BACKGROUND:
The World Bank supported Pakistan’s energy sector through a multi-year Programmatic Advisory Services and Analytics (PASA) activity titled “Pakistan Sustainable Energy Program.” This activity complemented and informed policy advice to the government and their extensive energy sector lending portfolio. It included support to the National Energy Efficiency & Conservation Authority (NEECA) in building its institutional capacity to implement energy efficiency and conservation (EE&C) policies, regulations, and programs in the country.
In the past years, the World Bank provided NEECA with support for:
- Conducting energy efficiency policy options analysis.
- Making recommendations for Provincial Action Plans for EE&C.
- Providing advice on NEECA’s human resource structure and regulations.
- Building capacity through consultancy and technical support.
NEECA’s strategic plan stipulated a target of 3 MTOE of energy savings by 2023 through various EE&C initiatives in five key sectors of the economy, including i) building; ii) industry; iii) transport; iv) power; and v) agriculture. The challenges identified included high energy losses, wastage in the supply chain, lack of investment in replacing obsolete technologies, and overall aging infrastructure. Pakistan’s Nationally Determined Contribution (NDCs) submitted to the UN COP-26 in Glasgow in 2021 pledged a 50% reduction in emissions below Business-as-Usual by 2030.
The industrial sector was the largest consumer of energy in Pakistan, accounting for 37.1% of the country’s overall energy consumption, followed by the transport sector (27%) and the domestic and commercial sectors (26%). Energy consumption by the domestic and commercial sector had increased by 18% over the past 5 years. The domestic sector consumed 45.9% of the total electricity, while the industrial sector consumed about 25%. Approximately half of the total electricity consumed was used in buildings and/or heating, ventilation, and air conditioning (HVAC) and lighting appliances. In China, even in extreme weather conditions, the energy consumed for the same purposes was 25 to 30% of the total electricity consumption.
With the construction sector being granted industry status by the Prime Minister last year and the incentives provided to real estate developers for new construction investments, there has been a significant boom in real estate development. Additionally, the Government of Pakistan launched the Naya Pakistan Housing Program (NPHP) in early 2019, aiming to provide 5 million housing units across the country. The buildings and structures being constructed today will remain in use for the next 50 years. Without incorporating measures in design and on-site generation to reduce energy consumption, new constructions are likely to become major sources of greenhouse gas (GHG) emissions in cities.
In collaboration with the Pakistan Engineering Council (PEC), NEECA is currently updating and finalizing the National Energy Conservation Building Codes (ECBC). Once revised and mandated through appropriate regulations, NEECA, along with provincial designated agencies, will focus on implementing these codes. Although the national ECBC was previously revised in 2011 by PEC and a Statutory Regulatory Order (SRO) was issued, its implementation remained ineffective due to market barriers in the buildings’ EE sector. Addressing these barriers requires awareness campaigns, capacity building initiatives, and financial interventions. As per NEECA’s strategic plan, the target is to save 0.5 MTOE or 5,800 gigawatt-hours (GWh) in the building sector by 2023 through the implementation of building codes, development of building energy management systems, and the introduction of mandatory appliances labeling regimes in buildings.
Energy efficiency and conservation (EE&C) can effectively contribute to Pakistan’s economic development and poverty reduction goals by enhancing economic and industrial productivity, creating new jobs, reducing heating and cooling expenses for households and the public sector, and fostering a green and efficient economy that aligns with Pakistan’s objective to reach upper-middle-income status by 2047. EE&C is also a crucial component of any decarbonization strategy, enabling Pakistan to reduce fossil fuel usage and the associated demands on foreign exchange reserves. Furthermore, investing in EE&C can help reduce peak power demand and, in the public sector, support the reduction of circular debt caused by unpaid electricity bills.
Despite the economic and financial benefits it offers, the EE&C market in Pakistan remains highly undeveloped. Numerous challenges have limited investments, particularly in the demand-side EE&C across industries, buildings, and public facilities, which have significant untapped potential for EE&C improvements. A major hurdle to the development of a vibrant EE&C market in the country is the lack of financial mechanisms to support EE&C investments, especially in the private sector.
PROJECT CONTEXT:
The project aimed to identify opportunities for energy efficiency and conservation (EE&C) in commercial, residential, and public sector buildings. Based on these findings, the project provided recommendations for policies and investments that could be initiated by NEECA or other government agencies, including provincial energy departments. These initiatives aimed to realize the identified opportunities and make substantial progress towards achieving the government’s EE&C goals and targets.
The implementation of the project tasks was carried out by the International Institute for Energy Conservation (IIEC) and SAMA^Verte. These tasks included:
- Implementing the project inception phase and conducting data collection activities.
- Identifying policies and investment opportunities.
- Analyzing and providing recommendations for an appropriate auditing and compliance regime.
- Analyzing and offering recommendations for potential financing mechanisms to mobilize private sector investment.
The implementation of these tasks was closely coordinated with NEECA and involved extensive stakeholder consultations. Relevant ministries, government agencies and departments, local financial intermediaries, the State Bank, private sector entities, civil society organizations, and development partners were engaged throughout the process.
