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Energy efficiency is an important aspect when it comes to energy management. The importance of the sector can be gauged by the sizeable investment of $240 billion that went into energy efficiency across buildings, transport and industry last year around the globe.

In its recently released report, the International Energy Agency (IEA) highlighted that the largest sector for energy efficiency continues to be buildings albeit with a slow-down in growth. Although adding more mega-watts was important in Pakistan’s case, energy efficiency has taken a backward seat when it comes to policy making.

Some energy experts believe that a better course of action is to adopt international energy efficiency standards and make them compulsory in new building codes. The argument is that saving one unit of electricity is better than generating three units because gains from efficiency will result in higher savings.

As setting up a power plant requires significant capital expenditure and results in machinery imports it also puts a dent into already scarce foreign exchange reserves. In the long term if the proper regulation is in place and acted upon, anywhere between 500-1000 megawatt can be saved per year which means almost half a billion dollars of capital expenditure on the power generation side.

In order to make the process more effective, the role of energy service companies (ESCO) has been instrumental throughout the world. In particular China’s ESCO industry has taken the lead in promoting industrial energy efficiency by providing energy efficient equipment to end consumers.

This is a good model and can be applied by the distribution companies in Pakistan too. One such initiative regarding installation of smart meters in underway but it can be extended to implementing other digital technologies as well.

Across the world, contracts between energy service companies and consumers contain separate energy performance contracts which bind the ESCO to install equipment and ensure guaranteed savings. This results in incentive for the private sector as well given lower utility costs while lowering power consumption.

Copyright Business Recorder, 2019

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