A framework for technology cooperation to accelerate the deployment of renewable energy in Pacific Island Countries

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A framework for technology cooperation to accelerate the deployment of renewable energy in Pacific Island Countries Emanuele Taibi a,n, Giorgio Gualberti b, Morgan Bazilian c, Dolf Gielen a a

International Renewable Energy Agency (IRENA), Bonn, Germany African Development Bank, Abidjan, Côte d’Ivoire c International Institute for Applied Systems Analysis, Laxenburg, Austria b

H I G H L I G H T S


We analyse the energy sector of Pacific Island Countries (PICs).
We assess current development finance practices for the energy sector of PICs.
We develop a new framework to orient technical cooperation for energy in PICs.

art ic l e i nf o

a b s t r a c t

Article history: Received 17 November 2015 Received in revised form 24 February 2016 Accepted 6 March 2016

When considering renewable energy, Pacific Island Countries (PICs) focus on energy security and affordability as primary benefits. In Melanesia, access to modern energy services represents a major unfinished agenda. To that end, Pacific Energy Ministers have endorsed the Framework for Action on Energy Security in the Pacific (FAESP) in April 2011. The associated implementation plan (IPESP) was developed, however never formally endorsed. PICs have instead taken a pathway towards national energy transition roadmaps. This paper describes the current status of the energy sector in PICs, the main challenges and the barriers to the deployment of renewable energy and the role of international cooperation in accelerating deployment. In the context of this analysis, technology cooperation is treated as the sum of cooperation on “orgware”, software and hardware. These three dimensions are explored in the context of the Pacific energy sector, looking at how development finance (DF) is currently distributed among them. Looking at the key barriers identified and the areas where DF has been focused to date, this paper proposes a framework for removal of barriers to the deployment of renewable energy in the Pacific through more focused use of DF and technical cooperation. The framework identifies key goals, actors, activities, resources necessary and indicators to monitor progress. & 2016 Elsevier Ltd. All rights reserved.

Keywords: Pacific Island Countries Renewable energy Technology transfer Development cooperation

1. Introduction The Pacific hosts some of the smallest and most remote countries in the world. This peculiar situation poses several challenges to the delivery of modern energy services in a sustainable, affordable and reliable way. Lack of scale, limited local capacity and challenging logistics are some of the main factors that contribute to an energy sector almost entirely dependent on diesel fuel for power generation, with the notable exception of those countries with substantial hydro power resources (i.e. Fiji, Samoa, Vanuatu and Papua New Guinea). The high degree of dependence on imported, price-volatile fossil fuels, puts a considerable pressure on n

Corresponding author. E-mail address: [email protected] (E. Taibi).

the already fragile trade balance of Pacific Island Countries and raises concerns over their energy security. The countries with a high share of diesel generation are also characterised by high electricity prices, hindering energy access to affordable modern energy services, affecting economic and social development. This is true also in countries where electricity tariffs are kept artificially low by not allowing the power utility to fully recover its costs, thus affecting its ability to perform the necessary maintenance on generation and distribution assets, therefore compromising its ability to operate efficiently and to reliably supply of electricity to its customers. Pacific countries have abundant and mostly unexploited renewable energy (RE) resources. A greater adoption of RE would likely bring a series of benefits – the extent of which is largely dependent on local conditions – including: reduced energy prices, improved trade balance, increased energy security and strengthened local

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Please cite this article as: Taibi, E., et al., A framework for technology cooperation to accelerate the deployment of renewable energy in Pacific Island Countries. Energy Policy (2016), http://dx.doi.org/10.1016/j.enpol.2016.03.009i

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economy. Exploiting locally-available renewable energy resources is also the most appropriate way to extend access to modern energy services to remote areas, especially in the context of isolated islands where grid extension is not physically or economically viable and fuel transportation is difficult and costly (REN21, 2012; UNEP, 2012; IEA RETD, 2012). Pacific island leaders are advocating for an acceleration in the uptake of RE. At the regional level, Pacific Energy Ministers have endorsed the Framework for Action on Energy Security in the Pacific (FAESP) in April 2011 (SPC 2011). However the associated implementation plan (IPESP) was never endorsed and put in practice. The FAESP represents the guiding regional framework for energy in the Pacific and, as the name suggests, has a main focus on energy security, pursued through national planning, improvements in energy efficiency, greater adoption of RE and, where appropriate and applicable, regional and sub-regional petroleum procurement approaches. Most PICs developed national roadmaps, charts or energy plans, often with assistance from development partners. This is for example the case for Cook Islands, FSM, Kiribati, Nauru, New Caledonia, Samoa, Tonga, Tuvalu and Vanuatu. Others, like Tokelau, have already transitioned to nearly 100% renewables. As of 2015, almost all PICs had roadmaps in place (IRENA, 2015a, 2015b). The international community, donors and development partners are also supporting the energy sector of PICs with technical assistance and development finance (DF) which, for every single country in the region, reaches much higher per capita levels compared to world average (see Fig. 8). The objective of this paper is to suggest key focus areas for technology cooperation to accelerate the adoption of renewable energy in the Pacific, proposing a framework for increasing the effectiveness of international cooperation in the energy sector. Following this introduction, we analyse the status of renewable energy adoption in the Pacific and the main barriers to the acceleration of RE deployment in the region. We then consider technology cooperation in its different dimensions and analyse the status and modus operandi of the cooperation activities for the energy sector in the region. Based on this analysis, we propose a framework for more effective technology cooperation to accelerate RE deployment in the Pacific through a sharpened focus on key barriers, followed by concluding remarks.

