7106_T5 VTM Training Day 1

Training Programs in Energy Efficiency and Renewable EnergyApplications for the Industrial Sector Training 5 - Vendor Training on Market Potential and Business Opportunities for EE and RE Technologies UNIDO Prepared by: Econoler 1

Your TrainerGerard Doherty, C.Eng.• UNIDO International Expert in Energy Efficiency and Energy Management• Certified Professional in Energy Management• Certified Measurement and Verification Professional 2

What about you?• Name• Company• Role in the company 3

Today’s ProgrammeHour Sessions09.30 Module 1: The EE & RE Technology Enabling Environment10:30 Module 2: Strategic Business Context of EE&RE Technologies11:15 Module 3: Pakistan EE&RE Finance Landscape12:00 Module 4: Value Add - EnMS12.30 Lunch13.30 Module 4: Value Add – Energy Auditing14.30 Module 4: Value Add – Monitoring & Targeting15.00 Module 4: Value Add – Measurement & Verification15.4516.30 End 4

Module 1The EE &RE Technology Enabling Environment 5

Energy Consumption by Sector in PakistanEnergy Consumption by Sector in Pakistan (2014-2015) 2% Domestic 25% Commercial Industrial32% Agricultural Transport 41,984,134 TOE 4% Other Govt. Institutes 2% 35% 6

Energy in the Industrial Sector of Pakistan• Industry 21% of GDP in 2015-16• SMEs in the textile, leather, pulp & paper and sugar sector constitute the majority of the industrial sector in Pakistan.• High dependence on fossil fuel - natural gas, furnace oil, diesel, and coal for heat and/or power generation - and most fossil fuel is imported• In most cases the fossil fuels are used in inefficient machines and processes, incurring high production costs for industries 7

EE&RE Technology Adoption Enabling Factors• Economic Growth – 6%• Population Growth – 2%• Young population – median 23 years• Energy price growth• Electricity blackouts and gas shortages• High losses in the transmission and distribution grids• Remote villages with no electricity access• Falling EE&RE prices• Low energy efficiency in SMEs 8

Renewable Energy 9

Current & In Development RE 10

RE Potential• Current annual electricity production c.150 TWh• Solar PV technical potential estimated at 350 TWh in 2010 and 700 TWh in 2050• Wind energy potential c.34 TWh p.a.• Biomass electricity potential 55-75 TWh by 2050• 1.1 GW of RE installed by 2016 (primarily PV, biogas and wind), 728 MW during 2015-16• 2006 ‘Policy for development of RE for power generation,’ aims to increase RE electrical capacity to 9.7 GW by 2030 11

Is Pakistan solar about to take off?• Solar irradiance in south west on par with best in world• 4.4 GW solar currently in the pipeline (AEDB)• Bahawalpur solar park, built with Chinese investment, produces 400 MW with plans to rise to 1,500 MW• PV commercial and residential installations steadily increasing, with 34 MW installed by 2013 and 50 MW by 2014.• Hospitals, educational facilities as well as public and private-sector office buildings are planning installations up to 1 MW to benefit from net metering.• Net metering expected to catalyze solar PV activity within residential, commercial and industrial sectors. The process of obtaining the license for utilization of net metering has also been fine tuned by the power utilities to minimize the time for obtaining a license 12

Pakistan PV tariff 2018• The Pakistani regulator has issued its tariff determinations for 300MW of solar with tariffs significantly below grid parity.• Last September the National Electric Power Authority (NEPRA) received tariff requests from project developers that just crept below 6 US cents per unit, already marking a major milestone for Pakistan’s solar ambitions, but NEPRA has come back with significantly lower determinations for these projects ranging from US cents 5.2622/kWh to 5.6073/kWh.• This is below grid parity• Solar can be grid tied or off grid, and with or without storage 13

Pakistan potential for power from biomass 14

Advantages of biomass• Reduced GHG emissions• Provides economic development as well employment opportunities• Supports food- processing and agriculture industries• Cost saving and abundantly available• Reduced landfill• Energy reliability and security• Reduce dependence on fossil fuels 15

