AEDB is in the process of updating the 2006 Alternative and Renewable Energy Policy. The Policy for the “medium-term”(i.e. five years), will succeed the current short term Renewable Energy policy in current year. The policy tools will help boost the growth of the domestic RE industry by 2014, and upon which future policy direction can then be evolved.

The Medium Term Policy(Click here to download the Mid term Policy) is the result of a mutli-year process that has involved participants from all over Pakistan and consultants from several countries to share the lessons learned and best practices. The MTP builds on the short term policy announced in December of 2006.

The 2006 Policy was a good start and focused on Wind, Solar and Small hydro. While a good start, other Asian Countries were already much farther ahead than Pakistan. Moreover, beginning in 2007 world oil prices began a dramatic rise providing incentives for renewable energy investment favored those countries that already had their policy and implementing rules and regulations in place. Then in late 2008 the world economic situation began to change, oil prices were falling, the US housing market collapsed and this was followed by major problems in the banking sector. So credit began to tighten and Foreign Direct Investment declined. In short, the 2006 policy was a good start but it was overtaken by external events.

The Medium Term Policy formulation process began in 2007/08 and experts from the Asian Development Bank, GTZ and USAID have helped AEDB to shape the new proposed policy. The Medium Term Policy is the logical progression from the short term policy established in 2006: Lenient Phase for rapid growth. The Medium Term is the Consolidation Phase for sustainable growth (2010– Dec 2014) and the Long Term policy will be the Maturity Phase for competitive growth (Jan 2015 onwards.

The Medium Term Policy goals are:

• Harmonize efforts of various Government bodies in developing ARE resources.
• Increase deployment of ARE technologies in Pakistan to help resolve the energy crisis.
• Introduce investment friendly incentives and facilitate ARE markets to attract private sector investment.
• Optimize impact of ARE deployment in underdeveloped areas by integrating energy solutions with provision of other social infrastructure.
• Promote productive use of energy for income generation activities.
• Help in broad institutional, technical and operational capacity building relevant to ARE sector.
• Facilitate establishment of a domestic ARE manufacturing base in the country.
• Promote research and development of indigenous ARE technologies and local manufacturing.

Medium Term Policy builds on Short Term through

• Expanded definition of Alternatives and Renewables
• Addressed Concerns of Stakeholders
• Resolved policy conflicts
• Incorporated Lessons learned here and abroad
• Develops the concept that Alternative and Renewable Energy actually costs the Nation less and thus deserves and requires a higher rate of return than fossil fuels (in the medium term).
• Presents a policy for Biofuels
• Develops the Policy of non-electric RE
• Expanded Incentives
• Innovative Financing such as the Alternative Energy Development Fund

INCENTIVES

• Partial Resource Risk Coverage
• Tariff on the Basis of a Premium Rate of Return for ARE Projects
• Mandatory Grid Connection
• Mandatory Purchase Requirements
• Mandatory Use (biofuels)
• SBP Small ARE Facility (<10MW)
• AEDF
• ADB Loan Guarantee Facility
• Credit Market Facility
• 100% Carbon Credits to IPP

Due to the significance of the RE Policy, its consequences on the future of the RE sector in Pakistan and the importance of the development of renewable energy in the country, AEDB held stakeholders’ consultation workshops at provincial and national level. Stakeholders’ comments and concerns are being addressed / incorporated to finalize the Medium term Alternative and Renewable policy document which will be presented to the cabinet for approval.