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ISLAMABAD: Several Pakistani solar companies have reported an increase in demand, particularly from wealthy households, after July when the government increased electricity prices, but high installation costs for solar systems remain a challenge lasting, officials and experts said this week. .

Pakistan increased its electricity tariffs in July as part of reforms agreed under an International Monetary Fund (IMF) loan agreement, aimed at reducing unsustainable public debt in its power and gas sectors.

Reforms linked to the bailout, including an easing of import restrictions and a demand that subsidies be eliminated, have already fueled annual inflation, which rose to a record 38.0 percent in May. Interest rates have also increased and the rupee hit record lows. Last month the currency fell 6.2 percent. To make matters worse, Pakistan also announced last Friday a record increase in gasoline and diesel prices, the second major increase in two weeks, while the inflation rate remained above the target of 27.4 percent. in August.

In these difficult times, many Pakistanis who can afford it are exploring the option of installing solar power generation systems in their homes.

“In the last few months, (electricity) rates have changed by around thirty percent and demand (for solar energy) has increased by more than sixty to seventy percent,” said Ammar Zaheer, sales development manager at a leading solar energy company. Sky Electric, told Arab News.

Gulsher Khan, director of Pakistani solar systems provider Alpha Solar, said his company had recorded a 30 percent increase in solar installations in the last two months.

“With this (rising) cost of electricity… those who have the investment available, are installing the systems quickly.”

Pakistan has ideal climatic conditions for solar power generation, with more than nine hours of sunlight in most parts of the country. According to the World Bank, using just 0.071 percent of the country’s land area for solar photovoltaic power generation would meet Pakistan’s electricity demand. But currently, only 5.4 percent of Pakistan’s installed power generation capacity of 39,772 megawatts comes from renewables such as wind, solar and biomass, while fossil fuels still account for 63 percent. of the fuel mix, followed by hydroelectric power at 25 percent, according to National Electric Power. 2021 Annual Report of the Regulatory Authority (NEPRA).

So why can’t Pakistan harness its solar energy potential?

Experts say procedural and bureaucratic delays in construction approvals and unattractive tariffs for selling power to the national grid, along with a lack of political will and reluctance toward government investment, are blocking the industry’s progress.

For households, a major impediment is the high initial investment.

A 5 KW solar system, which supplies a family of four, costs around 1.2 million rupees ($4,114), while a 10 KW solar system for up to six people can cost up to 3 million rupees ($4,114). $9,836), according to solar system providers. Batteries are expensive and need to be replaced for an extra Rs 300,000 every two years or so. On the other hand, solar panels generally have a 10-15 year warranty and a 25-year lifespan.

However, the long-term cost savings lie in net metering, which is a billing mechanism that credits solar energy system owners for the electricity they add to the grid. A company registered with the Alternative Energy Development Board (AEDB) will install solar panels on the roof or other sunny location and set up the net metering process on behalf of their customer. If the solar panels generate more electricity than is used, the excess electricity is sold to the national grid.

Pakistan has a total of 767 megawatts of installed net metered capacity, according to the AEDB, which oversees the development of renewable energy sources in the South Asian country. Around 461 megawatts were installed in 2022, while the remaining 305 megawatts were added between 2015 and 2021. The AEDB chief did not respond to questions seeking comment for this story.

“The future is mainly to move to solar energy, to renewable energy and I think that is a very good cost relief,” said Barrister Shahrukh Iftikhar, a lawyer who was installing solar panels on the roof of his house on the outskirts of Islamabad last week.

Iftikhar said his family decided to switch to solar energy after their electricity bill increased from the usual 50,000 rupees ($171.43) to 150,000 rupees ($514.28) a month.

“I think we won’t get economies of scale in the first two years, but then it’s like we don’t have to pay for electricity,” Iftikhar said, insisting that the Rs 2 million investment was worth it.

“My average summer electricity bill was reduced by more than 60 percent after installing a battery-free solar system,” Imran Mukhtar, an Islamabad resident who installed a 5KW solar system last December, told Arab News.

“We use solar energy during the day to even run the air conditioning, but at night we switch to grid electricity.”

Mukhtar said their electricity bill would remain between 10,000 rupees ($33.93) in summer, while other families of four would receive around 30,000 rupees ($101.78).

Despite the high cost of solar systems, as most panels, batteries and other accessories are imported, Sky Electric’s Ammar said the switch would still benefit consumers by significantly reducing their electricity bills.

“If you install a typical 10 KW system, which is the requirement for most homes, you get the return on investment in just three and a half years,” Zaheer said. “And it will reduce even more if electricity rates continue to rise.”

Despite the benefits, including for the environment, of zero-carbon emissions from solar panels, Pakistan is far behind in meeting its goal of moving to 60 percent renewable energy by 2030 with a 50% reduction. percent in projected emissions.

In 2022, Pakistan’s total installed solar capacity was recorded at 1.24 GW, increasing by 17 percent compared to 2021, according to Mordor Intelligence, a global market advisory firm. In May 2022, then Prime Minister Shehbaz Sharif announced the removal of the 17 percent general sales tax on solar panels. In September 2022, the Pakistani government approved the National Solar Energy Initiative to produce 10,000 megawatts (MW) of electricity through solar energy projects, aiming to reduce the import bill for expensive diesel and furnace oil.

But Pakistan still gets only five percent of its energy from renewable solutions, while its share of coal in the energy mix has increased significantly over the past five years, said Dr. Imran Khalid, director of governance and policy at the Global Fund. -Pakistan.

“Installing rooftop solar is a good thing, but we will have to install large solar and wind projects to meet the international commitment to renewable energy,” he added.

Aisha Khan, executive director of the Civil Society Coalition for Climate Change networking platform, said installing solar panels in Pakistan remains expensive, despite import incentives by successive governments.

“We import all solar panels and their accessories, and they have become expensive over the years due to the sharp devaluation of our currency and the rising cost of freight,” Khan said.

“Cost is the biggest obstacle in the expansion of the solar solution, even in urban areas, let alone in remote areas of the country.”