Solar projects: Power ministry refuses to accept higher tariffs

Asks the regulator to review its decision

ISLAMABAD: The Ministry of Water and Power has refused to accept higher solar tariffs determined by the National Electric Power Regulatory Authority (Nepra) and has asked the regulator to reconsider it, officials say.

Nepra being the sole regulator in the power sector determines and notifies the tariff for generation, transmission and distribution of energy.



The government under its energy policy is required to optimise and reduce the generation cost of energy to a reasonable level.

Numerous initiatives have been undertaken to reduce the energy demand and supply gap in the country in addition to bringing the cost down. These include short to medium-term coal and LNG-based power projects and long-term plans for hydroelectric power schemes.

Internationally, the cost of establishing renewable energy plants is on a decline and the government hopes to capitalise on this opportunity and set up such projects in the country.



Tariff confusion

Nepra is responsible for determining the tariff for solar power plants with capacity ranging from 5 to 100 megawatts. According to documents, the tariff determined by the regulator was Rs17.9 per unit in early 2014, which was reduced to Rs14.85 in January 2015.

However, during this period the regulator also set the tariff at Rs15.78 per unit for some plants.

Officials of the power ministry said the decline in project cost apparently was not being properly reflected in tariff determination. While public hearings have already been held for the new tariff determination, which is expected to push the tariff down, such high costs are not reflective of prudent practices.



Consequences

The determination of higher tariff will not only distort the basket price but will also cause confusion amongst investors that are looking at multiple tariffs set by the regulator.

The high cost determination will have financial implication of about Rs79.5 million per year and Rs795 million for the ten-year tariff period.

Published in The Express Tribune, November 17^th, 2015.

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