Country Report Pakistan

The Missing Link to Solar Energy Transition: Tapping Into the Hidden Power of Residential Prosumers

By 2 November 2018 No Comments

Among the broad contours of tackling climatic changes, transition toward clean energy is one of the defining challenges facing the 21st century. With an array of low emission technologies, the technical challenge for a shift to Renewables has successfully been resolved. However, the on-going technological development is unlikely to catalyse a clean energy transition in the absence of a policy framework that aims at mainstreaming participation of multiple actors within society. Hence it has become more than ever important that policy makers timely correspond to the emerging role of these new market actors (i.e. prosumers) who can prove primary transition agents within the energy sector and contribute to building of a more sustainable future. This entry will look into the potential of solar energy and residential prosumers in Pakistan as well as will analyse the policy framework pertaining to them in the country.

Changing Energy Landscape and Potential of Solar Prosumers within Residential Sector

Energy landscape across the globe is evolving quickly. With the breakthrough of distributed energy procurement (made possible through technological innovation), the role of energy prosumers within the transition debate is gaining momentum. Prosumers (those energy consumers who are at the same time power producers and end-users) have become one of the key players in the transition process toward renewable and clean energy sources. In the wake of the declining cost of renewable technologies such as solar PV systems, rooftop solar is already booming in many countries across the globe. Today, residential Prosumers alone own 35% of the global cumulated installed Photo Voltaic capacity.

Speaking of Pakistan, the country is positioned in an ideal solar belt having average global irradiations ranging between 200–250 watt per m2 a day, with about 1500–3000 sunshine hours in a year i.e. one-third more sunshine hours compared to Germany, the global leader in the solar power generation. Further, residential sector in the country is one of the biggest consumers of energy. Its share in the total power consumption stands at 50%, compared to the 25% of industrial sector and 8% share of commercial sector. Despite of this huge potential, share of solar energy stands merely at 0.52% of the total mix. Absence of a prosumer-centric framework (highlighted in the subsequent section) is largely responsible for failure in harnessing the massive potential of solar resources in the country.

Policies and Regulations Related to Prosumers in Pakistan

Pakistan has multiple policies aiming at increasing share of renewable energy in the total mix. However, these policies are largely inadequate when it comes to prosumption.  The net-metering regulations were not only launched very late (i.e. in 2015) but also merely applies to projects ranging between 1kW up to 1MW (NEPRA, 2015).   The facility is also currently provided by limited power Distribution Companies (Discos). Apart from price-based policies, financial incentives were also introduced for facilitating both small-scale and large-scale investors. Against the backdrop, State Bank of Pakistan (SBP) introduced two schemes for investment in renewables (under the title “Scheme for Financing Power Plants using RE”). Projects falling within the range of 1MW up to 50MW fall under Category I, whereas Category II applies to projects ranging between 4kW-1MW (RE Finance facility, 2016). Financial schemes under Category II (which deals with prosumers) are provided for a maximum period of 10 years, where the principal amount and mark-up payments could be repaid in monthly or quarterly installments. So as could be observed,  not only the scheme fails to cater to the needs of those prosumers who install set-ups below 4kWbut also the 1kW benchmark of availing net-metering facility and the provision of the facility by few Disco’s has resulted in exclusion of huge section of population.  Additionally, no investment grants or financial subsidies are currently offered by government for incentivizing investment in renewables.  Also, the procedures for availing net-metering facility are so cumbersome that it has made investment in PV further costlier.

Overall Analysis

Above analysis reveals that Pakistan does not have a sufficiently friendly-framework, particularly when it comes to small-scale prosumers. Currently, due to technological and political constraints not all Disco’s in the country are providing net-metering facility. Again, both the price-based policies and financial schemes have set benchmarks for availing the stated facilitates, hence excluding huge sections of population in the country. Also, the cumbersome procedures and process of availing net metering policy on one hand and the poor execution of the existing regulations on the other, have failed to engage even the high-end users.

The energy pricing in Pakistan also favours status quo as currently conventional energy (which is fossil-fuel dominated) is provided by government at subsidized rates to residential consumers. All this has significantly slowed down uptake of PV installations among households as hardly any incentive exists for them to switch to renewables (which become relatively expensive compared to conventional energy).  The current regulations are hence designed in a way that supports the existing energy pathways handicapping the transition toward the massive indigenous renewables resources. With these shortcomings in the existing policy framework, the drive toward solar energy will stay sluggish.

Pakistan needs to understand the scope and potential of residential prosumers. As for developing countries, mobilizing finances for investment in Renewable Energy is a major challenge. In the given scenario, active engagement of community and a push at the micro level can profoundly help in de-carbonizing the economy.  However, the existing framework is unlikely to engage prosumers at a larger scale. Against the backdrop, a strong need exist for addressing the loopholes and shortcomings in the current portfolio of policy tools. The largest challenge conceivably is achieving a dynamic regulatory framework that can foment the transition toward a desirable energy system.

 

 

 

 

 

Naila Saleh

About Naila Saleh

Naila has done her post-graduation in Public Policy at the Pakistan Institute of Development Economics (PIDE). Currently, she is Junior Research Officer at Institute of Policy Studies. She is very much passionate about clean and renewable energy, climate justice and energy security.

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