Importance of Energy Efficiency and Conservation for Pakistan
Energy conservation and efficiency have been repeatedly termed as the low hanging fruit for achieving commitments made by countries at COP 21. Increasing cost of energy, growing energy demand, along with declining energy resources has driven countries, across the world, to ramp up their efforts in achieving higher levels of energy efficiency improvements.
In the context of Pakistan, deployment of energy efficiency and conservation efforts can help relieve national pressure on domestic gas reserves as well as reduce the need for energy imports, constituting lion’s share of country’s imports.
More importantly, investment in energy efficiency can preclude the need to bring additional generating units for meeting the consumer demand, particularly during peak times. Due to their short annual operation time, peaking units are the most expensive sources of power generation and thus avoided reliance on these will contribute to millions of dollars of savings for the consumers and most importantly for government, responsible for making upfront investment for these plants.
Reduction in volume of electricity transmitted over the transmission and distribution lines, can also help in alleviating pressure on the system thereby decreasing T&D losses – the foremost cause for the system inefficiencies and circular debt in the power sector of Pakistan.
History of Energy Efficiency in Pakistan
The mandate to plan and implement energy efficiency and conservation measures in the country had long been with National Energy Conservation Center (ENERCON). Established in 1987, under Planning Commission, with support from USAID, ENERCON was tasked with the role of developing EE program for Pakistan. However, after USAID retracted its assistance from the country in 1990, the center was left without any resources. It was relocated from one ministry to another, eventually coming under the ambit of Ministry of Water and Power. However, since it was not an authority it lacked the regulatory capacity to implement or enforce any EE measure.
In 2016, the Government of Pakistan promulgated the National Energy Efficiency and Conservation Act, allowing transformation of ENERCON into National Energy Efficiency and Conservation Authority (NEECA). After the enactment of the act, NEECA and provincial energy departments have been entrusted with the task to develop, implement and coordinate energy efficiency and conservation measures in all economic sectors of Pakistan. Government of Punjab, through its Energy Department, has set up Punjab Efficiency and Conservation Agency (PEECA) to harness the benefits of both supply side and demand side efficiency in the province.
Measures for promoting Energy Efficiency and Conservation
Promulgation of the bill is a step in the right direction as it shows commitment of the government for improving country’s energy intensity but in order to achieve concrete results, the bill would have to be supplemented with adequate policy, fiscal and financial instruments. Some of the proven fiscal and financial measures adopted worldwide include:
- Energy Standard and Labeling (S&L)
Energy standards and labels are important in guiding the consumers, in purchasing energy efficient equipment, while at the same time motivating the manufacturers to develop energy efficient appliances by stimulating demand for efficient products and phasing out inefficient ones from the market. Worldwide, the use of energy standards and labels have been extended from electrical appliances (air conditioner, motors, fans, lighting, washing machines) to buildings and vehicles etc.
In Pakistan, NEECA and PEECA are working on developing energy labels for fans, lights, air conditioners and refrigerators in the short to medium term. Standard and Labeling of fans has been completed with 154,000 labels issued, resulting in savings of 20-25 MW. It has also been recommended that procurement of 3 star label fans should be made mandatory within the Punjab Government. S&L of air conditioners and refrigerators is in progress.
The next step for standard and labeling should be Minimum Energy Performance Standards whereby only products, with a minimum energy rating, are allowed to be sold in the market. This will ensure that inefficient appliances are completely removed from the market.
- Mandatory Energy Audits
Most of the time energy consumers are unaware of the potential energy savings they can get by adopting simple measures such as retrofitting inefficient appliances with energy efficient versions, changing building design to minimize heat losses, or installing solar system for reducing reliance on grid. Without getting their homes, offices, or factories audited, consumers would not be driven for undertaking any energy efficiency improvement as they wouldn’t even know that there is potential for such an improvement.
Energy consumers, especially those consuming more than a specified load, should be mandated by NEECA to conduct regular energy audits in their facilities by certified energy auditors. These auditors will also recommend cost-effective strategies that can save consumers energy.
NEECA may also issue Energy Performance Certificates. These certificates would indicate as to how these facilities perform and how much energy they consume relative to other facilities. The primary objective of doing so is to encourage the market towards an increased demand for energy efficient practices, operations and facilities.
