Energy-efficient projects: World Bank ready to extend $300m financing

ISLAMABAD: World Bank (WB) has shown willingness to extend over $ 300 million financing for solarisation of government buildings, water and space heating, shifting from more expensive fuels to electricity and improve efficiency, well informed sources told Business Recorder.

Both National Energy Efficiency and Conservation Agency (NEECA) and Punjab Energy Efficiency and Conservation Agency (PEECA) have sought financing of $ 150 million each and the Bank has agreed to enhance it.

According to a presentation of World Bank shared with the government, Pakistan's fuel import bill surged by 105 per cent in FY 22 compared to FY 21 due to heavy reliance of the energy sector on imported fuel. Households and businesses are struggling with high bills due to fuel costs. International fuel prices will continue to be high for the foreseeable future, putting pressure on the foreign exchange reserves.

Pakistan’s energy intensity is high compared to other countries in the region and improvement can support competitiveness and productivity. While implementation of IGCEP is critical, it will take time to deliver reductions in cost of generation.

Energy efficiency and conservation can provide immediate relief to consumers and firms and can help preserve foreign exchange reserves. In addition to NEECA, there is a potential at the provincial level through their respective agencies.

The Bank stated that the government can implement the following measures immediately by giving top priority to approval of Electric Appliance Regulations, which include Minimum Energy Performance Standards (MEPS) for lights, fans, air conditioners, electric motors and gas and electric water heaters: (i) mandate that all new public sector buildings should be energy efficient; and all appliances being purchased should be MEPS compliant; (ii) continue with electricity reforms to incentivise conservation and the adoption of more efficient appliances; (iii) require energy intensive industries to conduct energy assessments and publish the results, provide them with guidance on low-cost EE&C measures and benefits.

The Bank further contended that the government can implement the following measures within a year with high returns by giving top priority to: (i) develop flagship on-bill financing scheme to allow households to upgrade to efficient appliance, starting with fans but moving on to LED lighting, air conditioners, and water geysers; (ii) retrofitting of public buildings, solar, lighting, cooling, water heating; (iii) SBP credit line or refinancing scheme for energy efficiency through targeting commercial and industrial firms (boilers, motors, compressors); (v) capital grants and concessional loans to target industries to provide upgrade incentives; (iv) retrofitting and solarization of WASA system, pumps, electrical equipment, low cost solar; (v) public awareness campaign educating consumers and businesses on how they can reduce their bills; and (vi) national awards program to recognize firms that have taken strong action.

The government can roll out a mass fan replacement program in the next year to reduce the energy bills of low income households (bottom 50 per cent) in the summer.

Criteria for selecting households: (i) average yearly consumption of less than 200 units; (ii) consumers should not have any arrears in the last one year; and (iii) meter should be tagged to CNIC of the head of household.

World Bank has suggested target of 10 million efficient fans sold. Upfront investment cost Rs 81 billion and payback to consumer from energy savings in eight months. Consumer pays back over 16 months (Rs 500 per month) through on-bill recovery starting in October 2023 and avoiding summer peak (four months’ grace).

Audit of five public buildings in Islamabad showed savings potential of Rs 129 million. Combining solarization of public buildings with retrofitting will increase the savings by 49 per cent. Payback of this project is less than two years.

Copyright Business Recorder, 2022