Experts Call for Policy Coherence & Innovative Financing to Boost Clean Energy Investment in Pakistan

Experts at a High-level Roundtable, reinforcing the critical role of Mini/Micro Hydropower Plants (MHPPs) in Pakistan’s clean energy transition, has stressed the urgent need for policy coherence, innovative financing, and strengthened institutional frameworks to achieve long-term sustainability and investment in renewable energy. They also urged the government to integrate microgrids into the country’s Nationally Determined Contributions (NDCs) to attract climate finance.
The roundtable titled, ‘Scaling the Potential of Mini/Micro Hydropower Plants (MHPPs) in Khyber Pakhtunkhwa & Gilgit-Baltistan: Opportunities and Instruments,’ was organized by Sustainable Development Policy Institute (SDPI) in collaboration with Pakistan-German Energy and Climate Partnership (PGCEP) here.
Mr Sebastian Jacobi, Director of KfW, reaffirmed the German Development Cooperation’s commitment to supporting Pakistan’s transition to clean energy, saying that €200 million has been allocated for hydropower initiatives in Khyber Pakhtunkhwa (KP) and Gilgit-Baltistan (GB) to strengthen the energy infrastructure.
Dr Abid Qaiyum Suleri, Executive Director of SDPI, said MHPPs provide cost-effective renewable energy to underserved communities, which need enhanced provincial policy support, public-private partnerships (PPPs), concessional financing, and access to climate funds. He also underscored the potential of carbon markets in ensuring long-term financial sustainability through the sale of carbon credits.
Dr Sebastian Paust, Head of Development Cooperation at the German Embassy, stressed the need for addressing key implementation challenges, security concerns, and financial sustainability issues such as line losses and power theft for long-term sustainability beyond grants and blended finance. He further emphasized that municipal and community-level capacity building is the key to long-term success of MHPPs in Pakistan.
Mr Aftab Ahmad Shah, Technical Expert at KfW, highlightedkey challenges facing micro and medium hydropower projects, including low maintenance budgets, shortage of technical staff, and inefficient outsourcing models. He emphasized the need for standardized climate resilient project designs, tariff mechanisms, regulatory reforms, and innovative financing models to attract private investment.
Dr Zeeshan from University of Engineering and Technology, Peshawar called for regular monitoring, predictive sensors, and flood early warning systems to enhance longevity and efficiency of MHPPs. He also deliberated upon as to how digitized monitoring and anomaly detection can improve load management and overcome inefficiencies.
Mr Masood ul Mulk, Chief Executive Officer of Sarhad Rural Support Program (SRSP), stressed that tailored community engagement strategies are essential for successful MHPPs implementation. He added that these projects generate up to 2 MW of affordable electricity, with rates of PKR 5 per unit for domestic users and PKR 8 per unit for commercial users, saving communities an estimated PKR 168 million over five years compared to national grid costs.
Mr. Sherzad Ali, Coordinator GBC (Aga Khan Development Network), provided insights into the growth of over 180 operational micro-hydro units supporting both domestic and commercial use. He said that these projects have evolved into community-led models with strong local capacity building. Socioeconomic analysis revealed an Internal Rate of Return (IRR) exceeding 30% and a payback period of 2–3 years, making them highly attractive for private sector investment, he maintained
Dr Irfan Yousuf, Consultant for UNDP and World Bank, called for stronger institutional synergy and policy support to facilitate microgrid development in Pakistan. High costs and limited financial viability make microgrids inaccessible for end consumers, he said and sought hybrid battery solutions, particularly in winters, to enhance reliability. He said Pakistan, learning from the successful models in the region, should integrate microgrids into its Nationally Determined Contributions (NDCs) to attract climate finance.
Mr Arshad Rashid, Chief of Programs at Pakistan Poverty Alleviation Fund underscored the importance of bankable feasibility studies, risk assessments, and economic modeling to attract private capital. While financing is available through development finance institutions and commercial banks, he warned private investors that security risks, high capital costs, and structural constraints remain key deterrents for private investors.
Mr Safdar Hayat, Deputy Director of Renewable Energy at Pakhtunkhwa Energy Development Organization (PEDO), outlined the ongoing efforts to integrate solar PV hybrid models into MHPPs to enhance scalability. He highlighted PEDO’s 6.95 MW hydro project supporting small industries and its portfolio of 13 operational mini/micro hydro projects across KP.
Mr Shahzad ul Hasan, Manager Finance at Acumen Fund, called for tax exemptions and investment-friendly policies to encourage private sector participation in renewable energy. He emphasized the need for blended financing structures, government-backed guarantees, and long-term return horizons (10-15 years) to ensure financial sustainability.
Mr Umar Pervez, Deputy Director of Renewable Energy at PEDO, emphasized the importance of performance-based incentives to attract communities, private investors, and international donors.
Ms Sadia Satti, Gender Climate Expert at SDPI called for greater gender inclusion in energy policies, noting the lack of female representation in decision-making processes. She advocated for gender-responsive climate finance, gender bonds, and policy frameworks to ensure women’s participation in Pakistan’s energy transition.
Mr Asad Mehmood, Technical Advisor for Adaptation, stressed the need for localized technical support and institutional frameworks to enhance the long-term viability of MHPPs.
The session concluded with the recommendation that tailored policy interventions, enhanced community engagement, and robust financial support are required to drive sustainable energy solutions.