IN 2012, Northern Ireland launched an environmental initiative that escalated into the notorious Cash for Ash scandal. Originally designed to tackle energy issues, the plan ironically made the problem worse. The scandal unfolded around the Renewable Heat Incentive; a programme aimed at encouraging businesses to switch to green energy. However, this 20-year scheme backfired. Subsidies for using renewable energy were higher than the energy’s actual cost. This glitch led businesses to increase their energy consumption to make profits, going as far as heating empty buildings. Pakistan’s rooftop solar net metering is now a classic example of the same flawed policy design, making it a tragedy of the commons. Worse still is the government’s mishandling of the situation.

The Pakistan government has decided to reduce the incentivised tariff for net metering on new solar installations. This policy gives the impression that the government is turning against solar energy, even if that’s not the case. As new solar installations emerged, the government started to panic about consumers relying less on the traditional power grid. Should they have panicked? No.

A Lums electricity outlook report projects that in the coming years, the difference between peak load demand with and without distributed solar generation will be negligible; hence, there will be negligible impact on the capacity infrastructure of the grid. This also leaves little room for the argument that only 0.3 per cent of households, presumably wealthy, benefit from net metering with solar rooftops. If net metering for 0.3pc of households is causing difficulties with capacity payments, then the problem lies elsewhere, not with net metering. The real issues are the expensive take-or-pay guarantee model and a lack of demand for excess generation capacity.

Rolling back the incentivised net metering policy highlights the government’s poor preparation. The government launched the Fast Track Solar Initiatives which aimed to replace costly imported fossil fuels with solar energy, generate solar power on 11 kV feeders, and solarise public buildings. This project pulled the interest of investors in renewable energy production like none other. However, the government’s current policy against net metering contradicts this initiative. Net metering was supposed to add only 500 MWp per year for the next few years, according to the latest Indicative Generation Capacity Expansion Plan. More than 5,000 MW of existing thermal power projects are set to be retired from the NTDC system at the same time. Solar could have replaced them. It is a no-brainer.

The main concern should not be regulating solar net metering.

The government has declared the grid sacred. This enthusiasm emerges from the agreements with independent power producers (IPPs) that require us to complete the capacity payments, whether we use the national grid or not. This situation makes it tricky for the government to ensure consumers stay connected to the grid. Grid reliance, tied intrinsically to capacity payments, will perpetually stand in opposition to the adoption of any renewable technologies in the future — which, of course, is not the way to go. Owing to the capacity payments, we are about to enter an era of grid nationalism.

At this stage, the government’s main concern should not be regulating solar net metering. Instead, it should focus on navigating the committed capacity factor and the IPP agreements for which the capacity component is anticipated to rise significantly. Curtailing net metering will hardly solve the problem. As a wise man once said, “The reason most ma­­jor goals are not ach­ieved is that we spend our time doing second things first.”

With a new generation surplus on the horizon, the weighted average cost of generation will burden poor consumers, which it should not. We must avoid repeating western Australia’s mid-2000s mistake, where a projected surplus never materialised under the capacity electricity agreement, forcing them to pay $85 per MWh compared to $35 per MWh in eastern Australia. We are in a dire situation where the economic outlook does not support increased electricity demand. Our dollar exchange rate projections were incorrect, worsening the problem.

To resolve this, the government must expand the base load by introducing commercial and industrial energy demand. Designing a sensible gross metering concept could also benefit domestic consumers significantly. The situation also makes a case for electric vehicles that can not only reduce the need for imported fuel but also use the surplus capacity. Studies show that half a million EVs can be fully charged with 1,000 MW — an excellent solution. There are alternatives.

The writer is a policy adviser in the Policy and Economics Branch of Energy and Natural Resources, Government of Canada.

X: @umerasks

Published in Dawn, May 31st, 2024