Renewable Energy & Energy Efficiency

Project description

Title: Renewable Energy and Energy Efficiency (REEE) Project
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Pakistan
Lead executing agency: Ministry of Water & Power (MoWP)
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 is increasing its support for renewable energy, in particular the use if solar photovoltaic, small hydro and wind facilities. Renewable energy is promoted as an alternative to imported fossil fuels, which are the biggest contributors to Pakistan’s trade deficit. The government is also looking at ways to improve the management of demand and supply in this market.

Objective

Conditions have improved for the wider uptake of permanent and effective solutions for renewable energy and energy efficiency.

Approach

The project is active at national and provincial levels, with a special focus on the province of Punjab. It combines advisory services for the introduction of support mechanisms and the financing of 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 in the development of 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. The 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 different industrial sectors, the project is introducing and promoting energy management systems with the aim of improving demand-side management.

To implement the project measures, GIZ is working together with the German Solar Association and Pakistan Solar Association.

Results

New market incentives and financing instruments have so far resulted in renewable energy projects amounting to over 1,000 MW capacity being newly installed and connected to the national grid.

Since 2015, the project has focused attention on sustainable financing by commercial banks. Related to this, with support from the project, the State Bank of Pakistan has developed a set of sustainable 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, 14 applications have been submitted for project financing amounting to PKR 90 billion, while three 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.

The creation of the Pakistan German Renewable Energy Forum has led to increased interactions between the public and private sectors of Pakistan and Germany. Seven Pakistani solar power companies have so far established business contacts with 40 German companies, resulting in positive business transactions.

A new legal framework is currently being introduced for net metering, which will allow the owners of solar systems to be credited for their inputs to the grid. Already over 50 net metering licences have been issued for an installed capacity of more than 2 MW.