Anurag Bansal talking about how well intentioned actions like subsidising solar panels can end up hurting the most vulnerable sections of society on The Daily Brief podcast.
…if your house generated more electricity than it used, you could make money off it by selling it away. Now, if you combine that with the absence of any major import duties on solar panels, the financial case for a rooftop solar became very, very attractive. But this is also where things started getting a little bit complicated.
See, electricity grids are built for scale in general. They are designed to serve millions of people in a centralized and predictable way. That’s how, by the way, the costs stay reasonable because the fixed costs of generation, transmission, and distribution are spread across a large number of paying users.
But the thing is, when that scale breaks, which is when wealthier users exit the system, the math suddenly starts falling apart. And that is exactly what is right now playing out in Pakistan. The richest households who paid the most amount of money for grid electricity are suddenly leaving the grid system altogether.
That means that the burden of paying for the fixed cost of electricity infrastructure is falling on smaller, poorer group of users, which are people who cannot afford to install solar panels, but they still rely on the grid. Now, these users are now left to cover the cost of not just their own electricity, but also the expensive take-or-pay contracts that the government had signed many years ago. And to remind you, these contracts do not care about actual consumption.
Whether or not people use electricity from the grid, the government is still obligated to pay the power producers. So even though solar is reducing demand from the grid, the cost of that unused electricity is still very much there, and it is being passed on to whoever is left on the system. That, ladies and gentlemen, is invisible price of defection.
naveegator.in 