Pakistan: Energy Efficiency Investment Program

Sovereign Project | 42051-013 Status: Approved


The Energy Efficiency Investment Program is the first initiative in Pakistan to integrate energy security and climate change into a common strategic platform. It will establish a dynamic business environment for clean energy technology and finance priority projects. It constitutes tangible actions toward a sustainable low-carbon growth path, and it has a number of important features:

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Project Name Energy Efficiency Investment Program
Project Number 42051-013
Country Pakistan
Project Status Approved
Project Type / Modality of Assistance Loan
Source of Funding / Amount
MFF Facility Concept 0031-PAK: MFF - Energy Efficiency Investment Program (Facility Concept) (formerly Sustainable Energy Efficiency Investment Program)
Asian Development Fund US$ 20.00 million
Ordinary capital resources US$ 760.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Partnerships
Private sector development
Sector / Subsector

Energy - Energy efficiency and conservation

Gender Equity and Mainstreaming Gender equity

The Energy Efficiency Investment Program is the first initiative in Pakistan to integrate energy security and climate change into a common strategic platform. It will establish a dynamic business environment for clean energy technology and finance priority projects. It constitutes tangible actions toward a sustainable low-carbon growth path, and it has a number of important features:

Mainstreaming Energy Efficiency. The Investment Program underpins a reform strategy that will mainstream energy efficiency into national planning and public investments, and is a critical component of Pakistan's climate change program. The Government of Pakistan (the Government) is adopting a holistic platform for strategic planning of the energy sector and climate change. The Investment Program builds on ongoing work of the Asian Development Bank (ADB) to establish integrated energy planning. It backs change management and strengthens the capacity of key participants, particularly in policy planning, gender mainstreaming, investment, and monitoring and evaluation.

Clean Energy Market Transformation. The Investment Program will break down the financial barriers to clean energy investments, and finance deployment of clean technology that has been successfully demonstrated. It will strengthen regulatory and institutional frameworks, establish fiscal and financial incentives, and enforce standards and testing.

Private Sector Engagement. The private sector will play a key role in the deployment of clean technology and energy services. It will also be a direct beneficiary (on the supply and demand sides). Sustainable business models for energy efficiency services (i.e., energy audits, performance contracts) will be established and replicated. The Investment Program will increase industrial productivity and competitiveness by lowering operating costs.

Partnerships. The Investment Program sets out a framework for effective partnership with third parties -- investors and financiers -- over the medium term. In addition to ADB, Agence Francaise de Developpement (AFD) is the first of these partners. Over time, other development partners may determine to complement ADB's financing after the Board's approval of the proposed MFF through cofinancing to be administered by ADB. The Investment Program design is directly linked with the ongoing work by other partners. German development cooperation through GTZ has been implementing industrial energy audits and appliance labeling and certification projects in support of the Investment Program. The Japan International Cooperation Agency is now developing a climate change policy program. The United States Agency for International Development (USAID) is implementing a capacity development program to strengthen energy demand-side management among the utilities and private companies, and is focusing on women's roles in energy. The World Bank is implementing utility-based demand-side management demonstration projects. The Government is discussing scaling up of such investment and technical assistance activities with GTZ, USAID, and the World Bank.

Project Rationale and Linkage to Country/Regional Strategy

The energy gap is now one of Pakistan's most serious binding constraints to growth and jobs. It results from the rapid increase in demand and high wastage of energy, and is one of the main causes of the current economic crisis. Pakistan's dependency on oil imports results from the suboptimal energy supply mix that is a consequence of poor planning. The economy is susceptible to fuel price volatility.

Pakistan uses 15% more energy than India and 25% more than the Philippines (for each dollar of gross domestic product). Energy wastage is a high cost to the economy, businesses, and consumers; its reduction requires major and immediate shifts in policies, investment, and consumption patterns.

In 2009, the power deficit reached 5,000 megawatts (MW), and natural gas supply to industries was cut during the 4 winter months. People and businesses in many parts of Pakistan are experiencing power outages and rationing lasting more than 12 hours a day. Factory closures are causing social unrest.

Energy efficiency represents the least-cost and quickest low-carbon solution to bridge the energy gap. It cuts the high dependence on oil imports and avoids investment in expensive and inefficient rental power generation based on fossil fuels. It ultimately strengthens energy security, contributes to the environment, creates jobs, and improves industrial competitiveness. Energy efficiency is now a strategic priority for the Government.

Pakistan's total energy savings potential, through the application of clean and efficient technology, is estimated at 11.16 million tons of oil equivalent (493,304 terajoules [TJ]), or 18% of primary energy use (FY2008). This corresponds to a 51% reduction in net oil imports. In FY2008, the oil import bill was $12 billion. Savings in electricity and gas resulting from well thought out energy efficiency investments correspond to additional generation capacity of about 6,770 MW.

