Economic Coordination Committee of the Cabinet has sent the draft Alternative & Renewable Energy Policy (ARE) policy 2019 onward for consideration and approval for submission to the Council of Common Interests (CCI), well informed sources told Business Recorder.
On November 13, 2019, Power Division tabled the draft ARE Policy 2019 to the ECC which did not consider it saying the policy should be tabled before the Cabinet which is the competent forum.
According to sources, the ARE Policy 2019 has been prepared by the Alternative Energy Development Board (AEDB) with all relevant public sector stakeholders including provincial government departments/agencies, private sector stakeholders including major associations in the solar, wind and biomass business, academia, well known professionals like law firms, bankers and advisors in power sector and all major multilaterals and DFIs (World Bank, Asian Development Bank, USAID, KfW, IFC, UNIDO, GTZ).
According to the draft ARE Policy, tariffs will be denominated in rupees. Upfront or cost-plus tariffs for mature technologies will be discontinued. Tariffs will be comprise energy purchase price only (no capacity payments), coupled with a mandatory-purchase obligation for the duration determined in accordance with the prescribed clause of the policy.
For mature technologies, public utility procurement of ARE policy will be through competitive bidding only and not on upfront or cost-plus tariff.
In order to promote new technologies, Nepra may allow upfront or cost plus tariffs for new technologies if it deems appropriate.
AEDB will move the Federal Board of Revenue and Engineering Development Board to withdraw the import duty exemptions on ARE technology based consumer items which the local industry is capable of manufacturing or undertakes to manufacture, and such exemptions will be withdrawn on the conditions specified in the policy being met. AEDB will engage with the chambers of Commerce and Industry to pursue this end on an ongoing basis.
Plant and machinery imported by an existing or new industrial concern shall be free of import duties where the plant and machinery is imported for manufacture of ARE Policy or component thereof or ARE technology consumer items or components.
The exemption from the "locally manufactured" condition for duty free import for ARE policy above 25 MW will be abolished for items that the local industry is capable of supplying to the required specifications and, where applicable, with the requisite certification.
AEDB will maintain proactive ongoing oversight over taxation anomalies that discriminate against the local industry and will make interventions with the federal government to remove the anomalies.
The Renewable Energy policy 2006 approved by the ECC in December 2006, which supported the initial development of renewable energy sector in Pakistan attracted local as well as foreign investors towards development RE based power generation projects in the country.
The incentives provided in the policy along with AEDB's facilitation to the investors has resulted in installation of 24 wind power projects with a cumulative capacity of 12333.37 MW, six solar projects with a cumulative capacity of 430 MW and eight baggasse based generation projects of 259.1 MW cumulative capacity.
According to the Power Division, although the RE Policy 2006 had been instrumental in kicking off the alternative and renewable energy sector developments, the main focus had been limited to development of wind, solar and biomass based power generation on solicited mode through cost-plus and upfront tariff settings whereas the world has now shifted to competitive bidding mode for developments. Moreover, the Regulation of Generation, Transmission and Distribution of Electric Power (Amendment) Act, 2018 requires announcement of National Electricity Policy (NEP).
In order to further realize the full potential of alternative and renewable energy in the country while promoting competitive pricing, the government decided to formulate a new Alternative & Renewable Energy Policy 2019( ARE Policy 2019) which will be amongst the portfolio of policies together comprising the NEP.
The ARE Policy 2019, as a component of the overall plan has the vision of the development of an efficient, sustainable, secure, affordable, competitive and environment friendly power market while promoting indigenization of technology and the development of skilled human resources and local manufacturing capabilities in ARE technologies.
The policy promises a higher proportion of the national energy supply mix from ARE resources by targeting 20 per cent share of installed capacity by 2025 and 30 per cent by 2030.
The most important feature of the policy is that it makes a transition from the traditional methods of procurement based on cost plus and upfront tariffs to competitive bidding in line with the global trends.
It is an expanded scope encompassing all major alternative and renewable sources and also addresses areas like distributed generation systems, off-grid solutions, B2B methodologies etc. The policy envisages development of large scale ARE projects in all parts of the country through active participation and a leading role of the provinces.
The legacy contract structures will be reviewed to remove overlap with subject covered by regulation in order to avoid overlap with regulation. The licencing framework for non-utility procurement will be simplified and rationalized to minimize regulatory fee, compliance costs and timeframes.
AEDB's will be transformed from a passive responder to unsolicited projects to an active promoter for ARE technology and ARE policy penetration, buttressed by interventions for progressive indigenization.
AEDB will set up an Institute of Renewable Energy Technologies under the aegis of academic or institutional framework, with the flexibility to set up sub-campuses of the institute across the country.
Copyright Business Recorder, 2019
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