Renewable Energy Market in Pakistan
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The Government of Pakistan‘s (GOP) Renewable Energy Policy 2006 emphasizes the development of
renewable and clean energy in the country. In fiscal year 2005-06, Pakistan‘s consumption of energy generated through renewable energy (RE) sources stood at only 180-MW. Development of the power
generation potential of existing RE sources, solar, biogas, biomass, micro-hydel, and windmills, offers
substantial business opportunities for American manufacturers and exporters. Due to in-country depletion of
conventional energy resources and an expanding gap between power demand and supply, the development
of RE sources in the country has gained momentum over the past 3-4 years. The GOP has decided to
encourage and invest in the development of the infrastructure necessary for power generation through RE
sources through its Alternate Energy Development Board (AEDB). The goal is to have power generation from
RE sources contribute approximately 10 percent of the country‘s overall energy requirements by 2015.
American companies already dominate the foreign-owned portion of the local RE power generation market
with almost 25 percent of market share, followed by European and Chinese companies, which have 10
percent and 5 percent of market share respectively. The remaining 60 percent of current RE power generation
is in the hands of domestic companies. AEDB and the Pakistan Council of Renewable Energy Technologies
(PCRET) are playing a major role in promoting the development of infrastructure for RE power generation in
Energy demand in Pakistan is accelerating rapidly and the power generation sector requires massive
investments of private sector capital to meet this demand. With the economy experiencing high rates of
growth -- 6.3 percent and 8.4 percent respectively in the last two years -- Pakistan‘s energy requirements have expanded at a rate of between 7 and 8 percent annually. Pakistan‘s current annual power generation of
approximately 19,500-MW is insufficient to cover the growing gap between supply and demand. Daily load
shedding of up to 700-MW occurs due to the current power supply shortage and poor transmission
capabilities. Projections by various energy experts indicate that Pakistan would need to add at least 2,000-
MW of power generation every year during the period 2007-2015 to meet the increasing demands generated
by GDP growth target of 6 to 7 percent per annum. The GOP plans to meet the country‘s power generation
requirements by allowing the private sector to develop 12 hydropower projects with a projected generation
capacity ranging between 53-MW to 600-MW. In addition, existing independent power projects (IPPs) – a
Pakistani government euphemism for private sector-owned investments in this sector -- are being asked to
expand their existing capacities. IPPs currently generate approximately 5900-MW of power annually, mostly
through conventional thermal methods. In November 2006, the Private Power and Infrastructure Board (PPIB),
a department of the Ministry of Water and Power, announced seven new licenses that would be made
available to private sector companies to develop hydropower generation at pre-selected sites. The award of
such licenses to successful bidders is to be made during this fiscal year. Further details may be viewed at the
PPIB website: http://www.ppib.gov.pk. The website also provides information on the GOP‘s overall Power
Policy and provides the standard documentation necessary for setting up an IPP operation in Pakistan.
Although conventional thermal power generated by coal, oil, and gas is expected to meet a large percentage
of future demand, there is also enormous scope for more environmentally friendly options. The GOP has
adopted a systematic development plan called ‗Vision 2025‘ that targets a long-term capacity increase of around 35,000-MW by the year 2025. This planned expansion will cost approximately US$30 billion.
