Wind Energy Farms
Wind Energy Farms
Business Model Description
Invest in establishing or scaling up B2B, B2G or B2C wind energy farms to promote sustainable production and sourcing of renewable energy for power generation. Examples of companies active in this space are:
Gul Ahmed Wind Power Ltd. established in 2008 received a loan from Proparco of USD18 million to contribute to the financing of the construction and operation of a wind farm with a capacity of 50 MW (Megawatt), in Karachi. This new facility will strengthen the domestic grid with an additional 130 GWh (Gigawatt hour) a year. It will be reducing greenhouse gas emissions by 60,000 teq CO2 a year. (8)
International Finance Corporation invested in six projects in the Jhimpir wind corridor or the Super Six Wind projects. The total investment is USD 450 million. IFC is providing a financing package of USD 320 million out of which USD 86 million is from IFC and USD 234 million is for mobilization. (9)
The Super Six Wind project is implemented in collaboration with Deutsche Investitions- und Entwicklungsgesellschaft (DEG), part of the KfW Group in Germany. (9)
Expected Impact
Sustainable methos of energy generation by increasing the proportion of renewable energy in the energy mix to serve Pakistan's rising energy needs which will be ~249 TWh by 2030.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
Disclaimer
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Country & Regions
- Pakistan: Sindh
- Pakistan: Balochistan
Sector Classification
Renewable Resources and Alternative Energy
By the end of May 2021, the total installed generation capacity in Pakistan reached 34,501 MW, of which 34 per cent is renewable: hydro-electric, solar, wind and bagasse-based technologies and 66 per cent from natural gas, local coal, imported coal, RLNG based technologies. (1) There is a need to shift the mix towards renewable energy per Indicative Generation Capacity Generation Expansion Plan (IGCEP).
Policy priority
To enhance and support the renewable energy sector, the government has introduced an Alternate and Renewable Energy (ARE) Policy 2020 for sustainable development in the power sector. The ARE Policy 2020 aims to increase the contribution of power generation from renewable energy from 4 to 5 per cent in 2020 to 20 to 30 per cent by 2030. (2)
Gender inequalities and marginalization issues
Energy can be a vital entry point for improving the position of women in households and societies. Women in developing countries suffer in terms of health impacts, collection time, and quality of energy supply for the equivalent level of energy services as their counterparts in the developed world. (3) In Pakistan, women overall constitute 4 per cent of the workforce in the energy sector, 2 per cent in technical positions. (4)
Investment opportunities
New technology, the lower unit cost of production, and private solutions in the renewable energy sector, could revolutionize the energy industry in Pakistan. Benefits could include reliability, less pollution and more affordable energy to benefit households and producers, alike. Thus, opportunities are available in solutions for households and industrial units. (5)
Key bottlenecks
The biggest challenge to an on-grid solution is the unsolidified renewable energy policy and its implementation through an autonomous energy authority. An unpredictable Feed-in-Tariff and challenges to getting a Letter of Intent (LOI) dampens enthusiasm for investment in this sector. (2)
Alternative Energy
Development need
Circular debt in Pakistan’s energy supply chain refers to cash flow shortfall incurred in power sector from nonpayment of obligations. It has continued to grow in size over the years, rising from 1.6 percent of GDP in 2008, to 5.2 percent of GDP in June 2020. (1) Due to 2022 floods, damage is USD 88 Million, and loss is USD 2.5 Million. (6)
Policy priority
ARE Policy 2020 reportedly seeks to have 20-30% of all energy derived from renewable energy sources by 2030 and envisages development of large-scale renewable energy projects in Pakistan. Over the last five years, 19 wind power projects of 980MW, 06 solar power projects of 418 MW and 08 bagasse projects of total 258 MW achieved commercial operations. (2)
Gender inequalities and marginalization issues
Gender disparities in the energy sector have been observed around the world. Reasons include women’s own perceptions of the industry, insufficient access to information, finance, and training, corporate human resource practices, and cultural biases and norms about gender roles. (3) In Pakistan, women represent 7 percent of mid-level managerial positions, and even less at the senior and executive levels, at 2 percent and 4 percent respectively. (4)
