A unit of energy saved is equivalent to generating a unit of energy but the cost of doing the former is far lower than carrying out the latter, hence the importance of adopting energy-efficient practices. The investment required to add a new power generation capacity of 100MW is around $100 million. On the other hand, with a $10-20m investment in efficiency improvement measures, it is possible to avoid the installation of 100MW of new generation capacity.
In the eighties the national energy conservation centre (Enercon) was set up, however, the expected level of savings in energy use could not be achieved. Enercon has been renamed National Energy Efficiency and Conservation Authority (Neeca) under whose auspices a new national policy for energy efficiency and conservation is in a draft stage. In the implementation of this policy, Neeca’s work is to be supplemented by its counterpart authorities that have been or are soon to be set up in the provinces — eg the Punjab Energy Efficiency and Conservation Agency (Peeca).
With the right measures taken, this policy can markedly improve the efficiency of energy usage in virtually every segment of the economy.
Studies indicate that 22 government health and educational institutions combined have the potential to save Rs365m annually by making only retrofits in the electricity system
An efficient energy value chain, comprising energy producers and distributors as well as consumers be they households, industry, commercial ventures and agriculture, will reduce the country’s energy import bill at the same time give a good return on investments. Among the initiatives to be launched under the policy, an Energy Conservation Fund (ECF) is to be set up that will provide funding to the private sector for Energy Efficiency & Conservation (EE) projects.
Launching of EE bonds, concessional lines of financing through the State Bank of Pakistan similar to those offered for solar power projects, participation by international financing partners and the domestic banking sector are some of the resources to be tapped for mobilising investments for the EE projects. The present draft of the policy assigns to Neeca many roles — viz. policy-maker, regulator, enabler and even the role of initiating and implementing the EE projects in various sectors.
In parallel with the EE Policy document, the draft of a new National Electricity Plan (NEP) is also in circulation. Interestingly, the NEP states that for the integrated regulatory oversight for the energy sector, National Electric Power Regulatory Authority, Oil & Gas Regulatory Authority and Neeca shall be merged to form a unified energy regulator by June 2024.
It is, therefore, not clear how Neeca will remain engaged in the actual implementation of EE programs when it will itself cease to exist as an independent body in about two years. Further, if Neeca is going to take on a regulatory role starting from 2024, would it be rational that it takes a lead in the implementation of the EE investment program when it will have to give up the latter role in a couple of years?
The actual implementation of EE projects is an investment decision like any other business venture and should, therefore, be taken by those who are at the forefront of the economic activity whether they are private organisations, commercial establishments, public sector entities or the public at large. For a government agency to manage investment projects relating to EE has neither proven effective in the past (during Enercon days) nor would it do now.
Suitable financial incentives and funding sources are all that the private sector needs to implement EE projects on its own because of the high rate of returns it can get on such investments. Neeca is most suited to play the role of legislator, facilitator and enforcer of the new policy. The question then becomes that if not Neeca then which agency is suited to be at the forefront of guiding the physical implementation of the EE agenda? This question begets another question: Must a single agency be responsible for achieving the targets to be laid down for the EE goals? The case of Canada is illustrative and relevant for Pakistan.
Energy efficiency in Canada is a shared responsibility between the federal and provincial governments. The federal government works with stakeholders to develop model building codes, which can then be adopted and enforced by provinces.
The federal EE Regulations set appliance standards that represent the vast majority of appliances and equipment used in Canada. Provinces set standards for building designs, building components and equipment within their borders as the different provinces have different needs based on the structure of their economies, geographies and energy options.
Many provinces run their own EE programs, in some cases supported by federal funding. In transport, the provincial governments apply emissions standards to light- and heavy-duty vehicles, green levies on fuel-inefficient vehicles, consumer information campaigns, and federal funding programs to support the production, demand and infrastructure for electric vehicles.
The local EE institutional arrangement closely matches the Canadian model in terms of the involvement of federal and provincial governments. But in Canada, the provinces further delegate the actual EE improvement work to downstream bodies viz electric and gas utilities which develop programs for the consumers.
The studies done by Peeca indicate that 22 government health and educational institutions combined have the potential to save Rs365m annually by making only retrofits in the electricity system. It requires an investment of Rs1.2 billion, which means a pay-back period of investment of fewer than three years, indicating the huge potential of EE projects.
Carrying out the energy audits of buildings and establishing the high rates of returns on investments in installing the retrofits would be fruitful only when the funding mechanisms for such investments are also put in place. This is where Neeca, being a federal agency, comes in as it can aggregate the information from all provincial EECAs and then convert it into a bankable financing program with the help of international partners.
Neeca is at a crossroads and it should define its future path very carefully otherwise, as in the past, the mandate that it has been given to improve the efficiency of energy end-use in Pakistan would remain unachieved.
The author is the former Group Energy Director of Islamic Development Bank
Published in Dawn, The Business and Finance Weekly, January 14th, 2022