New Net Metering Policy: Is Pakistan's Solar Boom in Jeopardy?

by Riaz Haq

Aug 30, 2024

Recent experience in California has shown that changes in incentives have a huge impact on residential adoption of solar power technology. Since the introduction of NEM 3.0 last year, new rooftop solar business in California has dramatically slowed. New residential solar installation applications have plunged 80%, according to Cal Matters. This has driven many solar installers out of business. The business that remains is mostly focused on adding batteries to existing solar installations. 

Impact of California NEM 3.0 on Solar Business. Source: Cal Matters

California Net Energy Metering (NEM 3.0) was launched last year after heavy lobbying by the state's utility companies like PGE and SoCal Edison. It has reduced payments for the excess power exported by the consumer to the grid by 75%. This change means that the consumer is better off with storage batteries to maximize self-consumption of the power generated by the solar panels. Companies such as Tesla Solar with its PowerWall 3 battery are the main beneficiaries of this change. 


With rapidly falling solar panel prices, Pakistan is experiencing a solar power boom. The country imported some 13 gigawatts of solar modules in the first six months of the year, making it the third-largest destination for Chinese exporters, according to Bloomberg.   In addition, there is approximately 2.2 gigawatts (GW) of net-metered rooftop solar PV capacity connected to the grid by June 2024, according to IEEFA. 
What is likely to happen to this solar boom as Islamabad considers changes to its net metering policy? A recent study published by the Institute for Energy Economics and Financial Analysis (IEEFA) attempts to answer this question. 
Net Metering vs Net Billing Payback Period in Pakistan. Source: IEEFA

There are several proposals under consideration by the Pakistani government to change its net metering policy. All are designed to significantly reduce payments to the consumer for energy exported to the grid. One of these proposals likely to be adopted is to switch from "Net Metering" to "Net Billing". 
Net metering transactions are usually one-to-one, so the credits are often equal to the retail rate of electricity (aka what you pay). Net billing credits are often equal to the wholesale rate of electricity (aka what your utility pays), which is less than the retail rate, according to Energy Sage. Utilities tend to oppose net metering programs, so alternative compensation programs are increasingly being used. 
Analysis by Haneea Isaad, an Energy Finance Specialist at IEEFA, shows that the switch from net metering to net billing would still reduce the payback period for 5kW to 25kW solar systems combined with 50% to 70% self-consumption. She concludes that the payback period will be well under 4 years for a system that has a life of 25 to 30 years. It is better than the 5-year payback period in California under NEM 3.0. 
Would consumers without solar be stuck with high electricity bills? It is quite likely because capacity charges paid to independent power producers (IPPs) accounted for 62% of energy expenditure in Pakistan for the 2023-2024 fiscal year. For the 2024-2025 fiscal year, 64% of the total power purchase price is expected to be fixed capacity costs. Lower consumption of grid electricity will result in a disproportionate impact on consumers who rely entirely on grid power.  
Higher levels of self-consumption closer to 100% would require larger batteries which are still quite expensive in Pakistan. This is likely to change as traditional lead-acid battery makers switch to lithium ion batteries in the country. Recent launches of electric vehicle assembly plants in Pakistan are expected to boost the lithium-ion battery production and bring down prices in the country in the coming years, according to Mordor Intelligence. 
Load Previous Comments

  • Riaz Haq

    AI Overview
    Pakistan is actively developing its lithium-ion battery manufacturing sector through new national policies, incentives, and collaborations, particularly with China
    , aiming to cut imports, boost energy security for EVs and renewables, and attract investment, with local assembly and production starting via companies like Apex Lithium Batteries and Li-Power Green Energy (Pvt.) Ltd., building on existing players like Atlas Battery Limited, Exide Pakistan Limited, and Phoenix Battery Ltd. 
    Government Initiatives & Policy
    • National Policy Framework: Pakistan's Ministry of Industries and Production is creating a national policy for localized manufacturing to reduce import reliance, focusing on EVs, solar energy storage, and grid stability.
    • Incentives & Investment: The policy includes incentives, safety standards, and phased localization plans to attract private investment and joint ventures, especially from Chinese firms.
    • China Collaboration: Agreements worth hundreds of millions are being pursued with Chinese companies for battery assembly and to leverage local lithium reserves. 
    Key Local Manufacturers & Players
    • Apex Lithium Batteries: Manufactures locally in Multan using high-performance cells from Great Power and EVE.
    • Li-Power Green Energy: A Karachi-based company specializing in R&D, manufacturing, and sales of lithium batteries.
    • Badar Energy: A provider of lithium solar storage solutions in Pakistan.
    • SolaX & Wasiq Industries: Opened Pakistan's first GWH lithium-ion battery factory, a significant step in high-end manufacturing.
    • Established Brands: Atlas Battery Limited, Exide Pakistan Limited, and Phoenix Battery Ltd are key players, with Phoenix expanding into lithium. 
    Market Drivers
    • Electric Vehicles (EVs): Growing demand for EV batteries.
    • Renewable Energy: Need for storage for solar power integration.
    • Energy Security: Reducing dependence on imported batteries. 
    In essence, Pakistan is strategically shifting towards domestic lithium-ion battery production, driven by policy, technology transfer, and local entrepreneurship, to support its green energy transition. 