2. The Pacific energy sector Pacific Island Countries present heterogeneous local conditions and availability of renewable energy resources. Countries with larger land mass, typically tropical elevated rocky islands, are often endowed with abundant hydro power resources and generally already partially exploiting this renewable energy source in their energy mix, presenting substantially lower and less volatile electricity prices compared to neighbouring countries that rely exclusively on fossil fuels – essentially diesel used in internal combustion engines – for power generation, as shown for the countries on the left hand side in Fig. 1. Looking at the change in the RE share over time, progress is noticeable only in a few countries between 2010 and 2012, while some others have shown a drop in the RE share, explained by the fact that electricity demand growth is being supplied with an increase in diesel generation, reducing the share of RE over time (Fig. 2). For a glossary of the acronyms used in the figures from PPA, defining the name of each Pacific power utility, please check Table 1, which also refers each utility to its country of operation. In the region, there is an increasing focus on solar photovoltaic (PV) systems as a way to reduce dependency on diesel fuel for power generation. Although there are donor funded PV systems in every Pacific Island Country, the resulting share in the electricity mix was generally below 2% in 2009 with limited progress in 2012 (Fig. 2). In some cases, progress after 2012 has been rapid (e.g. Samoa and Cook islands), however mostly private sector driven (IPP) and not captured yet in the statistics available. In general, the RE share is projected to rise rapidly in many countries in the region due to the momentum created in the last few years, and the rapid decrease in solar PV costs. It is however important to note that exceptions exist already, like in the case of Tokelau, a New Zealand territory composed of 3 isolated atolls half-way half-way between New Zealand and Hawaii. At the end of October 2012, Tokelau moved from 100% diesel-based electricity to nearly 100% renewable energy, provided by three solar PV systems for a total of 1 MWp, in combination with a comparatively large, advanced lead-acid battery storage system. The transition was fully funded by the New Zealand government and costed ca. 7.5 Million NZ$ (currently ca. 6 Million USD). This translates into an investment of ca. 4500 USD/person, which is offsetting the cost of diesel imports, estimated at 819,500 NZ$, or ca. 650,000 USD per year in 2012 (PowerSmart, 2012).

Fig. 1. Average electricity supply cost by power utility for the Pacific. Source: PPA (2015).

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Fig. 2. renewable energy share in power generation for all Pacific utilities, 2010–2012. Source: PPA (2015). Table 1 List of power utilities and acronyms for all Pacific Countries and Territories. Source: PPA (2015). Acronym Name

Country/Territory

ASPA CPUC CUC

American Samoa Fed States of Micronesia (FSM) Commonwealth of N Marianas

American Samoa Power Authority Chuuk Public Utility Corporation Commonwealth Utilities Corporation EDT Electricité de Tahiti EEC Electricité et Eau de Caledonie EEWF Electricité et Eau de Wallis et Futuna ENERCAL Societe Neo-Caledonenne D’Energie EPC Electric Power Corporation FEA Fiji Electricity Authority GPA Guam Power Authority KAJUR Kwajalein Atoll Joint Utility Resources KUA Kosrae Utilities Authority MEC Marshall Energy Company NPC Niue Power Corporation NUA Nauru Utilities Corporation PPL PNG Power Ltd. PPUC Palau Public Utilities Corporation PUB Public Utilities Board PUC Pohnpei Utilities Corporation SEA Solomon Islands Electricity Authority TAU Te Aponga Uira O Tumu -TeVarovaro TEC Tuvalu Electricity Corporation TPL Tonga Power Limited UNELCO UNELCO Vanuatu Limited YSPSC Yap State Public Service Corporation

French Polynesia New Caledonia Wallis & Futuna New Caledonia Samoa Fiji Guam Marshall Islands (RMI) Fed States of Micronesia (FSM) Marshall Islands (RMI) Niue Nauru Papua New Guinea (PNG) Palau Kiribati Fed States of Micronesia (FSM) Solomon Islands

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2.1. The existing regional energy framework The FAESP “was formulated in response to the call from Pacific Leaders at the 40th Pacific Islands Forum in Cairns (August 2009) for greater energy security” (SPC, 2011) and emphasizes that technological solutions need to be, “cost-effective, technically proven and appropriate”, while acknowledging the importance of capacity building to ensure proper maintenance and operation of RE systems. Most importantly, the FAESP clearly states that each country should invest in its human capital for energy, “to gain the skills needed for planning, management and implementation of national energy plans”. The suggested means to reduce the energy vulnerabilities outlined in the FAESP are:


Mainstreaming energy security into national planning and budgetary processes.


Improving energy efficiency and conservation.
Adopting financially viable renewable energy sources.
Where appropriate, taking regional and sub-regional approaches to petroleum procurement.

Cook Islands

2.2. Economics of energy security in the Pacific

Tuvalu Tonga Vanuatu Fed States of Micronesia (FSM)

The price of electricity in PICs is high in absolute terms (Fig. 1). Once compared to the size and affluence of local economies, the impact of energy cost becomes a serious macro-economic concern: energy imports are a considerable burden on the economy of all PICs, representing for most countries between 10% and 20% of the GDP, with rapid variations year-on-year, due to the volatility of oil prices, as the vast majority of energy imports are indeed refined oil products. Once translated from the macro to the micro level, the impact of energy expenses on the disposable income of Pacific households is also considerable. Households spend more than 10% of their income in energy in all countries except for Samoa, while in Niue and Cook islands3 this share goes beyond 25% (Fig. 3). Electricity access is also an unfinished agenda in the region (Fig. 4), with the most populated countries being the least electrified ones, leaving over 77% of the households in the Pacific without access to electricity. Excluding PNG from the average,

Energy access, renewable energy and energy efficiency are clearly interconnected and positively reinforce each other, as it is also recognized by the three interlinked objectives of the UN SE4All initiative1 and by the Sustainable Development Goal 7,2 as adopted in September 2015. Furthermore energy efficiency measures, both on the supply and demand side, are considered the most cost-effective strategy to reduce diesel consumption in the energy mix of the PICs (Johnston, 2010) but unfortunately are frequently neglected due to limited awareness and their lesser visibility than, for example, large RE projects. Despite its importance, a detailed discussion of the barriers to the 1

implementation of energy efficiency measures in the Pacific goes beyond the scope of this paper.

http://www.se4all.org/our-vision/our-objectives/. http://www.un.org/ga/search/view_doc.asp?symbol ¼ A/RES/70/1&Lang¼ E

3 According to SPC IPESP data, Fiji's figure is 25%. However, IPESP source is the 2008–9 HIES of Fiji, which shows a figure of only 3%, roughly half for electricity and half for direct purchase of fossil fuels.