Biomass Potential• Municipal Solid Waste could generate c.360 MW of via anaerobic digestion• 5,357 biogas plants are installed and working with potential of 12–16 million m3/day to support rural populations for cooking• 400,000 t of ethanol can be produced annually in Pakistan from sugarcane• National Biodiesel Program aims at 5% by 2015 and 10% by 2025• Framework for power Co-generation 2013 (Biomass/Bagasse) was approved by Economic Coordination Committee (ECC) for bagasse/biomass based sugar industry projects: 1.5–2 GW expected within 2–3 years• Renewable and sustainable biomass has potential to generate 76% of peak demand for electricity in Pakistan 16

Wind Power Potential• Pakistan have wind energy potential estimate at 350 GW• Strongest in Sindh province• Chinese Pakistan Energy Corridor strong focus on energy including RE• In 2017 the International Finance Corporation (IFC) announced it will provide $66 million, and mobilize a further $172 million, to help build three 50 MW wind power projects in the Gharo-Jhimpir wind corridor• IFC estimates >2GW of wind and hydro projects in the pipeline 17

Energy Efficiency 18

EE Potential• It has been estimated that Pakistan can save up to 1.1 GW of energy if industry and households change behaviour (UN Environment Guide)• Energy conservation potential estimates are estimated at 25% for industry, 30% for buildings• Most industry is SME with old and inefficient machinery – large potential for EE 19

EE Potential – Pakistan Industry 20

Policy Environment 21

2009-2022 Integrated Energy Plan:• A planning document which sets a target for renewables energy mix:• 22

National Energy Efficiency and Conservation Act 2016• Covers 3 areas: Production facilities, Appliances & equipment, Buildings.• Major clauses: • Norms/specifications for processes & energy consumption standards for equipment which consumes, generates, transmits or supplies energy may be specified. • Manufacture/sale/purchase/import of equipment or appliance which does not conform to these standards may be prohibited. • Display of energy related particulars on label on equipment or on appliance may be directed. • Energy intensive industries may be directed to get energy audit conducted by an accredited energy auditor.• Mandates the creation of The National Energy Efficiency and Conservation Authority (NEECA, transformed from former ENERCON),and The Authority Fund• NEECA serves as the sole focal Federal authority for initiating, catalyzing, carrying out and coordinating the implementation of all energy conservation programs in all sectors of economy 23

EE Laws and Regulations for the Industrial Sectorin PakistanPolicy for Development of Renewable Energy for Power Generation• Focuses on the following RE technologies: • Small hydro of 50 MW or less capacity • Solar photovoltaic (PV) and thermal energy for power generation • Wind power generation • Bagasse/biomass/waste to energy • Bioenergy 24

Alternative Energy Developing Board (AEDB)Sole representing agency of the Federal Government for RE in PakistanMandated to:-• Implement RE policies, programs and projects through private sector• Assist development of RE to achieve sustainable economic growth• Encourage transfer of technology and develop manufacturing base for RE• Promote provision of energy services based on RE resources• Undertake RE projects on commercial scaleTasked to ensure 5% of national power generation capacity through RE by2030. Also to electrify 7,874 remote villages in Sindh and Balochistanprovinces via REAEDB manages the Alternative Energy Development Fund to incentivise RE 25

AEDB progress to date• Grid Code Amendment for Solar Power projects initiated, standard project documents developed;• Building lenders' confidence through supportive measures and introduction of leading global manufacturers into the local market to supply RE equipment;• Working with NEPRA offering an Upfront tariff for RE projects in line with other countries of the world to speed development• Capacity building of provincial governments through technical assistance• Tax exemptions on RE equipment• Promotion through international and local conferences, exhibitions etc.• Development of local capacities for EPC services and for manufacturing of towers locally;• Building capacities of the public sector institutions in solar power projects 26

