Can solar power Pakistan?

Amid a worsening energy crisis, Pakistan has approved the use of grid-connected solar energy, rooftop solar installations and mortgage financing for home solar panels to boost uptake of clean energy in the country.

The government has also reversed course and eliminated a 32.5 percent tax imposed on imported solar equipment in the country’s 2014-2015 budget. The reversal aims to bring down the cost of installing solar panels.

The approval of net-metering – which allows solar panel purchasers to sell power they produce to the national grid – is a major breakthrough that could spur use of solar energy and help Pakistan’s government cut power shortages in the long run, said Asjad Imtiaz Ali, chief executive officer of the Alternative Energy Development Board, a public organisation.

“The initiative will help scale up demand for solar energy across Pakistan,” he said, “and we hope the increased demand will also result in sufficient decreases in the price of solar equipment.”

Ali said the government decided to cut newly imposed taxes on the import of solar panels following pressure from business owners, the public and media.

And the decision to allow solar generators to sell their excess generating capacity means “consumers can now install rooftop solar systems and sell the extra energy to the national grid,” he said.

Currently, Pakistan’s rural areas face blackouts of over 11 hours a day while urban areas suffer up to eight hours of daily power cuts. The total power shortfall stands around 6,000 megawatts.

Safeer Hussain, a registrar at the National Electric Power Regulatory Authority, said consumers who intend to sell solar-generated electric power to a distribution company would need to register with his authority.

“Net-metering is a sophisticated system and the applicant would be responsible for the installation of the equipment used for interconnection,” he said.

How it works

Net-metering is a billing mechanism that credits solar energy system owners for the electricity they add to the national grid.

If a solar household uses more grid power than it supplies to the grid from its solar panels, it would still be billed each month for that excess power. But if it supplies more electricity than it uses in a month, then it will receive a credit against future bills or, be paid for the power on an annual basis, Hussain said.

“The tariff applicable for purchase of electricity from the consumer will be the same at which he has been billed by the company for electric power,” he said.

Nauman Khan, one panel importer and chief executive officer of Grace Solar Pakistan, said the changes could triple his solar imports in 2015.

Pakistan’s private sector imported 350 megawatts of solar panels in 2013 but that dropped to 128 megawatts in 2014 after the government imposed taxes on import of the panels, he said.

“The tax exemptions and other initiatives to boost clean energy are a welcome move by the government,” he said. “We hope the private sector would import around 800 megawatts of solar panels in 2015 to meet the demand.”

Net-metering will not only help consumers get uninterrupted power and energy credits through the year but also help the government bridge its power shortfall, he said.

Khan and the heads of two other solar companies plan to install rooftop solar on 100,000 homes in Lahore, Karachi, Rawalpindi and Islamabad in next two to three years, with Bank Alfalah Limited, a private bank, offering financing to buyers.

Funding to buy panels 

The State Bank of Pakistan and the Alternative Energy Development Board have recently allowed the bank for the first time to finance rooftop solar installation with home mortgages.

Fariha Mir, a senior manager at Bank Alfalah, said the financing up to five million rupees (around $50,000) for rooftop solar installation would be launched in the first quarter of 2015 under the banner “Green Market.”

“It’s our social responsibility to create awareness about clean energy and provide loans for it on easy installments to our customers,” she said.

Mir said the bank would give loans to customers who want to convert their homes to solar energy. The programme, which will allow buyers to borrow against their home’s value, will continue for five years, she said.

“The loan would be especially useful for people who otherwise can’t afford rooftop solar installation,” she said, adding the interest rate on the solar financing would also be comparatively low.

Qamar-uz-Zaman, an expert on climate change with Lead Pakistan, a non-profit organisation in Islamabad, predicted net-metering and private sector financing for solar installation would revolutionise the use of renewable energy in Pakistan, as it has done for many other developed and developing countries.

“Pakistan can cut carbon emissions to a significant extent and access international climate financing by promoting solar energy, besides overcoming its energy crisis,” he said.

This article is published in collaboration with The Thomson Reuters Foundation. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Aamir Saeed is an Islamabad-based freelance writer for the Thomson Reuters Foundation

Image: A prototype sun tracking solar panel made by Concentrix Solar collects energy from its location at the University of California San Diego February 10, 2011. REUTERS/Mike Blake.