An interview with Dr Sardar Mohazzam, MD NEECA 'Energy efficiency gains are exponential'

Dr. Sardar Mohazzam is currently working as the Managing Director of National Energy Efficiency & Conservation Authority (NEECA). He holds Ph.D. in Public Policy and specialized the area of Energy and Environmental Policy. He has provided Strategic Support for Energy Efficiency in Pakistan as World Bank consultant. He has led Sustainable Energy for All (SDGs No.7) Initiative as a consultant with UNDP.

BR Research recently discussed issues surrounding energy efficiency and conservation in Pakistan with Dr. Mohazzam. Following is an edited excerpt of the conversation.

BR Research: Tell us about National Energy Efficiency & Conservation Authority (NEECA) in detail. What is the mandate on offer?

Sardar Mohazzam: NEECA was earlier Energy Efficiency & Conservation Company (ENERCON), which was transformed into an authority in 2016. The aim and objective of this organization is to being in energy efficiency and conservation, which is undoubtedly, a very broad subject.

We have five key sectoral areas which include transport, domestic, agriculture, industry and power. In the overall mandate, oil and gas is also included in the power definition.

The organization has a great mandate, with an indirect responsibility of climate change, as we will be dealing with the climate change impact.

BRR: What are the key areas of the five sectors you mentioned that you would set as the organization's priority?

SM: We are currently working on an energy efficiency strategy paper for the next three years.

BRR: Is your mandate any different from that of ENERCON?

SM: Not a huge difference, but the key difference is that ENERCON was a company, while NEECA is an authority. An authority, by design, has more powers than a company, offering the luxury to take things up and execute them, without overly relying on the relevant secretary.

What has changed after 2015 Paris agreement is that the climate change responsibility has become more prominent, and NEECA will be the most important authority for climate change mitigation.

BRR: What is the mechanism for provincial coordination for all of these things, especially in the context of climate change being a provincial matter?

SM: We have provincial efficiency and conservation agencies, and the Act allows us to designate provincial agencies. We can designate a number of authorities in a province, having a much broader scope, but that still has to be operationalized. It is very much in our mandate to have such agencies in all provinces.

BRR: Is it also in your plans?

SM: We are currently working on it, and will start with Balochistan.

BRR: Do you have any tentative timelines for the first provincial agency?

SM: We are going to define everything in our strategy paper. To answer your question, a lot of these things are planned to be operational by 2020. The national strategy paper itself is due in the beginning of next year, which is just a month away.

BRR: Given that efficiency and conservation rely heavily on the private sector, has there been any meaningful consultation with the private sector in preparing the strategy paper?

SM: We are already in consultation with different associations, especially on the appliances side. The standards and labeling regime in Pakistan that we are planning to introduce will surely be in consultation with stakeholders. Lots of things are in pipeline and January 2020 onwards, we will be launching minimum energy performance standards for different appliances, every month.

BRR: Do you have in-house research capacity, as the scope of work seems driven by analysis and detailed research?

SM: Currently, we have a staff of 40 people, of which four to five young and energetic people are on the technical side. We are also talking to universities for collaborations and partnerships. Once the buy-in from the key stakeholders in the ministry is there, we are open up for consultations with the private sector.

BRR: Do the donors, such as the ADB and World Bank have a role in the making of the strategy paper?

SM: We wanted this strategy paper to be indigenous, and this is completely NEECA's paper. Once it is ready, we will take it for donor consultation in the coordination committee. We want to set the direction, and it is for the donors to look at it and pick the items on the agenda, to fund, if they want to.

BRR: What are some of the key issues in your view from the conservation point of view, that need addressing on urgent basis?

SM: Our goal is addressing Pakistan's energy intensity, which we aim to lower from where it is. For that, in the next three to five years, we have to reduce 3 million tons of oil equivalent (mtoe) on the energy map, out of the total 88 mtoe.

We have prioritized three sectors, where we see the low hanging fruits, which are industry, domestic and transport.

When you introduce energy efficiency in the industrial sector, this will provide a bigger incentive for the industry, as the energy efficiency gains will make them more competitive.

