The Renewable Energy (RE) Policy for Development of Power Generation 2006 represents a significant milestone in Pakistan’s efforts to enhance its power generation capacity through renewable energy sources. This policy, issued by the Government of Pakistan, focuses on the development and promotion of renewable energy resources to meet the country’s growing energy demands while ensuring environmental sustainability and economic growth.

Overview of the Policy

Introduction and Background

The RE Policy for Development of Power Generation 2006 was introduced to address the increasing energy demand and to exploit Pakistan’s vast renewable energy resources. The policy aims to diversify the energy mix by incorporating renewable energy sources such as wind, solar, hydro, and biomass. This diversification is essential for reducing dependence on conventional fossil fuels and mitigating the environmental impact of energy production.

Objectives and Goals

The primary objectives of the RE Policy are:

  • To ensure energy security by developing indigenous renewable energy resources.
  • To provide economic benefits by reducing the cost of energy production and creating job opportunities.
  • To achieve social equity by ensuring the availability of affordable and reliable energy to all regions, including remote and underdeveloped areas.
  • To protect the environment by promoting the use of clean energy technologies and reducing greenhouse gas emissions.

Key Features of the Policy

Incentives for Renewable Energy Projects

The policy outlines several incentives to attract investment in renewable energy projects:

  • Guaranteed Market Access: Mandatory purchase of electricity generated from renewable energy sources by the grid.
  • Grid Connection and Off-take: Facilitating grid connection and off-take voltage interface for renewable energy projects.
  • Wheeling: Permitting investors to generate electricity at one location and receive an equivalent amount for use elsewhere on the grid at the cost of generation plus transmission charges.
  • Net Metering and Billing: Allowing producers to sell surplus electricity to the grid and receive electricity from the grid at other times, settling accounts on a net basis.
  • Simplified Tariff Determination: Transparent principles for determining tariffs to ensure fair returns on investment.

Fiscal and Financial Incentives

The policy provides various fiscal and financial incentives to promote renewable energy investments:

  • Tax Exemptions: Exemptions on income tax, customs duty, and sales tax for renewable energy projects.
  • Financing Facilities: Access to concessional financing and credit facilities for project developers.
  • Carbon Credits: Facilitating projects to obtain carbon credits for avoided greenhouse gas emissions, improving financial returns and reducing per unit costs.

Implementation and Institutional Framework

The policy establishes a robust institutional framework to support the development and implementation of renewable energy projects:

  • Alternative Energy Development Board (AEDB): The AEDB is responsible for promoting and facilitating the development of renewable energy projects, providing technical assistance, and ensuring compliance with regulatory requirements.
  • National Electric Power Regulatory Authority (NEPRA): NEPRA regulates the generation, transmission, and distribution of electric power, including the approval of tariffs and licenses for renewable energy projects.
  • Private Power Infrastructure Board (PPIB): The PPIB facilitates private sector investment in the power sector, providing a one-window facility for project developers.

Critique from an International Perspective

While the RE Policy for Development of Power Generation 2006 sets a commendable framework for promoting renewable energy in Pakistan, several challenges and shortcomings need to be addressed from an international perspective:

1. Policy Consistency and Stability

  • International investors often seek long-term policy stability. Frequent changes in policy can deter investment. Ensuring a stable and consistent policy environment is crucial for attracting foreign investment.

2. Infrastructure Development

  • The success of renewable energy projects heavily depends on the availability of robust infrastructure. Pakistan needs to invest in grid infrastructure and storage solutions to handle the intermittent nature of renewable energy sources effectively.

3. Financial Incentives and Support

  • While the policy offers several financial incentives, accessing these benefits can be cumbersome due to bureaucratic hurdles. Streamlining processes and providing clear guidelines can enhance the attractiveness of renewable energy investments.

4. Technological Advancements

  • Keeping pace with global advancements in renewable energy technologies is essential. Pakistan should focus on adopting the latest technologies and best practices to ensure the efficiency and competitiveness of its renewable energy projects.

5. Environmental and Social Considerations

  • While promoting renewable energy, it is vital to consider the environmental and social impacts of projects. Implementing comprehensive environmental and social safeguards can ensure sustainable development and community acceptance.


The RE Policy for Development of Power Generation 2006 is a forward-looking initiative by the Government of Pakistan to harness the potential of renewable energy sources. By addressing the challenges and leveraging international best practices, Pakistan can achieve its energy security, economic growth, and environmental sustainability goals. Continued efforts in policy refinement, infrastructure development, and stakeholder engagement will be key to the successful implementation of this policy.

