Volume 1: Renewable Energy Policy

SUSTAINABLE ENERGY INITIATIVE FOR INDUSTRIES IN PAKISTAN Project ID 100045 Policy review and recommendationson the promotion of renewable energy and energy efficiency in industries in Pakistan Volume 1: Renewable Energy Policy (Final Report) December 2017

Prepared by: Full Advantage Co., Ltd. (Thailand) PITCO Private Limited (Pakistan) For any query or clarification, please contact: Masroor Ahmed Khan National Project Manager UNIDO, Pakistan,Serena Business Complex, 7 th floor, Khayaban-e-Suhrawardy Islamabad Office: 92-51-8354820, Cell: 92-3357888128 2

ForewordPakistan is blessed with abundant alternative and renewable energy (ARE) potential. TheGovernment has been pursuing promotion and development of ARE technologies in thecountry as part of its efforts to overcome the energy crisis and to energy security whilefulfilling its commitments towards climate change mitigation.The Alternative Energy Development Board (AEDB), being the focal agency on AREtechnologies, has been striving for utilizing the available indigenous ARE resources in thecountry. Apart from the large-scale grid-connected ARE projects, efforts are also being madefor harnessing the benefits of ARE technologies in other segments of the economy includingdomestic, commercial, agriculture and industrial sectors.In order to promote the adoption and utilization of ARE technologies in the industrial sector ofPakistan, an analysis of the required set of policy framework was needed which can helpindustries achieve sustainability while lowering their dependence on fossils fuels for theirenergy requirements.UNIDO has assisted AEDB in promoting market-based adoption of ARE technologies inindustries of Pakistan by carrying out the much-needed analysis under the initiative of“Sustainable Energy Initiative for Industries in Pakistan” for devising the required policy andregulatory framework for promoting ARE applications in industries in Pakistan.AEDB appreciates the support provided by UNIDO in shape of the policy recommendationsand the subsequent development of renewable energy (RE) and energy efficiency (EE)demonstration projects in selected industries which will set the pathway for industries to followand achieve sustainability while making their contribution towards climate change mitigation.Amjad Ali AwanChief Executive OfficerAlternative Energy Development BoardGovernment of Pakistan 3

AcknowledgementsThe United Nations Industrial Development Organization (UNIDO) and the Government ofPakistan (GOP) have decided to join hands and received the support of the Global EnvironmentFacility (GEF)to implement a programme that would contribute to the development of a policyand regulatory framework for incentivizing and promoting Renewable Energy (RE) and EnergyEfficiency (EE) applications in the industrial sector of Pakistan.One of the main tasks of the programme was to prepare a report that would review the existingpolicies and formulate recommendations on the promotion of RE and EE in the industrial sectorof Pakistan.This task was entrusted to a consortium of experts from two companies, namely Full Advantagefrom Thailand and PITCO from Pakistan.This report (Volume 1) covers exclusively the promotion of RE in the industrial sector ofPakistan.The members of consortium would like to express their gratitude:  to UNIDO, to the Alternative Energy Development Board (AEDB) and to the Small and Medium Enterprise Development Authority (SMEDA) for the unconditional support and advice they have provided them with during the whole duration of the study;  to the local key stakeholders for their comments and invaluable contributions during consultation meetings and during the validation workshop held in Islamabad on April 24, 2017.Their comments and feedback helped the consultants ensure that the recommended RE policieswere the most appropriate and fair in terms of benefits to the project developers, thegovernment and other relevant partners. 4

Executive SummaryThe industrial sector in Pakistan is characterized by a high dependence on expensive andenvironment degrading fossil fuels such as diesel, natural gas and coal for captive energy (heatand/or power) generation.. This part of the study is conducted with objective to develop andpropose a set of appropriate RE policies and their implementation roadmap, which could beincluded in existing government policies and regulatory framework or form a basis forformulating new legislation for promoting RE adoption in the industrial sector of Pakistan. Thisstudy focuses on the state policies, i.e., RE policies and regulatory framework (laws,regulations, decisions, guidance, plans, strategies, etc.) promulgated by government authorities.Furthermore, emphasis is placed on policies which impact on the RE adoption in the industrialsector. The synopsis of the report is presented in the shape of barriers and the measures to overcome these barriers. Barriers Measures to overcome barriers Limited assessment of economic M1.Assessment and mapping of economic potential ofpotential of different RE resources for different RE resources for industrial applications industrial applicationsInsufficient capacity of the T&D grid M2.Assessment of the existing and upcoming RE projects in the industrial sector that are expected to sell excess power toAbsence of specific tariff mechanisms for some RE-based power projects the grid implemented in the industrial sector M3.Expansion of T&D in order to absorb excess RE power produced by industries M4.Development of new appropriatetariff-related mechanisms for RE-based power generation and cogeneration projects in the industrial sectorHigh specific investment costs of M5.Provision of incentives to allow industrial RE projects to industry-based RE projects reach acceptable economic viability M6.Development and promotion of alternative business models for RE power projects in the industrial sectorInsufficient financial incentives for M7.Creation of scheme(s)/fund to provide financial support industry-based RE projects for RE projects in the industrial sectorLack of targets for utilization of RE M8.Assessment of energy requirement and setting of targets sources in the industrial sector for use of RE sources for power and/or heat generation in the industrial sectorComplicated and long licensing process M9.Creation of a One-Stop Agency to centralize and for RE projects implemented in the coordinate the licensing process and streamlining the industrial sector licensing process to simplify the approval procedure and reduce the processing time for industry-based RE projects Limited RE technology knowledge (including O&M aspects) among M10.Establishment of a RE Knowledge Center with the mandate to support the deployment of RE technologies industries 5

Limited capacity of local RE technology M11.Creation of a program and provide funding/incentives manufacturers to support the development of capacity of local RE technology manufacturersInsufficient local R&D programs in RE M12.Creation of a program and provide funding/incentivestechnologies to support the R&D activites on RE technologies Lack of effective communication M13. Development of a policy and protocol to promotemechanisms between the government communication andcoordination among relevant RE stakeholders and RE stakeholders M14.Creation of a program to disseminate information and Lack of awareness of the social and to raise awareness of industry decision makers in using RE environmental benefits of using RE technologies by industry decision technologies makersThe policies that have been recommended will have high-level provisions that will provide theoverarching basis and guidelines for the objectives being pursued. Further to this, theimplementing rules and regulations, as well as the implementation roadmap, are also elaboratedfor the guidance of the implementing agencies and those affected by the policies. This reportthus provides the guideposts and suggestions in drafting these documents once the policieshave been approved. 6

Table of ContentsForeword ...........................................................................................................................................3Acknowledgements ...........................................................................................................................4Executive Summary..........................................................................................................................5List of Figures ...................................................................................................................................9List of Tables .....................................................................................................................................9Acronyms and Abbreviations ........................................................................................................11Units .................................................................................................................................................15Currencies .......................................................................................................................................151. INTRODUCTION ..................................................................................................................162. TYPES AND OBJECTIVES OF RE POLICIES ................................................................193. RECENT RE DEVELOPMENT IN PAKISTAN................................................................21 3.1Brief of Pakistan EnergySector................................................................................................21 3.2RE Development in Pakistan ...................................................................................................264. REVIEW OF THE EXISTING RE INSTITUTIONAL AND POLICYFRAMEWORK IN PAKISTAN....................................................................................................44 4.1Existing RE institutional framework in Pakistan.....................................................................44 4.2 Existing RE Policy and RegulatoryFramework in Pakistan ...................................................515. GENDER MAINSTREAMING IN RE POLICYIN PAKISTAN ......................................65 5.1Gender in the National Policy..................................................................................................65 5.2Gender in the RE Policy ..........................................................................................................666. REVIEW OF INTERNATIONAL POLICY BEST PRACTICES ANDEXPERIENCE IN RE DEVELOPMENT ....................................................................................68 6.1International RE Policy Best Practices and Experience...........................................................68 6.1.1China.................................................................................................................................68 6.1.2 India ..........................................................................................................................75 6.1.3 Philippines ................................................................................................................89 6.1.4 Thailand ....................................................................................................................95 6.1.5 Vietnam...................................................................................................................102 6.2 Gender in RE Policies and Programmes in Asian Countries ..........................................107 6.2.1 Gender in national policies in Asia................................................................................107 6.2.2 Gender in RE Policies in Asia ................................................................................1087. RE POLICY GAP ANALYSIS............................................................................................110 7.1Barriersto RE Adoption in the Industrial Sector of Pakistan .................................................110 7.2Comparative and Gap analysis of RE Policies in Pakistan and five Asian Countries ...........114 7.2.1 Summary of existing RE policy instruments in Pakistan and five studied countries ....114 7.2.2 Best practices and lessons learned from all the five studied countries ..........................115 7.2.3 Policy gap analysis ........................................................................................................118 7.3Gaps and Lessons for Gender Mainstreaming in RE Policy..................................................1238. POLICY RECOMMENDATIONSFOR THE PROMOTION OF RE IN THEINDUSTRIAL SECTOR OF PAKISTAN..................................................................................126 8.1 Policy recommendations for RE promotion in the industrial sector of Pakistan ............126 7

8.2 Implementing rules and regulations &implementation roadmap for the recommended policies ........................................................................................................................................ 127REFERENCES .............................................................................................................................144 8

List of FiguresFigure 1: Overall approach and methodology of the study ....................................................................... 17Figure 2: Total primary energy supply mix in FY 2014-15 in Pakistan ................................................... 21Figure 3: Electricity generation mix in Pakistan (FY 2014-15) ................................................................ 24Figure 4: Electricity consumption in Pakistan (FY 2014-15) ................................................................... 25Figure 5: Existing institutional framework for RE sector in Pakistan....................................................... 47Figure 6: Evolution of upfront tariff for wind power projects (2011-15) ................................................. 54Figure 7: Evolution of upfront tariffs for solar PV power projects in Northern region ............................ 55Figure 8: Evolution of upfront tariffs for solar PV power projects in Southern region ............................ 55Figure 9: Application process according to Net Metering Regulations .................................................... 58Figure 10: Power generating capacity mix in China (Dec 2015) .............................................................. 68Figure 11: Power generating capacity mix in India (Oct 2016) ................................................................ 76Figure 12: Power generating capacity mix in the Philippines (Dec 2015)................................................ 90Figure 13: Power generating capacity mix in Thailand (Dec 2015) ......................................................... 96Figure 14: Power generating capacity mix in Vietnam (Dec 2015) ........................................................ 102Figure 15: Stipulated vs actual time in HP Cogen approval process ...................................................... 112List of TablesTable 1: Types of RE policy instruments.................................................................................................. 20Table 2: Sector-wide natural gas consumption in Pakistan (FY 2014-15)................................................ 22Table 3: Sector-wise coal consumption in Pakistan in FY 2014-15 ......................................................... 22Table 4: Electricity generation mix in Pakistan (FY 2014-15) ................................................................. 23Table 5: Electricity consumption by sector in Pakistan (FY 2014-15) ..................................................... 24Table 6: Existing transmission facilities of NTDC (as of Jun 2015) ........................................................ 25Table 7: Status of transmission network expansion projects of NTDC (as of Nov 2016) ........................ 26Table 8: Potential and actual power generation from RE sources in Pakistan .......................................... 26Table 9: Future HPPs to be implemented by WAPDA ............................................................................. 28Table 10: Future HPPs to be implemented under IPP scheme.................................................................. 28Table 11: Solar power plants dispatching electricity to the national power grid ...................................... 30Table 12: Solar PV installations in the industrial sector ........................................................................... 30Table 13: Solar water heater installations in the industrial sector............................................................. 31Table 14: Wind power plants dispatching electricity to the national power grid ...................................... 33Table 15: Technical potential of major crop and agro-industrial residues in Pakistan ............................. 35Table 16: Bagasse HP cogeneration plants dispatching electricity to the national power grid ................. 35Table 17: Capacity and cost of RE-based power projects under CPEC.................................................... 41Table 18: Market review of potential investment in RE in industrial sector of Pakistan .......................... 42Table 19: List of key RE-related policies of Pakistan............................................................................... 51Table 20: Levelized upfront tariffs for grid-connected wind power projects in Pakistan (2011-15) ........ 54Table 21: Levelized upfront tariffs for grid-connected solar PV power projects in Pakistan (2014-15) .. 54Table 22: Upfront tariffs for grid-connected small hydropower projects in Pakistan ............................... 56Table 23: Status of adoption of upfront tariffs for RE projects in Pakistan .............................................. 56Table 24: Licensing fee comparison between RE and non-RE power projects in Pakistan...................... 62Table 25: Potential, target and actual installed capacity of RE sources in China ..................................... 69Table 26: Current FITs for grid-connected RE-based power projects in China........................................ 70Table 27: Potential, target and actual installed capacity of RE sources in India....................................... 76Table 28: Current FITs for grid-connected RE-based power projects in India ......................................... 78Table 29: Growth of REC transactions on Power Exchanges of India ..................................................... 81Table 30: CFA for grid-connected biomass power and bagasse cogeneration projects of Category 1 ..... 83Table 31: CFA for grid-connected bagasse cogeneration projects of Categories 2 and 3......................... 84Table 32: CFA for industrial biomass gasifier projects ............................................................................ 84Table 33: CFA for captive biogas-based energy projects ......................................................................... 85Table 34: Present fellowship rates for students and researchers in India .................................................. 87 9

