MASTERS IN WIND POWER PROJECT MANAGEMENT

National Wind Power Policy

Pakistan
Haseeb Ahmad
1/30/2012

Submitted to Liselotte.Alden

Spatial Planning for Wind Power Development

Table of Contents
1. 2. 3. 4. 5. 6. 7. 8. Introduction .......................................................................................................................................... 1 Current Energy scenario of Pakistan ..................................................................................................... 1 Renewable Energy and Pakistan ........................................................................................................... 1 Institutions in the Power Sector............................................................................................................ 2 Policy for Development of Renewable Energy for Power Generation ................................................. 4 Renewable Energy Policy Challenges .................................................................................................... 5 Addressing Policy Challenges ................................................................................................................ 6 Pakistan Renewable Energy Policy Chart .............................................................................................. 9

Bibliography ................................................................................................................................................ 10

Spatial Planning for Wind Power Development

1. Introduction
The first and the latest renewable energy policy, developed in 2006, have aimed specifically at the promotion of renewable energy power projects. Wind power has a very vital part in the policy however no separate policy regarding wind power development exists. Since, there is no wind power development in the previous years; the policy is still under implementation mode. So the challenges and barriers are going to be discussed, and more importantly some suggestions will be presented to address these challenges. In the following discussion, Renewable Energy Technologies (RETs) will be discussed jointly.

2. Current Energy scenario of Pakistan

Pakistan has been plunged into severe energy crisis. In Pakistan, the primary energy source is fossil fuel which contributes 60%, while bio-fuels in the form of wood, agricultural and animal waste contribute 36% of total the supply. Now if we look down for electricity in particular, the thermal power (fossil fuel), hydropower and nuclear power produce 64%, 33% and 2.4% of the total the electricity. (Fossil Fuel Overview, 2007) On the demand side of electricity, we can see the largest consumer of electricity is household sector which take 44.2 per cent of total electricity consumption followed by industries 31.1 per cent, agriculture 14.3 per cent, other government sector 7.4 per cent, commercial 5.5 per cent and street light 0.7 per cent. (Haq, 2008) In 2004-05, the electricity consumption per capita was 425 kWh which is almost six times lower than that of world average. (An IEA Fact Sheet, 2006) But the gap between energy supply and demand is increasing rapidly due to industrial growth. The growth of electricity consumer has been recorded 83% over the last 15 years. (Economic Survey of Pakistan, 2005-06) So at present the electricity demand has increased about 23000 MW and the short fall is about 5000 MW. (WAPDA, 2011)

3. Renewable Energy and Pakistan

Pakistan, like other developing countries of the region, is facing a serious challenge of energy deficit. Renewable Energy resources can play an important role in bridging this deficit. More importantly, Renewable Energy can take electricity to remote rural areas, where power transmission becomes too expensive. The Government of Pakistan aims that all localities not planned to be connected with national grid in next 20 years are earmarked for Renewable Energy resources and the solar/ wind energy related technologies be indigenized in next decade through national/ international collaboration. According to the Government of Pakistan, "Government of Pakistan is putting greater emphasis on Renewable Energy and has set a target of 10% renewable energy or 2700 MW in the Country's energy mix by 2015. (Power & Alternative Energy Sector in Pakistan, 2011)
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Spatial Planning for Wind Power Development