Energy efficiency investments can be most effective when the policy, regulatory, and pricing regime is right. Energy tariffs have historically been low in Pakistan. As such, customers have not had much of an incentive to invest in efficient technology, nor shift consumption patterns. While electricity production costs tripled from FY2003 to FY2007, tariffs were not adjusted to cover this increase. Since FY2007, tariffs increased by an average of 20% and will continue doing so until reaching cost-recovery by FY2011. As tariffs increase, so does awareness of energy efficiency and incentives to acquire new, less energy-consuming technology.

Impact Improved energy security in Pakistan
Project Outcome
Description of Outcome Energy efficiency promoted in Pakistan
Progress Toward Outcome Target still feasible.
Implementation Progress
Description of Project Outputs

Energy efficient lights and appliances introduced in the market

Power generation losses (thermal) reduced

Status of Implementation Progress (Outputs, Activities, and Issues)

Tranche 1 ongoing - targets still feasible.

Tranches 2 and 3 scheduled for approval in Q4 2012 and Q2 2013. respectively.

Geographical Location Countrywide
Summary of Environmental and Social Aspects
Environmental Aspects

Improving energy efficiency and energy conservation, in general, leads to a cleaner and better environment. Electricity production, particularly from fossil fuels, has far-reaching environmental impacts. Consequently, energy efficiency is closely related to environmental benefits. Other than the economic and financial benefits, improving energy efficiency in the country will decrease the demand for natural resources and reduce atmospheric pollutants, resulting in reduced greenhouse gas emissions and consequently less climate change impact. Moreover, improved energy efficiency will lower water use and improve water quality, reduce accumulation of solid waste, and reduce pressure on natural wilderness and pristine areas from fossil fuel biomass and extraction.

An environmental assessment and review framework is in place. It complies with the Pakistan Environmental Protection Act, 1997, and associated rules, regulations, and guidelines; and is in conformity with ADB's Environment Policy (2002) and Environmental Assessment Guidelines (2003). Environmental assessment for investments under individual tranches will be conducted within the agreed framework and ADB rules.

Tranche 1 - Category B

Proposed Tranche 2 - Category B

Proposed Tranche 3 - Category A

Involuntary Resettlement The Investment Program will not trigger ADB's Involuntary Resettlement Policy (1995).
Indigenous Peoples The Investment Program will not trigger ADB's Policy on Indigenous Peoples (1998).
Stakeholder Communication, Participation, and Consultation
During Project Design To support the investment program preparation and the road map preparation, the Government established the Energy Efficiency and Conservation Consultative Group (EECCG) chaired by the Planning Commission and comprising Secretaries of EAD, Ministries of Finance, Water and Power, Petroleum and Natural Resources, Environment, Industries, the National Energy Conservation Center, PEPCO, power and gas utilities, Pakistan Standards and Quality Control Authority, Hydrocarbon Development Institute, Pakistan Council for Industrial and Scientific Research, and development partners. EECCG provides strategic guidance into the program design and implementation to ensure the effectiveness and sustainability of the project outcomes.
During Project Implementation EECCG will continue its strategic guidance role. The Planning Commission and PMU are coordinating with other stakeholders during implementation.
Business Opportunities
Consulting Services Consultants will be carried out in line with ADB's Guidelines on the Use of Consultants (2013, as amended from time to time) for (i) capacity and institutional development, (ii) project design and preparation, (iii) project implementation support, and (iv) energy efficiency standards program. The detailed terms of refence and implementation arrangements for each tranche are determined following consultations with the Government and the EA.
Procurement All procurement to be financed under an ADB loan will be carried out in accordance with ADB's Procurement Guidelines (2013, as amended from time to time). ICB or NCB methods will be primarily used depending on contract size.
Responsible ADB Officer Joonho Hwang
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Energy Division, CWRD
Executing Agencies
Planning Commission
Dr. Pavez Butt
Planning Commission of Pakistan
Concept Clearance 27 Apr 2009
Fact Finding 28 Apr 2009 to 15 May 2009
MRM 08 Jun 2009
Approval 17 Sep 2009
Last Review Mission -
PDS Creation Date 05 May 2009
Last PDS Update 28 Sep 2012

MFF Facility Concept 0031-PAK

Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 980.00 Cumulative Contract Awards
ADB 780.00 - 0.00 0.00 %
Counterpart 200.00 Cumulative Disbursements
Cofinancing 0.00 - 0.00 0.00 %
Title Document Type Document Date
Energy Efficiency Investment Program: Updated Facility Administration Manual Facility Administration Manual Jun 2014
Energy Efficiency Investment Program Facility Administration Manual Oct 2012
Framework Financing Agreement for Energy Efficiency Investment Program between Pakistan and Asian Development Bank Framework Financing Agreement Aug 2009
Energy Efficiency Investment Program Reports and Recommendations of the President Aug 2009
Sustainable Energy Efficiency Investment Program Facility Administration Manual May 2009

Safeguard Documents

See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

Title Document Type Document Date
Energy Efficiency Investment Program Environmental Assessment and Measures Aug 2009
Energy Efficiency Investment Program Environmental Assessment and Review Framework Jul 2009

Evaluation Documents

See also: Independent Evaluation

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Related Publications

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