ISLAMABAD: In a not-so-veiled warning, foreign investors are showing reluctance over the solar power tariff being proposed by the government and have stated that they might consider moving their business elsewhere.
The National Electric Power Regulatory Authority (Nepra) announced a tariff of 16.3 cents per unit in January 2014, which was revised down to 14.15 cents after a year. Now, the regulator has conducted a hearing where it was proposed that the tariff be reduced further to 9.25 cents per units from January 2016 onwards.
In the wake of this downward revision, investors, who have invested billions in solar energy projects, have warned that the viability of their businesses in Pakistan has gone down.
Foreign and local investors have also turned down the four-month cutoff time for the 100MW Quaid-e-Azam Solar Park to reach the specified amount of power generation, urging the regulator to extend the limit to a year. While also urging the government to raise the tariff, investors have warned moving to other countries where solar power generation seemed more viable.
During the public hearing held by the regulator, Qui Changbin, vice-president Zonergy China, said the revised tariff needs to be implemented at least one year after the Quaid-e-Azam Solar Park has been made operational. The official said that Pakistan’s experience in the realm of solar energy was minimal and it needed to tread carefully.
Zonergy China is working on a 900-MW solar project under the China-Pakistan Economic Corridor (CPEC).
Qui said the cost of solar power station in Pakistan was 15-30% higher than that in China. “The average electricity price is 14.15 cents which is still below the lowest feed-in tariff level of China,” he said, adding that Pakistan also faces problems of unstable security, slow economic development and deficient infrastructure.
He said that all countries, even with stable and healthy development of solar energy, experience a gradual phase of high to lower tariff.
“In the initial stage, investors are attracted to promote industrial development through high electricity tariffs. But with the gradual development of matched industrial environment and further development of solar energy, the price is reduced,” he said, citing China, Germany and Japan as examples.
Meanwhile, Rob McNab, representative of UK-based firm Eversheds that has completed financial close of solar projects worth $300 billion, criticised the move of the regulator to lower tariff based on four months of data. He said investors wanted to invest billions of dollars in Pakistan but the sudden talk of lowering tariff has dented their confidence.
Representative of US-based firm StormHarbour Partners, Sohail Khan, said that the company had spent a huge amount of money and worked for two years on developing the 100-MW solar project in Punjab. “Unfortunately, we feel the proposed tariff revision, both in terms of magnitude and implementation timeline, is inequitable,” he said. “We feel that proposed tariff does not allow for the development of a robust utility scale solar market in Pakistan. He urged the regulator to reconsider the proposed tariff for viable solar energy projects.”
However, representatives of the Planning Commission, AEDB and Central Power Purchasing Agency supported the stance of Nepra.
Published in The Express Tribune, October 16th, 2015.