4. Institutions in the Power Sector

Before explaining the energy policy of Pakistan, it is important to discuss the following institutions. These are relevant in facilitating electricity generation, transmission, and distribution in Pakistan. Ministry of Water and Power The federal Ministry of Water and Power is the Government of Pakistans executive arm for all issues relating to electricity generation, transmission and distribution, pricing, regulation, and consumption in the country, and exercises this function through its various line agencies as well as relevant autonomous bodies. It also serves to coordinate and plan the nations power sector, formulate policy and specific incentives, and liaise with provincial governments on all related issues. (Ministry of Water and Power, 2011) National Electric Power Regulatory Authority The National Electric Power Regulatory Authority (NEPRA) was established under an act of the Parliament (Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, also known as the NEPRA Act) to function as an independent regulator and ensure a transparent, competitive, commercially-oriented power market in Pakistan. The Authoritys main functions include, inter alia, issuing licenses for generation, transmission and distribution of electric power; establishing and enforcing standards to ensure quality, safety, and proper accounting of operation and supply of electric power to consumers; approving investment and power acquisition programmes of the utility companies; and determining tariffs for bulk generation and transmission and retail distribution of electric power. (NEPRA, 2011) Alternative Energy Development Board The Alternative Energy Development Board (AEDB) was established as an autonomous body with the aim of promoting and facilitating the exploitation of renewable energy resources in Pakistan so as to achieve the Government of Pakistans RE deployment targets. The AEDB is tasked with implementing government policies and plans, developing projects, promoting local manufacturing, creating awareness and facilitating technology transfer, channeling international assistance, and coordinating all associated activities as the national facilitating agency for the development of renewable energy in the country. It has also been designated as a one-window facility for processing RE power generation projects (of all capacity sizes except hydel projects larger than 50 MW; for hydel projects below 50 MW capacity, consultation with and concurrence of the provinces is mandatory). Provincial and Azad Jammu Kashmir Agencies Provincial and Azad Jammu and Kashmir (AJK) governments support the implementation of renewable energy projects within their geographical jurisdiction, either on their own or in collaboration with the AEDB, such as by expediting and facilitating allocation of land use rights (e.g., for wind farms), permitting, creating awareness of RE use, and removing other impediments which may hinder progress in their development. Irrigation and Power (I&P)
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Departments exist in each of the four provinces and in AJK, whose prime function is to manage water resources for agriculture and small power generation units of less than 50 MW. In the Northwest Frontier Province (NWFP), the Sarhad Hydro Development Organization (SHYDO), and I&P Departments in the Punjab, Sindh and Balochistan, are the key institutions. In the Northern Areas, the concerned organization is the Water and Power Department, Northern Areas. Each of these departments has a Chief Engineer, Power Cell, who heads the departments technical management capacity with respect to provincial power projects. Power Utilities Electricity utilities in Pakistan comprise nine separately corporatized distribution companies (DISCOs: Lahore, Gujranwala, Faisalabad, Islamabad, Multan, Peshawar, Hyderabad, Quetta, and Tribal Areas) serving different regions of Pakistan and a private integrated company, the Karachi Electric Supply Corporation (KESC), serving the Karachi metropolitan area. In addition, there are four generation companies (GENCOs: Southern, Central, Northern, and Lakhra) and the Water and Power Development Authority (WAPDA) Hydel Wing. Control of power transmission and dispatch is allocated to the National Transmission and Dispatch Company (NTDC). The institutional and functional organization of Pakistans power sector is depicted in the following figure

Spatial Planning for Wind Power Development

5. Policy for Development of Renewable Energy for Power Generation

Pakistan has abundance of RE resources but these resources have not been utilized yet. There is tremendous potential of solar power in Pakistan, and some of the coastal areas are blessed with wind power as well. The Pakistan Meteorological Department has installed met masts in the coastal areas and northern areas of the country. Wind speeds from 5 m/s to 7 m/s persist in these areas. (PMD, 2011) Currently, large hydro dams are supplying electricity to Pakistan but there is a need to promote wind power, solar power and small hydro dams. According to renewable energy policy, the statement, renewable energy (or RE) includes the following technologies: Small hydro of 50 MW or less capacity Solar photovoltaic (PV) and thermal energy for power generation Wind power generation Some other renewable energy technologies like biomass, wave, tidal, geothermal energy is also included in the policy. The objectives of the policy are to Increase the deployment of renewable energy technologies Promote private sector investment in RETs through incentives and by developing renewable energy markets Develop measures to mobilize financing Facilitate the development of a domestic RET manufacturing industry (thereby lowering costs, improving service, generating employment and improving local technical skills) Increase per capita energy consumption and social welfare, especially in remote and rural areas where poverty can be alleviated and the burden on women collecting biomass fuel can be reduced Promote environmental protection and awareness (Policy for Development of Renewable Energy for Power Generation, 2006) While the benefits of tapping the available renewable resource potential specially wind power in the country as a low-cost, clean option have long been recognized in strategic planning, specific steps for promoting and developing these small-scale options have not been given due priority in the face of more pressing concerns with the overall national energy situation. Following are the barriers to investment and adoption of renewable energy on a national scale.