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Fig. 3. Expenses on energy and impact of fossil fuel imports on GDP in selected Pacific Island countries, 2009. Source: SPC energy security indicators country profiles, 2012.

given its population being more than half of the region's and its energy access the lowest, would reduce the share of non-electrified households to 45%. With large shares of non-electrified population, Melanesia drives the average figures – and the agenda – for energy access in the region, with the situation being substantially better in Polynesia and Micronesia. 2.3. Barriers to renewable energy deployment in PICs A survey was administered in 2012 by the International Renewable Energy Agency (IRENA) to several energy officers from PICs, regarding barriers to renewable energy deployment in their respective country (IRENA, 2012a). According to the survey responses, the main barriers to renewable energy deployment in the Pacific can be grouped as following: Capacity: limited personnel dedicated to renewable energy in national institutions. Lack of quality training on RE at the national level, from policy makers level down to O&M training for technicians, seems to be a common reason for the lack of qualified energy professionals in PICs. Financial: specific areas, like resource assessments and

feasibility studies, are in need of stronger financial support from government and donors. In addition to the lack of investmentgrade resource assessment and feasibility studies, the limited scale of the energy sector in PICs often limits the interest of international investors. Data: many respondents pointed at lack of data as one of the factors hampering renewable energy deployment. Lack of quality data affects all areas of the energy sector in PICs, from absence of a comprehensive and updated energy balance, to lack of high-frequency, detailed electricity data from power utilities. Lack of data on renewable energy resources is also a major hurdle for projects as well as policy development, not informing the prioritisation and optimal location of projects, and preventing the development of the necessary quantitative policy support tools. Institutional and regulatory: respondents to the survey pointed at poor definition of roles at the national executive level as a frequent problem, leading to overlap of responsibilities. Lack of clear institutional and regulatory frameworks is also identified as one of the limiting factors to private sector participation, in contrast with the growing expectation from PICs governments that Independent Power Producers (IPPs) could play an important role in the

Fig. 4. Electrification shares and population without access in selected PICs, 2009. Source: SPC (2012).

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financing of RE deployment in PICs. Infrastructure: a frequent concern is the lack of infrastructure for transportation of equipment. The ability of existing electricity system to integrate growing shares of renewable energy is also a common concern. Grid stability studies could address this barrier, and many have been conducted or are currently being developed by IRENA and other development partners (incl. New Zealand and the World Bank) for many PICs. Social: lack of adequate consultation with local communities is a frequently reported problem that leads to widespread ownership issues, land tenure problems and unwillingness to pay for energy services. Other sources (i.e. Painuly, 2001) group barriers to renewable energy deployment in similar categories: Market Failure/imperfection; Market Distortions; Economic and Financial; Institutional; Technical; and Social, Cultural and Behavioural. Most of the barriers identified by the respondents to IRENA can be grouped under the categories presented by Painuly, with the exception of technical barriers. However, lack of technical standards and regulations for renewable energy are indeed compromising the quality of the deployment of renewable energy technologies in the Pacific, while not directly preventing the deployment itself. In fact, limited adoption of internationally recognized standards and regulations contributed to failures in several RE projects in the Pacific, leading to reduced confidence in RE technologies from PICs leaders (Wade, 2005) and only temporary benefits. Lack of coordination in the process of planning, project development and deployment leads to inefficiency in the transition towards RE in Pacific SIDS, which has been recognized by IRENA and many partners in 2014 with the establishment of the SIDS Lighthouses Initiative. The Initiative aims at catalysing and coordinating efforts of development partners in support of SIDS and their efforts in transitioning to a renewable energy future.4

3. The three dimensions of technology cooperation for renewable energy in the Pacific Technology cooperation and technology transfer are of particular relevance for the uptake of renewable energy in PICs, due to the endemic lack expertise and limited access to the latest technologies and associated technology knowledge. Technology transfer is defined by IPCC as, “a broad set of processes covering the flows of know-how, experience and equipment […] amongst different stakeholders such as governments, private sector entities, financial institutions, non-governmental organizations (NGOs) and research/education institutions” (IPCC, 2010). Dobrov (Dobrov, 1979) breaks down technology into its main components specifying that, “technology is the sum of hardware, software and orgware”. While hardware in our case is simply the equipment that will produce energy from renewable resources, and the software is constituted by the knowledge required to design, operate and maintain these renewable energy systems, orgware is often the overlooked component in technology cooperation projects. Specifically, Orgware is defined as “a set of organizational arrangements, specially designed and integrated using human, institutional, and technical factors to support appropriate interaction of the technology and external systems” (Dobrov et al., 1979). Orgware has been used frequently in the context of the recent technology work on climate change, with a particular focus on the institutional component:” Orgware refers to the 4 http://www.irena.org/EventDocs/S2_Emanulele_Taibi_Lighthouses_MAP_ and_Honolulu.pdf

