NEPRA Introduces Solar Tariff Cuts For 2016

With Pakistan slowly moving away from traditional sources of generating power and opting for several solar powered ventures, the National Electric Power Regulatory Authority (NEPRA) announced yesterday that it will be introducing a new upfront solar tariff.

The new tariff will range from:

• 35 to 11.53 cents/kWh for the Northern region, which comprises of Punjab and KPK
• 72 to 10.89 cents/kWh for the Southern region, which comprises of Sindh and Balochistan

The tariff will be applicable for solar power projects that will be generating power in the range of 1-100 MW.

Details about The Newest Tariff Cuts

As for when the tariff will begin; it will be applicable from January 1st 2016, and will remain valid for a period of six months. Previously, NEPRA made a move by reducing solar photovoltaic system’s prices, which was met with extreme criticism from investors. One reason why NEPRA may have been compelled to reduce the pricing of the tariff was due to the built-in degradation factor. The better quality of the equipment, the less amount of performance degradation.

During the previous upfront solar tariffs, the allowed annual degradation was 0.7 percent from year 2 to year 25. With better solar modules available in the market, their annual degradation has come down to 0.5. However, with better quality comes better pricing, which will increase the overall costs of the module and the entire setup. After looking at all the metrics and the available factors that will be coming into the playing field, NEPRA has approved 0.5 percent annual degradation from year 2 to 25.

Concluding Thoughts

Despite their higher costs, a high quality solar photovoltaic system will be capable of achieving a higher capacity utilization factor as compared to a low-quality solar PV system. This, in turn, will require less maintenance and less replacement costs to be incurred, and while the initial costs of procuring such equipment will obviously be higher, it will result in the reduction of other costs and will ensure a smooth flow of electricity that’s being generated.