Arshad Mahmood Awan
The adoption of solar energy has the potential to play a significant role in addressing the domestic energy crisis in Pakistan. As small-scale solar installations become more widespread, households across economic spectrums are finding it increasingly feasible to incorporate solar power into their energy mix. With escalating electricity bills and decreasing solar prices, coupled with the introduction of net metering, the payback period for solar investments has significantly reduced. Furthermore, advancements in battery and chip technology, along with plummeting prices, are contributing to the attractiveness of solar energy solutions. As a result, the widespread adoption of solar energy at the domestic level has the potential to alleviate the burden on the national grid and contribute to mitigating the domestic energy crisis in Pakistan.
A quiet but significant revolution in renewable energy, particularly solar power, is gaining momentum at a micro-level in Pakistan. Despite governmental efforts to discourage adoption and address national grid stranded costs, the proliferation of small-scale solar installations is poised to have a far-reaching impact in the years ahead. Embracing this trend may prove to be more advantageous than trying to impede it.
The decision for households, regardless of economic standing, to incorporate solar energy into their energy mix has been made more straightforward due to escalating electricity bills and declining solar prices. With the introduction of net metering, the payback period for solar investments has diminished from approximately 10 years to just 1.5-2 years. Although the government is considering reducing net metering incentives to dissuade this transition, it may not be sufficient to halt the shift.
The imminent game-changer lies in advancements in battery and chip technology, coupled with plummeting prices. Experts in the industry predict that the prices of batteries, especially those with extended life cycles, will decrease more rapidly than those of solar panels. Already, the price of Lithium-ion batteries has dropped by 90% in USD/KWh over the last decade, and it is anticipated to halve from current levels within 3-5 years.
The lack of clarity regarding the future of net metering means that households and other consumers may opt for hybrid (battery-dependent) solutions. Affluent consumers may opt for Lithium-ion batteries to reduce peak load expenses on the grid and potentially transition off the grid entirely in the future. On the other hand, middle and lower-middle-class consumers are swiftly moving towards energy storage for smaller loads using solar panels and Lead-Acid batteries, which are nearly a quarter of the price of Lithium-ion batteries.
It’s important to note that battery storage doesn’t need to cover a full 24 hours to be feasible for consumers. In regions where load shedding is prevalent due to grid transmission constraints or load management issues, small-scale solar adoption could potentially escalate at an even faster pace.
Furthermore, consumers in the value-conscious segment are heavily influenced by the warranty period offered by companies when making purchasing decisions. Companies such as Daewoo Batteries (Treet Battery Ltd) offering a 1-year warranty, as opposed to the industry standard of 6 months, can gain a competitive edge. Additionally, the recent introduction of BYD Lithium-Ion batteries in Pakistan by Diwan International may benefit the relatively affluent class.
Research reveals that the battery’s quality is a crucial factor in selecting a storage solution during solar installation. While Lithium-ion batteries boast a longer lifespan, their high initial costs and minimum base capacity may result in a smaller market share. Conversely, the larger share of the market may be captured by middle and lower-middle-class households opting for Lead-acid batteries, as they may not have sufficient roof space to accommodate larger solar panel setups.
Leading companies manufacturing Lead-acid batteries are positioned to seize a significant market share.
In the past, UPS and other solutions predominantly relied on conventional vehicle batteries, which are not optimized for use with UPS and solar and are prone to malfunction prematurely. As consumers become more knowledgeable about battery storage, the preference for ‘deep cycle’ batteries, specially designed for energy storage applications, may increase. Companies involved in deep cycle battery manufacturing, such as Treet Battery (Daewoo Batteries) and Atlas Battery (AGS), are likely to enjoy a first-mover advantage.
With falling battery prices, the adoption of electric vehicles (especially in two and three-wheelers) may accelerate. This shift aims to narrow the price gap between electric vehicles and internal combustion engine vehicles. Lower-end consumers may opt for electric bikes and utilize solar-powered energy to charge them, thereby reaping the dual benefits of reduced electricity and fuel expenses. At a macro level, this transition could lead to decreased fuel imports and lower emissions in an already polluted environment, benefitting all stakeholders.