BRR: What kind of efficiencies are you looking at in the transport sector?

SM: There is no fleet retirement age in Pakistan and it becomes inefficient after a period. The government is also working towards introducing electric vehicles. If 15 percent of vehicles come from the electrical side, this will provide us lot of space. Then there could be efficiency improvement in the engine tune up centers. The big centers could be aligned, and efficiency can be attained.

BRR: What exactly is NEECA's role in electric vehicles or improved tune up vehicle centers?

SM: Our mandate fits in with respect to setting efficiency standards, labeling and energy auditing. We are in the process of setting standards for various appliances, and then we can label it accordingly. This mandate across all appliances is with us.

BRR: You earlier mentioned that industries opting for efficient appliances will be more competitive. Are there any such regulations that are in place or in the offing, that stand to offer an added advantage?

SM: There is no immediate regulation in sight but by 2024, there is a framework coming up which is known as 'Enhanced Transparency Framework' which will require few changes. Secondly, globally some funds out there have huge sums available. If we start any of these initiatives with the industry, these funds can be drawn. For example, Green Climate Fund is a huge fund running in billions of dollars.

Similarly, there are other projects coming in the agriculture sector. Energy efficiency is one of the key sectors where a lot of money can be mobilized.

BRR: Knowing the constraints and inertia in Pakistan, what sums of money can Pakistan tap and how soon?

SM: Ideally, we could easily mobilize in the range of $200-300 million in one to two years. If private sector is pitching in their money, being the beneficiary of efficiency gains, and there is more pitched in through public-private partnership, this can set the ball rolling. Once you break the inertia, the gains are exponential.

BRR: In terms of impact in value terms, what kind of gains are we talking about that could be derived from implementing efficiency standards?

SM: What we calculated is that we could save Rs36 billion, if we get a funding of Rs4 billion per annum. Some of these measures can save us 1 mtoe, which is roughly equal to Rs36 billion.

BRR: Does a uniform mechanism currently exist that keeps a tap on efficiency standards and labeling of appliances, and energy audits?

SM: No such mechanism exists as of now, and that is exactly what we are working towards. From next year, we will be rolling out standards and labeling regime for an appliance a month. But this will be voluntarily, as we will have to establish energy efficiency tribunals before making it mandatory. Implementation of the standards is also our mandate.

We want to give time so that the real benefits of shifting on established standards can be seen by all, which is why we do not want to push it. Fans, for example, have seen an exponential exports growth, because their products were harmonized and up to international standards. That is when the realization sets in.

BRR: When you are energy efficiency compliant, does it increase your cost of production?

SM: The cost does increase but the payback for such appliances is very quick.

BRR: Is there any focus on the generation side as well?

SM: Generation side is currently not our focus, and would come later in the second or third year. We will be starting with transformers, as we have been recommended. Bear in mind, the likes of Ogra and Nepra are already working on the transmission and generation side. We want to develop a better understanding and enabling environment. But, first we want to pick the low hanging fruits, before entering the unchartered territory.

BRR: How important is the power pricing and subsidy regime in terms of the overall energy efficiency debate?

SM: Whenever the prices are high, people have this incentive to move towards energy efficiency. For example, we are proposing on-bill financing for people who are getting the subsidies but still have inefficient appliances, and they end up consuming more because of that. That subsidy effectively does not get fully utilized. Through efficient appliances, we can connect the Discos to the vendors. Since the poor people cannot afford it, we can spread the financing mechanism across the year.

We are addressing the demand side. We see that with this sort of tariffs, there will always be incentive for energy efficiency.

BRR: Is the overall regulatory regime towards energy efficiency conducive for it to be a success?

SM: The State Bank of Pakistan should incorporate refinancing facility for energy efficiency in its green lending guideline. This will be a great support for energy efficiency in Pakistan, as this will open up the financial channels and will expedite the phenomenon to a new scale. We also need to set up collaborations to attract international financing from donors, and the donors can play a vital role in making NEECA a success.

We intend to start awareness campaigns going forward, on product to product basis. NEECA was dormant for quite some time, and we are just beginning to make our presence felt.