Pakistan on Friday signed an agreement with Asian Development Bank for a $510 million multi-tranche loan for the development of renewable energy. The program is the first of its kind in Pakistan, and is one of the first to be developed under ADB's evolving clean energy and efficiency initiative.
Pakistan's energy supplies are highly dependent on oil imports, the cost of which accounts for a large share of the country's total import bill. In addition, demand for power is outstripping supply. Electricity needs are projected to reach 162,590 megawatts (MW) by 2030, from 15,000 MW in 2005.
While thermal power (coal, oil, and gas) is expected to meet much of the future demand, there is enormous scope for more environment-friendly options. Renewable energy accounts for only 180 MW of Pakistan's present power output. The first project under the loan will finance a set of small to medium hydropower plants in Northwest Frontier Province and Punjab.
The governments of Northwest Frontier Province and Punjab expect to borrow up to $180 million and $150 million, respectively, to fund renewable energy projects. Other provinces can request funding for renewable energy projects totalling $170 million.
The program will expand Pakistan's power supply, especially in rural areas, to serve about 600,000 new domestic connections for 4.8 million people. It will also improve reliability and quality of supply.
"Small to medium-sized hydropower plants offer the greatest renewable energy potential for Pakistan, while possibilities also exist in promoting greater use of wind, solar, and biomass power," said Peter Fedon, ADB's Country Director for Pakistan.
"Investment in such renewable energy options would not only be beneficial to Pakistan's energy security, but would also boost social equity, lead to a cleaner environment, and make good economic sense."
The loan and project agreements for the Renewable Energy Development Sector Investment Program were signed on Friday by Akram Malik, Secretary, Economic Affairs Division, Peter Fedon, ADB's Country Director for Pakistan, Arif Nadeem, Punjab Secretary Irrigation and Power, Khalid Gilani, Irrigation and Power Secretary for North West Frontier Province, and Ishtiaq Shah, Chief Executive of Sarhad Hydel Development Organisation (Shydo).
The loan will have a life of 10 years--to 2017. The Alternative Energy Development Board is the executing agency for the Renewable Energy Development Sector Investment Program at the federal level. At the provincial level, the program will be executed via special purpose implementing agencies such as Irrigation and Power Departments.
Power and energy, together with transport connectivity and water, are major constraints in Pakistan to achieving the kind of high economic growth that can benefit the poor. Under its clean energy and efficiency initiative, ADB is planning to expand energy efficiency operations in its developing member countries to $1 billion per year.
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