Table 35: Financial assistance to training activity in India ....................................................................... 88Table 36: Potential, target and actual installed capacity of RE sources in the Philippines ....................... 91Table 37: Current FIT rates for RE-based electricity in the Philippines ................................................... 91Table 38: Potential, target and actual installed capacity of RE sources in Thailand................................. 96Table 39: Current FITs for grid-connected RE-based power projects in Thailand ................................... 97Table 40: Current quota for AE projects in the power sector ................................................................... 98Table 41: Incentives for the promotion of ESCO investments in RE sector in Thailand........................ 101Table 42: Potential, target and actual installed capacity of RE sources in Vietnam ............................... 103Table 43: FITs for grid-connected RE-based power projects in Vietnam............................................... 104Table 44: Comparison of RE policies in Pakistan and five other Asian countries.................................. 114Table 45: Summary of barriers, policy gaps and recommended measures for Pakistan to promote RE inthe industrial sector ................................................................................................................................. 120Table 46: Recommended policy instruments for promotion of RE adoption in industrial sector ofPakistan................................................................................................................................................... 126 10

Acronyms and AbbreviationsACE ASEAN Center for EnergyADB Asian Development BankAE Alternative EnergyAEDB Alternative Energy Development BoardAEDP Alternative Energy Development PlanAFD Agence Française de DéveloppementAJK Azad Jammu and KashmirARE Alternative and Renewable EnergyASEAN Association of Southeast Asian NationsBIPV Building-Integrated PhotovoltaicBOI Board of InvestmentBOLT Build-Own-Lease-TransferBOO Build-Own-OperateBOOT Build-Own-Operate-TransferBOT Build-Operate-TransferCDM Clean Development MechanismCER Certified Emission ReductionCFA Central Financial AssistanceCIT Corporate Income TaxCOD Commercial Operation DateCNEA China National Energy AdministrationCNREC China National Renewable Energy CenterCPEC China Pakistan Economic CorridorCPPA Central Power Purchase Agency Guarantee LimitedCREDF China Renewable Energy Development FundCREIA Chinese Renewable Energy Industries AssociationCSP Competitive Selection ProcessDEDE Department of Alternative Energy Development and EfficiencyDFI Development Finance InstitutionDISCO Distribution CompanyDOE Department of EnergyECNEC Executive Committee of the National Economic CouncilECC Economic Coordination CommitteeEDF Energy Development FundEE Energy EfficiencyEE&C Energy Efficiency and ConservationEGAT Electricity Generating Authority of ThailandEIA Environmental Impact AssessmentENCON Energy Conservation FundENERCON Energy Conservation CenterEPA Environmental Protection AgencyEPC Engineering, Procurement and ConstructionEPIRA Electric Power Industry Reform ActERC Energy Regulatory CommissionESCO Energy Service CompanyESMAP Energy Sector Management Assistance ProgramEVN Electricity of Vietnam 11

FICCP Framework for Implementation of Climate Change PolicyFIT Feed-in TariffFY Fiscal YearGDP Gross Domestic ProductGEF Global Environment FacilityGENCO Generation CompanyGHG Greenhouse GasGHI Global Horizontal IrradianceGIZ Gesellschaft für Internationale ZusammenarbeitGIS Grid Interconnectivity StudyGOC Government of ChinaGOI Government of IndiaGOP Government of PakistanGOPH Government of the PhilippinesGOT Government of ThailandGOV Government of VietnamHP High PressureHPP HydroPower PlantIA Implementation AgreementIDBI Industrial Development Bank of IndiaID&T Import Duty and TaxIEE Initial Environmental ExaminationIFC International Finance CorporationIMG Inter-Ministerial GroupIPP Independent Power ProducerIREDA Indian Renewable Energy Development Agency Ltd.IRENA International Renewable Energy AgencyIRR Implementing Rules and RegulationsISO International Organization for StandardizationJICA Japan International Cooperation AgencyJNNSM Jawaharlal Nehru National Solar MissionKE K-ElectricKfW Kreditanstalt für WiederaufbauKP Khyber PakhtunkhwaLACE Levelized Avoided Cost of EnergyLCOE Levelized Cost of EnergyLOA Letter of AwardLOI Letter of IntentLOS Letter of SupportMEA Metropolitan Electricity AuthorityMNRE Ministry of New and Renewable EnergyMOCC Ministry of Climate ChangeMOE Ministry of EnergyMOEn Ministry of EnvironmentMOI Ministry of IndustryMOIT Ministry of Industry and TradeMOPD Ministry of Planning and DevelopmentMOPDR Ministry of Planning Development and Reform 12

MOWP Ministry of Water and PowerMSME Micro, Small and Medium-Sized EnterpriseMSW Municipal Solid WasteMTDF Medium Term Development FrameworkNAMA National Appropriate Mitigation ActionNCEF National Clean Energy FundNDRC National Development and Reform CommissionNEECA National Energy Efficiency and Conservation AuthorityNAPCC National Action Plan for Climate ChangeNEPRA National Electric Power Regulatory AuthorityNGCP National Grid Corporation of the PhilippinesNIRC National Internal Revenue CodeNOC No Objection CertificateNREB National Renewable Energy BoardNREDS National Renewable Energy Development StrategyNREL National Renewable Energy LaboratoryNREP National Renewable Energy ProgramNTDC National Transmission and Dispatch CompanyNTP National Tariff PolicyPC Planning CommissionPCRET Pakistan Council of Renewable Energy TechnologiesPEA Provincial Electricity AuthorityPED Punjab Energy DepartmentPEDO Pakhtunkhwa Energy Development OrganizationPEAC Pakistan Atomic Energy CommissionPEPCO Pakistan Electric Power CompanyPIT Personal Income TaxPMVN Prime Minister of VietnamPPA Power Purchase AgreementPPI Power Planner InternationalPPDB Punjab Power Development BoardPPIB Private Power and Infrastructure BoardPSMA Pakistan Sugar Mills AssociationPV PhotovoltaicQIF Qualified Industrial FacilityRA Republic ActR&D Research and DevelopmentRD Revenue DepartmentRE&EE Renewable Energy and Energy EfficiencyREAP Renewable and Alternative Energy Association of PakistanRE Renewable EnergyREC Renewable Energy CertificateRET Renewable Energy TechnologyRGO Renewable Generation ObligationRPO Renewable Purchase ObligationRPS Renewable Portfolio StandardSBP State Bank of PakistanSDG Sustainable Development GoalSEPF Sustainable Energy Promotion FundSERC State Electricity Regulatory Commission 13

SIDBI Small Industries Development Bank of IndiaSMEDA Small and Medium Enterprises Development AuthoritySPP Small Power ProducerSPPA Standardized Power Purchase AgreementT&D Transmission and DistributionTPES Total Primary Energy SupplyUNDP United Nations Development ProgrammeUNIDO United Nations Industrial Development OrganizationUSAID United States Agency for International DevelopmentVAT Value-Added TaxVEPF Vietnam Environmental Protection FundVSPP Very Small Power ProducerWAPDA Water and Power Development AuthorityWB World BankWESM Wholesale Electricity Spot MarketWTE Waste to Energy 14

Units kilovolt kilo-volt-amperekV kilowattkVA kilowatt-hourkW megawattkWh megawatt-hourMW gigawattMWh gigawatt-hourGW gigawatt-hour of thermal energyGWh tetawatt-hourGWhth megajouleTWh gigajouleMJ terajouleGJ tonne of coal equivalentTJ Million tonnes of coal equivalenttce tonne of oil equivalentMtce Million tonnes of oil equivalenttoe square meterMtoe cubic meterm2 Million cubic feetm3 Million cubic feet per dayMMCF kilometerMMCFDkm Euro Indian RupeeCurrencies Japanese Yen Philippine PesoEUR Pakistani RupeeINR Renminbi (Chinese Yuan)JPY Thai BahtPHP United States DollarPKR Vietnamese DongRMBTHBUSDVND 15

1. INTRODUCTIONThe industrial sector in Pakistan is characterized by a high dependence on fossil fuels such asdiesel, natural gas and coal for captive energy (heat and/or power) generation. In most cases,fossil fuels are used in old,inefficient machinery and technologies, thereby incurring highenergy production costs for industries. In addition, the use of fossil fuels for energy generationis harmful to the environment. Therefore, Pakistan’s industries have a large potential to reducetheir energy production costs and mitigate pollution emissions by increasing the efficiency offossil fuels and electricity use as well as adopting renewable energy (RE) technologies.Presently, the United Nations Industrial Development Organization (UNIDO), one of theimplementing agencies of the Global Environment Facility (GEF), is working with theGovernment of Pakistan (GOP) to promote inclusive and sustainable industrial development inline with its key thematic areas, one of which is energy and environment. Upon the request ofGOP, UNIDO developed a project, namely, “Sustainable Energy Initiative for Industries inPakistan”, which seeks to promote market-based adoption of RE and energy efficiency (EE)technologies and services in the industrial sector of Pakistan. The ultimate goal of thisUNIDO/GEF project is to mitigate GHG emissions by developing and promoting a marketenvironment that will stimulate investments in RE and EE projects. The project consists ofthree components: 1) Developing a policy and regulatory framework for incentivizing and promoting RE and EE application in the industrial sector of Pakistan; 2) Promoting RE and EE investments in industry through supporting RE and EE demonstration projects, facilitating EE audits, ISO 50001 Energy Management System (EMS) and energy use optimization; 3) Creating a robust and sustainable market for RE and EE investments through a series of capacity development and awareness initiatives for industrial establishments, energy service companies (ESCO), public sector organizations, financial institutions, academia, etc.This study is related to component 1 of the project. Its objective is to develop and propose a setof appropriate RE and EE policies and their implementation roadmap, which could be includedin existing government policies and regulatory framework or form a basis for formulating newlegislation for promoting RE and EE adoption in the industrial sector of Pakistan.The overall approach and method for conducting the study are shown in Figure 1. The studyconsists of five tasks:  Task 1: Collection and review of the existing RE and EE policy and regulatory frameworks in Pakistan and five other countries with relevant policy experience, and preparation of a First Draft Report on RE and EE preliminary policy recommendations for Pakistan;  Task 2: Consultations with project partners and key stakeholders on the First Draft Report, and preparation of the Second Draft Report based on the feedback from these consultation meetings; 16

