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October 11, 2019

ARE policy 2019: AEDB approves, sends policy draft to CCI for approval


October 11, 2019

ISLAMABAD: The Alternative Energy Development Board (AEDB) on Thursday approved and referred the draft policy for Alternative and Renewable Energy, 2019 to the Council of Common Interests (CCI) for approval.

The board that met here with Omar Ayub Khan, Federal Minister for Energy (Power Division)/Chairman AEDB in the chair approved the draft ARE Policy 2019 on the basis of consensus of all members.

A senior official told The News that a Technical Steering Committee would be formed after the approval by CCI. The Additional Secretary of Ministry of Energy (Power Division) would head the committee and comprising AEDB, and Provincial Energy Departments/secretaries shall review the project proposals submitted by the provinces/GB as well as location of projects to be procured by the federal government.

Interestingly, in this policy, the provinces have been given lead role, if the project is in a province, so the specific federating unit would be responsible for land provision and arrangement of bidding for that project and other requirements. The province would have a strong vote in the committee, official sources in the Ministry told The News.

The said committee will be a sub-committee of AEDB which shall come into force upon approval of this policy. The technical steering committee, shall have CPPA-G and NTDC as non-voting members to allow for consultation with CPPA-G and NTDC in terms of evacuation based on locational studies for variable energy resource and purchase needs, and prepare a provisional procurement plan of CPPA-G by March 31 of such year, and present it to the AEDB for approval.

The final plan shall be required to be approved latest by June 30 of such year, to allow bidding before the end of the year. The objective of the steering committee is to empower the provinces in decision what projects are to be recommended, and where, while consulting the key stakeholders (CPPA-g, NTDC, AEDB) towards synergising efforts for accelerated and distributed adoption of ARE technologies in the grid. Majority decision of the provinces in the steering committee, which is technically viable, shall be submitted to AED Board for final approval.

Minister said the policy is aimed at creating a conducive environment supported by a robust framework for the sustainable growth of ARE sector in Pakistan and increasing the share of renewable energy in the energy mix in order to achieve the strategic objectives of energy security, cheaper power generation and environmental protection. He further stated that the policy framework has an all-inclusive approach and stipulates an active role and participation of provincial governments at all stages of ARE developments.

Federal Secretary Power Division Irfan Ali on the occasion appraised the meeting that for the first time a very ambitious yet workable policy has been attempted to tap the indigenous resources of the country. He said that the policy provides for the steering committee comprising all provinces and co-opted members who will decide major projects of renewable energy. He said that provincial participation has been increased in the new draft of renewable energy.

It has been decided that rather than inducting RE projects on a reactive basis, a new policy direction is being set whereby Pakistan intends to have 20 percent of its generation capacity, as ARE technologies by 2025 and 30pc by 2030.

According to the policy draft available with The News, it is estimated that such targets can be achieved but will require upgradation of the transmission infrastructure; this exercise will be undertaken in parallel, and where necessary as a pre-requisite. This target, together with over 30pc hydel, will result in one of the most environmentally friendly and affordable electricity mix compared to the heavily dominated mix of imported fossil fuels in the past.

This policy covers projects for Renewable Energy as well as Alternate Energy Technologies i.e. Biomass (including but not limited to bagasse, agricultural waste, and other waste), Geothermal, Ocean/Tidal Wave energy, Solar (PV or Thermal, or any technology that uses heat and/or light of the sun to make electricity), Wind, Storage Technologies (Battery systems, Cells of all types, compressed gas, pumped storage), Biogas using any organic material (except fossil fuels), Energy from Waste (including but not limited to municipal solid waste, industrial waste, sewage, Refuse Derived Fuel), Hydrogen or Synthetic Gas (made from any source except fossil fuels) and Hybrids of any of these Technologies.

Article 157 of The Constitution of Pakistan allows the Provinces to develop their own power generation projects, lay transmission lines, distribute electricity, and even set their own tariffs, if the power generated is for use within the boundary of the relevant Province. Recognizing these constitutional rights, the Provinces are free to institute their own policies for projects where neither the power off-take is by a federal entity nor the interconnection by NTDC/DISCO if they wish to do so under Article 157. In such cases, there shall be no financial or contractual commitment of the Federal Government, or any of its entities, whatsoever. If a Province proposes a project that is proposed to sell power to CPPA-G/DISCO and/or requires evacuation by NTDC/DISCOs, the same shall be brought to the AEDB for processing, and if approved, for implementation.

Project implemented under this Policy, whether selling to a Public utility, on a distributed/off-grid mode or on a B2B basis shall be exempt from Corporate Income Tax under clause 132 of part-1 of the second schedule to the income tax ordinance, 2001. Dividend withholding tax shall be as applicable at the time the bid is submitted.

Projects are currently subject to no Customs Duty on import of equipment / machinery not manufactured locally to be installed in Renewable Energy Projects. However, in order to avail the same, the Project Company shall provide an undertaking to AEDB that it shall only bring in, without customs duty, items that are to be installed in its plant, and shall not sell any such items in local market or use for any other purposes than specified. If the customs duty is different at the time of a future bidding round, the same shall be specified in the bidding documents, and the rate applicable shall be the rate on the bidding date. There shall be GST on services by the Provinces that varies across the country. Currently applicable taxes may be checked with the relevant provincial agency at the time of the implementation of the project.