Investment opportunities
To diversify the investment portfolio, ARE Policy suggests participation in competitive bidding for large projects, development of projects based on new technologies on unsolicited mode, local manufacturing of RE equipment, investment in off-grid and distributed generation (net metering, B2B sales, mini/micro grid systems and Localized Energy Systems). (1)
Key bottlenecks
Government has curtailed electricity off-take from few existing wind plants as energy purchase agreements with these developers have become expensive due to impact of corona pandemic on economy, higher tariff, grid instability and currency devaluation which may impact completion of new projects. (7)
Wind Technology and Project Developers
Pipeline Opportunity
Wind Energy Farms
Invest in establishing or scaling up B2B, B2G or B2C wind energy farms to promote sustainable production and sourcing of renewable energy for power generation. Examples of companies active in this space are:
Gul Ahmed Wind Power Ltd. established in 2008 received a loan from Proparco of USD18 million to contribute to the financing of the construction and operation of a wind farm with a capacity of 50 MW (Megawatt), in Karachi. This new facility will strengthen the domestic grid with an additional 130 GWh (Gigawatt hour) a year. It will be reducing greenhouse gas emissions by 60,000 teq CO2 a year. (8)
International Finance Corporation invested in six projects in the Jhimpir wind corridor or the Super Six Wind projects. The total investment is USD 450 million. IFC is providing a financing package of USD 320 million out of which USD 86 million is from IFC and USD 234 million is for mobilization. (9)
The Super Six Wind project is implemented in collaboration with Deutsche Investitions- und Entwicklungsgesellschaft (DEG), part of the KfW Group in Germany. (9)
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
5% - 10%
The government aims to increase the renewable energy to 30 percent in the total energy mix.
Over the last five years 2015-2020, 19 wind power projects of 980MW, 06 solar power projects of 418 MW and 08 bagasse projects of total 258 MW achieved commercial operations. (2)
CAGR is expected to be more than 5 percent in the 2022-to-2027-time frame. In terms of market growth, factors such as supportive government policies and efforts to meet power demand using renewables to decrease dependency on fossils are expected to drive the market. (10)
Indicative Return
> 25%
15% - 20%
> 25%
Calculated as per Asian Development Bank's Renewable Energy Sector Investment Program 2021 (11) On average, Gross profit margin is 29-39 percent in power generation industry for 2017-2021(12)
Expected IRR for Karachi zone is 32 percent, Ormara 22 percent. In case of a 50MW Wind Farm, considering factors of energy output, economic feasibility, environmental impact, and fuel-saving analyzed for multiple locations and turbine designs, these 3 present best returns. It also represents the highest internal rate of return, benefit-to-cost ratio, and annual saving with a minimum payback period (4.5–7.2 years) for various commercially available turbine designs. (13)
Investment Timeframe
Medium Term (5–10 years)
Minimum payback period for various commercially available turbine designs is 4.5 to 7.2 years. (13)
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
In Pakistan, majority of power generation is from coal, which increases the CO2 emissions. Furthermore, Pakistan's biggest contribution to import bill is the imported fuel. Thus, power generation through renewable sources is vital to address these issues. (14)
Investing in solar, wind and thermal power, improving energy productivity, and ensuring energy for all is vital if we are to achieve SDG 7 by 2030 and have 30 percent RE in energy mix.
Gender & Marginalisation
Without electricity, women and girls have to spend hours fetching water, clinics cannot store vaccines for children, many school children cannot do homework at night, and people cannot run competitive businesses. 4 percent of GDP is lost due to electricity outage. (15)
According to a baseline study conducted by Women in Energy (Pakistan) in 2018, women make 4 percent of the workforce in 9 power utilities of the country. (4)
Expected Development Outcome
Wind energy offers great potential to attain energy security, environmental stability, and sustainable development in Pakistan at a lower cost of energy generation (40 percent lower as compared to other sources in Pakistan. Source: IFC's Super Six Projects. (8)
Generally, wind power is cost-effective, creates jobs, is a clean fuel source, uses "domestic source" of energy (no burden on import bill in long run), is sustainable and can be built on existing farms and ranches (as done in the US).