Appliance, Labels, and Minimum EfficiencyPerformance Standards• BRESL - 4 year UNDP/GEF project started 2010 to accelerate implementation of energy standards and labels (ES&L) in Asia.• Protocols adopted for CFLs, ballasts, fans, motors, refrigerators, room A/C. MOUs signed with Pakistan Council of Scientific and Industrial Research and Pakistan Standards & Quality Control Authority to ensure implementation• World Bank assisted Pakistan fan manufacturers to adopt standards & labeling for EE - by June 2017 11 manufacturers had obtained approval for fans to carry a 3-Star rating.• GoP to implement ‘import quality standards for PV equipment’ to curb import of uncertified and sub-standard equipment. This will lead to greater standardization of pricing and quality of products, which should encourage leading solar companies to increase participation in Pakistan’s solar market. 27

State Bank RE Supports• Concessional finance for large & small RE• Provided on a first come first served basis for projects achieving financial close up-to 30/6/19. State Bank shall provide refinance to each bank/ Development Finance Institutions (DFIs) on service charge (mark-up) basis.Projects between 1 MW and 50MW:• State Bank will provide a maximum refinance of PKR 6 billion to the banks/DFIs for a single project.• Service charges and rates for end users have been fixed as per the following: • Tenor: up to 12 years • Rate of Refinance: 2%, Bank’s/DFIs’ Spread: 4%, End User’s Rate: 6%Projects between 0.004 MW to 1 MW• Service charges and rates for end users have been fixed as per the following: • Tenor: up to 10 years • Rate of Refinance: 2% Bank’s/DFIs’ Spread: 4%, End User’s Rate: 6% 28

Biodiesel supportsThe Economic Coordination Committee (ECC) of the Cabinet approved“Policy Recommendations for Use of Biodiesel as an AlternativeFuel”:1. The Ministry of Water & Power in coordination with AEDB isresponsible for the National Biodiesel Programme.2. Biodiesel blending will be gradually increased to achieve 5% share,by volume, of the national diesel consumption by 2015 and 10% by2025.3. Oil Marketing Companies will purchase biodiesel from producersand sell after blending with petroleum diesel4. The Government shall provide buy back guarantees to biodieselproducers at a price determined by OGRA, and will make it mandatoryfor public sector vehicles running on diesel to use blended diesel.5. Plant, machinery and equipment used in biodiesel production shallbe exempted from customs duty, income tax and sales tax. 29

Cogeneration Supports• The Economic Coordination Committee on 6 March 2013, approved the ‘Framework for Power Cogeneration 2013 Bagasse and Biomass’• The power producer may establish the project as part of an existing sugar mill or as a separate entity.• The Upfront tariff for bagasse/biomass-based cogeneration projects shall be determined by the National Electric Power Regulatory Authority (NEPRA).• Power producers can offer electricity to the respective distribution companies or Central Power Purchase Agency provided that the cost of interconnection, grid station upgrades, etc. shall be incurred by the respective DISCOs.• It shall be mandatory for the power purchaser to consume all the energy offered to it by the power producer.• There shall be no requirement for feasibility or firm costs from the power producers. However, they will be required to submit grid interconnection studies and initial environmental examination reports to relevant agencies/departments 30

Green Banking Guidelines (GBGs)• State Bank of Pakistan introduced late in 2017 and gave banks and development finance institutions a year to implement them.• Banks encouraged to lend generously to environment-friendly projects• Banks and DFIs must make their infrastructure and operations environmently friendly.• State wants banks and DFIs to create green financing portfolios for loans for RE, sewage treatment, water conservation, waste disposal, wastewater treatment and public transport• Calls upon banks to consider earmarking a % of their overall financing & investment portfolio as a dedicated fund for green investment• Aims at a culture change within the banks to encourage sustainability including EE & RE 31

