity tariffs surrounding net meter owners should be subjected to revision. Currently, on-grid solar users supply excess electricity to the grid for a respectable 27 rupees per unit.

This has disproportionately benefitted households with large solar panel installations as they consistently provide more power to the grid compared to their consumption – resulting in zero or very low electricity bills.

As per reports, this has resulted in a shift in costs for those who do not have solar installations. Documents released in January from the Power Division revealed that under the current policy, tariffs have increased for underprivileged consumers by over one rupee per unit.

However, if the proposal is passed, it will reportedly result in on-grid solar users selling their electricity to the grid for a measly 10 rupees per unit. This spells terrible news for those who have invested in solar installations, especially those who have recently bought into the ‘solar hype’.

The proposed pricing for the sale of excess electricity to the grid by solar users may significantly increase the time it takes to recoup the initial investment amount. For reference, the time frame to break even on solar investments under the current policy is just 18-24 months.

However, if the IMF accepts Islamabad’s proposal, the time frame needed to break even on solar investments might creep up to approximately four years.

Regular grid consumers of electricity may witness reductions in their electricity bills, however, as the monetary value of the financial burden that net metering has imposed on other consumers stands north of a staggering 103 billion rupees.

The IMF may possibly expand the scope of the "crackdown" against solar panel owners to those who do not have a net meter installed. Reports suggest that the international creditor is concerned regarding Pakistan’s rapid ‘solarization’ since it could detrimentally impact the efficiency of the power sector in the near future.

Authorities have warned that the financial burden on grid users could cross half a trillion rupees over the next decade if regulations are not passed. Islamabad’s proposal to the IMF could significantly deter individuals from installing solar panels – as the net return on investing in panels gets squeezed.