Tariffs on New Solar Plants to be Adjusted Annually

Tariffs on new solar power plants will be adjusted annually rather than quarterly in order to offset exchange rate movements.

In response to the Power Division’s request for developing an optimal framework for addressing the country’s energy woes, the Economic Coordination Committee (ECC) of the federal cabinet has decided that tariffs on new solar power plants will be charged annually in accordance with fluctuations in USD/PKR rates, reported Business Recorder.

The ECC was informed that for the promotion and development of indigenous renewable energy resources in the country, the Federal Cabinet last month approved Frameworks Guidelines for the substitution of expensive imported fossil fuels, owing to high electricity tariffs and the drain of precious foreign exchange.

The government intends to develop large-scale solar PV projects to replace existing imported fossil fuel-based thermal power plants within their technical and contractual limits through the private sector on a Built Own Operate (BOO) and transfer basis. Therefore, in order to avoid unnecessarily long negotiations with investors, standard concession agreements were required for the development of the solar projects.

After due deliberations, the Alternative Energy Development Board (AEDB) and Central Power Purchasing Agency (CPPA-G) prepared “Security Package Documents” for providing a legal and contractual framework for constituting the infrastructural parameters of power projects. However, due to the nature of the transactions, certain amendments were imperative for the finalization of such agreements with the project companies.

In summary, the Power Division requested the following:

  1. Standard Security Package Documents for large-scale solar PV projects for substitution of expensive imported fossil fuel-based power generation under the Framework Guidelines.
  2. Boards of AEDB and CPPA-G may be authorized to approve any amendments in the IA and EPA as the case may be, that are project specific and may be required to comply with NEPRA’s Tariff Approval and/or Generation Licence for specific projects, subject to the condition that such amendments will not increase GoP obligations as contemplated and stipulated in the standard Security Package Documents.

After careful deliberations on the above-mentioned queries, the ECC approved the proposed tariff structure for new solar projects, including “Standardized Security Package Agreements for Solar PV Projects for Substitution of Expensive Imported Fossil Fuels with Solar Energy”.

The top committee further directed for the new payment mechanism proposed under the Security Package Agreements to be deleted and replaced with the “standard payment mechanism given under the earlier ECC-approved agreements.

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