 Task 3: Preparation of the Third Draft Report on RE and EE policy recommendations including Implementing Rules and Regulations (IRRs) and an Implementation Roadmap for these recommended policies; Task 4: Presentation of the Third Draft Report to the stakeholders in a National Stakeholder Workshop, and preparation of the Draft Final Report based on the feedback from the participants in the workshop;Review and Analysis of Existing RE & EE Policy/Regulatory RE & EE Policy / Framework of PakistanRegulatory Framework International best practices and lessons learned Rep Consultation Individual Consultation Meetings with orts Local Stakeholders Feedback1st Draft / Revise Meetings with UNIDO and its2nd Draft project partners3rd Draft Final Draft National Multi-Stakeholder Consultation Workshop Final Report  Task 5: Finalization of the Final Draft Report based on the final comments of UNIDO and its project partners, and submission of the Final Report to UNIDO. Figure 1: Overall approach and methodology of the studyThis approach is stakeholder driven. Local stakeholders participate through the whole processof the study to make sure that the recommended policies are balanced in terms of benefits to theproject developers, the government and other relevant partners.The First Draft Report including the preliminary policy recommendations was prepared inOctober 2016, based on the review and analysisofthe policy gaps between the existing RE andEE policies in Pakistan and the international best practices and lessons learned from five Asiancountries in similar circumstances, namely China, India, the Philippines, Thailand andVietnam. This report was used as background document for consultation with the stakeholdersin Pakistan. 17

The First Draft Report and preliminary policy recommendations were presented to variousstakeholders during the consultation meetings organized from 27 October to 9 November 2016in Lahore, Karachi and Islamabad.The Second Draft Report (both Volumes) was submitted to UNIDO in December 2016. Theywere sent to the key stakeholders of the project for their comments. In January 2017, thefeedback on the Second Draft Report was received from UNIDO, AEDB, NEECA, SMEDA,GIZ and KSP Pumps.The Third Draft Report (Volume 1) was prepared based on that feedback. It included also onenew section on the Implementing Rules and Regulations (IRRs) and the ImplementationRoadmap for the recommended policies. The report was submitted to UNIDO in April 2016,and subsequently presented to the local stakeholders during the consultation meetings withUNIDO, AEDB, NEPRA, PCRET and CPPAheld on 20-21 April 2017, and during theValidation Workshop organized in Islamabad on 24 April 2017.The Draft Final Report (Volume 1) was developed based on the feedback on the Third DraftReport received during the consultation meetings and the Validation Workshop. The report wassubmitted to UNIDO on 30 May 2017 for the final comments. There were no additionalcomments received from UNIDO and its project partners on the Draft Final Report.This report is the Final Report (Volume 1) on the policy review and recommendations on thepromotion of renewable energy in the industrial sector of Pakistan. 18

2. TYPES AND OBJECTIVES OF RE POLICIESThis study focuses on the state policies, i.e., RE policies and regulatory framework (laws,regulations, decisions, guidance, plans, strategies, etc.) promulgated by government authorities.Furthermore, emphasis is placed on policies which impact on the RE adoption in the industrialsector.Policies and regulatory frameworks play an essential role in the promotion of RE adoption inany country. They can support the RE development by1:  creating markets (e.g.,feed-in tariffs (FITs), renewable portfolio standard (RPS), setting government requirements, taxing negative externalities, subsidizing positive externalities, and other voluntary approaches);  establishing governance and the regulatory framework (e.g., setting targets, setting standards, taxing negative externalities, subsidizing positive externalities, voluntary approaches, and tradable permits);  providing finance (e.g., loan guarantees, “green” banks, and RE funds);  developing infrastructure (e.g., public-private partnerships, incentivizing private development, etc.);  building competence and human capital (e.g., subsidies and incentives for education and training, fellowships, scholarships, etc.);  creating and sharing new knowledge (e.g.,subsidies and incentives for new research, contest and prizes, intellectual property protection, etc.);  creating collaborative networks (e.g., joining or initiating international cooperation, supporting industry associations, etc.).There are best practices (success stories) as well as lessons learned from the deployment ofpolicy instruments to support the development of RE in different countries. Based oninternational experience, the key policy instruments for successful promotion of RE are:  Realistic and achievable targets for RE adoption;  Attractive FITs/premium for electricity generated from RE sources;  Suitable financial support to RE projects (e.g., subsidies, soft loans, grants, etc.)  Appropriate fiscal incentive mechanisms applied to RE projects (e.g.,value-added tax (VAT), corporate income tax (CIT), import duty and tax (ID&T) exemption or reduction);  Mandatory requirements (e.g., RE quota obligation/RPS, penalties/fines, technical standards, etc.);  Simplified and transparent licensing and permitting procedures;  Prioritized dispatch and clear grid connection procedures for RE-based power projects;  Gender mainstreaming in RE policy.The different types of RE policy instruments, their objective/expected impact, and someexamples of policy instruments are summarized in Table 1.1 IRENA (2013) 19

Table 1: Types of RE policy instrumentsType of policy instruments Objective/Expected impact of the policyPrice-based policies To reduce cost and pricing-related barriers by establishing favorable price regimes for RE relative to other sources of power generation.Quantity-based policies and To mandate the introduction of a certainprocurement mechanisms percentage or absolute quantity of RE capacityFinancial incentives or generation at unspecified prices.Fiscal incentives To reduce RE project investment costs for RE to be more competitive and on par with conventional energy technologies. To help improve the financial performance of the RE projects and make them more commercially attractive to investors.Mandatory grid access and To give renewable energy equal or favorableprioritized dispatch treatment for access to T&D grids.Other RE policy measures To support the capacity development of local stakeholders such as research and development (R&D) institutions, academic institutions, consultants, equipment manufacturers, and service providers.Gender mainstreaming To include the considerations, needs and priorities of both men and women in RE development and involve men and women equally in all RE policies and programs. Expected impact: gender-balanced involvement and optimal benefits equally for both men and women.Sources: compiled from IRENA (2013a), WB (2011)

Examplepolicy instruments • Feed-in tariff regime/premium • Standardized power purchase agreement (SPPA) • Premium/incentive for use of local equipment • Reduced transmission and distribution (T&D) costs • Net metering/banking • RE quota obligation / RPS • Renewable Energy Certificate (REC) market • Competitive bidding/Auction • Soft loan • Investment grant • Financial subsidy • Accelerated depreciation • Tax exemption/reduction (VAT, CIT, ID&T, etc.) • Exemption/reduction offees (licensing fees, land use fees, etc.) • Exemption/reduction of electricity sale duty • Mandatory grid access/Prioritized dispatch • Grid code/standards that facilitate RE integration • Financial and other support toeducational and R&D activities • Financial and other support to knowledge development • Financial and other support to capacity building • Financial and other support to local equipment manufacturers • Financial and other support to local service providers/ESCOs • Gender-sensitive targets and indicators and gender-separated monitoring and evaluation systems for RE programs • Earmarked human and financial resource allocation for gender mainstreaming and women-focused incentives, including loan programs fort female RE entrepreneurs • Capacity building programs for women in RE technologies and in RE business and management

3. RECENT RE DEVELOPMENT IN PAKISTAN3.1Brief of Pakistan EnergySectorPakistan’s energy sector has passed through several development stages since independence in1947. Pakistan is bestowed with natural gas and coal resources. Most of the coal resources are stilluntapped. In the areas of crude oil and petroleum products, Pakistan heavily relies on imports.Figure 2 shows the mix of total primary energy supplies (TPES) of 70.264 Mtoe in FY2 2014-15. Coal 7.05%Nuclear, Hydro and imported 13.43% Natural Gas 43.34% Crude Oil, Petroleum Products and LPG 36.19% Figure 2: Total primary energy supply mix in FY 2014-15 in PakistanNatural gas holds the major share with more than 43% of the TPES. According to the PetroleumInstitute of Pakistan (PIP), the natural gas production has been stagnant (around 4,000 MMCFD)for the last 10 years in comparison with the constrained demand of 6,000 MMCFD. In order toimprove its energy security, GOP is working on import of 750 MMCFD of natural gas through theIran-Pakistan pipeline and 1,325 MMCFD through the TAPI (Turkmenistan-Afghanistan-Pakistan-India) pipeline3. Both these projects have geopolitical and time constraints. Therefore, to reduce thedeficit, GOP has been importing around 400 MMCFD of regasified liquefied natural gas fromQatar since July 2016.4The total consumption of natural gas in Pakistan in FY 2014-15 was about 25.7 Mtoe. Table 2shows the consumption of natural gas in different sectors of economy. The industrial sector(comprising General Industry, Fertilizer, Steel Mills and Cement Plants) was the largest consumerof natural gas accounting for 26.7% of the total natural gas consumption, followed by the powersector (26.7%) and the domestic sector (25.3%).2In Pakistan, fiscal year (FY) starts on 1 July of previous calendar year and concludes on 30 June3 http://202.83.164.29/mpnr/userfiles1/file/LNGSeminarOct%20282015.pdf4 http://www.brecorder.com/fuel-a-energy/193/1236251/

Table 2: Sector-wide natural gas consumption in Pakistan (FY 2014-15)Sector toe %Power 6,847,894 26.7Domestic 6,506,824 25.3General Industry, Fertilizer (as fuel), SteelMills and Cement Plants 6,868,906 26.7Fertilizer (as feedstock)Transport (CNG) 3,088,834 12.0Commercial 1,556,505 6.1Total 3.2Source: Pakistan Energy Yearbook, 2015 823,381 100 25,692,344Pakistan has estimated coal reserves of 186 billion tonnes. Most (175 billion tonnes) areconcentrated in the Thar coal field in Sindh.5 Thar coal is the largest lignite deposits in the world.Thar coal resources are capable of producing 200 GW of electricity for 300 years6.According to thePakistan Energy Yearbook 2015, the consumption of coal in FY 2014-15 was about 4.95 Mtoe ofwhich imported coal had a share of 66%. This shows the lack of development in utilization ofindigenous coal resources. As shown in Table 3, in FY 2014-15, the industrial sector accounted for98.6% of the total coal consumption in Pakistan.Table 3: Sector-wise coal consumption in Pakistanin FY 2014-15Sector toe %Cement and Other Industries 3,284,782 66.3Brick Kiln Industry 1,346,844 27.2Steel MillsPower (WAPDA) 253,292 5.1Total 67,638 1.4Source: Pakistan Energy Yearbook, 2015 100 4,952,556In FY 2014-15, the industrial sector consumed around 1.30 Mtoe of petroleum products, mainlyfurnace oil and high speed diesel (HSD).The power sector of Pakistan has been developing in the recent years. However, the powerdemand-supply deficit has remained a largely unresolved problem. The power generation capacityhas increased, but could not match the increasing electricity demand of the country. It has remainedunder-performing and inefficient since independence. Various problems emanating from themalfunctioning of economic, political, institutional, technological and organizational machineryhave remained dominant to keep this sector below the mark. There is still a mismatch betweensupply and demand, prices and affordability, efficiency and sustainability of electric power inPakistan. Currently, the country is facing a severe electricity crisis to the tune of 6,000 MW whichhas resulted in severe black-outs in urban and rural areas. The current shortfall in supply of energyhas resulted in a massive negative impact both on societal as well as economic well-being.Up till the restructuring of the power sector in 1998, the power supply to the country was managedby the Water and Power Development Authority (WAPDA) and the Karachi Electric Supply5 http://www.sbi.gos.pk/pdf/Thar_Coal.pdf6 http://www.sbi.gos.pk/energy-sector.php 22