Renewable Energy Market in Pakistan
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Conventional Energy Sources: Pakistan, despite the enormous potential of its energy resources, remains
energy deficient and has to rely heavily on oil imports to satisfy its requirements. Pakistan spends $3.5 billion
every year on the importation of oil. 38.3
Primary Energy Supplies by Sourcepercent of the electric power currently Nuclear consumed in Pakistan is generated from Hydro ElectricityElectricityCoal11.0%oil (largely imported), while 43.8 percent is 1.4%5.1%Oilgenerated by natural gas, mostly from 38.3%Nuclear Electricitydomestic sources. During fiscal year Hydro ElectricityLPG2005-06, the total installed capacity of Coal0.4%electricity generation stood at 19,439-MW. LPGOf this, Hydel accounts for 56.9 percent, GasGasand thermal accounts for 43.1 percent. Oil43.8%The Water and Power Development Authority (WAPDA), the Karachi Electric Total Installed Generation Capacity Supply Company (KESC), the Karachi Name of Installed % Installed % % Change Nuclear Power Plant (KANUPP) and the Power Capacity Share Capacity Share Firms 2004-05 2005-06 Chashma Nuclear Power Plant are the
four main public sector power utility WAPDA 11298 58.2 11363 58.5 0.6
Hydel 6463 57.7* 6463 56.9* 0 organizations and are involved in power Thermal 4835 42.3* 4900 43.1* 1.3 generation, transmission, and distribution IPPs 5873 30.3 5858 30.1 -0.3 of electricity. Independent power projects Nuclear 462 2.4 462 2.4 0 (IPPs) are involved only in power KESC 1756 9.1 1756 9.0 0 generation that is distributed over one of Total 19389 100 19439 100 0.3 the public sector organization‘s ? Share in WAPDA system transmission and distribution grid. The Source: Hydrocarbon Development Institute of Pakistan share of power generated by the WAPDA
system stood at 58.5 percent followed by the IPPs at 30.1 percent, KESC at 9.0 percent, and nuclear at 2.4
Renewable energy accounts for only 180-MW of Pakistan's present power output. Small to medium-sized
hydropower plants offer the greatest renewable energy potential for Pakistan; possibilities also exist in
promoting greater use of wind, solar, and biomass power projects. The GOP‘s current infrastructure
development program, officially called the Renewable Energy Development Sector Investment Program,
is targeted to expand the country's power supply, especially in rural areas, such that it will permit
approximately 600,000 new domestic connections for 4.8 million people. The investment program in RE
development will consist mainly of small to medium-sized hydropower plants in the NWFP and Punjab
province. This program will be implemented in the following three major areas:
Renewable Energy Market in Pakistan
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I) Clean Energy Development: The GOP is seeking foreign or domestic power firms to bid on contracts to
expand its small hydropower generating New Hydropower Projects capacity. The main projects to be completed
under this phase of the program include Province Name of Hydropower Plant Capacity (MW) construction of thee grid-connected plants in Dharal Khwar 36.6 NWFP ranging from 2.6 MW to 36 MW and NWFP Ranolia Khwar 11.5 five hydropower stations in Punjab ranging
Machai 2.6 from 3.2 MW to 7.2 MW. The total capacity
will be about 75 MW, which will generate Chianwali 5.4 about 400 GWh of annual energy output. Deg Outfall 5.0 Punjab Pakpattan 3.2
II) Feasibility Studies and Other Due Diligence of New Sites: The GOP is further seeking domestic or
international firms to conduct various research activities into the feasibility of developing new potential
hydroelectric generation projects. The first New Raw sites for Hydropower Projects pre-feasibility report (PFR) will support
preparation of eight additional feasibility Expected Capacity Province Name of Hydropower Plant studies involving new sites in NWFP (three) (MW)
and Punjab (five). The feasibility studies Koto 18.0 include due diligence on technical, financial, NWFP Jabori 8.0 commercial, regulatory, operational,
Karora 7.5 governance, legal, safeguards, procurement,
and implementation matters. ADB will advise BS Link RD 106 10.0 on the terms of reference for the experts BS Link Tail RD 316 10.0 conducting these studies. All studies will be Punjab LBDC RD 258 6.0 required to comply with ADB operating rules
LBDC RD 461 3.5 and procedures.
LCC RD 0 5.0
III) Capacity Development: This component will support work at the federal, provincial, and project levels to
strengthen administrative oversight of the other two components of this project. The GOP is seeking
domestic or international firms to assist federal and provincial government authorities in developing their
technical skills relating to the management of development of the RE sector. Specific areas of support are to
include better planning, policy work, training, financial management, fiduciary oversight, tariff setting,
institutional strengthening, project management, safeguards, evaluation, monitoring, and reporting. Support
will also include provision of information on international developments in the hydroelectric sector and
technical backup expertise.
During fiscal year 2005-06, GOP has initiated several new projects in the renewable energy sector through its
AEDB designed to promote, implement and execute alternative renewable energy technologies. Most of
these projects are to be developed through private sector investment. The government has approved the
following operating guidelines for the AEDB under the Energy Security Action:
? Wind and solar energy power generation should be developed such that at least 5 percent of total
power generation capacity will be met through these resources (i.e. 9,700-MW) by 2030.
? A 100-MW wind power project should be installed by June 2008 at Keti Bandar and Gharo towns of
Sindh province and its capacity should be increased to 700-MW by 2010.
? The GOP‘s Roshan Pakistan Program‘s goal of electrification of all villages in the country within the
next three years should be carried out through RE power generation.
