Merger of AEDB with PPIB: What does it mean for future of renewables in Pakistan?

Could there be a move to merge Alternate Development Board (AEDB) into Private Power and Infrastructure Board (PPIB)?

State Minister for Power has recently introduced bill in the parliament for amending Private Power and Infrastructure Board Act. The act will be amended to merge Alternate Energy Development Board with PPIB.

For the uninitiated, PPIB was formed in 1994 to provide one-window operation facility for private power developers. Since then it has been able to induct 31 private power projects, adding more than 9,000 MW of power into the grid. At the time of its inception, the dominant fuel source for power generation, around the world, was natural gas, coal, hydel and furnace oil. Solar and wind energy were not financially viable for large scale generation. Hence, scope of PPIB was limited to conventional energy generation projects, and hydel projects of more than 50 MW capacity.

Over time due to incentives and subsidies offered to renewables, around the world generally, and in European countries particularly, demand for RE (solar and wind) saw an increase. Using renewable energy for power generation was now seen as a real possibility.  Thus, in order to introduce alternative and renewable energy at an accelerated rate in the country, AEDB was established in 2003. It introduced Pakistan’s first ever Policy for Development of Renewable Energy for Power Generation in 2006. However, it took 7 years for Pakistan to commission its first wind energy project after the announcement of policy.

Compared to PPIB, which has over 30 projects under its belt, AEDB only has a handful of projects, to its credit.  In all fairness, solar and wind energy became commercially viable in the last few years only and the perceived risk of investing in Pakistan’s power sector, didn’t help AEDB’s cause either. Having said that, it has been more four years since the first wind project was commissioned in the country. Since then, only 400 MW of solar and 660 MW of wind power have been added into the system. There is another 2,000 MW in the pipeline. However, most of these projects have been initiated by the provincial governments (QA Solar Park by Punjab Government and wind projects in Jhimpir and Gharo by Sindh Energy Department).

It is not that there is a lack of interest by developers to install renewable energy projects in Pakistan. Several companies have been issued Letter of Intent (LOI) for setting up wind and solar projects. But so far only few have reached financial close and even fewer have achieved commercial operation.

When AEDB was formed, it was expected to take on a proactive role in not just promoting private sector investment in alternate energy but also in research and development, technology transfer and development of indigenous manufacturing base. Unfortunately, AEDB’s role has been reduced to one of a file processor.

All private investors intending to set up power plant have to go through a series of procedures and stakeholder consultations before they are given the permits to begin construction. Although AEDB is supposed to provide one-window facilitation for investors, in reality this hasn’t been the case. The developers have had to engage with multitude of stakeholders including national transmission company for approval of interconnection study and the regulator for issuance of tariff and generation license. This has increased transaction cost for the developers resulting in several investors backing out.

Now that the provincial governments have been empowered to initiate and approve renewable projects and cost of solar and wind energy projects are comparable to conventional energy projects, we don’t need a separate agency for renewable energy. The same project processing duties that AEDB has been performing can be taken over by PPIB. As a matter of fact, AEDB would benefit from vast experience and resources of PPIB in executing private sector projects. AEDB manpower and resources will continue to be there. It is not being dissolved.

What is actually needed to promote renewables in Pakistan, is the will of the government to prioritize RE as it has until now preferred large scale coal and LNG projects over RE projects. There has been an implicit ban on additional solar and wind projects in Pakistan. I say implicit because there is no policy directive of the government stating that no new renewable energy projects will be added but through delays in approval process, developers have been hindered in executing projects.

Having AEDB in or outside PPIB won’t change much for future of renewables in the country. Prioritizing renewables and setting clear renewable energy targets will. Pakistan doesn’t have to look too far for seeing how countries are transitioning from thermal based generation to green energy. India and China have both set aggressive targets for induction of solar and wind energy in their energy mix sending positive signals to the investors. Pakistan, too, needs to get rid of the mindset that renewable energy isn’t feasible and instead of hindering investors it should work towards facilitating them. It won’t be too long before this interest in renewable energy projects by the private sector disappears.

 

 

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