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INSIDE STORY: Renewable energy solutions for Punjab’s industrial sector – Evaluating the NAMA approach in Sialkot City, Pakistan

Submitted by CDKN Communicat... 4th July 2016 14:30
cdkn sialkot 0 - climate adaptation.

Sialkot is the world’s largest supplier of footballs and home to dozens of sporting goods factories. Copyright © 2016, Climate and Development Knowledge Network.

Introduction

Pakistan’s energy sector is in crisis. Inadequate electricity supplies cost the country US$14 bn annually and some 11,000 small and medium enterprises operate at just 60% of capacity. This lack of a safe, reliable energy supply impinges on socio-economic development at all levels, thereby inhibiting the ability of Pakistan and its municipalities to adapt to climate change and other stressors.

In 2015, Pakistan’s Ministry of Climate Change and the Punjab Power Development Board asked the Climate and Development Knowledge Network (CDKN) to assess whether a Nationally Appropriate Mitigation Action (NAMA) would be an appropriate tool to support renewable energy solutions for Sialkot in the Punjab, one of Pakistan’s most emblematic industrial hubs of mainly export-oriented industry. Such a solution would be a positive step towards achieveing Sustainable Development Goal 7: access to affordable, reliable, sustainable and modern energy for all.

The project was seen as innovative as there is currently little by way of detailed analysis on coupling renewable energy solutions with climate change mitigation options in Pakistan. NAMAs are seen to be a potential policy tool to provide leverage for mitigation in energy, industry and other sectors. However, NAMAs are a relatively new concept and the understanding and assessment necessary for selecting and planning NAMAs is largely still missing in Pakistan.

The project*, which is documented in this CDKN Inside Story, showed that the use of photovoltaic panels for industry could mitigate up to 377,000 tons of carbon dioxide and gain average savings of US$27,400 per year on electricity costs.

*Download this Inside Story from the right-hand column or via the links under further resources. Key points from the document are summarised below, see the full text for more detail.

Methods

With CDKN support, Ecofys (Netherlands) and PITCO (Pakistan) analysed Sialkot’s industrial energy demand and the availability of renewable energy technologies in Pakistan. During the summer of 2015, over 100 Sialkot industrialists participated in workshops analysing their energy demands, the distribution among different company sizes and the renewable energy options available, along with associated costs, savings potential and emissions reductions.

The project’s main objective was to evaluate the scope for renewable energy solutions to energy shortages among the SMEs that make up the industrial sector in Sialkot, and the potential role of NAMAs as a policy tool to support them. The project was expected to build understanding of the viability of renewable energy-based industrial solutions, particularly with regard to supporting industrial development and energy sustainability, in the process delivering mitigation and adaptation co-benefits such as job creation, energy efficiency and environmental protection. 

Enabling Factors - Strengthening industry’s focus on renewable energy

The success of the project was mostly due to an active process of stakeholder engagement. The team (CDKN, PITCO and Ecofys) visited stakeholders in person before any analysis was conducted. They also spent two days in Sialkot, introducing the team to seven industrial associations, listening to industry’s concerns, and clarifying the project’s purpose. This approach allowed the team to make use of existing political power structures, which proved important in ensuring buy-in from industry in Sialkot. The close interaction further allowed the team to access data that were not publicly available, and to validate assumptions held by Sialkot experts.

Industries that had provided data wanted to see how their information would be used in the analysis, so preliminary analyses based on the data collected were presented to validate the results and obtain feedback on how to improve assumptions. This ensured stakeholder buy-in to the objectives of the project that resulted in its unilateral advancement, despite limited government engagement.

Barriers

Data availability: The data that could be collected from publicly available sources were limited to the electricity provided by the grid from the Gujranwala Electric Power Company and proved insufficient for robust quantitative analysis. Stakeholder engagement and collaboration proved to be an enabling factor for the project. The close interaction further allowed the team to access data that were not publicly available, and to validate assumptions held by Sialkot experts. 

Government engagement: The study uncovered a number of controversies in Pakistan that need to be tackled before a strong NAMA concept can be further developed. These revolve mainly around responsibilities for the electricity supply, with industry seeing the government as responsible for solving the energy crisis – and the government seeing industry as strong enough and better equipped to tackle this challenge.

Moreover, with its low level of greenhouse gas emissions, Pakistan faces numerous social, economic, development and national security challenges that often take priority over climate-related topics. The government, and specifically the Ministry of Climate Change, also lacks the capacity to address the opportunities offered by a sustainable development pathway.

Industry awareness: At the subnational level, the project team faced initial push-back from industry in Sialkot, which leaned towards a conventional electricity solution for the city as a whole, rather than just for industry. Industrialists also had many misconceptions about renewable energy technologies, particularly their belief that the quality of electricity varies depending on the renewable energy source (e.g. hydro is better than solar). 

Lessons Learnt (in brief)

Key results

  • Sialkot is facing rising electricity prices (230% since 2007) and load shedding of up to six hours a day. Despite using diesel generation to cover the electricity shortfall, Sialkot’s industry, which exports more than US$1.6 bn a year in goods, has lost more than 10% of its revenue.
  • This CDKN-led project to assess a Nationally Appropriate Mitigation Action (NAMA) as a policy tool to provide renewable energy to the city’s industrial sector showed that the use of photovoltaic panels for industry could mitigate up to 377,000 tons of carbon dioxide and gain average savings of US$27,400 per year on electricity costs. 

Lessons from the process:

  • Industry should have the opportunity to influence the NAMA process from the start, validate results mid-way and have a permanent presence in subnational decision- making on climate change. This builds trust, increases the legitimacy of results and improves management.
  • Sharing preliminary data with stakeholders can help to spark debate. It is not necessary to await ‘perfect’ data before engaging; rather, data and analysis can be improved through stakeholder feedback.
  • Providing examples of financial schemes from other NAMAs or similar projects can help to unlock the dialogue and stimulate action to secure investment. 

Lessons for decision-makers and practitioners elsewhere:

  • Engage with associations and chambers of commerce in highly industrial cities. Institutional arrangements need to consider the most relevant organisations, whether governmental or not, taking into consideration the roles the organisations are expected to play. If one organisation is not sufficiently proactive, the project is likely to fail unless other organisations are willing and able to fill the gap.
  • Ensure all stakeholders have ownership in the debate. Each person participating in the project should have something to gain (or lose) from the success (or failure) of the project. This project benefitted from strong subnational leadership that was open to partnering with private institutions, and was able to secure buy-in from these stakeholders to pursue the installation of PV panels. Both parties could clearly see the potential gains from the project.
  • Research financial schemes and actively involve local financial institutions. The most pressing issue in almost all the project’s conversations with the government and industry was finance. Even if all technical and policy challenges had been tackled, finding the financial resources often led to an impasse. Providing examples of financial schemes that had worked in other countries’ NAMAs, or similar development projects, helped to unlock the dialogue. It proved important to be able to indicate local financial institutions that could potentially help replicate those financial schemes. It is vital to research the financial institutions available and talk to them in advance to learn about their products and how they could be applied to the project.

Further Resources