Renewable Energy and Energy Efficiency (REEE) Project
Project description
Title: Renewable Energy and Energy Efficiency Project (REEE)
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Pakistan
Lead executing agency: Alternative Energy Development Board (AEDB), State Bank of Pakistan
Overall term: 2005 to 2019
Context
Pakistan currently faces a substantial shortfall in its energy supply. This is causing a deceleration in its economic growth and an outflow of businesses. The Government of Pakistan (GoP) is increasing its support for renewable energy, particularly the use of solar photovoltaic, small hydro and wind facilities. Renewable Energy (RE) is promoted as an alternative to imported fossil fuels, which are the biggest contributors to Pakistan’s trade deficit. The GoP is also focusing on the improvement of energy efficiency as well as supply and demand-side management.
The GoP is in the process of introducing a revised Renewable Energy Policy with higher targets of about 25-30 per cent of renewable energy in the total power mix of Pakistan by 2030.
Objective
The conditions for the wider uptake of permanent and effective solutions for renewable energy and energy efficiency have improved.
Approach
The project is active at national and provincial levels, with a focus on on-grid and off-grid RE applications. It combines advisory services for introducing support mechanisms and financing renewable energy and energy efficiency, with efforts to strengthen learning and exchanges within Pakistan. It advises the Alternative Energy Development Board, the State Bank of Pakistan and the provincial energy departments on developing policies and implementing guidelines and instruments for the promotion of renewable energy and energy efficiency. The partners also receive support in improving their organisational and technical capacities.
To encourage investment in renewable energy and energy efficiency, the project is assisting the State Bank of Pakistan for developing green banking policies and financing instruments for related projects.
The project partners have established the Pakistan-German Renewable Energy Forum to promote cooperation and knowledge transfer related to renewable energy and energy efficiency. This forum facilitates business-to-business and business-to-government links, while encouraging joint ventures for international projects and promoting exchanges on relevant legislation, policies and guidelines.
In various industrial sectors, the project is introducing and promoting energy management systems with the aim of improving demand-side management.
To implement the project measures, REEE is working together with the German Solar Association (BSW), the Solar Quality Foundation (SQF), the Renewable and Alternative Energy Association of Pakistan (REAP) and the World Wind Energy Association (WWEA).
REEE is also supporting the Punjab Energy Efficiency & Conservation Agency (PEECA) to finalise Energy Conservation Building Codes (ECBC). Additionally, various national institutions are supported to pilot renewable energy and energy efficiency projects.
Together with NRSP, the project has also launched a Results-Based Financing pilot project for off-grid electrification in three districts, with a collective rural population of around 6 million. It aims to provide access to quality certified solar home solutions in off-grid areas with ease of paying through PAYGO and other microfinancing mechanisms.
Results
Policy support to the Alternative Energy Development Board (AEDB) and National Electric Power Regulatory Authority (NEPRA) has so far resulted in renewable energy projects amounting to nearly 2,000 megawatts (MW) capacity being newly installed and connected to the national grid.
Since 2015, the project has focused on sustainable financing through commercial banks. In relation to it, with support from the project, the State Bank of Pakistan has developed a set of Green Banking Guidelines. The State Bank also now provides incentivised liquidity schemes for investors in renewable energy and efficiency measures, with commercial banks carrying the credit risk. So far, an amount of 8.5 billion Pakistani Rupees (roughly 51 million Euros) has been disbursed to 13 projects of cumulative installed capacity of 93.6 MW, while five commercial banks have already provided corresponding lines of credit for solar home systems. Capacity development enabling the banks to carry out due diligence of such projects is ongoing.
Establishment of the Pakistan-German Renewable Energy Forum has fostered interactions between German and Pakistani public and private sectors. Seven Pakistani solar power companies have so far established business contacts with 40 German companies, resulting in positive business transactions.
A new legal framework has been introduced for net metering, which allows public and private consumers to sell surplus power, generated by solar systems, of up to 1 MW to distribution companies. Already 1,500 net metering licenses have been issued for an installed capacity of more than 26 MW by six electricity distribution companies around Pakistan.
Through GIZ, support in the implementation of Energy Management Systems (EnMS), Pakistan’s industrial sector including textiles, food processing, foundries and steel re-rolling is able to save about an equivalent of 150 gigawatt hours (GWh) of electricity per annum. This also results in saving about 600 Million Pakistani Rupees (3.6 Million Euros) on an annual basis.