The World Bank (WB) has pointed out deficiencies in the proposed draft Energy Efficiency & Conservation (EE&C) 2022, prepared by National Energy Efficiency & Conservation Authority (NEECA), an arm of Power Division, as the draft lacks clear targets and priority areas.
In a letter to Managing Director, NEECA, World Bank’s Energy Team for Pakistan, Oliver Knight said the Bank has carried out its own review of the draft policy and shared its comments. Since, the policy, once finalized, may set the scene for EE&C developments in Pakistan for the remainder of this decade, and may also influence the scope of future Bank-financed activities in this space, it is important that it provides the necessary framework to guide NEECA and other relevant implementing agencies on the key opportunities and priorities, said Knight.
After going through the draft policy document, World Bank highlighted the following key issues and recommendations:
The proposed goal for energy savings does not measure up to the scale of the opportunity, and in Bank’s view could be strengthened. WB believes it is important that NEECA sets a target that is ambitions and is easy to measure. WB has proposed a goal based on energy intensity of GDP, set according to regional and international benchmarks for peer countries.
In addition to a stronger headline goal, it would be helpful if the policy could set some targets for key priority outcomes in terms of deliverables or energy saved.
Include a timeframe for the policy, with a date on which a new or updated policy would be expected to replace this one. We would suggest a timeframe of 5-8 years, which should be sufficient to achieve good progress but would also allow for lesson-learning and a scaling-up of effort in the subsequent phase.
It is a good idea to define a set of guiding principles against which NEECA will assess proposed programs, initiatives and regulatory activities. However, WB believes that these could be sharpened to provide a stronger framework for what NEECA - and other government bodies will and won’t prioritize. WB believes that a number of important elements are missing such as; (i) fostering an- all- of- government approach, whereby NEECA will work with other ministries, agencies, and the provincial governments to mainstream EE&C in key areas, including major public spending programs (e.g., affordable housing, health and education, and transport); (ii) giving priority to simplicity when it comes to designing sectoral policies, programs and initiatives thereby prioritizing proposals that have high EE&C potential, low cost of implementation, and do not require heavy enforcement or compliance regimes; and (iii) prioritizing private sector delivery, by using scarce public sector resources to leverage a private sector response, and not looking to carry out activities that can be carried out by the private sector if the right incentives are in place.
The draft policy rightly encompasses all relevant sectors and a wide range of EE&C opportunities, but it is less clear on what NEECA will prioritize, and perhaps more importantly what will be de-prioritized. Since NEECA is a relatively new institution, it will need to focus its efforts to achieve real results. It is important that the policy either outlines the priorities, or provides a prioritization framework that can be used by NEECA to guide its work.
More focus on non-energy impacts and integration of other actors
In several places there is an over-emphasis on saving energy for technical reasons-or because it’s a worthy cause - rather than because it will help improve outcomes for households and businesses. This would limit the awareness of EE&&C and resulting actions by constraining it to the energy sector. NEECA and other public agencies should consider all EE&C sectoral policies, programs and initiatives from a broader perspective, including saving money, raising productivity and competitiveness, reducing air pollution, and improving social outcomes both in terms of what NEECA prioritizes, but also in how NEECA’s actions are designed and communicated to enhance the alignment of EE&C priorities with the broader priorities of the country and other sectors.
Clarification of NEECA’s role versus others
The policy lists many programs and initiatives necessary to promote EE&C but it is unclear which actions will be under NEECA’s responsibility and which actions will require coordination with other stakeholders especially the provincial designated agencies which as per the NEECA Act are its implementing arm. With the Punjab Energy Efficiency & Conservation Agency already established, and plans to establish a similar agency in Sindh, it is critical that the policy outlines the differentiation of roles and responsibilities.
It will be critical to NEECA’s long-term success and sustainability that it achieves some quick wins. Reflecting the previous comments, NEECA should identify a small number of high impact areas where its actions could achieve visible, tangible energy savings that manifest as cost savings for households, businesses and public facilities. The World Bank stands ready to support NEECA in achieving these quick wins. Avoid heavy enforcement- In line with several others of our recommendations, World Bank recommends that NEECA stays clear of taking on a strong enforcement and compliance role, and instead looks at ways to keep any compliance regimes as light as possible. In most cases saving energy is already in the interests of households and firms, so World Bank would suggest putting more emphasis on awareness, fiscal incentives, financing, and technical support.
This report was first published in Business Recorder on February 7, 2022.