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institutional set-up and coordination mechanisms (and change) that are required to support the implementation of hardware and, in particular, software.” (Christiansen et al., 2011, UNFCCC, 2014). The same authors recognize that “Whilst hard and soft technologies are often introduced in isolation, it has been recognized that their simultaneous integration with orgware is necessary for success in adaptation” and “Though all three technology types are necessary, there is a concern that hard technologies are currently prioritised and often employed in isolation” (UNFCCC, 2014). For the purpose of this paper, and in line with the more recent definitions, we will focus on the institutional framework as key element of the orgware to support and enable the sustainable deployment of RE, and will elaborate on the above statement – made in the context of technologies for adaptation in agriculture – showing that the same is true also in the energy sector of the Pacific: the main focus of development cooperation for technology transfer in the energy sector of the Pacific has been on hardware, and orgware needs stronger support to make technology transfer effective and long-lasting. 3.1. Orgware: the institutional framework Being able to locally create knowledge on renewable energy technologies is the first step to enable a paradigm shift from assistance-based, ad hoc, small-scale renewable energy projects towards self-sustaining, large-scale deployment of renewable energy in PICs. Trained policy makers can create more effective policies and regulations. Availability of locally-trained installers and technicians can lower the overall installed cost of renewable energy projects, allowing for more capacity deployment with the same investment. This will also radically reduce the costs associated with lack of professional maintenance, which translates in poor efficiency and, ultimately, unreliable energy supply. One of the essential components of the institutional framework that needs to be addressed is the strengthening of the role of energy offices in the government structures. With a few exceptions, energy offices in the Pacific have limited personnel, if not only one single staff, sometimes with limited or no educational background in energy. Considering the relevant share that energy expenses have in the GDP of Pacific Island Countries (Fig. 3), more substantial budget allocations are needed to enable national energy offices to develop a solid energy policy and planning process, and political support must be given to these offices and the policies produced by them. Even a modest percent reduction in the cost of importing fossil fuels due to better energy policy and planning would pay back any reasonable additional budget allocation to strengthen energy offices. One interesting example is the Tonga Energy Roadmap (TERM), a plan and supporting processes designed to deliver on the aspirational national 50% RE target for 2015. In mid-2015 TERM had generated ca. 70 Million USD of grant funding, and ca. 6 MW PV have been installed (of which 1.8 MWp off grid), with 1.5 MW of biomass and 2.5 MW of wind in the pipeline for 2016 (TERM progress report 2015). Key components of TERM are strong commitment at the Prime Minister level and a mandate to coordinate all energy policies and decisions, an oversight committee including key ministers and CEOs of government organizations (TERMC), a TERM Implementation Unit, regular review and coordination meetings with Development Partners and an effort to keep everyone's effort coherent to the roadmap. As a final step to get to deployment, strong lobbying for funding at the regional and international level has been particularly successful (TERM, 2013). The structure is specific to the circumstances and needs of Tonga, and although its success in terms of meeting the government renewable energy objective so far has been limited, certain elements that proved effective could be replicated elsewhere in the region.

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Fig. 5. Institutionalization of the Tonga Energy Roadmap into a dedicated Ministry structure.

The main lesson is that successful roadmaps are more than ad-hoc reports written by short-term consultants: they need a proper institutional embedding and a clear set of actionable actions (Gielen, 2013). After a few years of piloting through a dedicated implementation unit (TERM-IU), energy has been institutionalised in the government structure, with responsibility given to the deputy Prime Minister (see Fig. 5). Due to the limited energy expertise in the government structures of Pacific Island Countries, there are still many opportunities for grant funding that remain unexplored or untapped.5 As a basic example, the cost of hiring a person with strong energy background, capable of writing successful grant proposals, could be easily covered by a small fraction of the grants this person would be able to leverage. If the person identified has also expertise in energy policy development and the necessary supporting quantitative analytical skills, this additional person could also become a key asset in the policy development process, playing a key role in strengthening the orgware in the country. A recent survey on the readiness of a Small Island Developing States to deploy renewable energy posed many orgware-related questions to experts and public officials of Pacific countries (selected indicators are presented in Table 2) (IRENA, 2015a, 2015b). The analysis of the answers confirms that, although almost all countries have specific policies to promote RE, and a dedicated office for energy planning processes, their impact is constrained due to inter alia limited adoption of quality standards, of defined procedures to develop RE projects and promote investments, and insufficient capacity to develop viable project proposals for grant, loan and private financing. 3.2. Software: capacity needs Having training programs set up in local training institutions and the energy offices properly staffed is only a first step. The following phase is how to create knowledge through these training institutions, and to identify the most effective means to educate from policy makers to technicians on renewable energy matters. Technology cooperation efforts should use the existing training institutions, strengthening them to address the domestic capacity gaps in the different aspects of the RE continuum. Training the trainers provides longer lasting results than repeating one off, ad hoc trainings for each technology cooperation project 5 for a comprehensive review of funding options for energy, see Limaye and Zhu (2012) and Gualberti and Taibi (2011).

that takes place. The same applies for the policy makers: trainings should increase the knowledge inside the institutions, both the ones providing training and the ones directly involved in the energy policy process. In the case of PICs, the small size of energy offices means that in the event of staff leaving, typically for better paid jobs or retirement, it is difficult and lengthy to find a replacement. In the meanwhile, key institutional knowledge is often lost. The training of trainers approach has been implemented, among the others, by the North REP project6 in the Federated States of Micronesia, where the training components have been conveyed through the local college, in order to provide the contents, teaching methods and practical tools for the incorporation of renewable energy technologies into existing vocational courses for electricians. The strengthening of policy makers' capacity of producing sound energy policies and regulations needs to be addressed under the software components of technology cooperation activities. As the orgware has to essentially provide energy offices with sufficient personnel, and to enable them to get the policy it produces effectively implemented, the software component should support these offices in the adjustment of the country's body of policies, plans and regulations. As Pacific Island leaders have expressed it in several occasions,7 there is a need for Independent Power Producers (IPPs) to scale up renewable energy deployment in the Pacific. However, several Pacific Island Countries do not have regulations for IPPs to operate under the existing legal framework, with cases where the existing laws prohibits electricity production to entities other than the public power utility. This is reflected by rapid development of IPPs in some countries, and no IPPs in place in most of the others (See Fig. 6). Another important issue is the transition from an electricity tariff structure based on diesel fuel cost as a variable component added to the fixed costs, to a tariff that incorporates the different cost structure associated with a significant share of renewable energy in the electricity generation mix. Both of these issues have to be addressed under the software components of a technology 6 North REP stands for North Pacific ACP Renewable Energy and Energy Efficiency Project. It is funded by the European Union under the 10th EDF funding window and implemented by the Secretariat of the Pacific Community. North REP covers the Federated States of Micronesia, Palau and the Republic of the Marshall Islands. 7 For instance, this was raised again by more than one government official during the Pacific Islands renewable energy workshop organized by IRENA in Sydney in October 2011.

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Table 2 Selected orgware-related indicators for Pacific countries, (IRENA, 2016). Green indicate yes, yellow stands for some progresses and red is no.

