SECRETARY GENERAL, AMBASSADOR SOLO MARA’S OPENING KEYNOTE ADDRESS
AT THE 2021 VIRTUAL ISLAND SUMMIT SESSION ON
“RENEWABLE MICROGRIDS: AN ECONOMIC, RELIABLE AND SUSTAINABLE ENERGY TRANSITION FOR ISLANDS.”
Tuesday 7 September 2021, 8.00am FJT
Thank you Moderator:
Ladies and gentlemen.
Good morning to you all from the Pacific.
I am delighted to be given this opportunity to make a few remarks at this important session titled “Renewable Microgrids: An Economic, Reliable and Sustainable Energy Transition for Islands.
I also wish to convey my sincere appreciation to Island Innovation for organizing this important event, the 2021 Virtual Island Summit and the invitation to participate. And hope that in sharing information and best practices we will be contributing positively to the building of resilient, sustainable and prosperous Islands worldwide.
At the outset I would like to state that Pacific Island leaders have made the transition to renewable energy a development priority for the region. And on the PIDF platform, this is part of our much bigger agenda of transitioning our member states into blue and green economies.
And it makes a lot of socio-economic sense! The cost of renewable-energy technology and materials are now affordable, particularly with China’s entry into the renewable energy market. And in a region with an abundance of sunshine, the Pacific has a lot of reliable sources of renewable energy in the sun, water and wind.
Renewable microgrids is therefore the obvious answer to a number of structural challenges and geophysical constraints that often hinder the implementation and progress of sustainable development in SIDS.
The four main challenges I want to highlight are:
- Geographic Isolation
SIDS are often located far from the major source markets for fossil fuel and other production centres, which inevitably make the cost of transportation and related expense quite high. And this has a spiralling effect on the cost of services and other commodities manufactured locally. Unfortunately for the Pacific, electricity production accounts for roughly 40% of petroleum/or fossil fuel use in the region. The long-term dependence on diesel generation (where the cost of fuel alone is typically at least US$0.20-0.30/kWh) has meant that the cost of electricity has remained among the highest in the world.
- ECONOMIC vulnerability.
SIDS economies constitute of small domestic markets and a relatively small manufacturing base. Relying on a narrow natural resource base thus makes for an undiversified economy. This limit achieving economies of scale, and reduced scope for private sector development – with attendant impacts on economic growth and job creation.
SIDS economies are also highly open – and thus are prone to the volatility of global trade and financial markets and economic downturns. The infrastructure costs – particularly for sustainable energy, communications and transport – are also re;atively high for small island states.
iii. SOCIAL vulnerability. The rapid population growth in most SIDS creates socio-economic stress for the provision of basic services and infrastructures. The islands are often scattered over a wide area of ocean, which affect the ability of governments to deliver public services due to its relative costs. Urban migration then becomes an inevitable option for those seeking better public services. But as you know, this then creates its own sets of socio-economic problems for governments in the urban areas.
- ENVIRONMENT vulnerability. This is often characterised by fragile natural environments such as threatened biodiversity, stress on water supply, land management challenges, etc. But SIDS are particularly vulnerable to the effects of climate change – like extreme weather events, sea level rise, coastal erosion and habitat degradation. Many SIDS have yet to build sufficient resilience to deal with these increasing incidences of natural disasters. And these creates a lot of uncertainties for island governments, and to many the only certainty for them is that these threats will intensify in the future.
We in the Pacific have been experiencing a lot of these natural disasters lately, now with greater frequency and intensity. In just the last decades, PSIDs have experienced natural hazard losses that, in any single year (World Bank Report 2012), have approached and in some cases exceeded the Gross Domestic Product (GDP) of our own countries.
And now Islands vulnerabilities has been worsened by the impacts of the COVID-19 pandemic. We are facing the most severe economic recession in history, with long-lasting repercussions for communities, businesses and governments.
- CURRENT STATUS IN THE PACIFIC
Against the backdrop of these challenges, countries and territories across the Pacific are further handicapped in the area of sustainable energy by: i) limited range of indigenous energy resources; ii) the high cost of developing energy resources and extending service to remote populations; iii) poor quality of energy data and trends; iv) a small base of skilled people to address the issues; and, v) weak bargaining positions with petroleum product suppliers.
Furthermore, access to electricity varies significantly. For example, nearly all the households in Niue, Nauru, Palau, Tokelau, Cook Islands, Samoa, Tonga and Tuvalu have electricity access, but in the more populous islands of PNG, Vanuatu and Solomon Islands, overall electrification rates remain very low at about 20% of households or less.
However, low-income households in all PICs use little electricity because of its high costs, even though these can be easily accessed. This is true for homes in informal settlements in urban areas.