Not only the cost will be lowest, but the outreach will also be widespread as it will generate enough to power 450,000 homes. (8)
Gender & Marginalisation
With the availability of clean and green energy, women in households will have a clean and affordable alternate to carbon-based fuel for cooking and other activities, resulting in reduced spending for other essential needs of households.
New investments in wind power sector can provide more opportunities to women for training as well as employment as compared to the existing 4 percent of women employment in power sector (4)
Primary SDGs addressed
7.1.1 Proportion of population with access to electricity
7.2.1 Renewable energy share in the total final energy consumption
7.b.1 Installed renewable energy-generating capacity in developing countries (in watts per capita)
An increase of three percent was recorded in 2019-20 with 96 percent of the population having access to electricity as compared to 93 percent in 2014-15. (150
Renewable energy share in the total final energy consumption recorded an increase from 0.77 percent in 2014-15 to 3.63 percent in 2018-19. (15)
The total renewable electricity capacity was 8,088.8 Megawatts in 2015 and this has been increased to 12,896 Megawatts in 2019. (15)
The Vision 2025 and ARE policy 2020 acknowledge that proportion of population with access to electricity is an important component of demand management but do not give a specific target to achieve but a demand projection that would need catering. Demand that needs to be met by 2030 will be 249 tera watt per hour. (4)
By 2030, ARE Policy suggests increasing the share of renewable energy to 30 percent by 2030 from 4 percent on 2020. (1)
As per Vision 2025, increase percentage of indigenous sources of power generation to over 50 percent by 2025. Demand that needs to be met by 2030 will be 249 tera watt per hour or 24,000 Megawatts. (2)
12.a.1 Installed renewable energy-generating capacity in developing countries (in watts per capita)
The total renewable electricity capacity was 8,088.8 Megawatts in 2015 and this has been increased to 12,896 Megawatts in 2019. (15)
From Vision 2025, increase percentage of indigenous sources of power generation to over 50 percent.
5.5.2 Proportion of women in managerial positions
The percentage of women in managerial positions has increased from 2.70 percent (2014) 4.53 percent in 2019. (15)
The National Vision 2025 by Government sets the target of increasing women labor force participation from 24 to 45 percent by 2025 but does not give a specific target of increasing their presence in managerial positions.
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Outcome Risks
Wind farms may negatively impact the wildlife, especially birds, and cause noise pollution affecting nearby communities.
Gender inequality and/or marginalization risk: In terms of prevalence of employment opportunity gaps in sectors of renewable energy investments as jobs are unevenly distributed. (16)
Impact Risks
Wind power generation depends on various external factors, including weather conditions and level of wind, which may limit impact.
The high costs of wind turbines may increase the cost of power generated and will be transferred to government or to the consumers if large-scale projects like corridors are not established.
Marginalization risk: Impact maybe limited as high cost of connection to the grid may limit vulnerable communities from accessing power; in many regions, this includes female-headed households. (16)
Impact Classification
What
The IOA will also reduce the burden on GOP. in terms of circular debt of power generation. (15)
Who
End consumers will benefit from low cost, affordable and clean energy solutions, along with the development of the local community.
Risk
External factors, including weather conditions and level of wind, may limit the operations of wind energy farms.
Contribution
Gul Ahmed Wind Power positively impacted the environment by reducing greenhouse gas emissions by 60,000 teq CO2 a year. (8)
How Much
The government aims to increase the renewable energy to 30 percent in the total energy mix.
Impact Thesis
Sustainable methos of energy generation by increasing the proportion of renewable energy in the energy mix to serve Pakistan's rising energy needs which will be ~249 TWh by 2030.
