The Alternative & Renewable Energy (ARE) Policy 2019 of Pakistan, notified on October 2, 2020, aims to foster the development and integration of alternative and renewable energy technologies (ARETs) into the national energy mix. This policy was developed by the Ministry of Energy (Power Division) in consultation with provincial representatives and various stakeholders, as mandated by the Council of Common Interests (CCI).
Vision and Objectives
The ARE Policy 2019 is part of Pakistan’s broader strategic plan to achieve energy security, affordability, environmental sustainability, and social equity. The policy envisions creating a competitive and conducive environment for the sustainable growth of the ARE sector, with specific objectives to:
- Increase the share of green energy in the overall energy mix.
- Ensure least-cost on-grid power generation.
- Facilitate fast-track and transparent procurement of ARE projects through auctions.
- Develop a competitive power market.
- Promote local manufacturing of ARETs and development of skilled human resources.
- Encourage private sector investment in both on-grid and off-grid ARE projects.
- Reduce pressure on public finances for power system expansion.
Key Policy Measures
1. Generation Capacity Targets (20×25 and 30×30): The policy sets ambitious targets for integrating renewable energy into the national grid, aiming for at least 20% by 2025 and 30% by 2030. This includes various technologies such as solar, wind, biogas, biomass, and other emerging ARETs.
2. Competitive Bidding: ARE projects will be procured through transparent competitive bidding processes to ensure cost-efficiency and attract private investments. The procurement will be based on the Indicative Generation Capacity Expansion Plan (IGCEP) outputs.
3. Displacement of Expensive Energy: The policy encourages the replacement of expensive thermal power with cheaper renewable energy, thereby reducing the average system generation cost.
4. Simplified Regulatory Framework: The policy aims to simplify regulatory and contractual frameworks to reduce barriers and costs associated with ARE projects. This includes streamlining licensing processes and reducing compliance costs.
5. Indigenization and Local Content: To promote local industry, the policy supports the manufacturing of ARET equipment within Pakistan. It proposes the withdrawal of import duty exemptions on ARET consumer items that can be locally manufactured and encourages joint ventures between local and foreign companies.
6. Fiscal Incentives and Carbon Credits: The policy maintains existing fiscal incentives for ARE projects, such as exemptions from corporate income tax and import duties. It also encourages ARE developers to access global carbon crediting markets to enhance financial viability.
7. Off-Grid Solutions and Captive Power: The policy recognizes the potential of off-grid solutions, mini/micro grids, and captive power to address energy access issues, particularly in remote areas. It promotes the development of such solutions through a supportive regulatory environment.
8. Provincial Roles and Municipal Authorities Empowerment: The policy acknowledges the constitutional rights of provinces to develop their own power projects and sets a framework for their participation in the national renewable energy landscape. It also empowers municipal authorities to engage in ARE projects through public-private partnerships.
Implementation Framework
The implementation of ARE Policy 2019 involves the coordination of multiple agencies, including:
- Alternative Energy Development Board (AEDB): AEDB plays a central role in promoting ARET deployment, facilitating investments, and ensuring compliance with policy directives.
- Provincial Governments: They are responsible for providing land, facilitating project approvals, and ensuring local support for ARE projects.
- Federal Government: The Ministry of Energy (Power Division) oversees the overall implementation, monitoring, and periodic review of the policy to ensure alignment with national energy goals.
Conclusion
The Alternative & Renewable Energy Policy 2019 represents a significant step towards integrating renewable energy into Pakistan’s energy mix, aiming for sustainability, economic growth, and environmental protection. By setting clear targets, simplifying regulatory frameworks, and promoting local manufacturing, the policy seeks to create a robust and competitive renewable energy sector, ultimately benefiting the country’s economy and its people.