Fig. 6. share of electricity generated by IPPs in 2011 and 2012, for all Pacific utilities. Source: PPA (2015).

cooperation framework, through tariff review studies and amendments to the laws to allow IPPs, in order to have the necessary conditions for rapid, large-scale deployment of renewable energy technologies in the Pacific. Lastly, with the exception of hydro power and geothermal, most of the other renewable energy resources – notably solar and wind –

are variable. This is an additional challenge that requires capacity building to the power utilities to ensure reliable operations. Understanding of grid stability concepts, dynamic modelling of the power generation, transmission and distribution infrastructure, deferrable loads, advanced inverters, and eventually electricity storage technologies are key components to ensure a stable power

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grid with increasingly relevant shares of variable renewable energy technologies. IRENA, in cooperation with the Pacific Power Association (PPA) is working on the development of grid stability models for the power utilities in the Pacific (IRENA, 2012b). The first pilot study has been developed for Palau, followed by Samoa, Cook islands and Fiji in the Pacific, and several studies in the Caribbean. 3.3. Hardware: technology needs In the Pacific there has commonly been a problem with operation and maintenance of renewable energy systems.8 Local capacity, as well as difficult logistic and availability of spare parts, should be taken into account in the design of renewable energy systems, assuming that a poorly operated or non-maintained system will have a lower efficiency and a shorter lifetime. Taking into account these elements would favour technologies that require low maintenance and that are easier to operate. In addition, higher quality equipment – generally more expensive – will last longer in the harsh salty environment of most Pacific Island Countries. Replacing corroded or failed components, especially in remote outer island locations, involve long lead times, sometimes many months, in some occasion even one year or more.9 Additionally, standardisation of hardware has to be considered to minimize the need for capacity building in small power utilities. If the utilities will be the ones operating and maintaining the renewable energy systems, it is fundamental that, to the extent possible, the operation and maintenance of these systems is standardised. Different donors sometimes provide equipment with different specifications and this requires additional effort for the power utilities to look after systems that require specific knowledge to be operated and maintained. In the case of solar PV systems, this mainly applies to programming and troubleshooting of power electronics like inverters and charge controllers. For certain applications, reliability of power supply comes at a premium. As an example, one of the main benefits derived from providing power to a remote rural clinic is the possibility to keep and administer vaccinations on site. However, if the clinic is powered by a solar PV system and the battery bank is not sufficiently large, in the case of an unusually long series of cloudy days, the system might run out of power. This is not uncommon, as during cloudy days artificial lighting will be used also during daytime, depleting the batteries even faster. Failing to provide light a few hours a month is not critical; however, failing to keep vaccinations constantly refrigerated will make them unusable, defeating the main purpose of electrifying the rural clinic. Systems should be designed to deal with such supply security issues with for example through PV-diesel-battery hybrid systems, and users should be educated on their operation and maintenance procedures. Unlike in many larger countries, the high reliance of PICs on diesel for power generation makes the transition to commercial RE technologies cost effective under current market conditions without the need for grants or government support, with technologies like solar PV and wind reaching grid parity in more and more countries every year (Bazilian et al., 2012; REN21, 2012; UNEP, 2012; Szabo et al., 2011; IEA RETD, 2012, IRENA 2014, IRENA 2015a, 2015b). However, expanding energy access to remote populations in the Pacific usually requires small isolated systems, as the geography prevents the option of grid extension. This usually comes at a high upfront cost. 8

Among the others, see UNESCAP (2005). In the Federated States of Micronesia some islands are only reached by one ship twice a year. It can therefore take up to six months to detect the failure of some component in these islands. If the necessary spare parts are not available on site, they have to be procured and installed on the following trip of the ship, up to six months later. 9

This paper argues that, if any support for purchase of hardware is provided through Development Finance, it has to be targeted to those areas in the Pacific where people currently have no access to modern energy services. RE technologies installed in an existing diesel grid (e.g. grid-connected solar PV or wind) provide immediate fuel savings to pay back the investment, therefore are generally financially viable without the use of grant funding, provided a smart design of financing packages (IRENA, 2012b). This ignores the fact that utilities are often part of government or de facto under government supervision, with electricity prices set at a level that does not allow for the retention of earnings to empower the utilities to inject equity into the financing of RE investments. Many PICs are not able to provide sovereign guarantees because of high levels of indebtedness, a precondition for accessing loans from International Financial Institutions (IFIs). Pacific Island Territories, such as the Cook Islands, are often unable to borrow from most IFIs due to their legal status as associated to an affluent country, therefore not on the list of Official Development Assistance (ODA) recipients. However the establishment of a feed-in tariff in the Cook Islands has resulted in a high response of IPPs, leading to government capping the capacity additions. This shows that well designed policy mechanisms may be able to break the grant dependency. However, viable business models for cost recuperation remain critical for harvesting the benefits from increased RE deployment. In the case of new electrification of rural households, there will be no initial fuel savings to design a cost recovery financing scheme, therefore the investment will be paid back exclusively through tariff collection or subsidies. This makes a case for targeted use of DF for supporting the initial expansion of energy access to remote rural areas.

4. International cooperation characteristics and modalities We have performed a qualitative and quantitative analysis of development finance projects for the energy sector of Pacific Countries, for the period 2000–2013, using OECD-CRS database.10 Development Finance commitments to Pacific countries increased considerably in the last decade and since 2008 always surpassed the 2 USD billion yearly (in 2013 terms).11 The energy sector storically has not been one of the main areas of support. Its share over total commitments remained generally below 4%, and below the world average, albeit an upward trend is noticeable since 2005 and particularly in 2013 (Fig. 7). The amount of Development Finance per capita is much higher in the Pacific than in any other region, reaching a level of hundreds of dollars per year per person for the less populated countries (Fig. 8), with a strong correlation between low population and high per-capita DF. Nonetheless, development partners have been increasing their support for the energy sector of the Pacific, as demonstrated by the commitments expressed in the Pacific Energy Summit 2013.12 DF for the Energy Sector can be further disaggregated by purpose13 (Table 3). We note that the most funded item in the Pacific is power generation, with a prevalence of renewable energy sources and particularly solar. This is particularly evident 10 We considered both Official Development Assistance (ODA) and Other Official Flows (OOF), together forming Official Development Finance (ODF). 11 The 2013 figures are substantially higher due to the various large committments approved in that year, including two projects in PNG financed by Japan and ADB for more than 120 USD m. one regional Project from EU with more than 47 USD m. and two projects in Tonga financed by Japan and New Zealand for 34 USD m. 12 https://www.aid.govt.nz/about-aid-programme/how-we-work/policiesand-priorities/investing-economic-development/pacific-ene-1. 13 Purpose codes in the CRS database have been further aggregated to ease the analysis.

