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Policy for Development of Renewable Energy for Power Generation

Pakistan is blessed with abundance of renewable energy potential but so far this potential has not been harnessed except for large hydroelectric projects.

The Ministry of Water and Power has now prepared the first ever Renewable Energy Policy of Pakistan, which envisages mainstreaming of renewable

energy in the development plans of the country. The policy comprises of three phases: short, medium and long term. The short term policy, which covers the period up to June 2008, lays down very liberal and attractive incentives to attract investment to put Pakistan on the renewable energy map of the world.

 

Based on the experience gained under the short term, the policy for the next phases will be consolidated and elements of competition will be introduced.

Some salient features of this policy are:

 

i. It invites investment from the private sector for following categories of proposals:

     a. Independent power projects, or IPPs (for sale of power to the grid only)

     b. Captive cum grid spillover power projects. (i.e., for self-use and sale to utility)

     c. Captive power projects (i.e., for self or dedicated use)

     d. Isolated grid power projects (i.e., small, stand-alone)

 

ii. Except for Category (a) above, these projects will not require any LOI, LOS, or IA from the Government.

 

iii. Electricity purchase by NTDC/CPPA from qualifying renewable energy-based generation projects has been made mandatory.

 

iv. It permits an investor to generate electricity based on renewable resources at one location and receive an equivalent amount for own use elsewhere on the grid at the investor’s own cost of generation plus transmission charges (wheeling).

 

v. It allows net metering and billing so that a producer can sell surplus electricity at one time and receive electricity from the grid at another time and settle accounts on net basis. This will directly benefit the economics of small scale, dispersed generation and optimize capacity utilization of installed

systems.

 

vi. It delicences and deregulates small scale power production through renewable resources (up to 5 MW for hydro and 1 MW for net metered sales) to reduce the transaction costs for such investments. This will be particularly beneficial for micro, mini and small hydro as well as solar-based electricity

production.

 

vii. It lays down simplified and transparent principles of tariff determination.

 

viii. In insulates the investor from resource variability risk, which is allocated to the power purchaser.

 

ix. It facilitates projects to obtain carbon credits for avoided greenhouse gas emissions, helping improve financial returns and reducing per unit costs for the purchaser.

 

These guidelines are in line with the Government’s open door policy for inviting private investment into the country. I hope that it will go a long way

in strengthening and improving the power supply position of the country and help fuel rapid and environmentally sustainable economic growth.

Liaquat Ali Jatoi

December, 2006 Minister for Water and Power

Policy for Development of Renewable Energy for Power Generation, 2006

Government of Pakistan