Non-solar consumers bear Rs200b burden

Rapid solar energy adoption increases tariff by Rs2 per unit for grid consumers

ISLAMABAD:

A report titled "The Distributed Divide – How Solar Expansion Affects Non-Adopting Consumers and Utility Economics" and released by Arzachel, reveals that non-solar consumers have borne a staggering burden of Rs200 billion in fiscal year 2023-24 due to the rapid expansion of solar energy adoption.

This transition has caused an estimated tariff increase of Rs2 per kilowatt-hour (kWh) for grid-dependent consumers, underscoring the financial burden and inequities stemming from the insufficiently managed expansion of solar adoption through behind-the-meter systems and net metering.

Without immediate regulatory intervention, the financial burden on non-solar consumers is projected to escalate further.

For the current fiscal year, a 5% reduction in grid demand, driven by solar integration, is expected to shift an additional Rs131 billion in annual costs to non-solar consumers, doubling to Rs261 billion if grid demand reduces by 10%, according to the study.

To address these pressing challenges brought on by rapid and under-regulated solar adoption, the report calls for immediate regulatory reforms and targeted policies to ensure equitable cost distribution and grid stability.

The report recommends transitioning from net metering to net billing or feed-in tariff (FiT) systems to lower rates and system marginal costs, introducing fixed grid access fees to reflect actual service costs, and establishing an ancillary services market to enhance grid stability.

It also advocates revising the distribution code to manage bi-directional power flow and ensure energy equity through fair cost allocation, balancing renewable energy benefits with grid sustainability.

The report highlights that the rising adoption of rooftop and behind-the-meter solar installations has significantly reshaped Pakistan's energy demand profile.

As per the study's estimates, an average 10kW net metering system enables a consumer to avoid grid costs of Rs20 per unit, while behind-the-meter installations allow consumers to bypass an average of Rs7 per unit in fixed costs.

While solar adopters benefit from substantial savings, the resulting drop in grid demand has caused energy sales to plummet by 8-10% during daylight hours, shifting the burden of fixed costs and grid maintenance to non-solar consumers.

The research underscores the technical challenges faced by DISCOs (distribution companies), including voltage instability, reverse power flows and increased demand for ancillary services such as frequency regulation and reactive power support.

These issues require significant infrastructure investment, further exacerbating the financial strain on the energy sector.

The report predicts that Pakistan's grid will soon face the "duck curve" phenomenon, marked by sharply reduced demand during midday – when solar power generation peaks – followed by a steep rise in demand in the evening, complicating grid management and operational planning.

Without reforms, this dynamic could trigger a "death spiral," a cycle of rising tariffs, declining grid revenues and further consumer defection to solar, threatening the long-term sustainability of the energy sector.