Enabling Environment
Policy Environment
ARE 2019 Policy: policy covers all projects to be implemented with Alternative or Renewable Energy technologies for producing power whether for sale to a public utility or for private sale to a consumer if the producer wishes to avail any incentives available in this Policy (2)
ARE 2019 Policy: The technologies covered under this Policy are both conventional Renewable Energy sources including solar, wind, geothermal, and biomass, also technologies like biogas, syngas, waste to energy (WTE), energy storage systems, Ocean/Tidal Waves, as well as all kinds of hybrids. (2)
Financial Environment
Financing is available for prospective sponsors for setting power projects with a capacity ranging from more than 1 MW and up-to 50 MW for own use, selling of electricity to the national grid or both- Max. Tenor of financing is 12 years. Financing for a single borrower is up to USD 20.1 million (2)
Fiscal incentives: Project implemented under ARE Policy, for selling to a public utility, on a distributed/off-grid mode or on a B2B basis shall be exempt from Corporate Income Tax. No Customs Duty on import of equipment / machinery not manufactured locally.
Other incentives: In case of special economic zone: Exemption from income tax for ten years for Zone Developers, Co-developers and Zone Enterprises and One time exemption from all custom-duties and taxes on import of capital goods to Zone Developers, Co-developers and Zone Enterprises. (20)
Regulatory Environment
Regulation for Generation, Transmission and Distribution of Electric Power 1977. The act identifies the process and criteria of licensing, prescribe procedure and standards for investment in such projects, prescribe fees for NOCs and prescribe SOPs. (18) A
lternate Energy Development Board, National Eletric Power Regulatory Authority are regulators with NEPRA Act as main law. The NEPRA Act 2021, NEPRA regulations state the rules and regulation regarding electricity generation, licenses and registration of generation and transmission companies. (19)
Marketplace Participants
Private Sector
Corporates: FFC Energy, SGS Pakistan, Hawa Energy, Master Group of industries Investors: IFC, ADB, Proparco
Government
Alternative Energy Development Board, Ministry of Water and Power, Energy Departments in provincial governments.
Multilaterals
International Finance Cooperation, Asian Development Bank, (Funding from UK and Australia Govt.)
Non-Profit
World Wind Energy Association Pakistan, Renewable and Alternate Energy Association of Pakistan
Target Locations
Pakistan: Sindh
Pakistan: Balochistan
References
- (1) Finance Division, Government of Pakistan. 2022. “Energy.” Chapter 14, Pakistan Economic Survey 2021-2022. http://www.finance.gov.pk/survey/chapters_21/14-Energy.pdf.Accessed 29 March 2023.
- (2) Government of Pakistan. 2019. Alternative and Renewable Energy Policy 2019. https://www.aedb.org/images/Draft_ARE_Policy_2019_-_Version_2_July_21_2019.pdf.Accessed 29 March 2023.
- (3) Babalola, F. D. 2010. "Harnessing Energy Crisis and Gender Empowerment: Impacts of Household Energy Consumption Pattern on Women's Welfare and Education." Paper presented at the International Conference organized by United Nations Girls' Education Initiative (UNGEI), Dakar, May 3-7. https://genderandsecurity.org/projects-resources/research/harnessing-energy-crisis-and-gender-empowerment-impacts-household-energy. Accessed 29 March 2023.
- (4) SDPI (Sustainable Development Policy Institute). 2022. “Role of Women in Energy and Climate Talks of Pakistan.” https://sdpi.org/role-of-women-in-energy-and-climate-talks-of-pakistan/event_detail. Accessed 29 March 2023.
- (5) Baloch, M., and S. Chauhdary. 2019. “Hybrid Energy Sources Status of Pakistan: An Optimal Technical Proposal to Solve the Power Crises Issues.” Energy Strategy Reviews Volume 24, 2019, Pages 132-153. https://www.sciencedirect.com/science/article/pii/S2211467X19300173.Accessed 29 March 2023.
- (6) UNDP (United Nations Development Programme). 2022. “Pakistan: Flood Damages and Economic Losses over USD 30 billion and Reconstruction Needs over USD 16 billion.” UNDP press releases. https://www.undp.org/pakistan/press-releases/pdna-pakistan-floods.Accessed 14 April 2023.
