The fear of several investors looking to expand their footprint into Pakistan’s solar power sector seem to have come true as the national electricity regulator announced a sharp cut in feed-in tariffs.
Pakistan’s National Electric Power Regulatory Authority (NEPRA) has announced tariff reduction for solar power projects by around 25%. The new tariffs will be applicable for new projects starting 1 January 2016. At present, the tariff of US¢14.15-15.02/kWh is available to solar power projects based on their size, which can vary between 1 and 100 MW.
The applicable tariff has been reduced to US¢11.35-11.53/kWh for various sizes and projects located in the northern part of Pakistan. For projects located in the southern part of the country, the tariffs have been reduced to US¢10.72-10.89/kWh. The new tariffs are sharply lower than the very first tariffs announced by NEPRA, which were US¢16.30-17.00/kWh.
Foreign investors had voiced their concerns about NEPRA’s plans to significantly reduce the tariffs. Several Chinese companies are believed to be planning large-scale solar power projects in Pakistan. The current tariffs are significantly higher than the tariffs seen in the other countries. Neighboring India recently saw tariffs fall to US¢7.12/kWh in competitive auctions.
It will be interesting to see if foreign investors reduce their exposure in Pakistan’s renewable energy industry. According to the Alternative Energy Development Board, foreign investors poured $3 billion over the last year into the renewable energy sector in Pakistan.