Spatial Planning for Wind Power Development

6. Renewable Energy Policy Challenges

Lack of Competition with Conventional Power Generation Renewable energy has higher cost than fossil fuel counterparts despite tax exemption. In case of wind power, the reasons are higher initial cost, absence of domestic manufacturing industry and subsidies on fossil fuels. Market Barriers As a result of the competitive disadvantage of RETs, the dominance of non-renewable power producers, and market prices which do not reflect external costs and benefits of technologies, the market penetration of RETs is small. (Mirza, Umar K., Nasir Ahmad, Khanji Harijan, and Tariq Majeed, 2009) Limited market penetration can also be attributed to limited marketing (for example, through promotional campaigns) and a lack of previously successful business models. (Mirza, Umar K., Nasir Ahmad, Khanji Harijan, and Tariq Majeed, 2009) Financial Barriers Another important challenge is that there is a lack of adequate financing for renewable energy projects in Pakistan, particularly for small-scale projects. (Mirza, Umar K., Nasir Ahmad, Tariq Majeeda, and Khanji Harijan, 2007) Part of this difficulty stems from a lack of awareness regarding RETs, a high risk perception of investment and also uncertainty about the reliability of resource assessments (for example, unreliable wind speed projections). Additionally, the relatively higher capital cost of RETs discourages financers. Poor Infrastructure The infrastructure for RETs is quite poor in Pakistan. The transmission network is poor in rural areas. Another infrastructure challenge is the decentralized natures of RETs particularly wind power while Pakistan has centralized power system. So it is quite hard to mingle two systems. Market-support infrastructure is also required. Market-support infrastructure refers to networks of dealers and manufacturers, after-sale services and support technologies. (COMSATS, 2005) Such infrastructure will result in market growth, increased sustainability and lower renewable energy project costs. Institutional Barriers Pakistan has a history of poor coordination and cooperation between governmental agencies. No governmental body was responsible for the planning and development of renewable energy policies in Pakistan prior to the founding of AEDB. A lack of coordination and cooperation between government agencies, institutions, ministries and stakeholders continues

Spatial Planning for Wind Power Development

today. Efficiency losses are incurred and progress is delayed as a result. R&D efforts are often duplicated where information sharing would have been far more efficient. Poor Information & Technology Access Limited access to RET-related information and technology is also prohibitive to renewable energy project development in Pakistan. There is a shortage of technical information with respect to resource assessment such as wind and water flow data. The availability of such data is vital for supporting investor interest and project development. Technical knowledge regarding the potential of mature technologies is also largely unavailable as a result of deficient resource assessment databanks and a lack of understanding about relevant technical and cost considerations. Lack of Capacity & Training
A skilled workforce is also required for the successful deployment and development of renewable energy projects. At present, there is lack of both trained personnel and training facilities for the installation, operation, and maintenance of RETs. Skilled individuals from a wide range of academic disciplines are also required for R&D activities. Without an adequate indigenous skilled and semi-skilled workforce, a sustainable renewable energy industry in Pakistan is difficult to achieve.