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Fig. 7. Energy Commitments – Share over total commitments (excluding emergency aid and debt relief) for the Pacific region and for all recipient countries, and absolute values for the Pacific region (USD 2013 Millions). Shares data (dotted lines) are 2-years moving averages. Elaboration over OECD data.

Fig. 8. Development Finance for the Energy sector per capita and per year, 2000–2009 average, USD 2009.

comparing with the global flows, where for instance generation is second after transmission and distribution, the lead of renewable energy generation on non-renewable is much smaller, as much smaller is the share of solar PV on energy financing. This reflects the growing awareness on the importance of RES in the region. DF purposes recorded in the aid statistics do not exactly match with the split among hardware, software and orgware introduced previously. We have therefore made a bottom-up, project by project analysis, considering how project budget has been allocated to different components, each of them linked to either orgware, software or hardware, through a screening of available projects documents.14 On the base of this analysis we split each 14

In this case we limited the analysis to the projects with a value equal or greater than 0.5 USD million (2013). Projects included represent 69% of the total number of projects and 97% of the value. Available project documents as well as project titles and description have been used.

Table 3 Development finance for energy in the Pacific, 2000–2013 (2013 prices). Elaboration on OECD-CRS database. Million USD (2000–2013)

Share in Pacific (%)

Share in developing countries (%)

Energy policy and administrative management Non Renewable Power Generation Renewable Power (of which PV) Transmission & Distribution Energy Education and Research Others

154.4

20.30

22.70

152.9

20.10

21.30

244.8 112.9 203.4

32.20 14.90 26.80

24.40 2.10 29.30

3.2

0.40

0.30

0.7

0.10

1.90

USD m. (2013 prices)

759.4

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Fig. 9. Development Finance projects by component – 2000–2013. Elaboration on OECD data and project data.

project in hardware, software and orgware which was subsequently aggregated to obtain the shares in the number and value of projects (Fig. 9). As expected we found that the great majority of projects, both in number and in value, are devoted to hardware components followed by orgware activities and software. The growth in orgware financing is particularly pronounced in the latest 5 years taken into consideration. This renewed focus on strengthening the enabling environment and the institutions is welcome. Although there cannot be a universal recipe indicating what is the most efficient level of hardware, orgware and software DF for each country, this paper argues that, given the specificities of Pacific countries, technology cooperation should focus on orgware, to create the necessary conditions to effectively steer many Pacific Island Countries away from diesel generation and accelerate the deployment of renewable energy at scale, given the business case is already in place. Lack of capacity at the country level is one of the main limiting factors to the identification of the most cost-effective solutions for the replacement of fossil fuels with renewable energy in power generation, for the development of realistic yet ambitious energy plans and to access DF for the energy sector. Numerous financial facilities exist, both from bilateral and multilateral development partners, which could greatly support the removal of barriers hampering the deployment of renewable energy technologies in the Pacific. Often these facilities are too complex to access for the national energy offices, and many smaller Pacific Island Countries are unable to submit acceptable proposals. This is made worse by a common misconception that grants alone are sufficient for the achievement of the ambitious renewable energy targets that have been adopted. While grants are useful for technology demonstration, barrier removal and for building the capacity of local actors on specific renewable energy technologies, significant deployment requires investments of at least an order of magnitude larger than the current level of available grant funding (Gualberti and Taibi, 2011; Bazilian et al., 2011; Nussbaumer et al., 2011; IEA, 2010). IRENA has been running a series of events in summer 2015, in partnership with the governments of France, US, Japan and Germany, with a focus on accelerating deployment of RE in Small Island Developing States (SIDS). Among the key findings, the lack of bankable project proposals was one of those that emerged clearly. The lack of strong regulatory authorities being another key one, which supports the argument that strengthening the institutional framework is key

for the accelerated deployment of RE in the region, as argued by this paper. Limited fiscal surplus prevents direct investments in RE from governments, while the high electricity tariff creates a strong case for loans, available from commercial banks and IFIs. IFIs usually provide particularly favourable conditions and associated free technical assistance, much needed for the successful deployment of technologies like solar PV and wind, still relatively new to most power utilities in the Pacific. However, accessing funding from IFIs has proven to be challenging for many PICs. The main challenge seems to be the lack of capacity to prepare bankable project proposal, while in a few cases the high level of sovereign debt is a major barrier. This is evident from the results of the IRENA Quickscan, where only Cook Islands, Samoa and Solomon islands feel like having the capacity to develop viable project proposals. Private sector participation should play a growing role in the Energy sector of the Pacific, driven by the profitability of renewable energies and innovations in the delivery and business models. So far the private sector participation has been limited mostly to some larger countries (e.g. Fiji, Samoa, Vanuatu) where relatively small companies provide design and installation services for grant-funded projects, with few attempts at the RE service company (RESCO) approach. Some IPPs are emerging in the countries where the regulatory framework has been designed to be conducive to this approach (see Fig. 6). To further enhance the growth of a private-led renewable energy sector, an holistic approach will be needed, including reforms in the regulatory and policy environment, business development support and risk mitigation instruments to improve the bankability of projects, reducing the interest rates applied by commercial banks and the risk for equity investors, which usually consider small developing countries as high risk for lending (IEA RETD, 2012).

