The expansion of solar energy is transforming the way we produce and distribute electricity, but it also presents economic challenges that need to be addressed. The current net metering system allows solar users to sell excess electricity back to the grid at rates that don’t account for the full costs of electricity generation, distribution, and infrastructure maintenance. This has led to a significant reduction in grid demand, resulting in a financial burden on traditional grid customers and utilities.
The report “The Distributed Divide” estimates that in Pakistan, around Rs200 billion worth of grid fixed costs are being shifted to non-solar users, resulting in a Rs2/unit tariff increase. A 5% decline in grid demand could lead to Rs130 billion in costs being incurred by non-solar consumers, exacerbating the financial strain on the power sector and leading to higher tariffs for consumers who rely solely on the national grid.
To address these challenges, the report recommends transitioning from net metering to net billing, where solar customers are compensated at a lower rate for their excess electricity while still paying fair grid fees. Many countries have implemented this change to address the financial challenges posed by distributed solar generation.
The International Renewable Energy Agency (IRENA) notes that net billing schemes are used in countries like Italy, Mexico, and Portugal, where prosumers are compensated for excess electricity fed into the grid based on the actual market value. This approach incentivizes self-consumption and ensures that prosumers are fairly compensated without imposing undue financial burdens on non-solar consumers.
In addition, introducing demand charges and minimum monthly bills for net-metered users can help recover fixed costs fairly. The report recommends charging residential net-metered users Rs1,000/kW/month in demand charges, while charging non-net-metered users Rs500/kW/month for the same.
In conclusion, while solar energy is essential for a sustainable energy future, its increasing adoption is creating economic challenges that need to be addressed. A transition from net metering to net billing, combined with the introduction of demand charges and minimum monthly bills, can help ensure a fair and financially viable energy system. It is crucial to implement a phased approach that balances immediate actions with long-term strategies to achieve a sustainable and equitable energy transition.