Renewable Energy Market in Pakistan
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? Solar products like solar fans, solar cookers, solar geysers, etc. must be developed on a priority basis
by the private sector.
? Laws and taxes should be designed to encourage household self-energy generation through such
technologies as solar heating, solar geysers, etc.
? Solar water heating systems at the household level should be promoted in order to save energy.
Solar water desalination plants should be installed in areas having brackish water.
? Efficient cooking stoves in villages should be promoted in order to conserve wood.
Medium Term Development Framework (MTDF)
? The AEDB should encourage the utilization of renewable energy, such as solar, wind and biomass,
especially in remote areas.
? The AEDB will implement projects based on renewable resources, to develop small size, isolated
solar/wind units in remote areas of the country, unlikely to get electricity through the national grid.
In December 2006, the Asian Development Bank (ADB) launched a development program of renewable
energy in Pakistan through a multitranche financing facility (MFF) of US$510 million. This program is the first
of its kind in Pakistan and also one of the first to be developed under the ADB's evolving clean energy and
efficiency initiative. Contracts for the construction of the hydropower plants to be financed under this loan will
be made available in accordance with ADB's Procurement Guidelines through international competitive
bidding (ICB) procedures.
The formal exploration and development of RE sources in Pakistan began in 1997 under the auspices of the
Pakistan Council of Renewable Energies Technologies (PCRET) with the objective of addressing growing
energy demands from household and industrial consumers. In order to provide electricity to rural areas that
would otherwise not have electricity in the foreseeable future (because they are either too remote and/or too
expensive to connect to the national grid), Pakistan is turning to solar power. Pakistan has worked with
WorldWater, an American company, to install solar-powered water pumps that can help address the water
needs of people in rural areas without electricity.
Photovoltaic (PV) Technology
According to an AEDB study, Pakistan is located in the ―sun-belt region,‖ ensuring sufficient sunlight for RE
purposes. The annual average solar radiation on a horizontal surface available in the country varies from 224.7Km/m to 6.2 Km/m. According to the Pakistan Energy Book 2004-05, the 20 percent use of efficient
device solar energy falling on 0.25 percent of Balochistan province would be adequate to meet the current
energy requirements of the country. The AEDB plans to electrify the country‘s remaining 400 remote villages,
300 of them in Balochistan and 100 in Sindh, utilizing solar energy. The Government has sanctioned an
amount of Pak Rupees 450 million (US$1.00 equals to Pak Rupees 60 at the current exchange rate) for solar
electrification projects countrywide.
Biomass in Pakistan comprises fuel wood, agricultural waste and animal dung, which is available in surplus in
all parts of the country. The production of energy through biogas was started in Pakistan in early 1997 by
PCRET with the installation of 4,000 plants in several major cities of the country, having a capacity of
between 5-15 cubic meters per day. During FY 2005-06, AEDB installed 1,200 new family-size biogas plants,
which will meet the domestic needs of 1200 households in the rural area of the Punjab province.
Micro Hydropower (MHP)
Renewable Energy Market in Pakistan
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The GOP is also focused on exploring the country‘s available micro-hydel resources. In this context, AEDB
has designed a number of projects to install micro and hydro power plants as part of its efforts to generate
cost effective electricity and mechanical power. According to an AEDB source, the recoverable potential of
hydroelectric power in the country is estimated to be around 40,000-MW. At present, only 16 percent of this
potential is being exploited. AEDB has already installed 300 micro and mini hydro power plants (with an
installed capacity of 3-MW) in northern areas of Pakistan, and the construction/civil work on 100 new sites is
under progress. In addition, the Pakistan Council for Appropriate Technologies (PCAT) is playing a proactive
role in developing hydel energy resources. In this regard, PCAT has installed 253 ―run of river type‖ hydel
plants in North-West Frontier Province.
