The ambitious renewable energy targets set by many Pacific Island nations may be running behind schedule, but there is still a lot of activity and investment in the sector, pandemic notwithstanding.
“Some of them are on track, some of them are really late, and some of them will need to reassess where they’re going,” says Paula Vivili, Deputy Director-General (Science and Capability) at the Pacific Community (SPC) of the targets. “There is certainly a commitment from all the countries to be able to move away, for all the reasons that we know, from fossil fuels. And for some of the remote islands, the only possible solution for them would be renewable energy, solar or wind.”
The SPC has an energy team in Suva and hosts the Pacific Centre for Renewable Energy and Energy Efficiency in Tonga. Vivili says besides providing technical advice, SPC also plays a coordinating role when there are multiple partners involved in a project.
“In some places, we help move the dial, from getting work started, encouraging future expansion, into energy efficiency.
“But there are still a significant amount of people still not even getting access. 60% of the Pacific still does not have access to electricity. The majority of these numbers of course are in Melanesia, primarily in Papua New Guinea and Solomon Islands. And so for the smaller countries, not only is the goal of getting electricity a bit simpler, but the goal of them also converting to renewable energy is a little bit more manageable.” The example of Tokelau holds here; it went 100% solar in 2012.
Vivili says coordination is not easy, and the investment needed is significant. “The estimates of what is required are US$3 billion in order to meet the region’s renewable energy targets.”
The Asian Development Bank (ADB) is making significant investments into the sector, including total financing (direct and co-financing) of US$205.5 million into the Tina River Hydro project in Solomon Islands (see page 23). It has US$200 million actively invested in the Pacific Renewable Energy Investment Facility (PREIF), which is delivering 13 projects across the region. Principal Energy Specialist, Len George, says the main objective of PREIF is to help countries improve their energy security through small-value renewable energy projects.
George cites the Tonga Renewable Energy Project as one striking success.
“The ADB has gone in and supported battery storage systems through the public sector. So, then this is something that is procured and operated by the utility. And the idea is that, by having these battery storage systems, you could then attract private sector investments to come in and put up the solar PV investments and sign Power Purchase Agreements (PPAs).
“It has been tried out in other places, in small islands. We have done it in the Maldives. We are doing it in other larger countries, but the whole idea is that the utility then plays the role in trying to ensure that there is reliable power supply in the storage devices, and then the private sector can kind of come in and essentially get into ‘take or pay contracts’, so that investments can be recovered,” George explains.
ADB has partnered with the Green Climate Fund on this work, and the ADB’s private sector arm is assisting with a letter of credit facility to try and ensure that some of the key risks that developers typically see when they sign PPAs can be addressed, and they get paid on time.
Pacific Islands states’ renewables projects commonly face the challenge of intermittency; “you do not get to control how the sun shines, or how the wind blows, or for a small hydro, how the water would flow” is how George puts it.
“Therefore, there is a very large need to be able to manage that system effectively through investments and battery storage and control systems. That is something that has kind of increasingly come out. The minute you go over about 10% or 20% of energy coming in from renewables, there is a disproportionately high amount of battery storage controls that need to kind of come in,” he explains.
Floating solar and micro hydro
One of the innovations the ADB and others are trialling is floating solar panels, which remove the pressure on land acquisition or allocation for solar arrays. “There is also a slight increase in the productivity or the efficiency of the panels because they get cooled by the water, so the output can be a little bit more. So, it is kind of helping address all of these key barriers around trying to scale up,” George states. He says there is also work underway to marry marine aquaculture and renewable energy in countries such as the Marshall Islands and Palau. “In terms of floating solar itself, our immediate investments that are planned in 2022-2023 would be in places like Tuvalu, Kiribati and also in Tonga, where there is significant interest and there is work ongoing to be able to design these products and get them in.”
The ADB is also looking at how it can introduce renewables technology that is commercial elsewhere to the Pacific, such as micro hydro, electrolysers and hydrogen production that may work in small markets like the Marshall Islands or Palau.
Financing for the future
Renewable energy targets can signal political ambitions and intent, but as the SPC’s Paula Vivili says, “it’s not exactly easy money for renewable energy.”
“Now, if you go to ask people for money for renewable energy, they’re going to say, ‘What’s your priority? COVID recovery or many other things, or would you like to go for renewable energy? So potentially, you could see a little bit of a slowdown. But of course, you have IRENA and some of the other institutions who will really prioritise it, and therefore, they will continue to be strong advocates and funders of the work.”
IRENA (the International Renewable Energy Agency) signed an agreement with the Alliance of Small Island States (AOSIS) at the COP26 climate conference last year that will see them work closely to mobilise climate finance for renewable energy across Small Island Developing States (SIDS).
The difficulty of accessing such funds is a constant point of frustration for Pacific Island nations.
Besides the PREIF, which seeks to streamline investments in smaller renewables projects, the ADB is also supporting the development of sustainable investment plans for Pacific energy utilities, and engaging the private sector and encouraging ‘inclusive finance’. Its 2021 Energy Report states: “The program is encouraging private sector investment by using donor funds to backstop the payment obligations of power utilities. The design for each project under the program includes one or more of the following forms of financing support: partial risk guarantee, direct loan, letter of credit, or TA. It mitigates short-term liquidity risk through donor-backed letters of credit and supports long-term investment through partial risk guarantees.”
Len George says there are a number of challenges in providing would-be private investors with some peace of mind.
“There could be things around payment security in terms of currencies, in terms of how some of these payments will happen, what if there is a drop in demand, will there be a mass transformation? So, that is something for example, that is coming up increasingly during COVID. And when diesel prices kind of move dramatically. So those are some of the challenges that private sector investors are increasingly getting wary about, and that is where the ADB program through the public sector, and the private sector is trying to come in and help address some of these gaps.”
The ADB’s 2021 Pacific Energy Update noted that one of the biggest challenges for power utilities during the pandemic has been the steep drop in electricity demand, which “significantly impacted revenue collection and threatens far-reaching issues in the medium term, including grid instability. Decreased electricity demand has been most acute in the tourism economies, where commercial consumers (including hotels) account for as much as 50% of utility business and are severely hurt by travel bans.” The report states that at the peak of Fiji’s April 2020 lockdowns, Fiji saw a 25% decline in power demand, while utilities in the Marshall Islands and Tonga also registered 25% declines in electricity demand during their lockdowns.
George says while a drop in diesel prices mitigated the impact of declining demand to some extent, diesel prices are again on the rise. “That is when you are going to see some of this pressure, translating in terms of utility financials, ability to honour PPAs, the need for government resources, not just for obtaining existing investments, but also for planning for new investments in terms of equity support.”
There’s clearly still work to be done to bed down the commitments to make the Pacific’s renewables ambitions a reality, and national energy utilities are not out of the woods yet, although in some nations, borders are slowly reopening, and with them, the hope for increasing economic activity.