5. Towards a framework for technology cooperation on renewable energy in the Pacific RE deployment could be initiated by accessing the available grant financing for technology demonstration, capacity building and risk mitigation; as we have seen in Section 4, most PICs receive a substantial amount of DF per capita, and the framework presented here suggests a more focused approach for the allocation of DF for the energy sector in the Pacific. However, grant

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funding alone is not sufficient to achieve the level of deployment necessary to steer PICs away from an almost complete reliance on oil products: deployment needs to be scaled up through soft-loans from development banks, climate financing and other development partners and by creating the enabling environment for the private sector to invest into the large scale deployment of renewable energy in the Pacific. The high electricity tariffs in the regions, coupled with the sustained decrease in cost of RE technologies, create the expectation that the private sector could play a leading role in RE hardware deployment, if the necessary orgware and software have been previously put in place. In particular, there is an urgent need for addressing the orgware, to create a level playing field for the private sector and public utilities to work together to reduce the cost of energy supply for PICs through the widespread use of RE. Well trained policy makers are needed to create, update and implement a stable policy framework for renewable energy deployment in PICs. The baseline for the power sector is a high cost generation through diesel; however, although the potential for renewable energy technologies to provide more affordable electricity is there,15 it remains largely unexploited to date. As an integral part of this deployment, national capacity needs to be strengthened in all of its dimensions, from the policy making, to the technical expertise on RE technologies as it is evident from the results of the IRENA Quickscan for the Pacific SIDS (IRENA, 2016). Looking at the group of indicators for capacity building it is noted that only five out of thirteen countries have educational programs for energy available, that the technical capacity to install, operate and maintain RE equipment is fully present only in three and that no country has the capacity to plan and manage power grids with a high share of intermittent RE. Although in past donorfunded projects some ad-hoc trainings were delivered, retention of expertise has proven to be difficult, and lack of institutionalization of training courses did not allow for continuous development of indigenous capacity. Some solutions have been tested in different contexts,16 but not yet successfully proven in the Pacific. In the long term, investments in the education sector of each country are needed to create the local energy experts of the future. This applies all the way from policy makers to technicians. Clear, credible and realistic policies must be accompanied by the necessary budget allocations and regulations, but this is not always the case. The SIDS inquiry (IRENA, 2016) notes that, out of 13 Pacific SIDS examined, RE targets are present in nine cases but that development is limited to four. Furthermore the necessary public or private financing to achieve the targets is partially present in just four cases, and not available in all the others. In the majority of the sampled cases, wholesale electricity prices do not take into account the variation of generation costs from intermittent renewable sources and retail tariffs do not pass to consumers savings derived from RE implementation. These issues are however critical in order to develop credibility for the private sector and the financial institutions. Without an associated budget commitment and effective regulations, any policy will unlikely bring the results for what it has been designed. On the hardware side, adoption of the most appropriate technical standards for the specific context is critical. It is not necessary to develop ad-hoc national or regional standards, as international standards cover the most diverse needs for hardware specification, installation, grid-connection and maintenance. There are specific standards for resistance to water and dust intrusion (e.g. IP or NEMA), specific grades of aluminium and steel resistant to

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corrosion and oxidation in salty environment (e.g. AISI 316), specific electrical standards that cover any detail of an electrical systems, from connection standards to safety, from cable quality and sizing to grounding (each PIC has already adopted standards from one of these three: US National Electrical Code, Australia/New Zealand, or France/EU). The necessary effort on standards is to identify the most appropriate existing ones for the national conditions and incorporate mandates for application of these standards at the national level.17 It remains important to ensure that support is given for the establishment of the appropriate standards for hardware that is suitable to local conditions, both in terms of size (e.g. smaller power systems require adequately smaller wind turbines compared to those installed in continental large systems) and capacity to withstand harsh environmental conditions (e.g. marine-grade technology and installation hardware, design systems to withstand cyclones and typhoons, which are common in the region). Based on the considerations made so far, the following framework is presented, to identify goals, actors and concrete actions for the transition of PICs towards mostly-renewable-based energy systems (Table 4). A link is also made to the Indicators of the Implementation Plan on Energy Security in the Pacific (IPESP). Based on these indicators, country profiles have been developed for each PIC by SPC (2012), which provide both quantitative and qualitative data. From this framework, we selected specific qualitative indicators for monitoring the progress of individual PICs towards a more conducive environment for renewable energy deployment. The IRENA Quickscans for the Pacific partners of the SIDS Lighthouses Initiative also provide an updated snapshot of the current status of each SIDS in regards to its readiness to deploy renewable energy within the power sector at an accelerated pace, and can be considered the most comprehensive and up-to-date mean of verification of the indicators suggested in this framework. Some additionally quantitative indicators are also suggested, to monitor the progress in specific activities suggested by this framework.

6. Conclusions Energy security has risen to the top of the policy agenda in the Pacific. However, barriers remain for the transition from an energy sector based on imported oil products to one based on locally available renewable energy resources. Where hydropower resources are available, they have been successfully developed, and additional capacity is under construction in the region. Where hydropower resources are not available, the deployment of other renewable energy technologies is still hampered by organizational, capacity and financial barriers. The deployment of RE technologies without the necessary orgware, software and hardware components in place, is unlikely to deliver the necessary change in the pace and scale of deployment necessary to address the energy challenges currently faced by Pacific Island Countries. Although the drastic reduction in the price of PV modules currently makes solar power generation cheaper than diesel generation (Bazilian et al., 2012; IRENA 2015a) and the number of projects and their size is rising, the contribution of the several PV systems in the Pacific is still relatively low. Many of the PV systems are still grant funded projects, while the level of investment from private sector and public utilities in solar PV remains low.

15

See Bazilian et al. (2012) for the revised economics of solar PV. See, as an example, the training of grandmothers on solar technologies from the Barefoot College in India: http://edition.cnn.com/2011/TECH/innovation/01/24/ barefoot.college.india/index.html. 16

17 For a complete overview of RE standards, please visit the IRENA INSPIRE platform (IRENA, 2015b)

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Table 4 Proposed framework for technology cooperation on renewable energy in the Pacific.

