Pakistan overhauls its solar industry for the better

A series of revolutionary new policies designed to increase the development of solar PV have been introduced in Pakistan.

The government has announced that it is to approve net metering program in an effort to increase solar deployment and ease the burden on the nation’s strained grid. This announcement follows mere weeks after Pakistan’s controversial tariff on imported solar products was abolished.

Allied to this apparent acceleration of pro-solar policies is the introduction of a new mortgage finance scheme that will allow homeowners to borrow up to $50,000 against their mortgage to fund a rooftop PV installation.

Further, the Pakistani government has approved the use of grid-connected solar energy as it aims to plug an energy shortfall that regularly plunges parts of the country into darkness. Many rural areas often face 11-hour blackouts daily, with the national power shortfall calculated at around 6 GW.

"The initiative will help scale up demand for solar energy across Pakistan," said the chief executive officer of the Alternative Energy Development Board, Asjad Imtiaz Ali. "We hope the increased demand will also result in sufficient decreases in the price of solar equipment."

The decision in December to remove import and sales tax on solar panels brought into the country – a move designed to "promote healthy competition in the market" – was welcomed by the Pakistan Solar Association and other public bodies, and this latest overhaul could provide the boost that Pakistan’s stuttering solar industry has craved.

In 2013, the private sector imported 350 MW of solar panels into Pakistan – a figure that plunged to just 128 MW last year following the introduction of the tariffs. Pressure from the media, public and business world prompted the government to reverse these taxes, said Ali.

Nauman Khan, CEO of local solar importer Grace Solar Pakistan, welcomed the move. "The tax exemptions and other initiatives to boost clean energy are a welcome move by the government," he said. "We hope the private sector would import around 800 MW of solar panels in 2015 to meet the demand."

Rooftop funding

Another interesting policy announced was the introduction of mortgage-backed funding for PV installations. For the first time, the State Bank of Pakistan and the Alternative Energy Development Board will allow home owners to leverage their mortgage to pay for a rooftop system, up to the value of five million rupees ($50,000). This scheme has been labeled the "Green Market".

"It is our social responsibility to create awareness about clean energy and provide loans for it on easy installments to our customers," said Bank Alfalah senior manager, Fariha Mir. The program will run for five years and is set to be introduced in Q1 2015. "The loan would be especially useful for people who otherwise can’t afford rooftop solar installation," she said.

Interest rates would be kept comparatively low, and with the introduction of net metering, the sector could kickstart widespread residential PV deployment in the country, said Qamar-uz-Zaman, climate change expert at non-profit organization Lead Pakistan.

Domestically, Pakistan’s solar manufacturing sector has so far struggled to meet demand, producing just 10 MW of local PV content in 2014. Current Finance Minister Ishaq Dar has been tasked with improving this sector by June 30 – the date by which Pakistan’s leading domestic partners must attain international quality certifications.