Sunblock for solar: Winter package might dim solar market spark

Business owners celebrated as Islamabad announced the Winter Electricity Package for the next three months.

As per the Power Division, commercial electricity is priced in a band between Rs39.5 to Rs52. However, they would only be charged Rs26.07 per unit for incremental usage.

This spells great news for businesses as the lower costs of electricity will directly translate into an increase in their profit margins. The money that these reduced costs free up can then be reinvested back into the business. This could allow business owners to expand the scope of their business activities without having to take on any debt or give up equity to new stakeholders for investments.

The dip in commercial electricity prices for incremental units below the base rate will be especially beneficial for industries that use up lots of electricity. For instance, the textile sector is a major consumer of electricity standing at 28 per cent of overall electricity consumption.

The reduced prices will allow for textile exports to benefit from more competitive prices in international markets. This is simply because a fall in their production costs will result in international customers finding it cheaper to import Pakistani textiles.

The textile sector is responsible for bringing in 60 per cent of export earnings, and this number could see an upward revision soon. This is undoubtedly great news for Islamabad, too, as the increased export earnings will improve Pakistan’s balance of trade, which has historically remained poor.

However, a policy that creates winners implies that there will be losers too. The ones who will lose out as a result of the reduced incremental electricity charges will be businesses that sell solar panels and inverters.

As it stands, Profit.pk has reported that Pakistan currently ranks as the sixth-largest solar market globally. This is largely due to the fact that tariffs on electricity purchased from the national grid surged by a whopping 155 per cent in just a little over three years.

As a result of these staggeringly high tariffs, residential, commercial and even industrial consumers began to transition away from the national grid in favour of powering up their spaces using solar energy. Reports have confirmed that the demand for electricity dropped by over 10 per cent in the previous fiscal year due to sky-high prices and solar adoption.

However, with the introduction of the winter package, experts are predicting a fall in demand for solar panels. This does not bode well for those involved in trading or installing solar panels. It will be interesting to note what the new prices will be once the winter package ends.