Goals

Orgware

Software

Hardware

Strengthening national and regional policy making and training institutions in the field of renewable energy Creating an enabling policy and regulatory framework for private sector involvement in the deployment of renewable energy

Build the capacity of national policy makers on renewable energy planning and policy development Build the capacity of national stakeholders for project preparation, both to apply for development finance and to attract private equity investors Empower national regulatory authorities in the development of efficient and effective regulations based on quantitative analysis. Empower national regulatory authorities in the development of efficient and effective regulations based on quantitative analysis. Enable national training institutions to deliver quality accredited vocational and graduate trainings in the field of renewable energy Building technical capacity in the private sector and public utilities for supporting the deployment of renewable energy (i.e. on installation and maintenance of RE systems, and operations of power grids with large shares of variable RE)

Identification of the most appropriate technologies and technical standards for RE systems in each PIC Deployment of the most appropriate RE technologies on a large scale in each PIC

Development partners, national governments, regional and national training institutions, private sector, public utilities

Development partners, IFIs, commercial banks, private sector, public utilities

Participants

Development partners, national governments, regional and national training institutions

Scope of Activities

Creation of vocational and graduate courses Ad hoc trainings for policy makers on energy planning in renewable energy in local training institutions Support to policy makers by regional and internaStrengthening of the role of national energy tional organizations on the development of naoffices tional regulations on renewable energy Creation of policies and regulations for the Train the trainers courses to national training inpromotion of renewable energy stitutions and institutional support for the incorporation of renewable energy topics in their vocational and graduate courses Ad hoc trainings for the private sector and public utilities on installation, operation and maintenance of renewable energy technologies

Qualitative Indicators Leadership, governance, coordination (from the IPESP) Status of Energy Administration Energy Legislation Co-ordination and consultation Energy Planning, Policy Regulation Energy Planning Status Enabling Framework for Private Sector Participation Quantitative Indicators

Number of vocational courses in renewable Number of policy makers that attended an energy energy established locally planning training in the last 5 years Number of graduate courses in renewable energy established locally

Number of technical assistance activities on energy that provided support for development of energy regulations in the last 5 years

Number of people in the national energy office with tertiary education in energy

Number of train the trainers courses delivered to national training institutions on energy in the last 5 years

Existence of an energy policy that covers renewable energy Existence of regulations that effectively support implementation of the energy policy Resources

Energy Planning, Policy Regulation Energy Sector Regulation Renewable Energy Renewable Resource Knowledge Least Cost RE Development Plan End-use Energy Consumption Appliance Labelling Availability of National Energy Balance

Development partners, government own resources, training institutions own resources

Number of trainings delivered in-country for installation, operations and maintenance of renewable energy systems in the last 5 years

Focus hardware support to increased energy access (where applicable)

Identification of the most appropriate technical requirements and existing standards for renewable energy technologies in the Pacific context Strategic allocation of all the available funding sources to deploy renewable energy technologies on a large scale in the Pacific

Where providing access to electricity is not commercially viable, focus grant funding for hardware in this area

Financing, Monitoring & Evaluation Availability of Financing Information Monitoring Framework Access to Energy Electrification Rate Access to Small Scale Power rural Access to Modern Energy rural

Number of internationally recognized standards suitable for local conditions adopted in National regulations

Number of different funding sources (i.e. grants, loans, IPP, government, etc.) used for deployment of RE systems

Share of donor funded energy projects that provide RE hardware for energy access (for countries without 100% access to electricity)

Development partners, private sector, local training Development partners through grant and institutions concessional finance, commercial loans, public utilities own resources, private sector equity investment

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Likewise, for the deployment of renewable energy technologies for which the Pacific is rich in resources (wind, coconut oil, in some places hydro power and geothermal) knowledge of the resources available, capacity to develop bankable project proposals, capacity in operating and maintaining the technology, conducive institutional frameworks, land access rights and tailoring of the hardware to the local circumstances are crucial. This paper proposes a more focused approach, based on identification and removal of barriers in all of the three dimensions of technology, to enable more effective technology cooperation in renewable energy for the Pacific.. Technology cooperation plays a key role, as initial efforts in renewable energy in the Pacific have been essentially donor-funded, and the small scale of PICs makes donor funding particularly relevant in relative terms. This paper argues that technology cooperation efforts should focus first on the removal of barriers, development of favourable policy frameworks and strengthening of local capacity, rather than mainly on hardware and individual project development, especially when it is not tailored to local conditions. Risk mitigation would be the ideal way to effectively utilize grant funding to leverage hardware deployment, rather than fully supporting the investment cost. From the data on DF discussed in this paper, a need for more attention to orgware and a more focused, replicable approach to hardware is necessary. On the software side, more efforts are needed to retain the capacity that is developed, through targeted support for the creation of a regional market for renewable energy experts from the region. Local educational institutions, such as colleges and universities, can play a major role in helping the transition to RE by serving as a key institutional player with regards to both orgware and software. It is clear that overcoming the energy challenges related to the extremely small scale and remoteness is particularly challenging and is indeed a matter of ongoing work for many governments and developing partners. Although solutions applicable to all do not exist, we argue that orgware should be addressed first, if the progress on software and hardware has to be maintained. The donor dependency (Fig. 8) is certainly a concern, especially in some countries, although it may also be the solution if through DF smaller SIDS are able to implement sustainable energy systems. The resilience of this transition still requires the necessary conditions to be put in place, and this paper tries to identify the key conditions on which support should focus. Ultimately, given the heavy reliance of PICs on imported, expensive petroleum products, opportunities for a shift to renewable energy are today greater than ever before. However, local institutions, policies and regulations are still slowly gearing-up for the transition. Widespread lack of capacity makes these changes in PICs slow and difficult to achieve. The analysis of DF flows shows a considerable amount of funding per capita dedicated to energy in PICs. This is an opportunity for addressing the barriers that prevent this transition, by more focused technology cooperation efforts that help to develop local institutions, policies, regulations and build the capacity of national actors in the energy sector to prepare for the implementation of renewable energy. The ambition of this paper is to provide a first step towards more focused technology cooperation efforts to accelerate the deployment of renewable energy in Pacific Island Countries.

Disclaimer This document has been produced without formal editing from the International Renewable Energy Agency, African Development Bank or IIASA. Responsibility for the opinions expressed rests solely with the

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authors. The views expressed in this document do not necessarily reflect the views of IRENA, AfDB or IIASA. The designations employed, descriptions and classifications of countries, and the presentation of this document do not imply the expression of any opinion whatsoever on the part of IRENA, AfDB or IIASA concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its economic system or degree of development. Terms such as “developed”, “industrialized” and “developing” are intended for statistical convenience and do not necessarily express a judgement. Any indication of, or reference to, a country, institution or other legal entity does not constitute an endorsement.

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