Pakistani solar business development C&I – pv international magazine

May 28, 2024 Emiliano Bellini

C&I energy consumers are increasingly adopting solar panels in Pakistan due to high energy prices and tariffs.

“The average industrial customer currently pays a rate of $0.12 per kWh,” said Omar Malik, CEO of Pakistani solar company Shams Power. magazine pw. “But that’s only half the story, because for every kilowatt-hour they buy from the grid, they also have to pay another $0.10 in taxes. The government relies on five to six sectors for most of its indirect tax collection, and one of the largest is electricity.

High self-consumption rates mean lower electricity costs and lower taxes. Under current regulations, the sale of excess power to the grid under net metering is only allowed for generators with a capacity of up to 1 MW.

The government also only exempts import duties on solar panels. “The exemption for solar inverters was recently lifted,” Malik said. “But it had no impact on market development.”

According to official statistics from Pakistan’s Associated Press, Pakistan’s National Power Regulatory Authority (NEPRA) has issued 1,596 net metering licenses across the country with a total capacity of 221.05 MW in fiscal year 2022-2023.

Malik said the market is also growing in terms of panel imports.

“In 2022, 2.8 GW of solar panels were imported into Pakistan. In 2023, approximately 5 GW, despite import controls, and this year the forecast assumes even 12 GW,” he said.

Financial concerns

One of the major hurdles to overcome in the Pakistani C&I segment is access to finance.

“Banks and lenders in Pakistan still consider solar assets to be rapidly depreciating,” Malik explained, noting that the volatility of the Pakistani rupee continues to be an issue compared to India, where access to financing is easier. “Indian currency is stable enough for international investors.”

Despite these challenges, Shams Power managed to raise $20 million in debt from local banks, secured by a guarantee from international credit support entity, GuarantCo.

“To achieve this, we need to involve the bank at the project financing stage,” Malik explained. “Or we can do it even after a year or two of operation when we have certain cash flows and we can show how these assets are performing and get the portfolio refinanced.”

Many Pakistani companies exporting denim and textiles to the US and European markets are facing pressure from their buyers to support their supply chains with clean energy.

“As a result, there is some pressure to switch to renewables, but it is not coming from the government,” Malik said.

Storage segment

The C&I segment does not yet offer a strong business case for battery storage.

“Batteries are still not economically viable in terms of grid parity due to high tariffs and taxes imposed on battery imports and storage technologies,” said Irteza Ubaid, chief operating officer of Shams Power magazine pw. “Under the current electricity pricing system, profits can only be generated in the event of a power outage. Or when you reach peak rates, you can start using the battery. However, the levelized storage cost for Tier 1 C&I batteries is currently still close to $0.35/kWh. We are still unable to provide customers with the economic benefits of installing storage because they can buy power from the grid for less than $0.30 and they are not really interested – unless they have a continuous production process and cannot afford any interruptions.” .

Shams Power is currently building 5 MWh of storage projects in Pakistan.

“We educate our customers and convince them that they should not only look at the cost per kWh, but also at additional benefits such as energy quality and environmental benefits,” Ubaid said.

Import tariffs continue to be imposed on batteries, which means upfront costs remain higher than in other, more mature renewable energy markets.

Shams Power has experience deploying over 40MW of C&I solar power for major clients such as Coca-Cola, Mondelez, AkzoNobel, Metro, Packages, Shifa Hospital, Hyundai and Sanofi. It has pipelines of over 200 MW with major international and local companies across Pakistan.