- (7) International Trade Administration. 2022. “Pakistan – Country Commercial Guide: Renewable Energy.” https://www.trade.gov/country-commercial-guides/pakistan-renewable-energy.Accessed 29 March 2023.
- (8. Zerah, O. 2015. “Gul Ahmed Wind Power Limited: Developing Wind Energies in Pakistan.” Republique Francaise. https://www.proparco.fr/en/carte-des-projets/gul-ahmed-wind-power#:~:text=Gul%20Ahmed%20Wind%20Power%20Limited%3A%20Developing%20wind%20energies%20in%20Pakistan&text=Gul%20Ahmed%20Wind%20Power%20Limited%20is%20building%20a%20wind%20farm,country's%20dependence%20on%20fossil%20fuels.Accessed 29 March 2023. 9. IFC (International Finance Corporation). 2019. “Wind Energy Transforms Pakistan.” https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/news/cm-stories/wind-energy-pakistan.Accessed 29 March 2023. 10. Mordor Intelligence. 2023. “Pakistan Wind Energy Market - Growth. Trends. Covid-19 Impact. and Forecasts 2023 - 2028.” https://www.mordorintelligence.com/industry-reports/pakistan-wind-energy-marketAccessed 29 March 2023. 11. ADB (Asian Development Bank). 2021. The Islamic Republic of Pakistan: Renewable Energy Development Sector Investment Program. https://www.adb.org/sites/default/files/evaluation-document/735646/files/pvr-2286.pdf.Accessed 29 March 2023. 12. PACRA (The Pakistan Credit Rating Agency Limited). 2021. Power Generation: An Overview. https://www.pacra.com/sector_research/Power%20Sector%20-%20PACRA%20Research%20-%20Jan'21_1611329371.pdf.Accessed 29 March 2023 13. Ahmad. S. S. Al Rashid. A. Raza. S. A. Zaidi. A. A. Khan. S. Z. and Koç. M. (2022). “Feasibility Analysis of Wind Energy Potential Along the Coastline of Pakistan.” Ain Shams Engineering Journal. 13 (1). 101542. https://www.sciencedirect.com/science/article/pii/S2090447921002938#s0070Accessed 29 March 2023. 14. Profit Pakistan Today. 2022. “Oil Import Bill Increased by 96% in 10MFY22.” https://profit.pakistantoday.com.pk/2022/07/17/oil-import-bill-increased-by-96-in-10mfy22/#:~:text=ISLAMABAD%3A%20The%20government%20imported%20oil,the%20same%20period%20of%20FY21.Accessed 29 March 2023. 15. Islamic Development Bank. 2023. “Sustainable Development Goals.” https://www.isdb-engage.org/en/page/sustainable-development-goals-enAccessed 29 March 2023. 16. Nelson. S. and Kuriakose. A. 2017. Gender and Renewable Energy: Entry Points for Women’s Livelihoods and Employment. Climate Investment Funds. https://www.cif.org/sites/default/files/gender_and_re_digital.pdfAccessed 29 March 2023. 17. Climate Transparency. 2021. Pakistan Climate Transparency Report 2020. https://www.climate-transparency.org/wp-content/uploads/2021/11/Pakistan-CP-2020.pdfAccessed 29 March 2023. 18. NEPRA (National Electric Power Regulatory Authority). 1997. An Act to Provide for the Regulation of Generation. Transmission and Distribution of Electric Power. https://www.nepra.org.pk/Legislation/Act/Regulation%20of%20Generation%20Transmission%20and%20Distribution%20of%20Electric%20Power%20Act%201997%20along%20with%20all%20amendments.pdfAccessed 29 March 2023. 19. NEPRA (National Electric Power Regulatory Authority). 2023. “Legal.” https://nepra.org.pk/Legal.phpAccessed 29 March 2023. 20. BOI (Board of Investment). 2021. “Incentives in Special Economic Zones.” Special Economic Zones Incentive Package. https://invest.gov.pk/sez#gallery-1Accessed 28 March 2023.