Critical Analysis of Pakistan’s Renewable Energy Policy for Development of Power Generation 2006 from an International Perspective

While Pakistan’s Renewable Energy (RE) Policy for Development of Power Generation 2006 is a laudable initiative aimed at diversifying the energy mix and promoting sustainable energy development, several critical aspects from an international perspective highlight areas for improvement. These include policy consistency, infrastructure development, financial incentives, technological advancements, and environmental and social considerations.

1. Policy Consistency and Stability

International investors often prioritize long-term policy stability when considering investments. Pakistan’s renewable energy policy landscape has been marked by frequent changes and shifts in focus, which can create uncertainty and deter investment. Countries with successful renewable energy sectors, such as Germany and the United States, have demonstrated the importance of stable and consistent policy environments in attracting and retaining investment. Pakistan needs to ensure that its renewable energy policy is consistent and stable to build investor confidence and promote sustained growth in the sector.

2. Infrastructure Development

The successful integration of renewable energy into the national grid requires robust infrastructure, including advanced grid management systems, energy storage solutions, and transmission networks capable of handling intermittent energy sources like solar and wind. Pakistan’s existing grid infrastructure is often inadequate to support large-scale renewable energy projects. International best practices emphasize significant investments in grid modernization and smart grid technologies to ensure efficient and reliable energy distribution. Without substantial improvements in grid infrastructure, Pakistan may face challenges in effectively integrating renewable energy projects and achieving the policy’s objectives.

3. Financial Incentives and Access to Capital

While the RE Policy 2006 provides several fiscal and financial incentives, accessing these benefits can be complicated by bureaucratic hurdles and regulatory inefficiencies. International experience shows that streamlined processes and clear, transparent guidelines are essential for attracting investment. Countries like China and India have successfully implemented simplified regulatory frameworks and attractive financial incentives to spur renewable energy development. Pakistan needs to enhance the ease of doing business in the renewable energy sector by reducing bureaucratic red tape, ensuring timely approvals, and providing clear pathways for investors to access financial incentives.

4. Technological Advancements

Keeping pace with global advancements in renewable energy technologies is crucial for maintaining the efficiency and competitiveness of renewable energy projects. The RE Policy 2006 does not sufficiently emphasize the need for continuous technological innovation and adoption of state-of-the-art technologies. Internationally, countries are investing in research and development (R&D) to drive advancements in renewable energy technologies, including more efficient solar panels, wind turbines, and energy storage solutions. Pakistan should focus on fostering a culture of innovation by supporting R&D initiatives, encouraging technology transfer, and facilitating collaborations between local and international firms.

5. Environmental and Social Considerations

While promoting renewable energy, it is essential to consider the environmental and social impacts of projects. The RE Policy 2006 could benefit from more comprehensive environmental and social safeguards. International standards, such as those set by the International Finance Corporation (IFC) and the Equator Principles, emphasize rigorous environmental and social impact assessments (ESIAs) for all large-scale projects. Ensuring that renewable energy projects adhere to these standards is crucial for mitigating negative impacts on local communities and the environment. Pakistan must adopt and enforce robust ESIA processes to gain local and international support for its renewable energy initiatives.

6. Policy Implementation and Governance

Effective implementation of the RE Policy 2006 requires strong governance and institutional capacity. However, Pakistan’s energy sector has historically faced challenges related to governance, including issues such as corruption, lack of accountability, and insufficient capacity within regulatory bodies. International best practices highlight the importance of transparent, accountable, and efficient regulatory frameworks. Strengthening institutions like the Alternative Energy Development Board (AEDB) and the National Electric Power Regulatory Authority (NEPRA), enhancing transparency, and ensuring accountability are essential for the policy’s success.


The Renewable Energy Policy for Development of Power Generation 2006 is a crucial step towards harnessing Pakistan’s renewable energy potential. However, from an international perspective, several critical challenges need to be addressed to enhance its effectiveness and sustainability. These include ensuring policy consistency and stability, investing in infrastructure development, simplifying regulatory processes, promoting technological advancements, implementing comprehensive environmental and social safeguards, and strengthening governance. By learning from global best practices and addressing these issues proactively, Pakistan can optimize its renewable energy potential and achieve its energy security, economic growth, and environmental sustainability goals.

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