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July 23, 2020

State Bank doubles financing limit for renewable energy projects

Business

July 23, 2020

KARACHI: The central bank has doubled the refinancing limit for a renewable power project to two billion rupees to increase contribution of clean energy to the grid, it said on Wednesday.

The State Bank of Pakistan (SBP) said it enhanced scope of its renewable energy refinance scheme to encourage production of clean energy by allowing financing under category-III of the scheme to solar and wind based energy-sale companies.

“In light of the feedback received from stakeholders, the size of the project established by vendor / supplier / energy-sale company has been enhanced from 1 MW (megawatt) to 5 MW,” the SBP said in a statement. “Accordingly, the cumulative financing limit has also been increased from Rs1 billion to Rs2 billion.

SBP financing scheme for renewable energy was announced in June 2016 with an aim to help addressing the challenges of energy shortages and climate change in the country. The scheme comprised of two categories. Category-I allowed financing for setting up of renewable energy power projects with capacity ranging from 1 MW to 50 MW for own use or selling of electricity to the national grid or combination of both. Category-II allowed financing to domestic, agriculture, commercial and industrial borrowers for installation of renewable energy based projects / solutions of up to 1 MW to generate electricity for own use or selling to the grid / distribution company under net metering. Later, in July 2019, SBP introduced a new category-III for facilitating financing to vendors / suppliers for installation of wind and solar systems/solutions of up to 1 MW. SBP also launched a shariah-complaint version of the scheme in August 2019. Since the introduction of the scheme, total outstanding financing under the scheme has reached to Rs15.6 billion for 217 projects having potential of adding 292MW of energy supply.

“This revision in the scheme is expected to not only attract fresh local and foreign investment in the sector but also facilitate production of clean energy in the country, helping in managing climate change,” said the SBP.

The government has envisaged power generation from alternative and renewable energy technologies at 25 percent of energy mix by 2025 and 30 percent by 2030. The policy aims to enhance the share of renewable resources while ensuring transparency by introducing competitive bidding regime.

Pakistan has so far only 5 percent of its total generation from renewable power -mainly from wind, a bit from solar and a bit from bagasse as captive power plants at sugar mills. The government decided to move to a renewable energy-reliant economy by 2030 in which hydropower will be the backbone. To keep pace with the demands of a growing economy, this would require the development of additional generation capacity of 20 gigawatts of hydropower, wind and solar.