Real estate

Renewable Energy Systems and Real Estate

By 15/09/2021 0 Comments

Introduction

According to a recent German Watch Report of the Long-Term Global Climate Risk Index 2020, Pakistan is the 8th most vulnerable country to the adverse impacts of climate change (The News, 2021). The demand for energy is constantly increasing in Pakistan as the country continues to develop its industry, agriculture, real estate, and transportation sector. However, the largest share of electricity generation is with the thermal sector, which uses LNG, coal, gas, furnace oil, and nuclear energy to produce electricity. Not only are these sources expensive and lead to a high cost of production, resulting in very high costs of electricity for the general and commercial consumer, but they also adversely impact the climate by contributing greatly to the emittance of greenhouse gases. Nevertheless, renewable sources of energy like solar systems are being widely implemented in various commercial and residential areas of Pakistan. These systems provide reliable and affordable energy to their users with low maintenance costs and multiple incentives in the form of tax breaks and goodwill in society. Continue reading to understand how renewable energy systems are transforming the real estate sector.

Renewable Energy and Pakistan

Realising the importance and potential of renewable energy in Pakistan, the Federal Government has set a target of achieving 20 percent renewable energy capacity by 2025 and 30 percent by 2030 in the national grid (NEPRA, 2020). However, achieving this herculean task will not be easy if the approach is limited to power stations that are based in remote locations. The high cost of installing and maintaining transmission lines alone will offset any perceived benefits over time. Therefore, the most appropriate method of introduction of renewable energy is to promote its usage in the residential and commercial real estate and agriculture sector. The declining costs of solar photovoltaic cells coupled with effective and efficient installation systems have made the adoption of solar energy the fastest growing sector of Pakistan. The State Bank of Pakistan (SBP) has also declared Renewable Energy the Sector of the Year for 2021-22 (Durrani, 2021). According to industry estimates, around 3500 MW of solar panels have been imported to Pakistan in the last ten years. Out of these, only 1000 MW have been installed in independent power generation plants, with the rest being deployed in the residential, commercial, and agriculture real estate sector.

Why Adopt Solar Energy Systems in Residential and Commercial Real Estate?

There are many advantages and upsides of installing renewable energy systems on residential and commercial real estate. Along with benefiting the environment in the form of generation of clean energy without burning fossil fuels, it also benefits the country in the future sustainability of energy. The real estate sector has a massive demand for energy which is also increasing with greater use and adoption of technologies in the construction and marketing area. Energy prices in Pakistan continue to increase at a fast pace, and with growing demand due to the expansion of the economy, future businesses also give an advantage to the estate that is self-sufficient in terms of its energy needs. Therefore, having solar systems installed on residential, commercial, and industrial units can greatly reduce the costs of energy for businesses and individuals while also helping increase the overall income generated by landlords of commercial properties.

Furthermore, a significant number of people have now gained awareness of climate-friendly strategies and opt for a greener lifestyle. They attach importance to living in homes and buildings that generate eco-friendly energy, while it also brings other benefits to them in the form of tax breaks and incentives from the government. Due to innovation in technology over time, the cost of installing a solar system has also been significantly reduced. There are now methods that are less invasive and keep intact the integrity of the structure. The use of special chemicals ensures that even after mounting solar brackets, the roofs remain waterproof and damage-free. Moreover, the climate of Pakistan presents a near-perfect picture for solar energy systems adoption. Summers usually last for several months, with roof-based panels also providing insulation from heat, thereby reducing energy requirements for air conditioning. Lastly, solar energy systems can improve a commercial and industrial estate’s net operating income and also help in the extension of lease terms.

Challenges in the Adoption of Renewable Energy Systems

There are serious challenges that impede the adoption of solar energy for residential and commercial consumers in Pakistan. As per the Alternate Energy Development Board (AEDB), a total of 16,639 applications for net metering of on-grid solar connections have been received by all distribution companies of Pakistan as of 31 July 2021. This only amounts to 314 MW of mid to large-sized residential and small to mid-sized commercial solar PV systems. A high initial cost can be one of the reasons for the slow adoption of the technology. However, the total number of loans under the State Bank of Pakistan’s financing scheme for renewable energy amounts to 423 since the launching of the scheme five years back, while the share of financing only stands at 2.5 percent of total on-grid installed systems. This shows the dismal picture of financing for solar systems in the country. Banks and financial institutions have remained sceptical of solar technology and local vendors. However, the market has taken significant leaps over the years, and more people are now aware of net-metering technology and rising imports of Solar PV panels. Another significant reason for the slow adoption of solar is that there is a lack of product understanding in the market and institutions. There are no formal efforts laid out by the government to promote a deeper understanding of how solar systems can help the general masses in their energy costs and sustainability.

Conclusion

Pakistan continues to face the threat of climate change as it is among the top ten countries most affected by it. The energy sector is one of the largest emitters of greenhouse gases as a large share of the generation process is based on thermal energy and the burning of fossil fuels. As demand for energy continues to grow in accordance with developments in the industry, agriculture, and real estate, the challenge of adopting sustainable energy sources for reliable and affordable energy become more highlighted. The Federal Government has set a target of achieving 20 percent renewable energy capacity by 2025 and 30 percent by 2030 in the national grid. The State Bank of Pakistan (SBP) has also declared Renewable Energy the Sector of the Year for 2021-22. It is hoped that by the adoption of prudent fiscal and awareness policies, the adoption of renewable energy in the real estate sector will increase significantly.

Bibliography

Durrani, M. K. (2021). Solar financing — push needing a shove. Retrieved from https://www.dawn.com/news/1646122/solar-financing-push-needing-a-shove

NEPRA. (2020). State of Industry Report 2020. 

The News. (2021). Pakistan is among the top 10 countries affected due to climate change. Retrieved from https://www.thenews.com.pk/print/787130-pakistan-among-top-10-countries-affected-due-to-climate-change

Research Questions

What are renewable energy resources being implemented in residential and commercial real estate?

What benefits do these sources offer?

What is the future of renewable energy in the real estate sector of Pakistan?

Key Takeaways

According to a recent German Watch Report of the Long-Term Global Climate Risk Index 2020, Pakistan is the 8th most vulnerable country to the adverse impacts of climate change.

The demand for energy is constantly increasing in Pakistan as the country continues to develop its industry, agriculture, real estate, and transportation sector.

Realising the importance and potential of renewable energy in Pakistan, the Federal Government has set a target of achieving 20 percent renewable energy capacity by 2025 and 30 percent by 2030 in the national grid.

The State Bank of Pakistan (SBP) has also declared Renewable Energy the Sector of the Year for 2021-22 (Durrani, 2021).

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