The Government Increases License Fee for On-Site Electricity Generation

The government has set a flat fee of Rs1,000 per kilowatt for distributed, also known as on-site, generation license, an exorbitant increase for private producers of any power, and a move that is seen as counterproductive, people familiar with the matter said on Monday, to the aim of rising the share of renewable energy.

The National Electric Power Regulatory Authority has informed the National Electric Power Regulatory Authority of the updated fee for the acquisition of a distributed generation license that does not include grid transmission and is generated and consumed on site.

Previously, there was no license fee for a distributed generation system of up to 20 kilowatts, priced Rs500 for 20 to 50 kilowatts, Rs1,000 for 50 to 100 kilowatts and Rs5,000 for a 100 to 1,000-kilowatt generation facility.

An industry official said such a license fee rise would deter distributed generation of renewable energy. “Such measures will prove to be counter-productive as Pakistan aims to increase the share of renewable energy in the energy mix as well as the growth of distributed generation.” Pakistan has also recently adopted a new alternative renewable energy policy in 2019 with the goal of increasing the share of renewable energy (non-hydropower) from the current less than 5% to 30% by 2030.

Generation provides one of the most promising options to advance the transition to renewable energy for a country such as Pakistan, and an optimal opportunity for secure supply access and access to energy at lower prices than conventional energy.

Any substantial growth will also lead to the achievement of the Energy and Climate Change Sustainable Development Goals. Over the past four years, a total of 3,020 licenses for distributed generators have been issued. As of December 31, 2019, the cumulative distributed generation installed capacity in Pakistan reached 47,652 kilowatts.

According to the Oil and Gas Regulatory Authority, the main user of natural gas consuming about 38 percent is the power sector, while the difference between gas demand and supply is expected to rise to 2.7 billion cubic feet per day (bcfd) in FY2022/23 and 4.8 bcfd by FY2027/28.

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