Roof Top Solar (RTS) has been responsible for promoting expansion of solar power worldwide. Under RTS, electricity is produced by the consumer by installing solar panel on his roof or any other space in his control, to consume himself and export excess electricity to the grid which can be consumed by other consumers in the distribution grid of the local DISCO.
Consumer is billed by the DISCO on the net electricity consumed (difference between electricity imported and exported) through a two-way metering system. It optimizes investments and creates a participative activity in meeting rising electricity demand. Perhaps the biggest benefit of RTS is the reduction of load on the transmission and distribution system which would be required in centralized generation. Consumers, distribution companies and governments have found RTS useful and have supported it worldwide.
In Pakistan, RTS has not caught up as much as it should have by now. RTS required approval from regulator and a well-defined policy framework, which is in place now after some delays and is reported to be working well. However, it may require some more facilitative framework including technical support and financing to increase the speed and penetration of this useful system. Before making some recommendations in this respect, this writer would like to inform the readers of what he deems to be a very progressive Roof Top Solar policy, by Chhattisgarh state in India.
France and California and may be in the meantime other jurisdictions have made RTS installation to be mandatory. Chhattisgarh has also done it but has added many useful features to this policy. The following are details:
1. Chhattisgarh has made RTS mandatory for larger houses of one canal or more, a reasonable provision under the regional socio-economic conditions.
2. Several companies have been selected through competition to install the RTS under government supported policy to install RTS and handle the administrative process.
3. The policy covers systems starting from 1kW to 100 kW thus including commercial, industrial, and institutional and possibly government entities as well.
4. Financing is available to the extent of a loan of 80% with a payback period of 5 years, probably at concessional rates.
5. Current approved CAPEX rates are at 60,000 IRs (1000 USD) per kW for 1-5 kW and goes down for larger capacities up to 100 kW.
6. Under a separate system, a subsidy of 30% towards CAPEX is provided by the federal government of India in all parts of India. One is not sure whether Chhattisgarh rates include this subsidy.
Thus all one has to do is to make an application to a competent authority and deposit 20% of the cost. In a few weeks, which involves site inspection and application processing and coordination with financing agencies and signing of contracts, one gets his RTS up and running. No hassle or requirement of technical knowledge and selecting the right vendor or approval of Disco.
We can have the same system with minor adjustments in this country as well. This may start from Karachi. Provincial government may launch such a scheme and Ministry of Power and Ministry of finance could agree on financial package with or without subsidy. Solar is competitive on its own and does not require subsidies. However, some subsidy can make it more attractive. Subsidy rate may be computed by calculating the savings that may accrue to government through lesser subsidies and cost of circular debt. Already, there are subsidy provisions which may be broadened and enlarged. Many innovations may be made for facilitating financing. Except for consumers 20% share, consumer may not have to have any cash to repay. Cash flow from solar installation can do that. For example, consumer may be required to pay for the whole electricity import and not the net bill initially; the solar export, valued at a certain agreed rate, could go towards payment of loan installation.
However, transparency may be an issue: selecting the company (for a city of Karachi’s size, several companies may have to be selected) and fixing the rates. If transparency is maintained through some magic, it may be ideal. Otherwise under alternative system, only financial concessions and provisions may be announced which can be channeled through banks and leasing companies. And third-party facilitators may be appointed which may provide advice and assistance in selecting solar panels and vendors, etc.
Apart from Karachi all major districts in Pakistan can be selected by the provincial governments for the scheme and eventually all the districts could be included. This could be a part of a larger solar/renewable framework under which a package of 10,000 MW of capacity can be inducted in the coming 5-7 years. Under the proposed RTS system, one would not like to encourage large foreign companies and would like to restrict it for local companies which may or may not have back-to-back arrangements with foreign companies on their own. Let local businesses develop as well.
Discos being in public sector are not as commercially driven as KE would be. Admittedly, RST is a competitor which eats into the sales and profits. Utilities have been demanding from regulators to allow levying some kind of charge on consumer rooftop solar. Many jurisdictions are allowing utilities (or considering) to install utility owned system and either pay a roof rent to consumer or offer a flat rate payment. Utilities argue that they can do it better than consumer having more technical know-how, borrow capital at lower rates, and thus be more efficient. For example, if net saving to consumer under consumer-owned system is Rs 1000 per month and if the utility is able to pay Rs 1500 per month to a consumer, which would be better. We may have to consider this model eventually. Consumer in Pakistan, however, is motivated to install RFT to save himself or herself from frequent load-shedding and failures and is probably less motivated by profits.
Yet another model of third-party solar installers is there. Under this model, consumer signs a Power Purchase Agreement (PPA) defining quantity, rates and other terms. Solar Installer installs his own system under his own investment on consumers’ rooftop. This model has attracted quite some market share in the west. In Pakistan also, this model is being implemented in commercial and industrial sector. Day time users and single shift operators are attracted more under this model.
Consumer motivation from remaining connected to the DISCO is to get electricity from grid when sun is not there in the evening or in some seasons. In this way, a consumer uses DISCO as a storage (he does not pay for). Storage batteries are expensive these days but costs are fast coming down. In a few years time, such consumers may want to and being able to afford his own storage and would be able to do away with the Disco.
Finally, when RTS acquires a significant market share, it would be a net cost to the system increasing the rates of Discos. Thus non-RST consumer would pay for the RTS benefit. It may either result in more consumers-owned RST or greater rationale for Disco-owned RST. For the time being, let us support whatever market niche RST is acquiring.
It is good to have launched Net Metering policy. However, it may not automatically boost solar roof top. India with the entire hullabaloo has managed to add some 2000 MW in RST as against a total of 20,000 MW of solar currently. In the USA, only California has a significant market share of 600,000 homes having RST as opposed to other states of lower than 100,000 homes only. A significant financial and non-financial facilitation may be required. Only well-to-do consumer are being attracted currently or industry may adopt it. In fact, for export industries, solar roof top may be the only way to get hold of cheap and competitive electricity. GoP may consider a subsidy on SRT to industrial sector instead of funneling into the bottomless pit of grid electricity suffering from theft and pilferage.
(The writer is former Member Energy, Planning Commission)
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Published in Business Recorder, May 27th, 2018.