Corporation (privatized in 2005 and later renamed as K-Electric). The Pakistan Power SectorStrategic Plan was approved in 1992 for restructuring the power sector and introducing reforms.Under this plan, in 1998, the power wing of WAPDA was unbundled into the NationalTransmission and Dispatch Company (NTDC), four Generation Companies (GENCOs) and tenDistribution Companies (DISCOs). NTDC is responsible for the transmission of power across thecountry, except for the city of Karachi which is served by K-Electric7. A critical element of the1992 Strategic Plan was the creation and establishment of a Regulatory Authority to oversee therestructuring process and to regulate generation and distribution companies.The National Electric Power Regulatory Authority (NEPRA) was created in 1997 to introducetransparent and judicious economic regulations, based on sound commercial principles, to theelectric power sector of Pakistan8. As part of restructuringprocess, the Private Power andInfrastructure Board (PPIB) was created in 1994 as \"One Window Facilitator\" to promote privatesector participation in the power sector of Pakistan9.The Alternative Energy Development Board(AEDB) was established in May 2003 with the main objective to facilitate, promote and encouragethe development of RE in Pakistan and with a mission to introduce alternative and renewableenergies (AREs) at an accelerated rate10.As of June 2015, the total installed power generation capacity in Pakistanwas 22,928 MW. Thiscapacity comprised 6,902 MW from WAPDA hydropower plants (HPPs), 214 MW fromindependent power producers (IPPs) HPPs, 8,735 MW from IPPs thermal power plants,6,001 MWfrom GENCOs thermal power plants, 650 MW from nuclear power plants of the Pakistan AtomicEnergy Commission, 256 MW from wind power plants, and 70 MW from bagasse-based high-pressure (HP) cogeneration plants. Recently, a 100 MW solar photovoltaic (PV) power plant wascommissioned at Quaid-E-Azam Solar Park in Bahawalpur, which is supplying power to thenational power grid. According to the Power Statistics of Pakistan, the total electricity generationin the FY 2014-15 was 97,728 GWh. The electricity generation mixis illustrated in Table 4 andFigure 3.Table 4: Electricity generation mix in Pakistan (FY 2014-15)Generation Source Electricity Share in Generation Mix (%) Generation (GWh) 32.62 1.09WAPDA hydro 31,877 45.36 14.54IPPs hydro 1,070 5.12 0.47IPPs thermal 44,332 0.32 0.03GENCOs thermal 14,205 0.45 100.00Nuclear 5,006Wind 459Bagasse HP Cogen 308Solar PV 28Imports from Iran 433Total 97,728Source: NEPRA State of Industry Report 20157 http://www.saarcenergy.org/wp-content/uploads/2016/03/6.-Pakistan.pdf8 http://www.nepra.org.pk/nepra.htm9 http://www.ppib.gov.pk/N_about_ppib.htm10 http://www.aedb.org/ 23

Nuclear RE Imports from Iran 5.12% 0.82% 0.45% Hydro 33.71% Thermal 59.90% Figure 3: Electricity generation mix in Pakistan (FY 2014-15)During FY 2014-15, thermal power and large-scale hydropower were the two main contributors,accounting for 59.90% and 33.71% of the total electricity generation, respectively. Although thetotal electricity generation from RE sources (wind, bagasse and solar) increased significantly from263 GWh in 2014 to 795 GWh in 2015, their share in FY 2014-15 generation mix was still verysmall, i.e. only 0.82%.During FY 2014-15, the total electricity consumption by various sectors was90,362 GWh. Table 5 and Figure 4 present the electricity consumption of various sectors.Table 5: Electricity consumption by sector in Pakistan (FY 2014-15)Electricity consumer Electricity Share (%) consumed (GWh) 45.07 7.13Domestic 40,727 27.37Commercial 6,442 8.89 0.56Industrial 24,733 4.98 6.00Agriculture 8,032 100.00Public lighting 503Bulk supply + Others 4,498Sold to K-Electric by NTDC 5,427Total 90,362Source: NEPRA State of Industry Report 2015 24

Public Bulk supply Sold to K- lighting + Others Electric by 0.56% 4.98% NTDC 6.01%Agriculture 8.89% Domestic 45.07%Industrial 27.37% Commercial 7.13% Figure 4: Electricity consumption in Pakistan (FY 2014-15)The domestic sector was by far the largest consumer of the electricity during FY 2014-15,accounting for 45.07% of the total electricity consumption in Pakistan. The second largestelectricity consumer was the industrial sector with 27.37%, followed by the agricultural (8.89%)and the commercial sector (7.13%).As a network operator, NTDC is required to construct and operate extra high voltage transmissionlines and grid power stations for transporting power from the existing and new power generationplants to the DISCOs. Besides managing transmission losses, NTDC has also to periodicallyrefurbish and upgrade its transmission facilities to cater for the increased load demand from theDISCOs.Table 6 presents the existing transmission facilities of NTDC, as of Jun 2015.Table 6: Existing transmission facilities of NTDC (as of Jun 2015)Facility Description500 kV transmission lines 5,110.48 km220 kV transmission lines 9,686 km500 kV grid stations 14 stations with a combined capacity of 18,624 MVA, including 33 units of 500/220 kV transformer and 28 units of 220/132 kV220 kV grid stations transformer 38 stations with a combined capacity of 24,063 MVA, includingSource: NTDCReport (2015) 129 units of 220/132 kV transformerBased on the NEPRA’s State of Industry Report 2015, the transmission network was barely enoughto cater for the generation capacity. It has been reported that out of 33 units of 500/220 kVtransformer, 8 were overloaded. Similarly, 90 out of 129 units of 220/132 kV transformer wereoverloaded. 25

NTDC is implementing several investments to strengthen and upgrade the existing transmissionnetwork. The status of these projectsis shown in Table 7.Table 7: Status of transmission network expansion projects of NTDC (as of Nov 2016)Grid Projects Status of completion (%)500 kV New Lahore Grid station Transmission line500 kV Rahim Yar Khan500 kV Shikarpur 42% 73%220 kV Chishtian220 kV Vehari 85% 57%220 kV Gujrat220 kV Dera Murad Jamali 80% 53%220 kV Mansehra Grid Station220 kV Ghazi Road Grid Station 80% 99%Jamshoro-Moro-Dadu to Rahim Yar KhanTransmission Line 82%220 kV Chakdara220 kV DI Khan (New) 60% 73%220 kV Nowshera220 kV Mansehra 73% 73%Switching Station at MoroInstallation of Static Var Compensators at 220 15%kV New Kot Lakhat grid stationSource: NTDCReport (2016) 12% - 66% Tenders opened, evaluated and under approval of award Tenders opened, evaluated and under approval of award Tenders opened, evaluated and under approval of award 5% - 11% 76%According to NTDC, at the end of FY 2015-16, the total power evacuation capacity of its systemwas around 23,000 MW11.3.2RE Development in PakistanPakistan has abundance of RE resources, such as solar, wind, hydro, biomass, and geothermalenergy. The current energy crisis in the country can be resolved to a major extent if these resourcesare explored, exploited and developed properly.GOP is introducing measures to promote the use ofRE.The total theoretical power potential of RE sources in Pakistan is estimated at around 3,310 GW.Table 8 presents the theoretical potential by type of RE resource and their installed capacities bySep 2016.Table 8: Potential and actual power generation from RE sources in PakistanNo. Type of RE Theoretical potential Installed capacity by Sep (GW) 2016 (GW) 1. Solar power 2,900 0.400 2. Wind power 340 0.60211 http://epaper.dawn.com/DetailNews.php?StoryText=25_12_2016_002_002 26

3. Hydropower (large-scale) 60.0 7.115 0.0764. Hydropower (small and micro-scale) 3.1 0.1395. Biomass (including MSW) 6.3212 -6. Geothermal 0.5 8.332Total 3,309.92Source: UNDP Pakistan(2014), AEDB website (2017), CPPA website (2017)Solar energy has the highest potential for power generation in Pakistan, accounting for 87.6% ofthe total theoretical power potential of RE sources. Wind power potential shares 10.3%, followedby large-scale hydropower (1.8%) and biomass-based power potential (0.2%). The powergeneration potential from small-scale hydropower and geothermal energy in Pakistan isinsignificant, accounting for 0.09% and 0.015% of the total theoretical power potential of REsources, respectively.As of September 2016, around 8.332 GW of RE-based power capacity was installed whichaccounted for 0.25% of the total theoretical power potential of RE sources. Hydropower plantshave a combined installed capacity of around 7.191 GW (86.3% of total RE-based installed powercapacity), followed by wind power with around 0.602GW (7.2%), solar power with 0.400GW(4.8%), and biomass-based power with 0.139GW (1.7%).GOP has prioritized the energy securityas one of its main goal and has set target of eliminating load shedding in 2018 and addinggeneration capacity of 25,000 MW by the year 2025.13The details of potential and current utilization of various RE resources are given below.Hydro EnergyHydropower is a well-known source of energy in Pakistan and the country has made significantprogress in this sector to develop it indigenously. Pakistan is endowed with hydropower resourcesof about 60,200 MW, of which 24,736 MW lie in the Khyber Pakhtunkhwa (KP), 21,725 MW inGilgit-Baltistan, 7,291 MW in Punjab, and 6,450 MW in Azad Jammu & Kashmir (AJK) regions14.However, most of the hydropower potential still needs to be harnessed. As of September 2016, thetotal installed capacity of the hydropower plants in the country was 7,115 MW, of which 6,939MW was from large-scale HPPs (≥50 MW), and 176 MW was from small/mini/micro HPPs (<50MW). KP has installed 4,303MW of hydropower (60.4% of total installed capacity of HPPs in thecountry), followed by Punjab with 1,698 MW (23.9%), and AJK with 1,114 MW (15.7%)15.According to AEDB16, there isa number of potential small and micro-scale HPPs (<50 MW) with atotal capacity of approximately 3,100 MW. Of these, several small-scale HPPs with a total capacityof 128 MW are operational, while many others with a combined capacity of 877 MW are under12 Calculated on the basis of Biomass Atlas, Agriculture Department Punjab and World Bank Data13http://www.mopdr.com/vision/uploads/vision/pakistan_vision2025.pdf14http://www.ppib.gov.pk/HYDRO.pdf15http://www.ntdc.com.pk/Files/power2015.pdf16http://www.aedb.org/index.php/ae-technologies/small-hydro 27

implementation. Thus, the potential of 2,095 MW (including 1,500 MW of small-scale HPPs and595 MW of micro-scale HPPs) is still available for development.For large-scaleHPPs, the Nelum-Jhelum HPP in AJK with a capacity of 969 MW is in the finalstages of completion. In addition, several HPPswith a total capacity of 24,946 MW are underimplementation by WAPDA (see Table 9).Table 9: Future HPPs to be implemented by WAPDA Name of the project Capacity Present status/Bunji Dam (MW) Expected year of commissioningDasu hydropower plant 7,100 Project has been principally cleared by CDWP on 2/12/2015 for approval of ECNEC. 5,400 WAPDA on October 18, 2016 approved both Bid Evaluation Reports (BERs) for RCC Dam and undergroundDiamer Bhasha Dam 4,500 Power House after approval from the World Bank 2019-2020 as per approved PC-117. However, the projectChitral Power Enhancement 5 has been postponed (due to lack of funding)18.Project Revised PC-I submitted to the MOWP on 12/02/2015.Lower Palas Valley Project 625Lower Spat Gah 496 December 2022Tarbela 4th extension 1,410 December 2022Tarbela 5th extension 1,410 30/06/2017 In January 2017, the Asian Infrastructure and InvestmentThakot Hydropower Project 4,000 Bank (AIIB) and World Bank have signed an agreement with GOPfor the financial support of 690 million USD.19 The Feasibility Study is in progress. It was expected to be commissioned on Nov 2017.Total 24,946Source: WAPDA website (2017)Sixteen large-scale HHPs with a combined capacity of 6,339 MW are also planned to be completedby 202520 (see Table 10). These HPPs are implemented under IPP scheme of the Private Power andInfrastructure Board (PPIB).Table 10: Future HPPs to be implemented under IPP schemeNo. IPP Mode Hydropower Project Generation Capacity (MW) 1 Patrind Hydropower Project 147 2 Gulpur Hydropower project 102 3 Karot Hydropower Project 720 4 Sehra Hydropower Project 130 5 Suki Kinari Hydropower Project 870 6 Azad Pattan Hydropower Project 640 7 Chakothi-Hattian Hydropower Project 50017 PC-1 is the Planning Commission Form number 118 https://www.thenews.com.pk/print/138262-China-not-interested-in-including-Diamer-Bhasha-Dam-in-CPECs19 http://tribune.com.pk/story/1299893/assistance-world-bank-aiib-give-720m-projects/20http://www.ppib.gov.pk/N_upcoming_ipps.htm 28

