Pakistan Falls Short of Harnessing its Solar Energy Potential: SBP Report

Despite having enormous potential for solar power, the generation capacity in Pakistan is almost non-existent and the use of solar energy is still in its evolutionary stage, said the State Bank of Pakistan (SBP).

Germany, which receives almost one-third less sunshine in a given year compared to Pakistan, generated almost 37,780 Gwh using solar power in 2013, which was equivalent to 43 percent of the total power produced in Pakistan in fiscal year. Looking at the EU experience, it was their political will that led to the adoption of the climate and the energy agenda in 2008, thus paving way for supportive policies for increasing the household and industrial investments in the renewable energy.

As a result, most of the European countries witnessed a rapid increase in the renewable energy production, with Germany climbing to the top of the ladder to become global leader in the solar power generation, it added.

Households Need To Invest in Solar Power

The Bank has suggested households’ investment in the solar power, one of the solutions to address power shortage in the country. However, SBP stated that, despite NEPRA’s advice, there is no initiative to encourage the household’s participation in solar power generation.

It is easier to encourage households to invest in solar energy. Not only is the installation and maintenance of residential solar panels low cost, the Solar Photovoltaic (PV) technology mostly used by households for generation of solar energy, are more efficient in utilizing space.

One disadvantage with solar panels is that they are only effective during daylight hours, as storing electricity is not an efficient process. In fact, adding batteries for storage not only increases the overall installation and maintenance costs, it also makes power management cumbersome for household, as this may require frequent switching between solar and conventional power supply.

Instead of managing two different power circuits, it is efficient for a photovoltaic panel user to be coupled with the grid. This would allow users to supply the excess power to the main grid during the day, and switch to grid source at night when solar output is not available.

Solar is the Way Forward

The sharp decline in global oil prices has drastically changed the dynamics for renewable energy sources. Specifically, low oil prices have rendered alternate energy resources less appealing, even with the significant fall in their fixed costs due to technological innovations.

For example, the power generation based on furnace oil, costs less than Rs 10 per kwh on average between January-June 2015, which is far less compared to upfront tariff of Rs 15.13 per kwh for Solar energy.

Nonetheless, the alternate energy projects still remain viable for producers as the government guarantees the purchase of power – though these may slip in their standing in the power generation merit order. Furthermore, looking from a long-term perspective, there is a need to reduce country’s heavy reliance on volatile fossil fuels in the power generation mix. This will lessen dependence on oil import and help achieve cleaner environment.

Most of the advanced economies, where solar energy witnessed a rapid growth in recent years, incentivized households through “feed in tariff”, under which anyone who installs an eligible solar system will receive a guaranteed fixed payment for all the electricity they generate for a certain period. Besides, these small producers also receive an additional payment for any surplus electricity that they feed back into the power grid. This tariff incentive attracted residential investment in the solar power and provided a boost to the economy,” SBP maintained.

In Pakistan, NEPRA has announced “Net Metering Regime” to encourage the alternate energy generation at smaller level, and allowed consumers to sell surplus electricity (maximum of 1 MW) to Discos. “Households’ investment in the solar power is one of the solutions to address power shortage in the country as it will release power units for the industrial sector from household consumption,” SBP suggested.