THE government has approved the use of grid-connected solar energy, rooftop solar installations and mortgage financing for home solar panels and eliminated a 32.5pc tax imposed on imported solar equipment.

It further approved the selling of extra solar electricity to the Wapda grid.

Owing to an average loadshedding of six to eight hours, a typical domestic building having a connected load of 4kW has annual electricity consumption of approximately 3,500kWh. If a 4kW solar PV system is installed on such a typical house, the capital cost will be in the range of Rs700,000 to Rs800,000.

This includes the cost of equipment and installation. A reduction of 32.5pc tax amount will make this capital cost to be Rs506,250. Average annual electricity generation from this size of solar PV system is approximately 6,838kWh. It means 3,340 kWh of electricity will be exported/sold to Wapda and remaining 3,500kWh will be consumed in houses.

Based on an electricity tariff of Rs16/kWh and a GST of 18pc, the owner of the domestic building will save Rs55,968 in terms of its annual electricity bill and Rs10,074 on GST savings plus he/she will get a revenue of Rs53,444 from selling 3,340kWh of electricity at the rate of Rs16/kWh.

This makes the net annual savings of Rs119,486. Based on this net annual savings, the payback period is found to be 5.86 years if the capital cost includes 32.5pc tax and is 4.24 years if the capital cost does not include 32.55pc tax.

This means if someone invests Rs700,000 today, he will get his money back in 5.86 years.

This level of payback period may not attract people towards this technology unless it is dropped further. One way of dropping the payback period further is by offering a higher electricity export tariff.

In addition, what will be the interest rate on the loan provided by the banks? What will happen to the equipment if someone fails to return their loan?

What will be the electricity export tariff for different sizes of solar PV installations? What protections will be required to safely operate the PV system?

What is the guarantee that the government will not change its mind in future about the offers given?

Dr Khuram Pervez

Mirpur, Azad Kashmir

Published in Dawn, March 6th, 2015

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