8 Madian Hydropower Project 157 9 Asrit-Kedam Hydropower Project 215 10 Turtonas-Uzghor Hydropower Project 58 11 Rajdhani Hydropower Project 132 12 Kohala Hydropower Project 1100 13 Athmuqam Hydropower Project 350 14 Kaigah Hydropower Project 548 15 Mahl Hydropower Project 590 16 Neckeherdim Hydropower Project 80 6,339 TotalSource: PPIB website (2017)The Government of KP has set a target of installing 1,000 small-scale HPPs across the province,out of which 53 have already been installed21.Based on the report of the Punjab Energy Department (PED), the project developers from theprivate sector are currently installing ten small-scale low-head HPPs with a combined capacity ofaround 95 MW on various canals across the province. PED is also working on the 135 MW TaunsaHPP. In the public sector, the Punjab Power Management Unit of PED, has intiated 10 hydalprojects with a cumulative generation capacity of around 80 MW22.A 5 MW run of the river hydropower project has been initiated by Sindh Energy Department(SED) at RD-15, Rohri Canal, near Sukkur Barrage, under PPP mode.23In AJK, The Kohala HPP of 1,100 MW is under development. Land acquisition has started. In June2015, IFC announced a 50 million USD loan for the 102 MW Gulpur HPP and has committed tomobilizing an additional 72 million USD for the project.24Recently, on 9th January 2017, SukiKinari HPP has achieved the financial close.Solar EnergyPakistan is one of the countries that receives the highest solar radiation in the world. Solarirradiance levels in parts of Pakistan, particularly in the southwest, are on par with the best in theworld, with global horizontal irradiance (GHI) values over 1,500 kWh/m² in over 90% of thecountry’s land area. Based on preliminary analysis by the World Bank, the annual mean value ofGHI for the whole of Pakistan is 2071 kWh/m².25The Government of Punjab is offering incentives to investors for solar power development in thecountry. According to the information provided by PPDB/PED, Quaid-e-Azam Solar Power PvtLtd., a public sector company, installed and commissioned a 100 MW solar PV power plant atQuaid-e-Azam Solar Park, in Bahawalpur in 2014. In the private sector, M/S Zonergy Company21http://www.siasat.pk/forum/showthread.php?435974-1000-Mini-Micro-HydroPower-Stations-will-be- constructed-in-Khyber-Pukhtunkhwa22http://www.energy.punjab.gov.pk/_pages/initiatives_PowerProjects.html23http://sindhenergy.gov.pk/brief-energy-projects/24http://sdg.iisd.org/news/june-2015-sustainable-energy-finance-update/25http://www.ifc.org/wps/wcm/connect/ 29

Limited have also recently commissioned 3×100 MW solar PV power plants in July 2016 atQuaid-e-Azam Solar Park, Bahawalpur.26 Table 11provides the key indicators of the four grid-connected solar power plants dispatching electricity to the national power grid.In September 2016only, the four solar PV power plants dispatched around 61.9 GWh of electricity to the nationalpower grid.Table 11: Solar power plants dispatching electricity to the national power grid Solar Power Projects Dependable capacity Power delivered in September (MW) 2016 (MWh)27Quaid-e-Azam Solar Park 100 15,204Appollo Solar Park (under M/S Zonergy) 100 15,252Best Green Energy (under M/S Zonergy) 100 15,674Crest Energy (under M/S Zonergy) 100 15,735Total 400 61,865Source: CPPAReport (2016)According to AEDB, a number of utility-scale solar PV power projects with a combined capacityof 1,556 MW are expected to be added to the national grid by 2018.28At present, 28 solar powerprojects with a total capacity of 956.8 MW are under development. AEDB has issued letters ofintent (LOI) to 24 projects for a combined capacity of 556.8 MW.29 Seven projects of combinedcapacity of 73 MW have achieved financial close and letters of support (LOS) have been issued byAEDB. Furthermore, the provincial government of Punjab has also issued LOIs for 600 MW ofsolar PV power capacity.In the industry sector, due to frequent load shedding and souring electricity prices, some of theindustries have shifted their partial loads on solar PV. No official figures are available on the off-grid installation of small and medium sized solar PV systems installed in various industries.However,a list of solar PV installations in the industry sector of Pakistan is provided in Table 12. Itis based on information from various local vendors and suppliers of solar PV systems.It shows thatthe industry is mainly using it for in-house consumption and very few installations are grid-connected. However, there is no licensegranted by NEPRA for netmetering in the industrial sector.Table 12: Solar PV installations in the industrial sector Capacity (kW) 1,600.0 No Name of industries 1,000.0 1. Solar System at Mehmood Textile Mill Multan(*) 505.0 2. Solar System at Wah Chemicals (Pvt) Ltd., Wah 380.0 3. Grid-tied solar system at Guard Filter (Pvt) Ltd.30 200.1 4. Grid-tied solar system at Rashid Textile Industry, Faisalabad31 149.0 5. Unilever Food (Pvt) Ltd. Phoolnagar, Lahore 6. Indus Motors Company, Karachi26 Information received during the Consultation Meeting with Punjab Energy Department27 CEO/CPPA-G/7062, CPPAG28http://www.aedb.org/index.php/ae-technologies/solar-power/solar-current-status29http://www.aedb.org/index.php/ae-technologies/solar-power/solar-project-requirements30 http://www.premierenergy.com.pk/projects/505kw-grid-tied-solar-power-plant-installation-automation-company-lahore/31 http://alphaengineering.com.pk/documents/RTI.pdf 30

7. Asia Petroleum Limited, Karachi 143.8 8. Grid Tied Solar System at Go Go Cotton 130.0 9. Solar System at Wah Noble Group of Companies, Wah 125.0 10. Grid-tied solar system at Interloop Limited (HD II), Faisalabad32 120.2 11. Unilever Tea Factory Extension, Khanewal 100.4 12. Grid Tied Solar System at AR Cold Storage, Islamabad 100.0 13. Sadiq Poultry, Sahiwal 45.0 14. Shafi (Private) Limited, Tayaba Industrial Zone, Lahore 44.0 15. Toro Dairy 35.0 16. Unilever Tea Factory, Khanewal 30.2 17. Engro Vopak Terminal, Karachi 29.5 18. Siddiq Leather Works, Lahore 22.0 19. Shafi (Private) Limited, Lahore 20.0 20. Grid Tied Solar System at Puri Textile Mill, Lahore 20.0 21. Bata Pakistan, Lahore 22. Grid-tied solar system at Sitara Energy Limited, Faisalabad 6.3 23. Ammar Embroidory, Lahore 6.0 24. Hafeez Shafi Tanneries (Pvt) Ltd. Lahore 4.5 25. WS Leathers, Lahore 3.1 3.0 Total 4,822.1Source: Solar PV vendors and suppliers in Pakistan (2016)(*) - The project is under construction and more than 500 kW is onlineSolar water heaters were also installed in the industry sector. A list of solar water heaterinstallations in the industry sector of Pakistan is provided in Table 13.The latter is based oninformation from various local vendors and suppliers of solar water heaters.Table 13: Solar water heater installations in the industrial sectorNo. Solar water heater projects Capacity (m3/d hot water supply)1 Khawaja Cotton Industries, Faisalabad 1202 Siddiq Leather Works, Lahore 603 Shafi Reso Chem, Lahore 104 Unilever Ice Cream Factory, Phoolnagar 255 Unilever Factory Rahim Yar Khan 406 Muhammad Shafi & Company 35Total 290Source: Solar water heater vendors and suppliers in Pakistan (2016)The building sector has also installedseveral solar PV power systems, such as: Two solar PV systems (178 kW each) installed within the premises of the Planning Commission of Pakistan and the Pakistan Engineering Council in Islamabad that would cater to the needs of both buildings. It is one of the first projects in the government sector. An integrated solar energy system with 10 kW installed capacity,with a possibility of grid tie- in, has been installed at Beacon House Canal Side Campus in Lahore. This project is one of the first-everamong the few projects implemented by the private sector in Pakistan.32 http://www.interloop-pk.com/pdf/IN%20THE%20LOOP-FOR%20WEB.pdf 31

The Government of Punjab is planning several other projects to solarize governmental and publicbuildingsin the province. Some of these projects are:  Installation of grid-tied solar PV systems on 50 governmental offices;  Rooftop installations of solar PV for 4,500 schools;  Solarization of 4,000 schools funded by the Government of Punjab with power capacities ranging from 1 kWp to 5 kWp. The solar power plants to be installed under this project will have a cumulative installed capacity of 6.15 MWp.33;  Solar PV systems with 30 W each were provided to 20,000 students in Punjab Goverment Schools, under UJAALA project34;  Installation of solar PV systems at 80 basic health units funded by ADB;  Installation of a 72kW rooftop solar PV system at the Planning & Development Department funded by KfW;  Installation of 2.5 MW solar PVplant at Islamia University Bahawalpur;  Zero Energy Building (to be called the “Energy Resource Center”) in Johar Town, Lahore, with a $20 million ADB funding under the Clean Energy Investment Program35.The Government of Punjab is currently working on the UJAALA-II project (2015-18) to providesolar home solutions to 113,000 households worth 1,153 million PKR36.Another RE development program recently initiated by the Government of Punjab aims to installsolar power plants with a capacity of 3 kWpeach in 100 Basic Health Units (BHUs) during its pilotphase (Phase 1).During phase 2, the program shall equip a total of 1,000 BHUs with similar PVsystems for uninterrupted power supply. All these PV systems have been designed with theprovision of net metering functionality.37In 2016, the Agriculture Department of Punjab through its Annual Development Program initiateda 3-year program for the “Promotion of High Value Agriculture through Provision of ClimateSmart Technology Package”. This program envisages the use of solar systems on 3,000 acres forHigh Efficiency Irrigation System supplying water to 20,000 acres of land with the financial budgetof 4,767 million PKR on cost sharing basis.38In Sindh province, there are five solar PV power projects with an installed capacity of 20 MW eachwhich are underway in districts of Thatta, Shaheed Benazirabad, Larkana, Sukkar, and atJamshoro. In August 2016, one of these projectsdeveloped by Benazirabad Solar Power (SMC-PVT) Limited has applied for Generation Licence with expected COD in January 2018.3933 http://www.aedb.org/images/RoadmapRolloutNetMetering2016.pdf34Information received during the Consultation Meeting with Punjab Energy Department35 https://www.adb.org/sites/default/files/project-document/200386/49056-002-pssa-01.pdf36 PC I for UJAALA-II Program. UJAALA-II project is being implemented by the Government of Punjab to providesolar panels to households living below the poverty line37 http://www.aedb.org/images/RoadmapRolloutNetMetering2016.pdf38 http://www.ofwm.agripunjab.gov.pk/solar39 http://www.nepra.org.pk/Admission%20Notices/2016/Aug/Notice%20of%20Admission%20BSPSPL.jpg 32

For rural electrification of remote villages, a pilot project is being intiated in Sanghar district ofSindh province. Around 140 homes of two villages in this district will be electrified through solarpanels. Another project for the supply & installation of 350 solar PV systems has also beeninitiated in remote areas in Taulka Nanagarparkar of the Tharparkaris district to promoteeducational activities.Under a project of the Sindh Energy Department, five villages in hilly areasof Malirdistrict (Karachi) will be equipped with stand-alone solar-powered LED street lights.Sindh Energy Department is also working on a feasibility study for solar-powered water pumpingunits & solar-powered desalination plants in 100 villages indesert areas of Tharparkar, Sanghar &Khairpur districts.A feasibility study for the establishment of the concentrated solar thermal powergeneration projects of 50 MW, 20 MW and 10 MW in northern Sindh and at desert areas of Sindhis also under progress.40Wind EnergyWind energy is another important sector Pakistan can benefit fromif it is exploited in an efficientmanner. Pakistan has a 1,046 km long coastline in the South. The average wind speed inthemajority of areas, including Gharo Wind Corridor, is higher than 7 m/s at and above a 60mheight. This corridor has an estimated power generation potential of about 50,000 MW41. Severallocations in Baluchistan, Punjab and northern areas have been identified to have favorable windconditions. This sector is getting worldwide attention with the development and availability ofinexpensive technology that allows its easy conversion to useful energy.42Twelve projects with a combined capacity of 601.9 MW are currently in operation.43About 158.5GWh were generated from these grid-connected wind power plants in September 2016, and itsshare in the total electricity generation mix was 1.55%. As part of the Energy Security Action Plan2006, GOP has set a target to generate at least 5% of the total national on-grid power through windenergy by 2030.44 In June 2015, as part of its Global Trade Finance Program, IFC issued aguarantee to Deutsche Bank to back a letter of credit issued by Bank Al Habib, allowing YunusEnergy to import a wind power turbine from Nordex Germany.45 Wind power plantscurrentlysupplying electricity to the national power grid are presented in Table 14.Table 14: Wind power plants dispatching electricity to the national power grid Wind power plants Dependable Electricity delivered to the capacity (MW) gridin September 2016Zorlu Enerji (MWh)46FFC Energy Limited 56.4 21,136Three Gorges First Wind Farm Pakistan (Pvt) Ltd 49.5 49.5 16,040 17,54840http://sindhenergy.gov.pk/brief-energy-projects/41http://www.dawn.com/news/122755342https://www.scribd.com/document/82179086/Pakistan-Country-Report-renewable43http://www.aedb.org/index.php/ae-technologies/wind-power/wind-current-status44http://www.aedb.org/index.php/ae-technologies/wind-power/wind-investment-opportunities45http://sdg.iisd.org/news/june-2015-sustainable-energy-finance-update/46 CEO/CPPA-G/7062, CPPAG 33

