The World Bank (WB) Board of Directors has approved a $700 million additional financing for Dasu Hydropower Project to help Pakistan generate low-cost, renewable energy, to ensure affordable electricity supply to millions of users.
This support for one of the country's longer-term development priorities comes as the WB is also working with the federal and provincial governments to prepare and respond to the immediate challenge of the COVID-19 outbreak.
The project will be financed from the International Bank for Reconstruction and Development (IBRD), with a variable spread, and 25 years maturity including a five-year grace period.
The project will facilitate the expansion of electricity supply of hydropower in Pakistan. The additional financing will support the construction of a transmission line to evacuate power from Dasu Hydropower Plant to Islamabad.
According to the official statement, the additional financing for Dasu Hydropower Stage I Project will finance the transmission line to complete the first phase of the Dasu Hydropower Plant that will install 2,160MW capacity along the main Indus River. Plans for stage-II expansion will double the installed capacity to 4,320MW, making Dasu the largest hydropower plant in the country.
"Pakistan's energy sector is aiming to move away from high-cost and inefficient fossil fuels towards low-cost, renewable energy to power the national grid," said Illango Patchamuthu, WB country director for Pakistan.
"Along with reforms in the tariff structure, the Dasu Hydropower Project will result in fewer imports of fossil fuels, alleviating the stress on the country's current account balance."
The project will help to lower the overall cost of energy generation in Pakistan, benefiting millions of energy users by making electricity more affordable for households and productive sectors, such as manufacturing and agriculture.
The Dasu Hydropower Plant will provide most of its electricity during the summer months to reduce blackouts when the demand is the highest. The project also contributes to the socioeconomic development of the communities in Dasu, and surrounding areas of the Upper Kohistan District of the Khyber-Pakhtunkhwa.
"The Dasu Hydropower Plant has a low environmental footprint and is considered to be one of the best hydropower projects in the world," said Rikard Liden, task team leader for the project. "It will contribute to reducing Pakistan's reliance on fossil fuels and producing clean renewable energy."
Dasu hydropower station will produce electricity at $0.03/kWh compared to Pakistan's current average cost of electricity generation of $0.08/kWh. According to the project documents, the overall project development objective is to facilitate the expansion of electricity supply of hydropower in Pakistan.
The project would also improve access to socio-economic services for local communities in the project area and build the WAPDA's capacity to prepare future hydropower projects. The project is a "high-risk, high-reward" operation aimed at providing low cost non-carbon renewable energy.
Dasu Hydropower Project (DHP) is about eight kilometres from Dasu Town, capital of Upper Kohistan District of the Khyber-Pakhtunkhwa, and about 350 kilometres from Islamabad. The total project of 4,320MW is being developed in a staged design.
The DHP-I, currently under implementation, has an installed capacity of 2,160MW and will generate over 12,000GWh of renewable low-cost energy for supply to the central grid. Stage-II will add another 2,160MW and 6,000GWh of electricity per year and would be undertaken in future as stage-I nears completion.
The DHP is essential for addressing the key issues faced by Pakistan's power sector by adding renewable generation at lower cost (lowering overall cost of generation in Pakistan and making electricity more affordable) and reducing the foreign currency requirements by using domestically available hydropower.