The World Bank and United States Agency for International Development (USAID) will work with Asian Development Bank on Capacity Development Programme to promote investment in Energy Sector Pakistan.
The investment programme for the power sector as a whole is estimated to be $150 billion (2006-2030) with $2.2 billion expected for Renewable Energy. According to ADB sources, the investment programme in Energy Sector will contribute to economic development through expanded power supply, especially in rural areas.
It will also generate energy equivalent to 1,700 Gigawatt-hours (GWh) annually, sufficient to serve about 600,000 new domestic consumers. It will improve the reliability and quality of supply. It will also increase the utilisation of Clean and Renewable Energy based power.
USAID will also provide direct support to the South Asia Regional Energy Initiative for Energy and assist sector agencies with collecting and assessing wind data.
Finally, Alternative Energy Development Board (AEDB) is already receiving specialised technical support from the German Agency for Technical Cooperation (Deutsche Gesellschaft für Technische Zusammenarbeit), primarily with project preparation.
Official sources stated that the renewable energy development investment programme combines physical investments in new generating capacity across four provinces in several sub-sectors and non-physical interventions in policy reform, capacity development, fiduciary oversight and governance, regulatory and legal frameworks, knowledge management, safeguards, procurement, disbursements, project implementation, evaluation, supervision, monitoring and reporting. The investment programme is the first of its kind in Pakistan. It is also one of the first to be developed under Asian Development Bank's (ADB's) evolving clean energy and environment initiative.
The investment programme has its context in a road map for the energy sector as a whole, in itself a product of diagnostic work over recent years. The starting premise for this work is a recognition that power and energy represent, together with transport connectivity and water, major bottlenecks to high and inclusive economic growth in the country.
Energy supplies are far too dependent on oil imports, the cost of which accounts for a big share of the total import bill. Pakistan needs to be more efficient in energy use, but also to generate more power domestically-through the use of indigenous resources and by changing the mix towards renewable resources. The diagnostic work identified key constraints, challenges, and opportunities. This paved the way for defining a strategic framework, a new policy agenda, and action plans over the short to medium term. The action plans are sequenced and complementary, with transactions involving the private and public sectors, debt and equity finance, and technical assistance.
Nation-wide power demand is outstripping supply, a trend likely to continue unabated for some time. To balance these, Pakistan needs to increase production capacity from 15,500 MW (megawatts) in 2005 to 162,590 MW by 2030.
About 99,000 MW of this is likely to come from thermal power, ie, coal, oil, and gas. But the balance could be met from hydropower and renewable energy, which potentially are environmentally friendlier. Hydro includes large, medium and small plants.
This programme focuses on small to medium plants with significant environmental benefits. Total generation capacity from renewable energy (RE) is currently at a low 180 MW. But there is considerable scope and opportunity to increase it to 9,700 MW by 2030. This will raise RE's profile and its contribution to the total energy mix to 6 percent. This contribution would be much higher were medium to large hydropower generation facilities to be included under the RE package.
Official sources stated that Pakistan's renewable energy potential is greatest in the case of small to medium-sized hydropower plants, but wind, solar, and biomass resources also have potential.
Hydropower resources are located mainly in the northern and central parts of the country, wind and solar resources in the southern provinces of Sindh and Balochistan, respectively. Pakistan's vast agricultural base provides ample opportunities to develop biomass-based energy.
RE delivers on four strategic objectives given in Pakistan's Medium Term Development Framework (MTDF): (i) greater energy security; (ii) reasonable economic and financial returns; (iii) improved social equity, especially in rural areas; and (iv) clean energy and environmental sustainability.
The investment programme for the power sector as a whole is estimated to be $150 billion (2006-2030) with $2.2 billion expected for RE. Of RE, half would be run-of-the-river hydro plants. The rest is assigned to wind energy, solar power, and biomass.
The financing plan involves federal and provincial government budgets, but also the private sector and institutions such as ADB.
The fund-raising strategy calls for a minimum critical mass but also for certainty and diversity of funding sources. A programme of this nature cannot be easily supported on an ad hoc basis, ie, through stand-alone projects processed every two to three years in different sectors and different parts of the country.
The integrity of the investment programme as a whole demands a partnership and continuity. It also means flexibility with regard to subproject choice, a linkage of finance to project preparedness, financial discipline, and maturing physical investments with policy and capacity. It is in this context that the authorities requested ADB support for the programme in the form of a multitranche financing facility (MFF). Such support provides a platform for financial as well as expert assistance, blending reform and capacity development with investments.
Official sources mentioned that the diagnostic work undertaken in support of the programme identified weak capacity at the federal, provincial, and implementation agency levels. Weaknesses differ in importance and magnitude, but include policy formulation, planning, project preparation, financial management, fiduciary oversight, governance in the broader sense (incentives to private sector investment), procedures, systems, safeguards, and procurement.
There is also weakness with regard to evaluation, monitoring, and reporting. The latter include procedures, systems and expertise. The investment programme includes a strong capacity development component. This will support executing agencies (EAs) and implementing agencies (IAs) alike.
Key result areas include (i) information, planning, policy framework formulation and revisions thereof; (ii) human resources development and training; (iii) sector and thematic due diligence, including technical feasibility studies, and RE resource assessments; (iv) systems and procedures for project supervision, monitoring, and reporting; (v) due diligence and mitigation plans (with emphasis on safeguards); (vi) fiduciary oversight, including financial management, procurement, anticorruption measures, and governance; (ix) project management, including accounting and auditing; and (x) outreach work, including communications and public relations. The Alternative Energy Development Board (AEDB) will act as the main counterpart for ADB financing and for the programme. Actual day-to-day work in the sector will be the mandate of specialised RE agencies at the provincial level.
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