Foundation Wind Energy-I 49.5 31,734Sapphire Wind Power 49.5 18,300Yunus Energy Limited 49.5 12,821Metro Wind Power 49.5 14,571Gul Ahmed Wind Power 49.5Master Windpower 49.5 492Tenaga Generasi Ltd. 49.5 7,004Foundation Wind Energy-II 50.0 3,439ACT Wind 50.0 6,942Total 601.9 8,451Source:NEPRA Report (2016), CPPAwebsite (2017) 158,478According to AEDB47, four wind power projects with a combined capacity of 299 MW are underconstruction and fourteen projects with a combined capacity of 663 MW are in the pipeline.In Southwestern Punjab, a potential wind power projectwith a capacity of 4 x 250 MW wasidentified by VESTAS, a Denmark-based wind turbine manufacturing company.48The Governmentof Punjab and VESTAS signed a Memorandum of Understandingin February 2015 to implementthis project under IPP scheme of the PPDB.49 According to the Punjab Energy Department, the first250 MW wind farm is expected to be completed by 2018.50Crop and Agro-Industrial BiomassResiduesPakistan is an agricultural country with a very promising potential to produce energy (power and/orheat) from biomass residues. As per World Bank statistics, around 47% of the land is undercultivation. The major sources of biomass are crop residues (generated at the fields) and agro-industrial residues (generated at the sites where the crops are processed). Wheat straw, rice straw,cotton stalk, sugarcane trash, maize stalk, bagasse and rice husk are the major crop and agro-industrial residues.Based on the final report on Biomass Atlas for Pakistan,51 the total technical potential of thesemajor crop and agro-industrial residues was calculated at 432,052 TJ/year (120,016GWhth/year).The technical potential of crop residues wascalculated based on their existing uses andthe farmers’ willingness to sell their crop residues. The technical potential of five major cropresidues in Pakistan was calculated at about 20.5 million tonnes/year which is equivalent to anenergy potential of 280,177 TJ/year (77,828 GWhth/year). These crop residues would be collectedand used as substitutes for fossil fuels to produceenergy (heat and/or power) in the industrial sector.47http://www.aedb.org/index.php/ae-technologies/wind-power/wind-current-status48 https://www.vestas.com/~/media/files/punjab.pdf49http://arynews.tv/en/punjab-on-track-to-host-pakistans-largest-windfarm/50 Information received during the Consultation Meeting with Punjab Energy Department51World Bank. 2016. Biomass resource mapping in Pakistan: final report on biomass atlas. Energy sector managementassistance program. Washington, D.C.: World Bank Group.http://documents.worldbank.org/curated/en/104071469432331115/Biomass-resource-mapping-in-Pakistan-final-report-on-biomass-atlas 34

However, with the exception of a small amount of wheat straw, most of potential crop residues arenot being utilized in the industrial sector. The main reasons are thelack of an effective andsustainable biomass supply chain in Pakistan and the current high prices of crop residues (perenergy unit) compared to those of fossil fuels.Table 15: Technical potential of major crop and agro-industrial residues in Pakistan Type of residues Annual technical Energy potential of residues potential of residues TJ/year GWhth/year (‘1000 tonnes)Crop residues:Wheat straw 5,689 81,922 22,756 81,675 22,688Rice straw 6,534 75,585 20,996 32,155 8,932Cotton stalk 5,039 8,840 2,656 280,177 77,828Sugarcane trash 2,552 128,250 35,625Maize stalk 680 23,625 6,563 151,875 42,188Sub-total 20,494 432,052 120,016Agro-industrial residues:Bagasse 17,100Rice husk 1,750Sub-total 18,850Total 39,344Source: WB (2016):Biomass Resource Mapping in PakistanBagasse is identified as the largest agro-industrial residuewhich canbe used for generating andsupplying heat and power to the sugar mills. There are 86 sugar mills currently operating in thecountry, most of which are using inefficient cogeneration plants equipped with low pressure (LP)steam boilers and back-pressure steam turbines working at 21-25 bar. Based on the surveyconducted under the “Biomass Resource Mapping in Pakistan” project, a total of 17.1 milliontonnes of bagasse was generated in the sugar mills in Pakistan during the crop year 2014-2015.About 90% of this amount (15.4 million tonnes) was used for heat and powerproduction in theexisting cogeneration plants with a total installed power capacity of 830 MW.There is a large potential to implement new high pressure (HP) cogeneration plants at the sugarmills. If HPcogeneration technologyis used in all 86 sugar mills, bagasse has the potential togenerate a net electricity of 6,653 GWh/yearwith a combined power capacity output of 1,844 MW.About 75% of the net generated electricity could be sold to the national grid.According toCPPAstatistics, as of September 2016, four bagasse-based HP cogeneration plants with a combinedcapacity of 139.11 MW were operational and exporting power to the national power grid. The totalelectricity generation from these cogeneration plants was 42.21 GWh, and its share in thegeneration mix was 0.41%.Table 16 provides key information on these four HP cogenerationplants.Table 16: Bagasse HP cogeneration plants dispatching electricity to the national power grid Biomass Power Project Dependable capacity Electricitydelivered to the gridJDW Sugar Mills Limited Unit (I) (MW) in September 2016 (MWh) 26.35 16,427 35

JDW Sugar Mills Limited Unit (III) 26.35 13,864RYK Sugar Mills Limited 24.01 190Chiniot Power Limited 62.4Total 139.11 11,729Source: CPPA Report (September 2016) 42,210In December 2016, a new bagasse-based power plant of Fatima Energy Limited with dependablecapacity of 118.8 MW started to supply power to the national power grid.As of September 2016, AEDB has issued LOIs to 19 other bagasse-based HP cogeneration projectswith a combined capacity of 582.2 MW52. However, these projects are moving at a very slow pacedue to hindrances when following the 2013 regulatory framework. The main bottlenecks are theGrid Interconnectivity Study (GIS) and theEnvironmental Impact Assessment (EIA)/InitialEnvironmental Examination (IEE) Study. These two studies are milestones identified in the LOIissued by AEDB, but the timeframe is not given, so most of the sugar mills are stuck at GIS andEIA stage.53Rice husk is also a potential biomass residue used as a fuel for captive energy (heat and/or power)generation and grid-connected power plants. With a total amount of rice husk of 1.75 milliontonnes generated during the 2014-15 season, the potential heat generation output would be 18,900TJ/year (5,250 GWhth/year) based on an average fuel-to-heat conversion efficiency of 80%. If100% of this amount of rice husk is used for power generation, the potential power capacity outputwould be about 200 MW, based on an average electrical efficiency of 22.5% and an annual plantcapacity factor of 85%.At present, the use of rice husk for energy generationin the rice mills is very limited. Most ricehusk isbeing sold to other industries (e.g., textile mills) to be used as fuel for heat/steam generation.Biogas EnergyPakistan is the world’s fourth largest producer of milk. The cattle and dairy population in Pakistanis around 67 million heads. The annual animal manure generation is estimated at 325 milliontonnes which can yield 20 million cubic meter of biogas per day.54 The generated biogas would beused for energy generation for covering the energy demand of the livestock farms. If all the biogasis used for power generation, it could produce around 1,850 MW of power.The GOP started its biogas program in 1974. According to a report published by National RuralSupport Program in 2011, during the 1974-1987 period, a total of 4,137 biogas units has beeninstalled under a government funded grant. However, after the government withdrew its financialsupport, the program progressed further at a slower pace. From 1987 until 2011,only 1,700 biogasplants have been constructed.5552http://www.aedb.org/index.php/ae-technologies/biomass-waste-to-energy/biomass-loi-holders53 Feedback from Stakeholder Meetings54 http://pecell.agripunjab.gov.pk/system/files/biogas.pdf55 http://www.nrsp.org.pk/publications/Evaluation-Assessment-Studies/Renewable-Energy-Evaluation-of-Biogas-Initiative-in-Punjab.pdf 36

There are very few installations of biogas plants for industrial application in Pakistan. For instance,in 2008, Shakargunj Sugar Mills Limited has installed a biogas power generation facility in Jhang.This facility comprises an Effluent Treatment Plant (ETP) and a Power Generation Facility. ETPoperations involve biological treatment of ethanol distillery waste to produce biogas which is thenused in the power house to produce electricity. The installed power capacity of the plant is8.512MW which is operated as a captive power plant.56Landhi Cattle Colony, which is one of the biggest cattle colonies in Asia, comprises more than1000 dairy farms within an area of 7 square km57. In June 2013, to harness the potential of thishuge cattle waste, KE and the Aman Foundation signed a Joint Development Agreement with theIFC for the co-development of Karachi Organic Energy Limited (KOEL) which will be responsiblefor the implementation of the biogas-to-energy project.58According to the initial estimates, it was a30 MW biogas-based grid-connected power plant which was supposed to utilize about 4,200 tonnesper day of cattle waste from Landhi Cattle Colony and 700 tonnes per day of organic food wastefrom the city. The residual organic content was to be processed into over 100,000 tonnes perannum of soil amendment (low nutrient organic fertilizer). The project was to be developed in twophases of 15 MW each, and with an investment of 80 million USD.59 However, when KOELstarted working on it, it became clear that with the available waste quantities, it was not possible togenerate more than 11 to 12 MW power. There is no further update available regarding the actualimplementation of the project.Municipal Solid WasteAs per the Environmental Protection Department of Punjab, municipal solid waste (MSW)generation in Pakistan ranges between 0.283 to 0.612 kg/capita/day, and the waste generationgrowth rate averages 2.4% per year.60 Another study, conducted in 2010 by the World Bank,reported that around 54,888 tonnes of MSW is generated on daily basis in Pakistan which isequivalent to around 20 million tonnes per annum.61The average calorific value of MSW inPakistan is 6.89 MJ/kg on wet basis which implies anelectricity generation potential of around13,900 GWh per annum62 with a total installed capacity of around 1,820 MW.The government is showing interest in the development of a MSW management mechanism in thecountry and in replacing the inefficient and outdated MSW collection and disposal system. Inaddition to the MSW management mechanism, the government also has a plan to utilizebiogas/landfill gas energy from the disposed MSW. Currently, MSW is dumped in open plots, roadsides or dumping sites in some cities. It is not utilized yet for energy generation.56State of Industry Report 2015 published by NEPRA57 http://www.theamanfoundation.org/wp-content/uploads/2014/05/KOEL.pdf58http://www.ifc.org/wps/wcm/connect/59 https://www.ke.com.pk/download/newsletter/60 http://epd.punjab.gov.pk/solid_waste61http://documents.worldbank.org/62 20 million tonnes with 6.89 MJ/kg @ 36.5% power plant efficiency 37