Access to Clean Energy Programme (Punjab)• Aimed at installing over 20,000 solar PV rooftop systems to reduce the burden on the National Grid and improve environmental conditions through implementation of off-grid, decentralized energy solutions.• Aims to install solar PV rooftop systems on all basic health units (2,400), schools (20,000) and public buildings in the province.• Program includes EE audits on the public sector buildings, construction of a model net zero building and an IT based Program Performance Monitoring System• Asian Development Bank will support the programme with $88m• 2 phases envisaged (i) solar PV rooftop systems on 10,861 schools in South Punjab; and (ii) systems on another around 9,700 schools in Northern and Central Punjab.• PV installations projected to increase 46% in 2017 from 700 MW to 1 GW 32

NEPRA Net-Metering Regulation: A market disruptionpolicy to encourage integration of renewables:• National Electric Power Regulatory Authority (NEPRA) approved a net metering programme in Sept 2015• Solar PV and wind generators under 1 MW can sell electricity to the national grid.• Payment for purchase of electricity from distributed solar and wind generation units shall be the same as the off-peak electricity rate charged by utility companies for electricity sold to distributed solar and wind generation units.• Residential, commercial and industry scale owners of the eligible generators can participate in the scheme.• The Parliament House of Pakistan set the precedent by obtaining the first Net-Metering license for a 1 MW solar installation• Subsequently, a number of distribution companies started issuing Net- Metering licenses• At present only K-Electric is not entertaining Net-Metering licenses. 33

NEPRA Net-Metering Regulation: A market distruptionpolicy to encourage integration of renewables: 34

NEPRA Net-Metering Regulation: A market disruptionpolicy to encourage integration of renewables: 35

Opportunities for vendors: Offer Net-Metering to clientswhen offering Solar PV solutions for fast payback:However:• State Bank preferential financing at 6% interest still difficult to access through private banks• Solar PV power sales contracts require long-term exposure and risk for the vendor 36

UNIDO Private Financial Advisory Network (PFAN)• Collaborative initiative of UNIDO and the REEP (Renewable Energy and Energy Efficiency Partnership). Business plans for financing are invited by PFAN to encourage the adoption of RE and EE initiatives.• Provides excellent guidelines for developing robust business plans for RE&EE. www.unido.org/environment/o591190/climate-policies-and- networks/private-financing-advisory-network.html• PFAN mobilizes private sector's expertise in financing climate-friendly projects and technologies to select projects that are economically viable, and environmentally & socially beneficial.• PFAN provides guidance in areas such as economic feasibility, project structure, investment and financing, preparation of the business plan, and introductions to investors. 37

UNIDO/GEF Initiative:Sustainable Energy Initiative for Industries in Pakistan• UNIDO has been implementing this 4-year project in the industrial sector since April 2014• Funded by the Global Environment Facility it aims to stimulate investment in EE projects in industry, which in turn will support industrial development.• Targeted to address barriers through a sustainable approach for promotion of EE&RE in Industry and by offering a mix of technical assistance and investment activities.• Focusing on the 3 areas: i. Developing policy and regulatory framework on RE/EE in Industry for AEDB/NEECA, ii. Creating an investment platform for promoting investments in RE/EE and scaling up the market, and iii. Establishing an accreditation center for energy experts on EMS and RE applications in Industry• Aims to save 2 million tons of CO2 during it’s lifetime 38

IEA Blue MAP Scenario 39

Climate Change & EE/RE• Climate Change is one of the major – maybe THE major – issue for humanity• At current projections it will wipe out many species and habitats, and many people(s) – particularly in the developing world• Industry is responsible for c.25% of CO2 emissions• Industry leaders have a moral responsibility to act – to preserve the environment for future generations - as well as a responsibility to their brand• People are increasingly aware of the threats of climate change – particularly in the developing world where it’s effects are becoming more obvious 40

Customer demands• Nielsen (2014) found 2/3 of people in Asia willing to pay more for goods from companies that are committed to positive social & environmental impact.• A 2014 analysis showed an average annual sales increase of 2% for products with sustainability claims on their packaging and 5% for products that promoted sustainability actions through marketing programs. Brands without sustainability claims or marketing showed an increase of only 1%• Recent Unilever study found 88% of those surveyed in India are more likely to purchase a product if they believe it benefits society and the environment• This inclination is higher in emergency economies worldwide – thought to be because they have seen more evidence of the effects of climate change• The effect is more marked in younger consumers – whose influence will grow 41

