Net Metering Market

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  • Post published:December 26, 2019
  • Post category:Blog


KARACHI: Pakistan still lacks net-metering market, even though the power sector regulator had notified the regulations in 2015. As many as 1,143 distributed generation licences, with the total installed capacity of a meagre 19.55MW, were issued under the net-metering regime in FY19, National Electric Power Regulatory Authority (NEPRA) reported.

The Alternate Energy Development Board (AEDB) is targeting 1,000MW of net-metering-based solar installations by 2020/21 and 4,500MW by 2025.

However, experts believe the Distributed Generation and Net-Metering Regulations, introduced by NEPRA in September 2015, landed distribution companies (DISCOS) in unfamiliar territory. Having no prior experience of a mechanism through which to purchase electricity from consumers, several DISCOS expressed reservations over the technical and financial viability of net-metering.

Moreover, DISCOS’ staff lacks the technical expertise to implement the regulations, or evaluate interconnection feasibility, and that a large number of distributed generators may destabilise the reliability of the system.

An official of a renewable energy company offering net-metering solutions said the switch in their role from consumers to partial sellers of electricity might affect the revenues of DISCOs, at least in the short -term.

“Although this would help increase generation capacity and potentially alleviate the country’s power deficit, excessive distributed generation capacity installations may quickly challenge the financial liquidity of DISCOS.”

An official at a distribution company said they had been receiving net-metering

applications from the consumers, and licences were issued to them, but only a fraction of those setup distributed generation systems.

“It will not be a successful experience for them, as the consumers would end up paying more. We have reason to believe that under the impression of selling electricity, the consumers use substantially more than their normal consumption.”

Coordination between NEPRA and other government agencies in regulation design has improved, but the distributed generation sector too overlooks the importance of integrated planning.

“Distributed power generation and its related challenges, at this stage, can be compared to the early years of utility-scale renewable energy deployment in Pakistan. It remains to be seen, which government agency will assume the supervisory role for creating a net-metering market. The roles of various agencies have yet to be defined,” a recent report on Pakistan issued by the International Renewable Energy Agency (IRENA) noted.

NEPRA’s net-metering regulations offer an opportunity to exploit the vastly available and geographically scattered solar energy.

“Given the importance of grid integrity and overall financial viability to DISCOs, the technical and financial impacts of distributed power generation should be an integral part of Pakistan’s energy planning. Since the dynamics of distributed power generation differ significantly from the conventional power generation system, growth would create challenges that decision makers must resolve appropriately,” IRENA reported.

The ministry of power expects a large number of systems would get installed in near- to short-term due to enhanced awareness, better service delivery through prequalified installers, strict adherence to equipment quality standards and monitored focus of DISCOS for the promotion of net-metering.

Concerns over commercial viability expressed by various DISCOS are not quantifiable at this stage. However, these concerns cannot be ruled out, since they echo those of distribution utilities in other countries.

“Integrated energy planning should; thus, include a rigorous analysis of distributed power generation potential and its impacts on the economics of the power market. This is important to ensure the fair distribution of anticipated dividends so that net-metering may be seen as mutually beneficial to both buyer and seller,” IRENA report showed.

Technical challenges and the lack of experience in distributed power generation are valid concerns that can be addressed by building capacity. The government should facilitate such programmes, but DISCOS would remain responsible for allocating sufficient resources to develop their in-house capacities.

The same can be said about administrative and security challenges that DISCOs must resolve to ensure compliance with the NEPRA standards. The government could consider installing flagship projects at various locations to help DISCOS gain the much-needed confidence and technical knowhow without added commercial obligation