    Jan 10

  • Riaz Haq

    Pakistan in talks with world’s largest EV battery maker CATL on investment cooperation — business chamber  | Arab News
    • Envoy to Beijing says China-Pakistan MoUs, joint ventures worth over $13 billion signed in two years
    • Says Pakistan eyeing “first-mover advantage” in sodium battery sector amid global clean energy transition

    KARACHI: Pakistan is in discussions with China’s CATL, the world’s largest electric vehicle battery manufacturer, over potential investment and cooperation in advanced battery technologies, Pakistan’s ambassador to Beijing said this week, as Islamabad pushes to attract industrial investment under the next phase of the China-Pakistan Economic Corridor (CPEC).

    China remains Pakistan’s largest strategic and economic partner, with the two countries deepening cooperation through CPEC, the flagship Pakistan arm of China’s Belt and Road Initiative launched in 2015. The first phase of CPEC focused largely on power generation, roads and transport infrastructure, while the second phase has increasingly shifted toward industrial cooperation, technology transfer, manufacturing, agriculture and special economic zones.

    Pakistan has recently intensified efforts to attract Chinese private-sector investment as it seeks to stabilize its economy under an IMF-backed reform program and position itself as a regional manufacturing and logistics hub.

    “Pakistan and China have made significant progress in strengthening bilateral economic cooperation with more than 300 Memorandums of Understanding (MOUs) and over three dozen joint venture agreements signed during the last two years, carrying a cumulative value exceeding $13 billion,” Pakistan’s Ambassador to China Khalil Hashmi said during a meeting on Monday with a Chinese business delegation at the Karachi Chamber of Commerce and Industry.

    Highlighting emerging opportunities in energy and technology, Hashmi said Pakistan was “currently engaged in active discussions with CATL,” which he described as one of the world’s largest battery manufacturers specializing in lithium-ion and increasingly sodium-based battery technologies.

    “He said Pakistan is encouraging the company to establish cooperation and investment initiatives in the country, expressing optimism that concrete developments may emerge during the forthcoming visit of the Prime Minister to China,” according to a statement released by the Karachi Chamber. 

    Global demand for EV batteries and energy storage systems has surged in recent years as governments and industries transition toward cleaner energy and electric mobility. CATL, headquartered in China, is the world’s dominant EV battery producer and supplies major global automakers including Tesla, BMW, Volkswagen and Ford.

    Pakistan has increasingly positioned itself as a potential destination for battery manufacturing and mineral processing investment, particularly as global attention shifts toward supply chains linked to electric vehicles, renewable energy and energy storage.

    Hashmi said the global market was gradually moving from lithium-ion batteries toward sodium-based battery technologies and noted that Pakistan possessed “abundant raw materials required for such industries.”

    “Pakistan aims to capitalize on the first-mover advantage in this evolving sector and is working steadily toward attracting investment in advanced battery manufacturing and new energy technologies,” the statement said, quoting the ambassador. 

    Hashmi also said Pakistan had established a mechanism to improve implementation of Chinese investment agreements, adding that nearly 30 percent of signed MoUs were now being converted into practical contracts and business ventures.

    5 hours ago

  • Riaz Haq

    Pakistan says China’s Dongjin Group to invest $15 million in battery plant in Faisalabad

    https://www.arabnews.com/node/2643228/amp

    Move expected to help Pakistan meet growing demand for batteries, driven by increasing number of electric vehicles, solar systems
    Plant likely to create jobs, support allied industries, including electronics, automotive components, packaging, chemicals, says official
    ISLAMABAD: Chinese company Dongjin Group recently announced its plan to invest $15 million in a dry battery facility in the eastern city of Faisalabad, state-run Associated Press of Pakistan (APP) reported on Monday.

    Dongjin Group designs, manufactures and sells lead acid batteries and chargers used in UPS systems, telecom, medical equipment, electric vehicles, solar and wind power systems and others. The Chinese company recently announced its plan to invest $15 million in the facility, APP said, adding that it will be established in the Special Economic Zone near Faisalabad.

    The investment agreement was signed with the Punjab Board of Investment and Trade (PBIT), the state-run media reported.

    “Chinese company Dongjin Group’s plan to establish a dry battery manufacturing facility in Allama Iqbal Industrial City is expected to help Pakistan meet growing demand for batteries, driven by the expansion of electric vehicles and solar energy systems,” APP said.

    Sharqui Ali Tipu, director of marketing at PBIT, said Dongjin Group decided to establish the plant after observing the increasing demand of batteries in Pakistan, particularly due to the growing use of electric vehicles and solar energy solutions in the country.

    He said the project is expected to generate economic and industrial activity across multiple sectors, while facilitating the transfer of modern technology.

    Tipu said the battery plant is likely to support allied industries, including electronics, automotive components, packaging, chemicals and engineering support services. He added that it would also create employment opportunities in Faisalabad and its surrounding areas.

    “Under Pakistan’s Special Economic Zone incentive package, the company will be eligible for a 10-year income tax holiday and a one-time exemption from customs duties and taxes on the import of plant and machinery,” APP said.

    Almas Hyder, former chairman of the Engineering Development Board, an apex government body under the Ministry of Industries & Production, noted that Pakistan is moving toward localizing lithium-ion battery manufacturing to strengthen energy security and reduce import dependence.

    Hyder said batteries have become strategically important globally due to their growing demand linked to renewable energy, electric vehicles and grid stability.

    “The greater the battery production in Pakistan, the higher the chances of reducing dependence on expensive electricity and imported fossil fuels,” Hyder was quoted as saying by the APP.

    4 hours ago