KARACHI: International financial institutions should stop fossil fuel funding in Pakistan while diverting their money towards renewable energy, speakers at the launch of “Energy Finance Outlook: A Case of Pakistan” said on Wednesday.
Conducted by the Department of Economics and Management Sciences of NED University of Engineering and Technology in collaboration with the Indus Consortium, the study sheds light on financing flows from 2019 to 2022 for energy projects and their implications for the country’s future electricity supplies.
Pakistan’s energy sector continues to rely heavily on fossil fuels, with over 85 per cent of supplies originating from such sources. Thermal sources contribute more than 60pc to electricity production despite the availability of greener alternatives like wind, solar and hydropower, the study showed.
China, World Bank, Asian Development Bank and other international and domestic entities have been major financiers in the energy sector. Hydropower received the largest share of financing (45pc), followed by coal (17pc) and nuclear (16pc).
The study indicated a potential decrease in the proportion of fossil fuels in the energy mix despite expectations of an increase in coal usage.
With respect to the State Bank of Pakistan’s Incentive Scheme for Renewable Energy (ISRE), the study said a total of Rs127 billion has been financed for the installation of renewable energy projects across different provinces. About 14 banks contributed Rs118bn while five development finance institutions invested Rs9bn. Bank AL Habib Ltd, the Bank of Punjab and Habib Metro Bank Ltd remained the main facilitators as they accounted for approximately 65pc of the total financing under the ISRE.
The study concluded that indigenisation, financial sustainability and environmental responsibility should be prioritised with higher involvement from the private sector to reduce the reliance on international financiers.
Additionally, the optimisation framework of the Indicative Generation Capacity Expansion Plan should consider separate scenarios for environmental and economic costs, fostering a balanced energy mix, it said.
A total of 21 energy projects have been approved or selected under the China-Pakistan Economic Corridor (CPEC) to generate 16,034 megawatts of electricity from various sources. Over the last four years, 12 projects have been completed or are currently in the final stages of completion.
The World Bank has extended a total of $8bn in financing, with 90pc of the amount going towards hydropower energy expansion and the development of renewable energy projects. The International Finance Corporation has allocated a total of $633 million, which is exclusively directed towards the advancement of renewable energy initiatives.
Asian Development Bank provided $4.4bn from 2019 to 2022 mainly for two active power generation projects i.e. 300MW Balakot hydropower project and 600MW Jamshoro coal power project.
Published in Dawn, June 22nd, 2023
