The exorbitant rate hikes (155% between 2021 and 2024) and unreliability of supply from the power grid in Pakistan are forcing consumers to seek alternative options to meet their demand. This trend is evident in the phenomenal growth of rooftop solar capacity, which has already crossed 45,000 MW. Not all of this is interactive with the grid. Grid-interactive solar systems, which are governed by NEPRA (A&RE) Distributed Generation and Net Metering Regulations 2015 (“NEM Regulations 2015”), are estimated to add up to 6,000 MW.
This growing trend (being termed the “Solar Revolution”) has alarmed some high priests in the power sector and also in the energy ministry, as demand on the grid is not just eroding, it is also seeing a radical change in profile. However, instead of embracing these trends and using them to fix the power sector’s woes, they are making lame excuses to resist the rising solar tide that has swept the whole world.
Common refrains making rounds in media and other forums include stranding of capital investments, shifting of sunk costs to non-solar consumers (PKR 159 billion as claimed by the energy ministry), and painting those with solar systems as greedy and heartless profiteers.
There is little substance to these claims, and it seems to be just a hoax used by the proponents of the status quo to perpetuate poor governance, inefficiency, and rampant corruption at all levels in the power sector. A senior executive in the power sector is reported to have conceded before NEPRA recently that while solar generation was increasing in the country, it had not yet reached a level to cause adverse impacts on the grid. He also claimed that consumers with solar systems were actually consuming more and that their consumption from the grid had not changed much.
The above lobby seems to have succeeded in persuading the Power Division and NEPRA to rescind the NEM Regulation 2015 and replace it with a new policy. Its draft was posted on the regulator’s website last week, seeking stakeholder feedback before approval. The new policy will be titled “NEPRA (Prosumer) Regulations 2025” and, once approved, will supersede the previous one.
This is unfortunate because it reflects the deeply ingrained and rigid mindset of those who currently control the power sector. Instead of rising to the new challenges of the energy market and using them to the nation’s advantage, policy and decision-makers in Pakistan seem content with business as usual, also happy to let a historic opportunity pass. However, they must realise that no amount of “crying wolf” will save the day for them. They may have succeeded in winning a small battle, but are destined to lose the war eventually, since the fundamentals of the electricity supply industry (ESI) have completely changed.
Continuation of the traditional approach, therefore, is tantamount to locking the country into capital-intensive, long-lived, import-dependent, and environmentally hostile infrastructure
The traditional approach to managing the ESI focused on aggregating consumers’ forecast demand within a utility’s control area and meeting it through a least-cost sequence of generation and transmission and distribution (T&D) capacity additions—currently also the mainstay of the country’s power plans, including the “indicative generation capacity expansion plans (IGCEPs)”.
New technologies and market developments in the past couple of decades, however, have rendered this century-old approach anachronistic and practically obsolete.
Traditionally, power in the grid used to flow in one direction only (from public- or privately-owned power generating plants to end-users via the grid), and revenues in the opposite direction (from end-users to the power company) with prices fixed and controlled by the regulator. In the new world, power can flow in either direction, as some consumers may now be able to meet part or all of their demand through their own generation. This enables them to bypass the grid or use it only for backup. They can also provide the grid with their excess capacity to contribute to its security and reliability. Like power, revenues can also flow in either direction.
Continuation of the traditional approach, therefore, is tantamount to locking the country into capital-intensive, long-lived, import-dependent, and environmentally hostile infrastructure. It is unfortunate that instead of a vision-led, progressive approach, Pakistan’s policy and decision-makers seem adamant to confront the new challenges with the same approach that has brought the country to its knees financially.
Pakistan needs an imaginative and progressive approach to effectively deal with the emerging challenges. A “problem-driven” approach that sees the ESI only through the lens of a centralised grid and focuses mainly on reducing losses, improving bill recovery, and promoting competition in some functions, though necessary, will not be sufficient. A “vision-led” approach and systemic transformation are a must for this purpose, including its legal and regulatory framework, its systems, its institutions, its business model, and its investment and pricing frameworks and schemes.
The draft policy lacks much in dealing with promising DGs and DERs in the country, and seems mainly to squeeze the consumers currently on net-metering arrangements and discourage those who may aspire to have one in the future
A glance at the draft policy reveals that it is just a reincarnation of the previous policy, however, making the process of obtaining a grid-interactive solar interconnection more stringent and expensive for interested consumers, drastically cutting down the buyback rate for electricity injected into the grid, restricting the individual capacity of each such facility to a consumer’s sanctioned load and to 80% of the capacity of the transformer if the new user will share with other consumers, and NEPRA wresting additional control in this process.
Though each component of the draft policy requires independent discussion, we will restrict ourselves to offering only a high-level critique. The title and contents of the draft policy seem to be in conflict. This notion is reinforced in the definitions of the terms “prosumer” and “distributed generation”. Though it claims to cover distributed generation (DG) in general, its contents do not support this intent. It limits coverage to only those consumers who desire to install solar, wind, or biogas systems on their sites to meet their own demand and sell any excess production to the grid.
The draft policy defines the term “prosumer” as a consumer with a 3-phase 400V or 11kV domestic, commercial, industrial, agricultural, general service connection, or a single-point bulk supply connection, who secures a licence from NEPRA to interconnect and operate the on-site generation facility (solar, wind, and biogas, limited to one MW) with the local distribution system.
Apparently, it excludes anyone who may want to develop a distributed generation (DG) facility solely for supplying electricity produced to the distribution system as a business endeavour. Other DG options also seem to have been excluded from the new policy. Since DGs are only a part of the rich array of distributed energy resources (DERs), options on the demand side of the grid also seem to have missed the boat.
It is not clear why the draft policy demands prosumer generation systems to comply with the Grid Code instead of the Distribution Code, which should be the most relevant and appropriate document to regulate these systems. It is also not clear why it demands these systems to comply with IEEE Standard 1547-2003, whereas a much more enhanced revision of this standard has been available since 2018.
In a nutshell, the draft policy lacks much in dealing with promising DGs and DERs in the country and seems mainly to squeeze the consumers currently on net-metering arrangements and discourage those who may aspire to have one in the future. Moreover, it is regressive in the sense that it places the existing customers on net metering, as well as those who may be interested in deploying solar or other DERs in the future, at the mercy and whim of the power sector managers and the regulator. In simple terms, the government and the regulator offer old wine, albeit in a new bottle.