Islamabad - The United States and Pakistan have agreed to facilitate and accelerate private investment in clean energy projects with the aim to add at least 3,000 megawatts of clean power to Pakistan’s national grid within next 3-5 years.

The decision came following Pakistan’s cold response to US advice to buy surplus electricity from Indian state of Punjab to meet its pressing energy needs, sources said.

“The US proposal (of buying power from India) was mooted in the meeting of the US-Pakistan Working Group held in Islamabad last month”, said a senior official privy to the development while requesting not to be named.

According to sources, Washington has been asking Islamabad to explore this option but Pakistan did not buy the idea largely because of the fears that it might weaken its position on water dispute with India.

Even though electricity by the Punjab State Power Corporation Limited (PSPCL) is thermal generation facility and has nothing to do with hydro power generation still Pakistan is shying away from exploring the option.

Instead, Pakistan has opted for CASA 1000, to buy hydropower from two central Asian republics of Kyrgyzstan and Tajikistan and is trying to materialise the multi billion dollar project at the earliest.

“Pakistan has not considered the US proposal for political reasons”, another source said, adding Islamabad does not want to engage India for the purpose as such an agreement would have far reaching implications for Pakistan.

Consequently, the United States and Pakistan agreed to facilitate and accelerate private investment in clean energy projects in Pakistan. Under this initiative, the US Government will work with Pakistan to advance reforms that will allow the US, Pakistani, and international private sector developers and investors to add at least 3,000 megawatts of clean power to Pakistan’s national grid within the next 3-5 years. “This clean energy initiative will help address Pakistan’s energy challenges,” said US State Department’s Special Envoy for Energy Amos Hochstein during the second US-Pakistan Energy Working Group under the broader US-Pakistan Strategic Dialogue framework. “It is a partnership to help alleviate Pakistan’s energy challenges based on a set of goals shared by Pakistan, the United States, multilateral banks, donors, and the private sector,” he said.

Energy demand in Pakistan is expected to double by 2020 and both the US and Pakistan agreed on key reforms in Pakistan’s power sector in order to create space for private sector to help address the challenge.

In order to advance the goals of this common initiative, US and Pakistani officials discussed steps to: strengthen regulatory institutions and develop market-based rules to attract private investment; develop an investment strategy for expanding the role of clean energy systems; expand transmission capacity for clean energy projects; and mobilise loans, grants, technical assistance and guarantees needed to manage and reduce private sector risks and leverage private capital into clean power projects.

Both sides agreed that helping the energy sector become more market-based is one of the best alternatives to ending the current crisis and ensuring that future demand can be met.

Clean power investments in hydroelectric, wind, solar, biomass, and natural gas, combined with an expanded effort to improve the efficiency at all parts of the energy sector, will reduce Pakistan’s dependence on foreign fuel sources, help address climate change, improve Pakistan’s energy security, and promote innovation and growth.

This initiative marks a new phase of US energy sector assistance to Pakistan, which since 2010 has contributed over 1,500 megawatts of electricity to Pakistan’s national grid by refurbishing existing hydropower and thermal generation facilities, completing hydropower projects, and improving the operation and efficiency of Pakistan’s transmission and distribution systems.