The Government of Pakistan’s (GOP) Renewable Energy Policy 2006 emphasizes the development of renewable and clean energy in the country. In fiscal year 2005-06, Pakistan’s consumption of energy generated through renewable energy (RE) sources stood at only 180-MW. Development of the power generation potential of existing RE sources, solar, biogas, biomass, micro-hydro, and wind power, offers substantial business opportunities for manufacturers and exporters.

Due to in-country depletion of conventional energy resources and an expanding gap between power demand and supply, the development of RE sources in the country has gained momentum over the past 3-4 years. The GOP has decided to encourage and invest in the development of the infrastructure necessary for power generation through RE sources through its Alternate Energy Development Board (AEDB). The goal is to have power generation from RE sources contribute approximately 10 percent of the country’s overall energy requirements by 2015.

Market Demand

Energy demand in Pakistan is accelerating rapidly and the power generation sector requires massive investments of private sector capital to meet this demand. With the economy experiencing high rates of growth - 6.3 percent and 8.4 percent respectively in the last two years - Pakistan’s energy requirements have expanded at a rate of between 7 and 8 percent annually. Pakistan’s current annual power generation of approximately 19,500-MW is insufficient to cover the growing gap between supply and demand. Daily load shedding of up to 700-MW occurs due to the current power supply shortage and poor transmission capabilities.

Projections by various energy experts indicate that Pakistan would need to add at least 2,000 MW of power generation every year during the period 2007-2015 to meet the increasing demands generated by GDP growth target of 6 to 7 percent per annum. The GOP plans to meet the country’s power generation requirements by allowing the private sector to develop 12 hydropower projects with a projected generation capacity ranging between 53-MW to 600-MW. In addition, existing independent power projects (IPPs) – a Pakistani government euphemism for private sector-owned investments in this sector - are being asked to expand their existing capacities.

IPPs currently generate approximately 5900-MW of power annually, mostly through conventional thermal methods. In November 2006, the Private Power and Infrastructure Board (PPIB), a department of the Ministry of Water and Power, announced seven new licenses that would be made available to private sector companies to develop hydropower generation at pre-selected sites. The award of such licenses to successful bidders is to be made during this fiscal year. Further details may be viewed at the PPIB website: http://www.ppib.gov.pk. The website also provides information on the GOP’s overall Power Policy and provides the standard documentation necessary for setting up an IPP operation in Pakistan.

Although conventional thermal power generated by coal, oil, and gas is expected to meet a large percentage of future demand, there is also enormous scope for more environmentally friendly options. The GOP has adopted a systematic development plan called ‘Vision 2025’ that targets a long-term capacity increase of around 35,000-MW by the year 2025. This planned expansion will cost approximately US$30 billion.

Market Data

The formal exploration and development of RE sources in Pakistan began in 1997 under the auspices of the Pakistan Council of Renewable Energies Technologies (PCRET) with the objective of addressing growing energy demands from household and industrial consumers. In order to provide electricity to rural areas that would otherwise not have electricity in the foreseeable future (because they are either too remote and/or too expensive to connect to the national grid), Pakistan is turning to solar power. Pakistan has worked with WorldWater, an American company, to install solar-powered water pumps that can help address the water needs of people in rural areas without electricity.

Photovoltaic (PV) Technology

According to an AEDB study, Pakistan is located in the “sun-belt region,” ensuring sufficient sunlight for RE purposes. The annual average solar radiation on a horizontal surface available in the country varies from 4.7Km/m2 to 6.2 Km/m2. According to the Pakistan Energy Book 2004-05, the 20 percent use of efficient device solar energy falling on 0.25 percent of Balochistan province would be adequate to meet the current energy requirements of the country. The AEDB plans to electrify the country’s remaining 400 remote villages, 300 of them in Balochistan and 100 in Sindh, utilizing solar energy. The Government has sanctioned an amount of Pak Rupees 450 million (US$1.00 equals to Pak Rupees 60 at the current exchange rate) for solar electrification projects countrywide.

Biomass

Biomass in Pakistan comprises fuel wood, agricultural waste and animal dung, which is available in surplus in all parts of the country. The production of energy through biogas was started in Pakistan in early 1997 by PCRET with the installation of 4,000 plants in several major cities of the country, having a capacity of between 5-15 cubic meters per day. During FY 2005-06, AEDB installed 1,200 new family-size biogas plants, which will meet the domestic needs of 1200 households in the rural area of the Punjab province.