Critical Analysis of Pakistan’s Alternative & Renewable Energy Policy 2019 from an International Perspective
The Alternative & Renewable Energy (ARE) Policy 2019 of Pakistan is a commendable initiative aimed at integrating renewable energy sources into the national energy mix. However, when viewed from an international perspective, several critical aspects emerge that may affect its implementation and effectiveness.
Ambitious Targets with Limited Infrastructure
The policy sets ambitious targets of achieving 20% renewable energy by 2025 and 30% by 2030. While these targets align with global trends towards sustainable energy, the existing infrastructure in Pakistan poses significant challenges. The national grid and transmission systems are not adequately equipped to handle large-scale integration of intermittent renewable energy sources like solar and wind. International best practices suggest that achieving such targets requires substantial investment in grid modernization, energy storage solutions, and smart grid technologies. Without these upgrades, Pakistan may struggle to achieve the intended levels of renewable integration, leading to potential grid instability and inefficiencies.
Regulatory and Bureaucratic Hurdles
Despite the policy’s aim to simplify regulatory frameworks, Pakistan’s bureaucratic landscape remains complex and often cumbersome. International investors and developers might face significant delays and obstacles in obtaining necessary approvals and clearances. Countries like Germany and Denmark have shown that streamlined, transparent regulatory processes are crucial for attracting investment and ensuring timely project implementation. Pakistan needs to demonstrate tangible progress in reducing red tape and improving regulatory efficiency to build investor confidence.
Financial Viability and Subsidy Dependency
The policy’s reliance on fiscal incentives and subsidies to promote renewable energy development raises concerns about long-term financial sustainability. International experience indicates that while subsidies can kick-start renewable energy sectors, they are not sustainable in the long run and can lead to market distortions. For instance, Spain’s early renewable energy boom, driven by generous subsidies, led to a financial crisis when the government could no longer sustain these incentives. Pakistan needs to develop a clear roadmap for transitioning from subsidy-driven growth to a market-based approach, ensuring that the renewable energy sector remains viable without perpetual government support.
Local Content and Indigenization Goals
The policy’s emphasis on local manufacturing and indigenization of ARE technologies is laudable but challenging. Building a robust local manufacturing sector requires significant investments in technology transfer, skills development, and capacity building. Countries like China have successfully developed local manufacturing capabilities by creating favorable policies, investing in research and development, and providing substantial government support. Pakistan needs to ensure that its local content policies do not inadvertently increase project costs or delay deployment. Balancing the promotion of local industries with the need to maintain competitive project costs and timelines is crucial.
Environmental and Social Considerations
While the policy aims to increase the share of green energy, it lacks detailed mechanisms for addressing environmental and social impacts. International standards, such as those set by the International Finance Corporation (IFC) and the Equator Principles, emphasize the need for comprehensive environmental and social impact assessments (ESIAs) for all large-scale projects. Ensuring that renewable energy projects comply with stringent environmental standards and actively involve local communities is essential for sustainable development. Pakistan must adopt and enforce robust ESIA processes to mitigate potential negative impacts and ensure community buy-in.
Global Competitive Landscape
The global renewable energy market is highly competitive, with countries vying for investment and technological leadership. Pakistan’s ARE Policy 2019 needs to position the country as an attractive destination for international investors. This requires not only favorable policies and incentives but also a stable political and economic environment. Recent geopolitical tensions, economic instability, and security concerns could deter potential investors. To compete globally, Pakistan must address these macroeconomic and geopolitical risks, ensuring a stable and predictable business environment.
Conclusion
The Alternative & Renewable Energy Policy 2019 of Pakistan is a significant step towards sustainable energy development. However, from an international perspective, several critical challenges need to be addressed to ensure its success. These include upgrading infrastructure, streamlining regulatory processes, ensuring financial viability, balancing local content goals, addressing environmental and social impacts, and enhancing Pakistan’s global competitiveness. By learning from international best practices and addressing these challenges proactively, Pakistan can effectively harness its renewable energy potential and achieve its ambitious energy goals.