PEECA, in collaboration with UET Lahore, has conducted energy audits of 800 public sector institutions. An estimated energy savings potential of 7.36 GWh, through retrofitting of lights, fans and air conditioners was found. This is equivalent to savings of Rs. 125 Million in the electricity bill. Based on the results of these audits, PEECA has proposed retrofitting of lights and fans in all its public sector buildings including government offices, public hospitals, schools and libraries. The saving potential of such a project is 1,604 GWh.
- Building Code
Buildings are also significant consumers of energy though their performance can be improved by strict enforcement of building energy codes. Pakistan Energy Council launched the building energy code in 2014. The code sets thresholds for building energy consumption through design and construction standards that apply to energy systems, equipment, and the building envelope.
After the enactment of Energy Efficiency and Conservation Act, NEECA and provincial energy departments have been entrusted with the task to ensure that these building codes are strictly complied with. PEECA has initiated the process to review and modify the national building code in accordance with the climatic conditions of the province.
- Exemption of custom duties and taxes
In order to incentivize import and/or manufacturing of energy efficient appliances and equipment, exemption from custom duties and taxes are afforded to such products. It not only incentivizes the manufacturer but also the consumer to purchase energy efficient products as usually these costs higher than their inefficient versions.
While Government of Pakistan has exempted import of solar panels and batteries from custom duties, other energy efficient equipment such as inverter air conditioners, LED bulbs, DC tv and fans still have considerably high duties imposed on them.
- Installation of Solar Panels to reduce reliance on grid electricity
Concept of prosumers (producers + consumers) is increasingly becoming popular worldwide residential and commercial consumers install solar panels on their respective rooftops. The energy generated is not just used for self consumption but any unused energy is sold to the grid. It not only helps in providing relatively reliable source of electricity for the consumer, especially in the wake of scheduled and unscheduled load shedding, but also helps reduce demand for grid electricity.
AEDB worked on developing net metering regulations, which were approved by NEPRA in September 2015 for solar and wind generation of up to 1MW. All five distribution companies in Punjab have started implementing the net-metering regime for their customers.
In addition to the residential applications, a number of commercial entities such as hospitals, educational facilities, and public and private sector buildings are planning to install up to 1 MW to benefit from the expected cost savings from the scheme.
PEECA is in the process of contracting with Energy Servicing Companies (ESCOs) that will install solar systems in 10 educational institutes across Punjab. Sanctioned load of these institutes is around 38 MW. In the ESCO model, the servicing company will ensure that it delivers the committed energy, while PEECA will ensure that ESCOs are paid for the energy generated.
- Investment Subsidies
Financing energy efficiency projects remains a formidable challenge across the world but particularly in developing countries. These projects require heavy up front investment and have relatively longer payback periods. Moreover, the commercial banks are hesitant to extend lending for such projects because of lack of third party technical support, weak vendor base, and inadequate knowledge and understanding of the technology.
Worldwide, financial institutions are providing attractive financial packages for energy efficiency investments for industrial, residential and commercial sectors. For example, consumers who invest in energy efficiency improvements are provided soft loans at subsidized interest rates by banking institutions. Governments, with the help of international financial institutions, establish specific credit lines with support of some guarantee scheme encouraging banks to finance energy efficiency investments. Same can be done in Pakistan.
The recorded demand in Pakistan is already constrained due to years of load shedding and slow economic growth. As soon as the current deficit is eliminated and the economy starts growing at the projected rate of 7% per annum by 2020, the electricity demand, will grow at an even higher rate requiring 5,000 MW of capacity additions every year.
It is extremely important therefore, that the energy efficiency and conservation efforts are ramped up and and are replicated in other provinces as well. Until now, the EE efforts have been concentrated in Punjab under the leadership of PEECA. The rest of the provincial energy departments’ efforts in tackling the energy crisis has remain focused on adding generation capacity with dispersed EE initiatives, if any.
It is high time that they, following Punjab’s footsteps, also set up their energy efficiency and conservation agencies and help implement the measures given in the NEECA Act in their respective provinces.