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Solar disruptions
PAKISTAN is not usually an early mover on global climate concerns. But at least from one perspective, that is exactly what is happening as rich Pakistanis defect from a fossil-fuel and hydro-dominated power grid to rooftop solar self-generation.
Much has been made of net-metering policies in recent months and the implications of grid defection have been hotly debated, but the basic reality underlying this controversy has somehow evaded comment, which is that a low-carbon energy transition is underway. And it is happening despite the state, not because of it. This unplanned and uncoordinated transition has urgent implications for social equity and the political and institutional arrangements needed to support it.
At the heart of the net-metering kerfuffle is public distribution companies’ fear of what is called the ‘utility death spiral’. This rather unfortunate name emerges from European and the United States’ experiences in which utility companies increase their tariffs, thereby prompting high-income customers to invest in self-generation for some or all of their electricity supply. Utilities thus lose their best customers, forcing them to increase tariffs even further, and the problem is compounded.
Usually utilities tend to overstate the risks posed by customers going off-grid, but curiously, the opposite may be true in Pakistan. The understating is evident in the numbers quoted. Cash-strapped distribution companies and the public exchequer have been sweating about net-metering solar installations whose combined capacity in different accounts varies from approximately 1,000MW to 2,000MW. But if media reporting is to be believed, the scale of the defection is much higher.
Grid defection at the scale implied by import figures may add to the poor’s suffering.
Earlier this year, major newspapers reported that 7,500MW of solar panels had been imported into Pakistan just in the first four months of 2024. This is almost a fifth of Pakistan’s total installed capacity of 46,000MW. It is a huge number. These panels are probably not all with retailers yet, although some will be, but it bears noting that unless a new licensing regime is introduced fast, the vast majority of these installations will never be included in power sector statistics.
Installed capacity figures only include grid-connected capacity. They do not include the ‘simple’ off-grid solar installations that currently require no licence and are selling like hotcakes in every bazaar. The 7,500MW of panels imported this year, 5,000MW imported last year, and the 2,800MW imported the year before that in 2022 are invisible in official frameworks used to plan and regulate the sector.
Such ‘invisibility’ is of course hardly unique to the power sector. The Pakistani informal economy is enormous, and its unregistered and socially regulated nature enables significant accumulation by some while giving workers and petty producers and traders a raw deal. Informalised self-generation is no different. Unless the state steps in with intent, renewable energy will expand but the costs of this otherwise welcome development will be displaced onto those least able to bear them.
Grid-dependent households and businesses, the distribution companies that supply them, and those in charge of this country’s finances should be much more concerned than they are about what is happening. The poor are already suffering relentlessly as inflation eats away at their already meagre purchasing power — grid defection at the scale implied by import figures will add to this suffering unless the state acts swiftly and decisively to rebalance the costs and benefits emerging from this unplanned transition.
It would behoove us to learn from ongoing debates and experiences around the world on this. South Africa is desperately searching for solutions to this problem, Spain has found that certain measures it took to deal with this have backfired, and Australia has more per capita rooftop solar installations than any other country in the world. At the very least, we would need to begin by putting in place a licensing regime for all rooftop solar generation systems (not just net-metering) and instituting a small charge on them that could cross-subsidise grid-dependents. The larger the system, the greater the charge. Or lowering fixed costs by not conceding things like dollar indexation in renegotiations with IPPs that have long paid back their debts.
However, all these actions assume a state that has the willingness, capacity, and incentive to care for its poor and set its house in order. Even assuming the best of intentions, no public official can do this if every day in office is spent currying favour with seniors, defending against existential threats posed by party bosses and perpetually incumbent unelected institutions, and navigating fiscal suffocation by debt servicing and defence expenditure.
These are serious structural constraints that no policy reform can fix. It takes a full-blown revolutionary political movement to see out the old and set up the new. Which begs the question: how useful is it really to talk policy in such circumstances? Not much perhaps.
We may not be able to see it yet, but the rise of self-generation, battery storage, and microgrids is truly disruptive and will have far-reaching social repercussions. Moving away from fossil fuels and large hydro is essential, but so is shielding the poor from the negative effects of this and initiating an equitable, locally owned and democratically organised politics of energy provision. In his book Access to Power: Electricity and the Infrastructural State in Pakistan, Ijlal Naqvi concludes that Pakistan’s overly centralised state and its commitment to suppressing provincial autonomy is a key contributing factor to the power sector’s circular debt.
Peripheral areas most aggrieved by the centre are also the ones that largely do not pay their electricity bills. Enforcing payment in Balochistan for example would start an all-consuming fire, and so the centre accepts this budgetary burden as the price of its heavy-handedness and everyone loses.
This centrist authoritarianism must give, and the advent of self-generation systems at household and community level will soon add its weight to existing forces militating for greater democratic control. Unfortunately, the odds of history repeating itself are high.
The writer is a researcher at the University of Bath, UK.
Published in Dawn, July 27th, 2024
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