The Aga Khan Rural Support Program (AKRSP) will launch a Project "Pakistan Community-Based Renewable Energy Development" in Northern Areas and in Chitral, which will be completed with the total cost of $16.599 million. The World Bank will also provide financial assistance for this project.
In the update project report, World Bank expert Jeremy Levin said the proposed development objectives of the carbon offset project are: to increase access to modern energy from renewable energy sources and reduce global emissions of carbon dioxide.
The carbon offset project will provide additional support for the achievement of the objectives, namely (a) develop hydropower potential in an environmentally and socially sustainable manner so as to help meet local electricity demand, (b) improve access of rural areas to modern electricity services, and (c) improve standards of living for the poor through provision of community level infrastructure.
Jeremy Levin said this carbon offset project will facilitate greenhouse emission reductions and support the development of the international market mechanism for trading emission reductions (ERs) developed in the framework of the Kyoto Protocol.
The project consists of sale of ERs to the Community Development Carbon Fund (CDCF) which provides carbon finance to small-scale CDM projects in the least developed countries and poorer areas of all developing countries.
Operational since July 2003, Jeremy Levin said the CDCF actively seeks to reach countries and communities that are neither presently benefiting from development through carbon finance nor are likely to benefit greatly from it in the future.
The CDCF also seeks to support projects, which include, as a measurable output, the provision of goods and services that will lead to improvement in the social welfare of the communities involved in the projects.
The project will be partially financed through grant support from the ongoing World Bank Pakistan Second Poverty Alleviation Fund (PPAF) Project, which includes provision of grants for small scale infrastructure projects. The AKRPS's proposed sale of ER credits to the CDCF will allow for the mobilisation of additional resources to fill the current financing gap and fully fund the community-based renewable energy program.
Jeremy Levin mentioned that this carbon offset project consists of purchase of ERs generated from at least 103 run-of-river hydroelectric plants ranging in size from 0.035 MW to 0.6 MW, with combined capacity of 15 MW in different locations in remote Northern Areas and Chitral by the WB-managed CDCF.
The program shall be financed by a combination of PPAF grant funds, government contributions, equity contributions and domestic borrowing repaid through future carbon finance payments and community payments recovered through tariff charges, Jeremy Levin added.
The WB expert said the hydroelectric plants would be managed on a community basis with implementation support provided by the Aga Khan Rural Support Program. The project includes active community involvement at the identification, design, implementation and operation stages.
The operation of these renewable energy systems will provide increased access to modern energy services to an estimated 22,181 households (with associated social benefits) currently depending on traditional fuels, kerosene, and diesel-fired sets to meet their energy needs.
Operational costs will be recovered from users through tariffs, whose level shall be determined by the operator of the plant, a "Maintenance Committee" formed by the beneficiary community, and other stakeholders at a level, which shall be sufficient to cover all maintenance, repair, depreciation and loan repayment expenses, said Jeremy Levin.
He both local and imported technology will by used for the mini hydel units, depending on site conditions and operational specifications. The private equipment supply companies shall provide warranty and after-sales service to the communities.
Technical support will be provided by the AKRSP, with additional support provided by NAPWD and CWD (Chitral Works Department) for assistance in identification and commissioning stages and in capacity building, WB expert's report added.