Lack of Social Awareness & Acceptance Finally, there are a number of social challenges which renewable energy policies must manage. There is a considerable lack of awareness regarding renewable energy technologies and the benefits they can provide to communities. This is largely due to inadequate awareness programs aimed at educating the general public about the advantages of RETs, especially for those in rural and remote areas. (Mirza, Umar K., Nasir Ahmad, Khanji Harijan, and Tariq Majeed, 2009) Land availability is another social barrier of potentially significant consequence. Ideal locations for renewable energy projects, such as wind energy projects, are often located on traditional lands. Gaining community confidence and acceptance can result in extensive negotiations and can require significant compensation payments. (Mirza, Umar K., Nasir Ahmad, Khanji Harijan, and Tariq Majeed, 2009)

7. Addressing Policy Challenges

The previous section detailed key policy challenges facing renewable energy project development in Pakistan. Moving forward, it is necessary to identify possible approaches to address these challenges for future energy policies. Strategies for improvement are discussed below. Energy Subsidy Transfers It is a bold but necessary step for the government to consider transferring subsidies from fossil fuels to RETs in order to bridge the competitive gap between them (COMSATS, 2005).
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Spatial Planning for Wind Power Development

The transfer of subsidies from fossil fuels to RETs could significantly increase RET competitiveness. Feed-In Tariffs The implementation of feed-in tariffs (FITs) is another important policy tool that can be used to increase the deployment of RETs and improve competitiveness. A feed-in tariff guarantees payment to renewable energy developers at a set rate for electricity production over a given period of time (usually 15 to 20 years). Grid operators are typically required to provide grid access and to purchase 16 all of the electricity produced within their service area. The FIT rate is also reduced over time in order to promote innovation (DeMartino, Samantha, and David Le Blanc., 2010) Accounting the externalities A good approach to bridge the competitive gap between renewable energy and fossil fuels is to account for the negative and positive externalities associated with each. The negative externalities associated with fossil fuel combustion include health and environmental costs and the positive externalities associated with RETs include reduced air pollution and biomass combustion in rural areas. Accounting for the external costs associated with fossil fuels results in a higher price and reduced output, placing these conventional technologies at a disadvantage compared to RETs. Public Sector Involvement Market expansion is vital for the growth of the renewable energy industry in Pakistan. The public sector can play a significant role in this respect. One simple measure to increase the market penetration of renewable energy, for example, is to utilize RETs on public buildings. Germany and Australia have successfully utilized such measures. Institutional Cooperation It is vital for different groups, working for the promotion of RETs, to cooperate by sharing information and coordinating efforts in order to increase efficiency and progress. By good coordination, they can each contribute unique skills and insights by working together, enabling them to effectively achieve common goals. Financing for Renewable Energy Projects It is also vital that sufficient RET financing is made available to stimulate and encourage project development in Pakistan. Financing arrangements to support investment in RETs must be developed at the local, national, and international level in order to encourage technology adoption. Aside from government subsidies, innovative funding programs should be developed, particularly for small RET project investors (Mirza, Umar K., Nasir Ahmad, Khanji Harijan, and Tariq Majeed, 2009). One study has suggested that the government can provide banks with funds from donors and international financing institutions for IPP projects. Banks would then lend
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Spatial Planning for Wind Power Development

