To promote renewables, the State Bank of Pakistan (SBP) has expanded the scope of its renewable energy refinancing program, allowing financing under category III of the program to solar and wind companies.
SBP financing program for renewable energy was announced in June 2016 to help address the challenges of energy shortage and climate change in the country. The program originally had only two categories. Category I allowed financing to set up a renewable energy power project with a capacity ranging from 1 MW to 50 MW for self-use or selling to the grid or both. Category II allowed financing to commercial, industrial, agriculture, and domestic borrowers for projects of up to 1 MW to generate electricity for own use or for selling to the distribution company under net metering.
Later, the bank introduced a new Category III for facilitating financing to vendors and suppliers in the installation of wind and solar projects of up to 1 MW. Now, it has increased the size of the projects under this category from 1 MW to 5 MW based on the feedback of stakeholders.
SBP also increased the cumulative financing limit from 1 billion Pakistani Rupee (PKR) ($5.94 million) to 2 billion PKR ($11.88 million).
Since the inception of the program, SBP is said to have financed PKR15.6 billion ($92.8 million) to 217 renewable energy projects totaling 292 MW.
The Bank expects that this revision would encourage new local and foreign investment in the renewable energy sector and facilitate renewable expansion in the country. Pakistan expects that the new policies will help the share of renewable energy to reach 28 to 30% in the national grid by 2030.
Last year, the Pakistan government had proposed a five-year exemption of taxes for the manufacturing of solar and wind energy equipment in its budget bill, reported Reuters. The tax break was expected to boost the local manufacturing of equipment needed for renewable power expansion in the country.
Mercom has reported in the past about how Pakistan was slowly turning to solar power to meet its energy requirements. In June 2018, the World Bank pledged over $500 million for two renewable energy projects in Sindh, Pakistan. The projects were to help in the development of an economic corridor along the Khyber Pass and were expected to accelerate economic activities between Pakistan and Afghanistan. Pakistan has been a member of the World Bank since 1950.
Image credit: Kuebi = Armin Kübelbeck / CC BY-SA
Harsh is a staff reporter at Mercom India. Previously with Indian Express, he has covered general interest stories. He holds a Masters Degree in Journalism from Symbiosis Institute of Media and Communication, Pune.