As per a recent study conducted under the ESMAP/WB Biomass Resource Mapping Project, thegross quantity of MSW generated in the 8 major cities is 25,352 tonnes/day, out of which only16,175 tonnes/day are collected by the municipalities. If all the MSW could be collected for biogasproduction, and assuming an organic fraction of 50%, 694,011,000 m3 of biogas could be generatedfor the first year which is sufficient to generate around 1,527GWh of electricity with a totalinstalled capacity of around 200 MW.The Government of Punjab is planning to construct more landfills in major cities such as Multan,Bahawalpur, Faisalabad, Rawalpindi, Gujranwala, etc. Other provincial governments areimplementing modern MSW collection and disposal mechanisms and implementing differentwaste-to-energy (WTE) projects. Lahore Waste Management Company (LWMC) is currentlyconstructing a modern landfill site and will install a landfill gas capture system in order to use it forelectricity generation.63In 2016, PPDB has issued a LOI for development of a 40 MW WTE plantin Lahore with the assured supply of 2,000 tons/day of MSW by LWMC.64 The Government ofSindh initiated a project of 20 MW based on MSW and agro-waste in Khairpur Special EconomicZone.65Tidal EnergyTheoretically, global ocean energy resources are estimated to be over 32,000 GW. Interestingly, theglobal net potential of both wave and tidal power is greater than that of wind and solar.66Pakistanhas various strategic locations with high tidal current velocities or strong ocean currents along its1,046 km long coastline. According to a study conducted by the National Institute ofOceanography, creek network in the Indus deltaic region, extending over 70 km along the ArabianSea, can alone generate about 900 MW of tidal power.67 Grid-based or off-grid tidal power stationscould be constructed, depending on site conditions. Off-grid power stations would be moreappropriatetomeet rural electricity needs.Geothermal EnergyMost of the high enthalpy geothermal resources of the world are within seismic volcanic activity. Aglobal seismic belt passes through Pakistan and the country has long geological history ofgeotectonic events. In Tibet, which occupies more or less the same geological position inHimalayan mountain ranges as Pakistan, more than 6,000 surface indications of geothermal energyresources have been discovered with an estimated potential of 800 MW. The geotectonicframework suggests that Pakistan should not be lacking in commercially exploitable sources ofgeothermal energy. This view is further strengthened by the fairly extensive development ofalteration zones and fumaroles, presence of a fairly large number of hot springs in different parts ofthe country, and indications of Quaternary volcanism.6863http://www.lwmc.com.pk/64 Comments from Stakeholder Meeting at Punjab Energy Department65 Sindh Energy Department66http://www.dawn.com/news/104148567http://www.jofamericanscience.org/journals/am-sci/am1010/008_26106am101014_40_43.pdf68https://www.geothermal-energy.org/pdf/IGAstandard/WGC/2005/0650.pdf 38

There is nosingle installation of geothermal-based technology for power generation. However,installations of geothermal systems for residential cooling and heating (heat pumps) can be foundin Pakistan which make use of almost constant temperatures (around 10-20 ft beneath the earthsurface) throughout the year. Ground source heat pumps are amongst the most energy efficienttechnologies for heating and cooling purpose around the world.69Recent RE Development Initiatives in PakistanAEDB has taken several initiatives for the promotion of RE through organization of internationaland local conferences, exhibitions and road shows with active participation of media to address theissues of consumer shyness and acceptability of RE technologies, and to develop local capacitiesfor Engineering, Procurement and Construction (EPC) services. AEDB, being the solerepresentative of the GOP for the promotion of RE, is supporting the private sector in addressingtheir administrative issues and building capacities of the public sector institutions in solar powerprojects.70The biggest challenge in promotion of RE is to develop state of the art technologies which cangenerate energy at cost comparable to conventional sources. During the last two decades, Pakistanhas not made quite significant advancement in manufacturing renewable energy technologies(RET). Photovoltaic panels are being used in Pakistan for rural electrification, telephoneexchanges, repeater stations, highway emergency telephone centers, and refrigeration of vaccines.These panels are imported from America, Europe, China and also being fabricated at small scale inthe country.The Pakistan Council of Renewable Energy Technologies (PCRET) has designed and developedsolar water-heaters, solar cookers, solar dehydrators and solar desalination plants. PCRET is themain agency involved in the installation of biogas plants in the country, which are locallymanufactured. PCRET and the Agha Khan Rural Support Program (AKRSP) are also involved inthe installation of micro hydel plants in the northern areas and Khyber Pakhtunkhwa. They havedesigned and developed micro hydel turbines, which are locally manufactured. Wind turbines areimported, but some micro turbine fabrication facilities are established in the country.Several international development and financing organizations have been implementingprograms/projects to support RE development in Pakistan.Since 2005, GIZ’s Renewable Energy and Energy Efficiency (RE&EE)projectis working with avariety of partners.Their main political partners are the Ministry of Water and Power (MOWP),office of the secretary and several implementation agencies such as AEDB, provincialenergy/power departments, the National Energy Conservation Centre (ENERCON), as well asother public and private stakeholders71. The overall objective of the project is to improve capacitiesof the public and private sector to promote RE as part of rural electrification and to implement EEactivities in small and medium-sized enterprises (SMEs). The project has supported AEDB in the69 http://www.economia.com.pk/70http://www.aedb.org/index.php/ae-technologies/solar-power/solar-current-status71 https://www.giz.de/en/worldwide/17995.html 39

development of upfront feed-in tariffs for grid-connected power generation from RE sources. Theproject has also helped define political targets for RE and EE that have been adopted by Pakistan’scabinet. Likewise, the project is helping to implement RE & EE policies. Intially, the project’scompletion date was 2014. However, it was extended until 2017.72The following are the mainachievements of the project:  The project has helped define political targets for RE and EE that have been adopted by Pakistan’s cabinet. Likewise, the project is helping to implement policies.  The incentives created have resulted in increased investment in RE from private and public funds. To date, around 100 villages have been electrified through solar energy.  A hydropower model, including CDM instruments, is helping villages to build up their business activities.In November 2007, the Renewable Energy Development Sector Investment Program was started bythe Asian Development Bank (ADB) to develop indigenous, non-polluting and renewable sourcesof energy to help meet Pakistan's power shortage and diversify its power sources. The projectfocused on small to medium-size hydropower stations to be operational in KP and Punjab. ADBassisted in the establishment of Punjab Power Development Company Limited (PPDCL) andPakhtunkhwa Energy Development Organization (PEDO) for the development of power projectson fast track basis in the public sector. In Punjab, six small hydropower plant contracts (Ranolia,Machai, Marala, Pakpattan, Deg Outfall, and Chianwali) have been awarded, and the work is inprogress. Under the program, feasibility studies and other due diligence work on new RE schemeshave been completed.73During 2010-2012, a project entitled “Introduction of Clean Energy by Solar ElectricityGeneration Systems” was implemented with a grant of approximately554million PKR fromtheJapan International Cooperation Agency (JICA). The first on-grid rooftop solar PV power systemswith a combined capacity of 356.16 kW were installed at the premises of Planning Commissionand Pakistan Engineering Council in Islamabad.74The project also included the arrangement fornetmetering through which surplus power can be sold to the Islamabad Electric Supply Company(IESCO).During the same time interval, JICA also conducted field surveys for the installation ofPV systems at four airports, seven hospitals and six universities.In 2011, the United Nations initiated the SE4ALL initiative, which serves as a global forum for allcountries to make joint efforts towards achieving universal access to energy, doubling the rates ofenergy eficiency & conservation and doubling the share of renewable energy in the overall energymix. Pakistan joined this global initiative in 2013. “Rapid Assessment and Gap Analysis”, throughextensive consultation with all the stakeholders, has been completed for the energy sector ofPakistan. UNDP Pakistan facilitated the consultation process75.In April 2012, the GEF approved a project under its Climate Change Focal Area, entitled,“Promoting sustainable energy production and use from biomass in Pakistan.” The overall72 https://www.giz.de/projektdaten/index.action?request_locale=en_EN#?region=2&countries=PK73 https://www.adb.org/projects/34339-023/main#project-pds74 https://www.jica.go.jp/pakistan/english/office/topics/press120529.html75 http://www.se4all.org/sites/default/files/Pakistan_RAGA_EN_Released.pdf 40

objective of the project was to promote market-based adoption of modern biomass energyconversion technologies for process heat and power generation in SMEs and for electrifying ruralareas in Pakistan. Part of the project is to support the adoption of biomass gasification technologiesin SMEs. The project is being implemented by UNIDO76 and executed by AEDB and the Smalland Medium Enterprise Development Authority (SMEDA)77.Since May 2013, a comprehensive RE resource assessment and mapping project covering biomass,solar and wind is being implemented with funds from the Energy Sector Management AssistanceProgram (ESMAP) and the Asia Sustainable and Alternative Energy Program (ASTAE). It isimplemented by the World Bank (WB) in cooperation with the AEDB. A Biomass Atlas has beendeveloped and is available at ESMAP web portal.78The work on solar and wind resource mappingis ongoing, with a Solar Atlas expected to be finalized in early 2017. The solar mapping componentincludes up to two years of high quality, ground-based solar measurements taken from ninesitesacross Pakistan. The measurement data are being published on the World Bank’s Energy &Extractives Open Data Platform, and can be freely downloaded.79In July 2013, the China Pakistan Economic Corridor (CPEC) was established during the visit ofPrime Minister of Pakistan to China. Several RE-based and conventional thermal power projectsare currently constructed under the CPEC. The RE-based power projects include the 1,000 MWQuaid-e-Azam solar park in Punjab, four wind power plants with a combined capacity of 300 MWin Sindh, and the 870 MW Suki Kinari HPP in KP. A 720 MW hydropower project is in thepipeline in AJK/Punjab. Land acquisition for another 1,100 MW HPP in AJK is also underprogress. RE-based power projects under CPEC are listed in Table 17.Table 17: Capacity and cost of RE-based power projects under CPECNo. Project Capacity Estimated cost (MW) (million USD) 1 Quaid-e-Azam Solar Park, Bahawalpur, Punjab 1000 2 Dawood wind Farm, Bhambore, Sindh 50 1,350 3 UEP wind Farm, Jhimpir, Sindh 100 125 4 Sachal Wind Farm, Jhimpir, Sindh 50 250 5 Suki Kinari HydroPower Station, KPK 870 134 6 Karot Hydropower Station, AJK & Punjab 720 1,802 7 Kohala Hydel Project, AJK 1100 1,420 8 Pakistan Wind Farm II 2X50 MW (Jhampir, Thatta, Sindh) 100 2,397 3,990 150 Total 7,628Source: CPEC Report (2016)In September 2013, GOP started its energy sector reform, as one of the priority issues in theExtended Funded Facility arrangement approved by the International Monetary Fund (IMF). Topromote the reform process, the Energy Sector Reform Program (ESRP) was formulated incollaboration with JICA, WB and ADB.80 The program began in June 2014. The Formulation of76http://biomass-unido-nust.com.pk/77 https://www.thegef.org/project/promoting-sustainable-energy-production-and-use-biomass-pakistan78WB (2016). Biomass Resource Mapping in Pakistan79http://www.ifc.org/wps/wcm/connect/80 Least Cost Generation and Transmission Expansion Plan in Pakistan, May 2016 by JICA 41

the Long-term Least Cost Generation and Transmission Expansion Plan (LCGTEP) was a keycomponent of ESRP presented by JICA in May 2016 to support NTDC.In April 2014,UNIDO started a GEF-funded project entitled “Sustainable Energy Initiative forIndustries in Pakistan”. The project aims to stimulate investments in RE and EE projects inindustry till May 2018.81The project is financed through a grant of 3.55 million USD. Primarytarget groups of the project are the institutions mandated for development of RE and EE, includingGOP’s policy making and implementing institutions, industries, energy consultants, professionals,suppliers and academia. The main beneficiaries of the project will be small and mediumenterprises. The reduction of 2 million tonnes of CO2 is targeted during the project lifetime. Theproject will help the industrial sector through development of policy regulatory framework onRE/EE, capacity development of energy consultants, conducting energy surveys, implementingenergy management systems and developing demonstration projects on RE.In 2014, a market review of Sustainable Energy Financing (SEF) opportunities was conducted byIFC in the industrial, residential and agribusiness sectors of Pakistan. Some of the estimates forinvestment in RE in indusrial sectors is given in Table 18.Table 18: Market review of potential investment in RE in industrial sector of PakistanIndustrial Potential Investment Potential TechnologiesSector (Million PKR) Solar water heaters (“SWH”), wind power, solar PV Biomass, solar PVTextile 133,500 Solar PV, SWH Biomass, SWHSugar 16,700 Wind power, concentrated solar power Solar PVLeather 12,000 Various technologiesPaper 1,400Cement 33,000Fertilizer 10,800Other sectors 52,000Source: IFC (2015)In October 2014, the Government of Punjab established the Punjab Bio-energy Institute (PBI) atthe University of Agriculture, Faisalabad for achieving self-reliance and sustainability inalternative energy resources. During the same year, the Punjab Bio Energy Company (PBC) wasestablished to exploit biomass/biogas energy resources on a fast track basis82. In July 2016, PBIinstalled a 100 kW biomass gasification plant in collaboration with Guangzhou Institute of EnergyConversion, China to demonstrate the use of biomass for power generation through the gasificationmode. PBI’s role is to provide energy solutions at domestic and industrial level.83The PunjabAgriculture Department is also promoting the use of biogas for energy in all districts of Punjab.Two projects related to biogas have recently been executed successfully.84In November 2015, a study was conducted by USAID’s Energy Policy Program for determiningthe limit of integrating intermittent renewable (wind, solar) resources onto Pakistan’s National81https://timesofislamabad.com/sustainable-energy-initiative-for-industries-launched-in-pakistan-by-gef/2016/07/25/82 http://www.pbe.com.pk/company_history.htm83 http://uaf.edu.pk/projects/pbi/pbi_overview.html84 http://field.agripunjab.gov.pk/renewable_energy 42