Pacific Island governments also find themselves subsidising energy consumers on the main grid systems to mitigate this high costs, so retail electricity tariffs in the region are among the highest in the world. The high tariffs mean that there is significant scope for renewable energy to deliver tariff reductions and improve the commercial viability of investments in renewable energy-based power generation.
Overall, there is ‘strong support for renewable energy in the Pacific, because of the need to address climate change and energy security, and to address high electricity costs.’
But there is significant variation in the legal, policy and regulatory environment for renewable energy. In general, the ‘absence of a strong institutional set-up, effective regulatory frameworks, and effective policies and incentives are…regarded as key obstacles…’
The emergence of solar panels [photovoltaic (PV)] as an alternative solution across much of the Pacific is apparent’. Dramatic price reductions for solar panels over the past 10-years has brought the cost of solar generated electricity down to the point where it is competitive with most forms of commercial generation, which is particularly true for those grids where generation is mostly by diesel engines, as is the case in most of the PICs.
Currently most PICs have a few relatively large PV plants feeding electricity into the main island grids. Some of these are owned and operated by the state-owned power utilities, but some are financed, owned and operated by private sector independent power producers (IPPs).
- WAY FORWARD
As a “way-forward”, Solar energy is a modular technology that can be deployed on- and off-grid and its Small stand-alone systems offer the potential to pre-empt a shift from privatisation and centralisation (associated with fossil fuels energy production) to decentralised and community-owned assets.
Many PSIDS also adopt off-grid solar energy solutions (such as standalone Solar Home Systems and mini/micro-grids) to mitigate the difficulty of extending their electricity grids to hundreds of scattered islands.
The Department of Energy and the Ministry of Rural Development of Solomon Islands have been carrying out Solar Home Systems (SHS) programme that has provided electricity to 40% of the total number of households (108,041 HH) in the country. The government of Kiribati also has an ongoing SHS programme which provides electricity to over 5,000 households in its Outer Islands. The rural electrification project implemented by the Department of Energy of Vanuatu also aims to provide SHS to 85% of the dispersed off-grid households. Currently 96% of the population in Fiji has access to electricity, of which 25% uses SHS (data from the Department of Energy in Fiji).
At the PIDF we are supporting this effort by promoting a multi-stakeholder and an all of society participatory approach to the development of Renewable Energy in our member states. Currently we are rolling out the Solarisation of Head of States of Pacific Leader’s Residences where each system installed becomes a demonstration project of this multi-stakeholder approach involving the private sector and civil societies, to inspire the mass adoption of solar energy and other renewable energy technologies in member countries.
Another such initiative is the Capacity Building to Strengthen Sustainable Implementation of Renewable Energy Technologies for Rural Energy Access Initiative. The goal of this project is to contribute to increased energy access and reduction of carbon emissions through sustainable use of natural resources and renewable energy technologies in rural areas of Fiji, Vanuatu, Solomon Islands and Papua New Guinea.
There are various actors currently focused in this area in the Pacific who all work to support the development of the regional Framework for Energy Security and Resilience in the Pacific (FESRIP) 2021-2030. The focus of the 2021-2030 framework is to help the PICTs address their own energy sector priorities with a strong emphasis on improved energy sector resilience to adverse climate change and natural disasters.
Recently the region has tried to embrace the private sector as a provider of utility services including increased rural energy access. However, various attempts to get the private sector involved in the supply of energy and electricity have not fully materialised owing to a number of reasons, including:
- The lack of innovative energy policies and the gap between policy development and implementation.
- Perception of high sovereign risks amongst potential investors.
- Lack of effective legal and regulatory structures.
- Absence of national strategies to promote private sector development in energy.
- Inadequate financing of high up-front cost for renewable energy.
- Lack of understanding and support for green energy investments in the commercial financing and banking sectors.
Historically, a considerable number of energy projects have been funded under various donor programs. Often, private sector involvement was at least mentioned as an objective of these interventions, however, independent evaluations of these initiatives have often found that results were disappointing.
Often it comes down to the failure to recognize that, in the long run, private investors need to at least cover their opportunity cost and secure a fair return on their investment.
A particular challenge in Pacific small island states: is that the vulnerability and special characteristics of small states, and weak capacity in the private sector, contribute to perceived riskiness and difficulty in attracting private investment flows.
In conclusion, I can say that despite the many challenges to building sustainable renewable energy in Island communities, we in the Pacific are working with a wide range of partners to take advantage of the availability of small grid solar and hydro units that can provide stand-alone sources of electricity to rural and isolated island communities. It is especially important now in the context of the COVID-19 pandemic and the green recovery that is being planned to mitigate its effect on education, health and other social services in our island communities.
Yes, developing renewable microgrids can reduce persistent vulnerabilities and also build resilience in island communities.
I thank you for your attention.
 Refer to PPA & PRIF (2018), pp. 16-32 for a recent overview of the status of IPP involvement in the Cook Islands, Fiji, PNG, Samoa, Solomon Islands and Tonga.