Micro Hydropower (MHP)

The GOP is also focused on exploring the country’s available micro-hydro resources. In this context, AEDB has designed a number of projects to install micro and hydro power plants as part of its efforts to generate cost effective electricity and mechanical power. According to an AEDB source, the recoverable potential of hydroelectric power in the country is estimated to be around 40,000-MW. At present, only 16 percent of this potential is being exploited. AEDB has already installed 300 micro and mini hydro power plants (with an installed capacity of 3-MW) in northern areas of Pakistan, and the construction/civil work on 100 new sites is under progress. In addition, the Pakistan Council for Appropriate Technologies (PCAT) is playing a proactive role in developing hydro energy resources. In this regard, PCAT has installed 253 “run of river type” hydro plants in North-West Frontier Province.

Wind Energy

According to PCRET, Pakistan has a considerable potential of wind energy in the coastal belt of Balochistan and Sindh provinces, which is sufficient to electrify all remote coastal villages in the country. Energy generation through windmill technology is relatively new in Pakistan. During FY 2004-05, PCRET installed 134 wind power turbines for pilot projects in the remote coastal areas of Sindh and Balochistan provinces. In addition, PCRET is collaborating with the private sector and the United Nations Development Program (UNDP) for the development of a network of small windmills with a capacity ranging from 0.5-KW to 5-KW to meet the electricity demand of coastal areas in Pakistan.

The AEDB has also identified a wind corridor between the towns of Gharo and Keti Bandar in Sindh province. This corridor has the potential to produce 40,000-50,000 MW of electricity. The AEDB has conducted a pre-feasibility study of the site and has invited the private sector to setup wind turbines there. So far, eight companies have been short listed to execute the projects on a build, own, operate, and transfer (BOOT) basis. These projects are scheduled to start producing 100-MW of electricity by June 2007. The AEDB issued 28 Letter of Interest (LOI) to prospective investors that allow them to set up windmill farms of about 50-MW each in the coastal areas. This production is scheduled to increase to 700-MW by 2010 and to 9,700-MW by 2030. Companies from the USA, Canada, Germany, Holland and China have expressed interest in wind energy projects in Pakistan.

Best Prospects

With a population of approximately 162 million people and a rapidly growing GDP of more than US$130 billion, Pakistan continues to offer significant trade opportunities for businesses in the following sectors.

• Solar cells and solar wafers

  
  

• Solar energy equipment and solar desalination equipment and accessories

  
  

• Windmills/turbines – sizeable market exists for small to large-scale energy generation (from 100 KW up to 2 MW)

  
  

• Energy storage technology for intermittent generation

  
  

• Biomass generating technology including waste to energy and bio-fuel manufacturing

  
  

• Equipment and accessories for geothermal and hydro power generation

Market Issues & Obstacles

The main challenge that the AEDB is facing in the execution of its projects is the availability of equipment. Wind turbines are not available off-the-shelf in the world market. This is due to the fact that the United States has an extensive wind energy program that offers tax rebates until the end of 2007. All leading manufacturers of wind energy equipment have fully committed existing supplies to the American market.

However through extensive marketing efforts, the AEDB states that it has convinced the four top OEMs – GE of USA, VESTAS of Denmark, Gamesa of Spain and Fuhrlander of Germany – to reserve the equipment needed to produce 50-MW in Pakistan.

A similar supply problem exists with the components of solar energy systems. Due to current high demand, there is a shortage of solar power systems in the world market. As wind and solar power systems will be in direct competition with the GOP’s Vision 2025 hydropower generation program, interested firms must offer price competitive wind and solar power systems, in order to ensure profitability and competitiveness in the local market.

Although, the development work on the proposed 3,600-MW Kalabagh Dam and the Thar Coal power projects has not been initiated, the current delays are mainly due to political controversies, environmental concerns, and downstream economic impacts that could hold less sway over time. Once these projects become operational, they may offer low cost energy supplies that would obviate the need for renewable energy sources.

Pakistan is a diverse and challenging market requiring adaptability and persistence. Careful planning and patience are the prerequisites for success in this emerging market. Firms that are willing to invest time to develop market presence should expect to be rewarded in the long-term.

Excerpts from “Pakistan: Renewable Energy Market”, U.S. Commercial Service, August 2007.