Power Grid. The study report states that there is no need to make major upgrading of the nationalpower grid for inclusion of 4,000 MW (around 10% of the total installed capacity) from solar andwind power plants. The grid integration of more than 4,000 MW capacity from solar and windpower plants will require the appropriate reinforcement of the national power grid. The study alsorecommended that a solution should be considered to stabilize the power system in Pakistan, andthat the limited integration of wind and solar power should be examined by comparing thecost/benefit of introducing power system stabilizers. According to the study report, for systemsintegrated with a high share of wind and solar power, the spinning reserve and contingency reserveshould cover the Residual Load Forecast Error instead of the Actual Demand Forecast Error.85In February 2016, a grid-tied solar PV plant with 1 MW capacity was installed at the ParliamentHouse in Islamabad with the financial assistance of the Chinese Government.86 The cost of theproject is around 280.61 million PKR with an anticipated payback of 10 years.87In May 2016, the Pakistan-German Renewable Energy Forum (PGREF) was established topromote the RE and EE in Pakistan. The PGREF is a cooperation initiative between theGovernments of Pakistan and Germany. It isimplemented by GIZ on behalf of the German FederalMinistry for Economic Cooperation & Development (BMZ). It aims to create a network betweentheir respective industries, public sectors and innovation networks in the RE and EE fields.8885 Least Cost Generation and Transmission Expansion Plan in Pakistan, May 2016 by JICA86 http://www.na.gov.pk/en/pressrelease_detail.php?id=181487 http://www.na.gov.pk/uploads/1429522953_299.pdf88 https://www.pgref.org 43

4. REVIEW OF THE EXISTING RE INSTITUTIONAL AND POLICY FRAMEWORK IN PAKISTAN4.1Existing RE institutional framework in PakistanThe existing institutional framework for RE sector is presented in Figure 5. The powers andfunctions of each institution are described as follows:1. Ministry of Water and PowerThe federal Ministry of Water and Power is the GOP’s executive arm for all issues relating toelectricity generation, transmission and distribution, pricing, regulation, and consumption in thecountry. It exercises this function through its various line agencies as well as relevant autonomousbodies. It also serves to coordinate and plan the nation’s power sector, formulate policy andspecific incentives, and liaise with provincial governments on all related issues.2. WAPDA and PEPCOWAPDA, the Pakistan Water and Power Development Authority, was created in 1958 as a Semi-Autonomous Body for the purpose of coordinating and giving a unified direction to thedevelopment of schemes in Water and Power Sectors, which were previously being dealt with, bythe respective Electricity and Irrigation Department of the Provinces. In October 2007, WAPDAwas bifurcated into two distinct entities i.e. WAPDA and the Pakistan Electric Power Company(PEPCO). WAPDA is responsible for water and hydropower development whereas PEPCO isresponsible for the management of all the affairs of corporatized ten DISCOs, four GENCOs andNTDC.3. National Electric Power Regulatory AuthorityThe National Electric Power Regulatory Authority (NEPRA) was established under an act of theParliament (Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997,also known as the ‘NEPRA Act’) to function as an independent regulator and ensure a transparent,competitive, commercially-oriented power market in Pakistan.The Authority’s main functionsinclude, inter alia,  issuing licenses for generation, transmission and distribution of electric power;  establishing and enforcing standards to ensure quality, safety, and proper accounting of operation and supply of electric power to consumers;  approving investment and power acquisition programs of the utility companies; and  determining tariffs for bulk generation and transmission and retail distribution of electric power.4. Alternative Energy Development Board 44

The Alternative Energy Development Board (AEDB) was established under AEDB act 2011 as anautonomous body, with the aim of promoting and facilitating the exploitation of RE resources inPakistan so as to achieve the GOP’s RE deployment targets. The AEDB is tasked with:  developing andimplementing government policies and plans;  developing projects;  promoting local manufacturing, creating awareness and facilitating technology transfer;  channeling international assistance; and  coordinating all associated activities as the national facilitating agency for the development of RE in the country.It has also been designated as a ‘one-window’ facility for processing RE power generation projects(of all capacity sizes except hydel projects larger than 50 MW; for hydel projects below 50 MWcapacity, consultation with and approval of the provinces is mandatory).A required amendment ofthe RE Policy 2006 was approved by the Economic Coordination Committee (ECC) on May 21,2015. AEDB is also offering Federal Government guarantee to projects initiated under provincialLOIs, provided they obtain a tripartite LOS (AEDB, Provincial Governments and IPP).5. Private Power Infrastructure BoardThe Private Power and Infrastructure Board (PPIB) was constituted under PPIB Act 2012. It hasrepresentation from each of the four provinces of Pakistan and AJK and acts as a ‘one-window’facilitator to promote private sector participation in the power sector of Pakistan. PPIB supportsinvestors in establishing IPP power projects, executes Implementation Agreements with projectsponsors, and issues sovereign guarantees on behalf of the GOP. One of functions of PPIB is torecommend and facilitate the development and implementation of power policies.6. Provincial and AJK AgenciesProvincial and Azad Jammu and Kashmir (AJK) governments support the implementation of REprojects within their geographical jurisdiction, either on their own or in collaboration with AEDB.They are in charge of expediting and facilitating allocation of land use rights (e.g., for wind farms),permitting, creating awareness of RE use, and removing other impediments which may hinderprogress in their development. The PEDO in KP province and the Energy Departments in Punjab,Sindh, Baluchistan, and AJK were created to manage water resources for agriculture and smallpower generation units of less than 50 MW. In the Northern Areas, the concerned organization isthe Water and Power Department. Each of these departments has a Chief Engineer, who heads thedepartment’s technical management capacity with respect to provincial power projects.7. Power UtilitiesElectricity utilities in Pakistan comprise ten separately corporatized DISCOs: Lahore, Gujranwala,Faisalabad, Islamabad, Multan, Peshawar, Hyderabad, Sukkur, Quetta, and Tribal Areas) servingdifferent regions of Pakistan and a private integrated company, the K-Electric, serving the Karachimetropolitan area.In addition, there are four GENCOs (Southern, Central, Northern, and Lakhra) 45

and the WAPDA’s Hydel Wing. Control of power transmission and dispatch is allocated to theNTDC. These companies are established under companies (amendment) Act 1999.8. National Transmission and Dispatch CompanyThe National Transmission & Dispatch Company (NTDC) was incorporated in November 1998. Itscommercial operation started in December 1998. It was established to take over all the properties,rights, asset obligations and liabilities of 220 kV and 500 kV Grid Stations and TransmissionLines/Network owned by WAPDA. NTDC has three major responsibilities:  As a System Operator, NTDC is responsible for secure, safe and reliable operation, control and dispatch of power from generation facilities.  As a Transmission Network Operator, NTDC is in-charge of the operation &maintenance, planning, design and expansion of the 500 kV and 220 kV transmission network.  As a Registrar and Power Exchange Administrator (CRPEA), NTDC is responsible for recording and monitoring contracts relating to bilateral trading system.9. Central Power Purchase Agency Guarantee LimitedThe Central Power Purchasing Agency (CPPA-G) is a company incorporated under the CompaniesOrdinance, 1984. It is fully owned by the GOP. In accordance with Rule-5 of the NEPRA MarketOperator (Registration, Standards and Procedure) Rules, 2015, CCPA-G was registered as theMarket Operator, and conducts market operations. Some key tasks performed by the CPPA-G areas follows:  Procurement of electric power on behalf of DISCOs, including import of power from other countries.  Issuance of generation invoice, verified based on meter reading or dispatch scheduling report and terms of the respective Power Purchase Agreements with DISCOs.  Billing to DISCOs, based on the meter readings, at Common Delivery Points as per the procedure defined in the Commercial Code.  Collection of bills from DISCOs and settlement to the Market Participants as per the Commercial Code.  Collection of information and statistics, as well as the publication of reports and information related to the performance of the Market 10,an Operator administered market which essentially relates to the 10 regional DISCOs.  Development and implementation of competitive power markets based on policy guidelines of the Federal Government and/or NEPRA requirements.  Liaison with other bodies having similar market functions to the Market Operator (i.e., DISCOs) or administering competitive power markets. 46

Figure 5: Existing institutional fra

amework for RE sector in Pakistan

10. Other key stakeholdersSmall and Medium Enterprises Development Authority (SMEDA)As aPremier institution of the GOP under the Ministry of Industries & Production, SMEDA wasestablished in October 1998 to take on the challenge of developing Small & Medium Enterprises(SMEs) in Pakistan. With a futuristic approach and professional management structure, ithas focused on providing an enabling environment and business development services to small andmedium enterprises. SMEDA is not only an SME policy-advisory body for the GOP but alsofacilitates other stakeholders in addressing their SME development agendas. It has the followingobjectives:  Formulation of the policy to encourage the growth of SMEs in the country and to advise the GOP on fiscal and monetary issues related to SMEs.  Provision of business development services to SMEs.  Facilitation of the development and strengthening of SME representative bodies, such as associations, chambers of commerce, etc.  Setting-up and management of a service provider’s database including machinery and supplier for SMEs.  Conduct of sector studies and analysis for sector development strategies.  Facilitation of SMEs in securing financing.  Strengthening of SMEs by conducting and facilitating seminars, workshops and training programs.  Donor assistance for development of SMEs through programs and projects.  Assisting SMEs in getting international certifications for their products and processes.Pakistan Council of Renewable Energy Technologies(PCRET)PCRET was established by merging the National Institute of Silicon Technology (NIST) and thePakistan Council for Appropriate Technologies (PCAT) on 8 May 2001. It is a prime institution inPakistan for coordinating R&D and promotional activities in different RETs. PCRET has its headoffice in Islamabad, regional offices in the provincial capitals (Karachi, Lahore, Peshawar andQuetta), and field offices at Abbottabad, Muzaffarabad, Bahawalpur and Ghokti. The main tasks ofPCRET are the following:  To establish facilities, and acquire expertise to conduct research for suitable RETs.  To produce materials and devices for applications in the field of RE.  To promote RETs in the country and pilot-scale production of indigenously developed technologies.  To organize conferences, seminars, workshops for promotion of technologies and products.  To establish national/provincial and international linkages in the field of RETs.PCRET is providing the following services to private and public sectors organizations:  Consultancy services for design and development of RE systems and appliances.  Testing services for solar PV systems and components, for solar thermal appliances, etc. as per international standards.  Training services to users, manufacturers and installers of RE systems.