Nepra to cut upfront tariffs

LAHORE: Investment of billions of dollars in solar projects has been put at stake as the power sector watchdog is going to significantly reduce the power tariff for upcoming projects, industry sources said on Wednesday.
Currently, investors are contemplating to execute solar projects, having 5,000 megawatts of production capacity with accumulative financial outlay of approximately $7.5 billion, said an investor on the condition of anonymity.
The investor said investment in the solar power sector has gained momentum following the completion of Punjab government's solar project,
Besides, he added that solar renewable energy has become one of the fastest developing technologies globally in the power sector, with plug and play convenience and having no adverse environmental impact coupled with zero cost of fuel.
On the back of such environment, he observed that the federal government initiated many solar projects on private investment basis at the end of 2014.
The National Electric Power Regulatory Authority (Nepra) determined a reasonable tariff in May 2015 in order to attract investment in this untapped potential of solar energy in Pakistan.
Later, several developers started working on the development of solar independent power producers in Pakistan, said the investor.
The projects are approaching at various stages of completion and significant amount of investment has already been made in their development.
However, he lamented that Nepra notified to initiate suo motu proceedings to revise tariff downwards by a significant percentage of approximately 40 percent in the last week of September 2015 for which a hearing is scheduled today (Thursday).
Industry sources believed that this revision has no practical basis and the only effect it has is discouraging genuine investment in a country at a time when there is a deficit of 7,000 megawatts in electricity demand and supply.
The sources said power regulator did a wrong thing by making output of Qauid-e-Azam solar park a standard for evaluating tariff for upcoming projects.
They added that the higher-side efficiency of the park could not be made a benchmark for the new projects as it would be incorrect approach of the regulator.
They added that original equipment manufacturer cost for future solar projects had been wrongly put at a lower side, while profit on engineering, procurement and construction had not been included by the regulator while calculating tariff for solar power projects.
The sources warned that such severe downward revision of the power tariff would badly discourage investment in solar power sector. They asked the relevant authorities to take corrective measures; otherwise, investors would have to take drastic measures of withdrawing investment.
While referring to the distinct benefits of solar technologies, the sources said, such projects can significantly attract millions of dollars of foreign investment and contribute to energy mix through increase in percentage of green and clean alternate renewable projects.
However, the sources said this proposed cut in tariff will have severe repercussions for overall investment climate in the country as investors have started doubting consistency of government policies.