Increasing electricity rates reducing payback periods

After approval from the Federal cabinet under the supervision of Prime Minister of Pakistan, the Government has decided to increase the electricity tariffs which will be implemented immediately. In the evening time, the per unit price for the commercial consumers with the increase of Rs.6 is now Rs.16 per unit and for the industrial consumers the new per unit price with the increase of Rs.5 is now Rs.18 per unit. All these new rates will be implemented immediately.

Now with the increase of electricity prices, the payback or recovery periods for the projects of renewable energy system like solar, wind or biomass etc will now be reduced which is quite attractive for those investors, companies and consultants who are working in the field of Renewable Energy Systems. Those who have already invested in this sector may update their payback analysis which will definitely turn them joyful.

It is natural and interesting to see that on one side the people who are fully dependent on utility electric supply will become irritated and frustrated and on the other side, those who are fully/partially independent from the utility electric supply may feel some sort of relaxing themselves.   

As the Government has already cleared to the nation that in the coming years/months they will increase the electricity tariffs further because of the recovery of the circular debt, it is highly recommendable in these years to go for the renewable energy like solar, wind etc because these kinds of decision from the government may help the investors to get the payback as quickly as possible.    

Why to invest in Pakistan's Alternate or Renewable energy sector

As it is clear from the solar and wind resource maps posted earlier that this region similar to other central and south asian regions has a very strong potential of Renewable Energy. One of the unique aspect of why someone to invest in Pakistan in this sector as compare to other countries is the big Electricity shortfall and due to which utilities are unwillingly go towards load shedding. The other attractive aspect of Pakistan is the availability of cheap labor which can financially support the investors for quick returns. Now the Government which is recently elected in Pakistan has sincerely (as compare to previous Governments) prioritized the issue of the electricity short fall in Pakistan which is between 3000 and 6000 MWs. In this regard, the recent visit of the Prime Minister of Pakistan and his development team to China invited the different energy companies to invest in Pakistan and till now a number of companies have already signed MOUs with the provincial and as well as federal Government. So this is one of the great opportunity in this period of time for the global renewable and sustainable energy market, companies, consultants and manufacturers to invest in the sector of producing energy from alternates energy systems in Pakistan

Following are some other reasons of why to invest in Pakistan set by Alternate Energy Development Board, AEDB;

(1)  Extremely Attractive/ investor-friendly Renewable Energy Policy 2006

- Wind Risk Coverage

- Buy Back Guarantee

- Liberal Political Risk Coverage

- Liberal Fiscal / Financial Incentives

- Attractive IRR

(2)  Facilitation for procurement / lease of land for wind farms provided by Alternate Energy Development Board, AEDB (unheard of in other territories around the world).

(3) Extremely cheap rates offered for land for Wind farms (Euro 7/- only per acre per year.

(4) Environmental Issues dealt with by AEDB on behalf of investors (incl. EIA and relevant Government permissions).

(5) Attractive Tariff offered.

(6) Availability of infrastructure for setting up manufacturing facilities.