World Bank to extend $100 million for solar power projects in Sindh

ISLAMABAD: World Bank on Wednesday signed a financing agreement with Pakistan to extend $100 million for “Sindh Solar Energy Project” with the objective of enhancing renewable generation and availability of power to the people in the province, where electricity accessibility rate was alarmingly lower at 37 percent.

An official statement said the project would support the deployment of solar power in Sindh spanning three market segments, which are: utility scale, distributed generation, and households.

Utility scale segment includes development of solar parks to support private sector investment and launching of Pakistan’s first competitive bidding for solar power production, starting with an initial 50 MW pilot solar auction, the statement said.

It added that distributed power included at least 20 MW of distributed solar photovoltaic (PV) panels on the rooftops and other available space on and around public sector buildings in Karachi, Hyderabad and other districts of the province.

The project, which aims to provide solar home systems to 200,000 households in areas with low or no electricity access, will cost $105 million.

It further said International Development Association (IDA) would extend financing of $100.0 million for the project, while the government of Sindh would contribute $5.0 million.

Public funding will be used to leverage private sector investment and/or expertise in the three segments, with an emphasis on long-term sustainability, developing domestic solar PV experience, and the emergence of self-sustaining markets, it said.

The project is said to introduce and showcase international best practice with renewable energy auctions, reduce the headline cost of solar deployment, create sustainable business models for potential replication, build institutional and private sector capacity, and identify opportunities for future renewable energy deployment that address issues of grid integration.

The project, it said, had been designed to help steer Pakistan toward a lower-carbon path to development.

The agreement was signed by Noor Ahmed, Secretary Economic Affairs Division (EAD) on behalf of the government of Pakistan, while Musadiq Ahmed Khan, Secretary Energy Department, Government of Sindh, represented government of Sindh.

Patchamuthu Ilangovan, Country Director, World Bank inked the financing and the project agreements on behalf of International Development Association.

World Bank’s project appraisal document says despite huge hydropower and renewable energy potential, Pakistan’s electricity mix is becoming more reliant on imported fossil fuels, and thus more vulnerable to price volatility.

The energy sector is the largest contributor to Pakistan’s greenhouse gas (GHG) emissions at 46 percent of total emissions and will grow with the planned increase in coal-fired generation capacity, the paper said.

It added that in its Nationally Determined Contribution (INDC), Pakistan had committed to reduce up to 20 percent of its projected GHG emissions, subject to the availability of international grants to meet the $40 billion estimated abatement cost.

According to the document, the main mitigation options presented in its NDC are: increased grid efficiency, improved coal efficiency, and large-scale and distributed grid-connected solar, wind, and hydroelectricity.

The World Bank said for solar and wind, the resource potential was very significant, especially in the south and west of the country.

In Sindh, however, the rate is much lower, at 37 percent, it said, adding according to International Finance Corporation (IFC) estimates, around 24 million households were currently either without a grid connection or were suffering from severe underelectrification -those with working grid connections but without adequate supply.

The international financial institution also pointed out that most of the previous efforts to bridge the gap in electricity access had been conducted primarily through grid extension, which proved to be uneconomic in some rural areas because of low population density and high dispersion among rural settlements.

As a result of sustained equipment and construction cost reductions internationally, and the experience gained from several early projects, solar power is now a low-cost option for additional power capacity, the World Bank said.