Wind Energy Technology
According to PCRET, Pakistan has a considerable potential of wind energy in the coastal belt of Balochistan
and Sindh provinces, which is sufficient to electrify all remote coastal villages in the country. Energy
generation through windmill technology is relatively new in Pakistan. During FY 2004-05, PCRET installed
134 wind power turbines for pilot projects in the remote coastal areas of Sindh and Balochistan provinces. In
addition, PCRET is collaborating with the private sector and the United Nations Development Program (UNDP)
for the development of a network of small windmills with a capacity ranging from 0.5-KW to 5-KW to meet the
electricity demand of coastal areas in Pakistan. The AEDB has also identified a wind corridor between the
towns of Gharo and Keti Bandar in Sindh province. This corridor has the potential to produce 40,000-50,000
MW of electricity. The AEDB has conducted a pre-feasibility study of the site and has invited the private
sector to setup wind turbines there. So far, eight companies have been short listed to execute the projects on
a build, own, operate, and transfer (BOOT) basis. These projects are scheduled to start producing 100-MW
of electricity by June 2007. The AEDB issued 28 Letter of Interest (LOI) to prospective investors that allow
them to set up windmill farms of about 50-MW each in the coastal areas. This production is scheduled to
increase to 700-MW by 2010 and to 9,700-MW by 2030. Companies from the USA, Canada, Germany,
Holland and China have expressed interest in wind energy projects in Pakistan. The following table shows the
current installed capacity of RE sources in the country:
Technology Net Installed Unit Size 3 Bio-Mass 5,357 units 3-15 m/Day Improved Chullahs (Stoves) 60,000 units 12-28 % efficient Microhydel HHLD 300 units (3 MW) 3-300 KW LHHD 550 KW- in pipeline 25-75 KW Wind Mills 30units 150-8,000 gph (For water lifting) Wind Turbines 134 units 0.3-0.5 KW (For power generation) Photovoltaic 650 KW 5-56 KW 60 KW- in pipeline Solar Water Heaters Limited production Family size Solar Cookers 3,000 units 250-750 watts Solar Desalination 15,000 gal/day 250-6,000 gal/day Solar Dryers (For fruits) Effectively being used in northern mountain regions.
With a population of approximately 162 million people and a rapidly growing GDP of more than US$130 billion,
Pakistan continues to offer significant trade opportunities for U.S. businesses in the following sectors.
? Solar cells and solar wafers
? Solar energy equipment and solar desalination equipment and accessories
? Windmills/turbines – sizeable market exists for small to large-scale energy generation (from 100 KW
up to 2 MW)
Renewable Energy Market in Pakistan
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Energy storage technology for intermittent generation ?
? Biomass generating technology including waste to energy and bio-fuel manufacturing
? Equipment and accessories for geothermal and hydro power generation
American products and services enjoy an excellent reputation in the local market based on their quality and
durability. However, American companies face tough competition from European, Chinese, Japanese and
Korean competitors, which generally have a larger presence in the country and are able to offer their products
and services at competitive prices. Providing after-sales service is essential and U.S. firms are advised to
establish this service either through a local agent/distributor or through their own presence in the local market.
Recently, Pakistani firms have shown a strong interest in collaborating with American firms to expand their
access to the latest technology and expertise. The best way for American manufacturers and suppliers to
penetrate the Pakistan market is to utilize the benefits of the network services and programs of U.S. Export
Assistance Centers (USEAC, visit http://www.export.gov/comm_svc/eac.html) in association with the U.S.
Commercial Service offices located in Islamabad, Karachi, and Lahore. Seeking the assistance of USEACs
before exploring an opportunity in this market is highly encouraged. We recommend that interested American
firms use an agent/distributor relationship with a locally registered company.
Using an Agent/Distributor: Many foreign firms in Pakistan appoint local agents to provide market
intelligence and to facilitate distribution. These agents typically work on a fixed commission, which can range
from two to 10 percent for plant and equipment purchases and from 15 to 20 percent for spare parts.
Commissions may be computed on f.o.b., ex-factory, or c.i.f. basis, as mutually agreed. Some agents prefer
to have suppliers quote net prices to them and they, in turn, add the commission to arrive at their selling price.
Other agents operate as consultants on a retainer ship basis, receiving their fee regardless of the volume of
total sales. Many foreign principals appoint one or more agents/distributors to cover the entire country; at
times foreign principals work through a regional office to cover this market. Several U.S. firms cover Pakistan
through their Dubai, Singapore or London offices.
Probably the most common arrangement is the exclusive agency agreement, under which the supplier agrees
neither to appoint another dealer/distributor, nor to negotiate sales through any other party. In return, the
agent is barred from handling similar items produced by other companies. Under this arrangement, the agent
receives commissions on all sales of the product regardless of the channels through which the order is placed.