funds to renewable energy IPPs; however, it is suggested that the banks share the credit risk by lending at least 20% of their own funds in order to avoid irresponsible lending behavior (Bhutta, 2008). Another study has suggested that the government develop a financing scheme for RETs similar to the system successfully implemented for thermal and hydro projects in Pakistan (Mirza, Umar K., Nasir Ahmad, Tariq Majeeda, and Khanji Harijan, 2007). Improving Information & Technology Access Improving access to RET-related information and technology is crucial to the success of renewable energy project development in Pakistan. Foremost, a central information database should be established which is both comprehensive and accessible. This system should document field experience gained through the installation, operation and maintenance of RET systems. Such information serves as an essential learning tool enabling developers to improve and adapt RETs for specific environmental conditions. Additionally, resource-assessment databanks are needed which should include regional wind speed and water flow data, for example. The development of resource-assessment tools, as well as monitoring and evaluation tools are also vital in this process. Increasing Capacity & Training It is necessary to recruit and train a semi-skilled and skilled workforce in Pakistan in order to increase domestic capacity to support RETS development. Educational facilities should be established to train semi-skilled workers on the installation, operation and maintenance of RETs. Universities should develop programs to educate scientists and engineers in the field of renewable energy. Generating Social Awareness, Acceptance and Interest The general public must be educated on the availability and benefits of renewable energy technologies, particularly in remote and rural areas. It was noted earlier that the availability of an accessible information system will help to spread general awareness, acceptance and interest in RETs. The media can play a significant role in this respect as well. Broadcasting media can be effectively utilized in order to spread awareness about the existence of RETs and their associated benefits. In areas lacking access to such media outlets awareness can be spread through demonstration projects which actively involve members of the community.

Spatial Planning for Wind Power Development

8. Pakistan Renewable Energy Policy Chart

Energy Policy of Pakistan

Barriers Lack of Competition with Conventional Power Generation Market Barriers Financial Barriers Poor Infrastructure Institutional Barriers Poor Information & Technology Access Lack of Capacity & Training

Renewable Energy Policy of Pakistan

Political Instability and security concerns in some parts of the country No Considerable development in the RETs

Proposed Solution to the Barriers Energy Subsidy Transfers

Lack of Social Awareness & Acceptance

Feed-In Tariffs Accounting the externalities Public Sector Involvement Institutional Cooperation Financing for Renewable Energy Projects Improving Information & Technology Access Increasing Capacity & Training Generating Social Awareness, Acceptance and Interest

Significant growth in RETs

Spatial Planning for Wind Power Development

Bibliography
(2011). Retrieved 01 23, 2012, from WAPDA: http://www.wapda.gov.pk (2006). An IEA Fact Sheet. International Energy Agency Statistics. Bhutta, N. (2008). Wind Power Projects and Role of Government. World Wing Energy Conference. Islamabad: Energy Wing, Planning Commission. COMSATS. (2005). Renewable Energy Technologies and Sustainable Development. Islamabad: Commission on Science and Technology for Sustainable Development in the South (COMSATS). DeMartino, Samantha, and David Le Blanc. (2010). Estimating the Amount of a Global Feed-in Tariff. DESA Working Paper, New York: United Nations Department of Economic and Social Affairs. (2005-06). Economic Survey of Pakistan. Islamabad: Finance Division, Government of Pakistan. (2007). Fossil Fuel Overview. Pakistan: Ministry of Petroleum and Natural Resources. Haq, D. N. (2008). Energy crisis in Pakistan. Ministry of Water and Power. (2011). Retrieved 01 23, 2012, from http://www.mowp.gov.pk/ Mirza, Umar K., Nasir Ahmad, Khanji Harijan, and Tariq Majeed. (2009). Identifying and Addressing Barriers to Renewable Energy Development in Pakistan. Renewable and Sustainable Energy Reviews , 927-931. Mirza, Umar K., Nasir Ahmad, Tariq Majeeda, and Khanji Harijan. (2007). Wind Energy Development in Pakistan. Renewable and Sustainable Energy Reviews , 21792190. NEPRA. (2011). Retrieved 01 23, 2012, from NEPRA: http://www.nepra.org.pk/ PMD. (2011). Retrieved 01 24, 2012, from Pakistan Meteorological Department: http://www.pakmet.com.pk/wind/Wind_Project.html (2006). Policy for Development of Renewable Energy for Power Generation. Islamabad: Government of Pakistan. Power & Alternative Energy Sector in Pakistan. (2011). Retrieved 01 23, 2012, from PowerAsia: http://powerasia.com.pk/introduction.htm

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