Private Sector Initiatives• UN Global Compact (61 active members in Pakistan)• Carbon Disclosure Project• SBTi (Science Based Target Initiative)• Global Energy Efficiency Accelerator Platform• RE100• The Business End of Climate Change• The B – Team• These have engaged corporates and encouraged collaborative decarbonisation beyond the traditional top-down approach, driving progress towards a decarbonised world• Companies disclose their impacts & reduction commitments aligned with the Paris Accord 42

GHG Targets for leading brands• Unilever to be carbon positive by 2030 with 100% RE• M&S reduce CO2 emissions by 80% by 2030, 90% by 2035• Walmart – Project Gigaton to reduce emissions in the supply chain by 1 gigaton by 2030• Kelloggs committed to reduce GHG emissions by 65% by 2050• Tetrapak 42% reduction in GHG emissions by 2030, 58% by 2040• Pepsico 20% reduction in GHG emissions across value chain by 2030• Danone 50% reduction in GHG emissions across value chain by 2030• Google already at 100% renewable electricity 43

Drivers of Energy Efficiency & Renewable Energyin Industry• Climate change & pollution: 50% chance of +4C by 2100• Consumer demand, marketing & corporate responsibility• Supply chain demand from global brands• Cost saving through less energy consumption• Energy security, rising cost of energy and carbon pricing• Decreasing cost of RE• Government support, feed-in tariffs and national production capacity – Pakistan vision 2025• Favorable trend towards investments in renewable energy 44

Key Benefits of Energy Management in Industry• Savings often achieved without capital investment through good practice, improved operational control & maintenance, employee awareness• Indirect benefits often exceed the energy savings: • Improved maintenance and reliability, quality and health & safety • Reduced material waste • Improved corporate image and feelgood factor for employees • Better energy supply contracts • Increased equipment lifetime • Savings through Energy Efficient Design • Improved working conditions – thermal comfort, acoustics, lighting, ventilation • Reduced noise and pollution – good for neighbours 45

Benefits of Energy Management in Industry :Competitiveness and ValueImproved Competitiveness and Value• Productivity improvement• Production reliability• Reduce cost / unit product• Promotes innovation• Corporate Social Responsibility Profile• Promotes strategic, cost effective supplier relationships (energy and services)• Investing in the maintenance and upgrade of asset increases value• Green leases attract premium tenants• Increasingly driven by the supply chain 46

Benefits of Energy Management in Industry :OperationalReduce operations costs• Utilities• Maintenance• Quality drivers• Reduce Accidents• Upgrade outdated equipment for higher reliability• Reliability: Reduced unplanned shutdowns• Secure tax incentives 47

Energy Management:Helping Lower Barriers in EE & RE Investments• First: Always Develop energy projects with the strategic business context in mind! Financial barriers will decrease as linkages increase.• Once a company successfully implements an EnMS, energy will begin to be seen as an important, strategic operational instrument – this will help transcend many of the common barriers to energy efficiency, such as financial viability and the perceived technical risks of energy efficiency projects.• Documenting and quantifying energy use, operational drivers, energy savings opportunities, and potential cost savings in accordance with the standardized methodology provided by an EnMS could also help banks to better assess the risks and returns of these projects. 48

Multiple Benefits of EE&RE in Industry 49

Multiple Benefits of Energy Management in Industry :OperationalImproved Operational Ownership• Energy KPIs are elevated to strategic business goal• Energy performance is systemic – success require cooperation• Achieving energy performance requires top level support for resourcing and high level pressure for cross divisional cooperationImproved operational oversight / cooperation• Energy sub-metering helps identify maintenance issues• Integration: Energy efficiency requires cooperation across work units• Continued energy performance requires pro-activity• Accurate production control 50