Pakistan suffers from a lack of available power generation and renewable energy is being developed as a quick solution to alleviate power shortages. The country aims to close its power supply-demand gap by 2018 and achieve 5% of its total on-grid energy supply from renewables by 2030. Total installed power capacity stood at 24GW at year-end 2014, of which 1.8% was renewable energy (excluding large hydropower).
Various policy incentives have been introduced or are under way to encourage renewable energy development. The government offers a levelized feed-in tariff (FiT) of $0.13/kWh for up to 500MW of wind capacity. The solar FiTs are $0.14-0.15/KWh. As of January 2015, 150MW of wind capacity had been installed, while six solar projects totaling 47.5MW had been awarded the solar FiTs, with commissioning scheduled for end of 2015.
Direct electricity sales between private power producers and bulk end users were permitted in 2014, with wheeling charges for using the grid to transport the purchased electricity. This opens up opportunities for private developers to provide power solutions directly to consumers, who present lower default risk than utilities who have been struggling with high debt loads since 2010.
Pakistan’s government approved a net metering regulation on 1 September 2015 which allows all domestic, commercial and industrial owners of distributed solar and wind generation under 1MW to sell surplus electricity to the grid. The payment for surplus electricity will be the same as the off-peak retail rate charged to the distributed system owners.
The country also offers fiscal and financial incentives to project developers. Renewable energy businesses are exempt from income tax, custom duty and sales tax. The State Bank of Pakistan directed commercial and development banks to provide project loans to renewable power plants of less than 10MW with fixed interest rates for up to 10 years. The 2015 rate stands at 7.5% for renewable energy plant developers, lowered from over 11% previously.
Pakistan in 2015 scored 1.53 to finish 13th among all Climatescope nations. The country moved up two places from 2014 on the basis of improvements on parameters I and IV.
Pakistan ranked 16th on Parameter I Enabling Framework, with a score of 1.42. In 2014, it was 25th with a score of 1.21. The country approved direct electricity sales by private generation companies and net metering to encourage off-grid generation, particularly rooftop solar.
Pakistan’s score on Parameter II Clean Energy Investment & Climate Financing slipped somewhat, from 0.45 to 0.39. Its latest investment total stood at $232m, a marginal decrease from the previous year.
On Parameter III Low-Carbon Business & Clean Energy Value Chains, Pakistan in 2015 posted a 4.32 score, which placed it third among Climatescope countries and was a one-place advance from 2014, when it scored 4.13. The country benefited from strong off-grid value chains, especially in distributed clean energy service providers and financial institutions.
Pakistan’s 2015 rank improved 14 places on Parameter IV Greenhouse Gas Management, as its score jumped from 0.81 to 1.30. While it lacks a national carbon policy, Pakistan hosts a growing level of carbon offsets activity and environmental business training.
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