A Fair Deal For Distributed Solar: Moving Beyond Rhetoric

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Solar needs a level-playing field to compete with conventional supply options—an enabling legal and regulatory umbrella and an equitable decision-making framework in which every option for serving consumers' demand is objectively evaluated

2024-08-24T16:48:09+05:00 Dr Shahid Rahim

In a recent article, this writer had pointed out that distributed solar, mostly photovoltaics (PV), were sweeping the world and Pakistan should expect the same. A recent report from BloombergNEF only confirms it. Drawing evidence from satellite imagery and import statistics, it estimates the total installed PV capacity in Pakistan has reached 12.7 GigaWatt (GW) by the end of 2023 and was poised to further grow by 10 to 15 GW this year.
 
Most such installations are behind-the-metre, non-grid-interactive, and are in response to the endless streak of rate hikes that have made grid supply unaffordable for most consumers. Alarmed by this trend, the government seems to have panicked and is trying to control this trend by rethinking its policies of net metering and exemption of import levies. This knee-jerk reaction is ill-advised because distributed solar is a technology whose time has finally come, and its march is now unstoppable

In another recent article, I pointed out that even though the presence of distributed solar in the power grid poses some technical challenges, these were not insurmountable and could be easily managed with proper planning, design, and operation. If thoughtfully deployed, distributed solar energy can benefit the grid and the country that far exceed their short-term costs.

Located at the source of demand or in its vicinity, distributed solar offers significant prospects to avoid capital investments locally and in the grid upstream that would be needed otherwise to serve it from the centralised grid. However, identifying these avoidable costs and incorporating them in the decision-making frameworks will need a sea change in the power sector planning and regulation mindset.

First and foremost, the government will need to treat distributed solar, not as a foe but as a friend. All that distributed solar needs to succeed is a level-playing field to compete with conventional supply options—an enabling legal and regulatory umbrella and an equitable decision-making framework in which every new option for serving consumers' demand is evaluated objectively by considering all the costs and benefits to the grid and the country. 

The National Electric Power Regulatory Authority (NEPRA) will need to provide an enabling regulatory framework for this purpose. Any new proposal to expand generation capacity in the country must include any option that can be used at the demand site to either avoid that requirement or serve it locally. The point of business case evaluation must also move from the generation terminals to the customer site or the distribution substation.

Many of the requirements laid down and standards referred to in this code do not cover the unique characteristics of distributed solar for their interconnection and subsequent operation

This framework should empower DISCOs to devise innovative pricing and compensation schemes to induce consumers and investors to install these technologies in the distribution systems. It should also enable proper accounting, allocation, and recovery of costs from participating consumers and investors while allowing them fair compensation for the value their schemes contribute to the grid.

NEPRA will also need to devise a set of rules for processing the applications of integrating distributed solar with the grid, stipulate time limits for their processing, setting the priority in case of multiple applications for a location, and allocation of costs for any system upgrades. This will add clarity to the whole process, about the costs involved, and their fair and equitable distribution among existing and future applicants.

Assessing the potential negative impacts of the distributed solar on the distribution system and preventing these requires complex system impact studies. The expertise and tools required for this purpose are not currently available within DISCOs. Planning and design capabilities in DISCOs will require considerable enhancement and strengthening to equip them with the required capability, expertise, and toolkits.

The Distribution Code is the most appropriate document to define the processes, requirements, and standards for planning, developing, connecting, and operating distributed solar. It was developed in 2005 to deal with the one-way flow of power. Many of the requirements laid down and standards referred to in this code do not cover the unique characteristics of distributed solar for their interconnection and subsequent operation. This code is currently being revised and must include the requirements and standards to deal with distributed solar and other similar schemes.

NEPRA had adopted the IEEE Standard 1547-2003 in its regulations to govern the interconnection of distributed generations facilities with the distribution systems. Meanwhile, this standard has been substantially revised and has been complemented with many sub-codes. NEPRA will need to revise its regulations accordingly.

The existing process of seeking interconnection by a distributed solar customer with the grid is cumbersome, reactive, and time-consuming. An applicant is required to submit an intention application first for preliminary screening, which is to be followed by a formal application to assess the proposed facility's impact on the system and any upgrades required. This process must be improved and simplified.

Planning with distributed solar requires different techniques and skills because the solar irradiance—on which distributed solar technologies rely—is diffused, dispersed, intermittent, and variable

The hosting capacity (the ability of the system to accommodate different types and sizes of distributed solar - with or without system upgrades) depends on multiple factors. Hoping the developers of these systems work out the best site or point in the grid for developing their facilities is unrealistic. DISCOs will need to identify the scope of distributed solar in their systems by studying the existing and future power demand in their jurisdictions and the prospects of serving this demand via distributed solar at various points in their system. NEPRA should mandate DISCOs to conduct such assessments periodically and publish the results on their respective websites to guide and facilitate potential developers in determining the best option to seek interconnection with the system.

Most planning tools, expertise, and financing are built around large and centralised supply schemes based on conventional technologies. Planning with distributed solar requires different techniques and skills because the solar irradiance—on which distributed solar technologies rely—is diffused, dispersed, intermittent, and variable; it's also location-specific. Their integration into the system requires a careful assessment of resource patterns at a specific site and how well they correlate with patterns of consumer demand in that locality.

The management of DISCOs will need to develop appropriate tools, data, information, and knowledge bases and make these freely accessible to customers and investors for assessing the scope and viability of distributed solar for meeting demand for electricity at source and their contribution to the grid. This should include any technical assistance they might need for making such assessments.

DISCOs will also need to modernise their existing networks to transform them into an intelligent and smart grid that can facilitate the successful integration of distributed solar and squeeze the most value from them. The modernised grid must be capable of bringing together a host of stakeholders —developers of distributed solar and their financiers, other market actors, producers, operators, and end-users—with the aim to optimise resource utilisation and operational performance, minimise economic and environmental costs, and maximise system reliability and resilience.

In the absence of a favourable business environment, the distributed solar will still get "connected" with the grid, but will not be optimally "integrated", raising multiple challenges that a conducive approach can help avoid or mitigate. Consumers will lose, too, because the benefits associated with their schemes may not be fully realised. The country will thus suffer. It's the right time for our leaders, decision-makers, and the regulator to act and lead the nation towards a secure, affordable, sustainable energy future.

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