Asian Development Bank (ADB) and Pakistan signed a $325 million loan agreement on February 7, 2017 in Islamabad to help enhance Pakistan’s energy security by installing clean energy sources and improve people’s access to electricity in Khyber Pakhtunkhwa (KP) and Punjab, two of the country’s largest provinces.
The program will install renewable energy power plants including the construction of 1,000 micro-hydropower plants(MHPs) in off-grid areas of KP. It will also provide and install rooftop solar plants for 23,000 schools and over 2,500 primary healthcare facilities in two provinces and a university in Bahawalpur, Punjab. The MHPs and solar plants will provide electricity to around 1.5 million people in rural areas and to more than 2.6 million students, including 1.2 million girls.
ADB will also provide a $750,000 technical assistance grant for capacity development and improvement of performance monitoring of the program. Energy shortage is one of the issues hampering development efforts and poverty reduction in Pakistan especially in rural areas, where only 57% enjoy electricity access. Although Pakistan has abundant renewable and non renewable energy resources, public and private investment in energy infrastructure has remained inadequate, and the system suffers from the low efficiency of generation, transmission and distribution networks.
KP, with a population of over 28 million, is one of the poorest provinces in Pakistan and in some of its districts the electrification rate is below 20%. Meanwhile Punjab, a province with the largest population in Pakistan, consumes around 68% of the country’s electricity and gas. The economy is based largely on agriculture and industry, and depends heavily on a reliable electricity supply. Geographic constraints make extending the national grid to such remote areas costly and technically difficult. In these areas, the least-cost option is off-grid renewable energy sources.
The program will strengthen the capacity of provincial governments to improve the program sustainability, through enhanced monitoring, procurement and internal audit capacities, and promotion of public sector energy efficiency. The loan is part of ADB’s commitment announced last year to double its annual climate financing to $6 billion for Asia-Pacific by 2020. Out of the total project loan, $16 million will be dedicated for climate change adaptation activities and $247 million for climate change mitigation activities.