The agent often imports and stocks the spares most frequently required by the end-users. Agency
agreements typically extend for a term of one to three years and generally require 30 to 90 days notice by
either party for termination.
Joint-Ventures/Licensing: Joint ventures can be an attractive option in Pakistan, as there are many local
entrepreneurs who have built a substantial base in their industrial enterprises and are seeking to combine
their knowledge of local markets with foreign capital and technological know-how. The foreign joint venture
partner limits its initial country exposure while enjoying the support of a local partner in a new market.
Prominent joint ventures have been established in the automobile, fertilizer, electronic, financial services, and
food and consumer product sectors.
Firms wanting to delay direct entry into the Pakistani market should consider licensing arrangements with
Pakistani firms, an option that permits them to enter the market in stages if the initial response is promising.
Market Issues & Obstacles
? The main challenge that the AEDB is facing in the execution of its projects is the availability of
equipment. Wind turbines are not available off-the-shelf in the world market. This is due to the fact
that the United States has an extensive wind energy program that offers tax rebates until the end of
Renewable Energy Market in Pakistan
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2007. All leading manufacturers of wind energy equipment have fully committed existing supplies to
the American market. However through extensive marketing efforts, the AEDB states that it has
convinced the four top OEMs – GE of USA, VESTAS of Denmark, Gamesa of Spain and Fuhrlander
of Germany – to reserve the equipment needed to produce 50-MW in Pakistan.
? A similar supply problem exists with the components of solar energy systems. Due to current high
demand, there is a shortage of solar power systems in the world market.
? As wind and solar power systems will be in direct competition with the GOP‘s Vision 2025
hydropower generation program, interested American firms must offer price competitive wind and
solar power systems, in order to ensure profitability and competitiveness in the local market. Although,
the development work on the proposed 3,600-MW Kalabagh Dam and the Thar Coal power projects
has not been initiated, the current delays are mainly due to political controversies, environmental
concerns, and downstream economic impacts that could hold less sway over time. Once these
projects become operational, they may offer low cost energy supplies that would obviate the need for
renewable energy sources.
? Pakistan is a diverse and challenging market requiring adaptability and persistence. Careful planning
and patience are the prerequisites for success in this emerging market. American firms that are
willing to invest time to develop market presence should expect to be rewarded in the long-term.
Alternative Energy & Power Asia Exhibition
Date: 09-MAR-07 to 11-MAR-07 Alternative Energy & Power Asia Exhibition is the biggest specialized exhibition in Pakistan, covering power
generation, transmission and distribution, as well as energy saving technologies and renewable energy
Venue: Karachi Expo Centre, Karachi, Pakistan
Target visitors include foreign companies seeking joint ventures, foreign & local investors / industrialists, trade
delegations from various countries, high level government officials, policy and decision makers, foreign
missions, business magnates of Pakistan, top executives and professionals from local industry, opinion
leaders & consultants.
E- Commerce Gateway Pakistan Private Limited
18, C.P Berar Society, Off Amir Khusro Road
American firms should also consider participation in regional events (focusing on either South Asia or the
Middle East) in order to reach potential Pakistani purchasers, agents, and distributors.
Resources & Key Contacts
Renewable Energy Market in Pakistan
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Mr. Mujahid Sadiq
Director General for International Cooperation
Alternative Energy Development Board
B-344, Prime Minister's Secretariat
Mr. Ishtiaque Hussain Shah
Sarhad Hydel Development Organization (SHYDO)
Tel +92-91-9212034, 9212026
Mr. M. Yaqoob
Chief Engineer (Power)
Irrigation and Power Department
1ST Floor, Central Design Building,
Irrigation Secretariat near Old Anarkali
For More Information
The U.S. Commercial Service at the Consulate of the United States of America in Lahore can be contacted via e-
mail at: Aftab.Qamar@mail.doc.gov; Phone: (92)-42-603-4000; Fax: (92)-42-603-4229 or visit our website: www.buyusa.gov/pakistan.
The U.S. Commercial Service — Your Global Business Partner
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the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S.
companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the
U.S. nearest you by visiting http://www.export.gov/.
Disclaimer: The information provided in this report is intended to be of assistance to U.S. exporters. While we make every
effort to ensure its accuracy, neither the United States government nor any of its employees make any representation as to the
accuracy or completeness of information in this or any other United States government document. Readers are advised to
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International copyright, U.S. Department of Commerce, 2006. All rights reserved outside of the United States.