Last September the National Electric Power Authority (NEPRA) received tariff requests from project developers that just crept below 6 US cents per unit, already marking a major milestone for Pakistan’s solar ambitions, but NEPRA has come back with significantly lower determinations for these projects ranging from US cents 5.2622/kWh to 5.6073/kWh. The tariffs vary by project size to account for economies of scale and whether the land is privately purchased or allocated by the government.

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All the developers awarded tariffs have either already received their generation licences from the regulator or have applications currently being processed. While the regulatory framework allows for review motions, PV Tech understands that at least one and likely multiple developers will not be going back to the regulator with further petitions for tariff adjustments.

The steep decline in tariffs in the still nascent solar sector in Pakistan is primarily driven by falling EPC costs and significant increases in assumed DC plant factor. Compared to the earlier plant factor of 18% under the feed-in tariff (FiT) regime, NEPRA has assumed a plant factor of 22.21% for projects with single-axis tracking and 20.5% for fixed-tilt plants.

The next step for the developers is to execute power purchase agreements (PPAs) on the determined tariffs. PV Tech understands that there are two main off-takers in the country: the state-run Central Power Purchasing Agency (CPPA) for the majority of the country and K-Electric Limited, a private utility that serves Pakistan’s largest city and industrial centre Karachi. On the current tariffs, solar is well on its way to becoming by far the lowest cost option for power generation for both power purchasers.

A source told PV Tech that coal-fired power, LNG and hydroelectric generation are all in the range of 8-9.5 cents per unit at present and these solar projects could become the first grid parity large-scale PV plants in the country. In recent years, CPPA, in particular, has signed various PPAs for large LNG and coal projects, which are just beginning to come online; however; the solar projects mentioned all have significantly lower rates.

The project details and latest tariff determinations were as follows:

Developer: HNDS Energy (50MW)
Location: Goth Gagrawara, Taluka Saleh Pat, District Sukkur, Sindh
Tariff: 5.2622/kWh
Offtaker: CPPA
EPC: Scatec Solar (also sponsor along with Nizam Energy)
Developer: Helios Power (50MW)
Location: Goth Gagrawara, Taluka Saleh Pat, District Sukkur, Sindh
Tariff: 5.2622/kWh
Offtaker: CPPA
EPC: Scatec Solar (also sponsor along with Nizam Energy)
Developer: Meridian (50MW)
Location: Goth Gagrawara, Taluka Saleh Pat, District Sukkur, Sindh
Tariff: 5.2622/kWh
Offtaker: CPPA
EPC: Scatec Solar (also sponsor along with Nizam Energy)
Developer: Gharo Solar (50MW)
Location: Deh Ghairabad, Mirpur Sakro, District Thatta, Sindh
Tariff: 5.6073/kWh
Offtaker: K-Electric
EPC: Self-EPC
Developer: Zorlu Solar (100MW)
Location: Quaid-e-Azam Solar Power Park (Extension), Lal Sohanra, District Bahawalpur, Punjab
Tariff: 5.3086/kWh
Offtaker: CPPA
EPC: Self-EPC

These cost-plus/negotiated tariff projects have arisen during an interim period between the country’s FiT programme, which saw a couple of projects built, and its recently announced attempt to migrate to tariff-based competitive auctions. The province of Sindh has already made known its intentions to tender 50MW on such a basis this year in collaboration with the World Bank, which has already approved funding for follow up tenders. PV Tech understands that a bidding stage is expected to take at least six months to materialize.

It is expected that auctions will drive prices even lower than the cost-plus projects, as has been the case in multiple PV markets worldwide. In the meantime, the recently determined tariffs mark an important stage in the evolution of utility-scale solar in Pakistan by demonstrating its competitiveness and economic viability as a power generation resource.