Different stakeholders like international donor agencies, private sector investors and consultants had strongly emphasised to introduce Feed-in-Tariff (FIT) mechanism for Alternative/Renewable Energy (ARE) technologies during a consultative process, which AEDB initiated for ARE Policy, 2011
During the consultations, it was highlighted that globally FIT mechanism has proven to be an effective and efficient tool for development of ARE sector, which helped in increasing its share in global energy mix. Considering the stance, AEDB proposed introduction of Upfront/FIT mechanism by Nepra for ARE technologies in the upcoming ARE Policy.
The AEDB with the support of GIZ initiated the process of developing the FIT models for two technologies initially; Wind and Small Hydro for which GIZ hired the services of Lahmeyer International. The assignment was initiated in January, 2010 when the Consultant met different stakeholders including Nepra, and on suggestions of Nepra, it was decided that the Upfront/FIT for Pakistan should be computed based on CPT mechanism and models be designed accordingly. The consultant prepared two separate models for Wind and Small Hydro, which were earlier presented and discussed in detail with AEDB and Nepra and it was decided that workshop for presentation/dissemination of the FIT models should be held to demonstrate calculation and determination methodology to all relevant stakeholders.
The objective of the workshop was to see the viability and general acceptance amongst the stakeholders, which also included investors, donors, regulators and other government agencies both federal and provincial. The workshop was opened by CEO AEDB, Arif Alauddin.
The participants of the workshop agreed on the advantages of Upfront/Feed-in-Tariff (FIT), which would speed up project implementation, minimise investors concerns and promote efficiency and cost of RE projects. They also pointed out advantages of Cost Plus Tariff (CPT) in a regime, where the government is taking wind risk and hydrological risk. Given the perceived risks, associated with the country in term of security, technology, financial viability and infrastructure, the advantages of CPT were also considered necessary for many ARE technologies. The participants expressed concern that in case low CPT was determined, the whole sector would suffer as potential investors would not come in to invest. It was, therefore, proposed to ensure that the case must be taken to select a realistic tariff, which provides sufficient incentives for investments. AEDB was of the opinion that FIT should be on Cost Plus basis.
The workshop identified that in order to introduce FIT, there is a need to change Energy Purchase Agreement (EPA), which is a great task in itself. They recommended that AEDB in consultation with private sector and NTDC should work on this issue. A committee has been formed to take the process forward, and make concrete recommendations to Nepra.
The CEO AEDB in his closing remarks said that FIT though appeared to be simple, required in-depth understanding of the input parameters, the lenders concerns, the nature of technology and the project site. He appreciated the GIZ support, especially the commitment and skills of GIZ Consultant, Annika Seiler, which helped take the first step forward to the journey towards FIT.
DG, Nepra in his remarks said that it was the first serious effort in the direction of FIT. Bernhard Meyhoefer, Principle Advisor GIZ -REEE Program informed that another forum would be organised wherein other donors would also participate in the process. Annika Seiler informed that the models were prepared in line with the United Nations Energy Transfer Initiative, which Pakistan might consider and explore opportunities to participate in the initiative supported by Deutsdie Bank.