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January 24, 2020

Unchecked growth in distributed generation likely to bite utilities

Business

January 24, 2020

KARACHI: The Central Power Purchasing Agency (CPPA) has opposed the unmonitored growth in distributed generation citing that since full grid defection was economically unfeasible at the moment, partial defection would result in “death spiral” for utilities.

Grid defection occurs when customers cut their grid usage, either partially or fully, by investing in self generation, storage and generators.

“When people defect from the grid, electricity rates increase for the remaining customers to cover for fixed costs, encouraging them to defect as well. This results in a ‘death spiral’ for utilities ie a threat to their business,” CPPA commented on a generation license application of a distributed generation company. National Electric Power Regulatory Authority (NEPRA) had sought comments from the stakeholders before deciding the application.

Industries have been defecting the utilities in favour of captive generation, and industrial base load was down from 32 percent to less than 20 percent already, suggests a research conducted by LUMS Energy institute titled “A Study on the Opportunities and Challenges of Distributed Solar and Other Innovations in Pakistan”.

“With distributed solar, the residential customer and small business customer has also started to leave the grid, which will raise the price of electricity for remaining ones thus forcing more customers to resort to alternate energy solutions,” the CPPA noted.

As per existing tariff structure for the end consumers, the major portion of fixed charge was being recovered through sale of energy to end consumers. The more the number of units being sold, the less was the per unit rate for the fixed capacity charge and vice versa.

Power procurement agency has suggested that a quantum for distributed generation needs to be ascertained in light of the demand projections. It should be done while keeping in view the energy charge avoided by the distributed generation consumers against which the capacity charge was supposed to be recovered as per existing tariff structure of the end consumers.

CPPA also proposed a uniform tariff for the grid connected distributed generator consumer, both net-metering and self-consumption; a separate category for grid-connected distributed generation through a central planning mechanism to ensure proper registration and charge of respective tariff.

It may be mentioned here that government through Alternate Energy Development Board (AEDB) has envisaged adding 5,000MW of solar based generation by 2023 through net metering and other related initiatives.

Distributed alternate energy generation and net metering offer several advantages including promotion of friendly environment; lessening burden on national grid; reducing grid investment; and community participation in power generation.

NEPRA is of the view that distributed generation facilities will result in optimum utilisation of renewable energy which is currently untapped, resulting in pollution free electric power. Solar is an indigenous resource and such resources must be preferred for ensuring energy security.