OUTLINE OF EXPRESSION OF INTEREST TO PARTICIPATE IN SREP. The Republic of the Marshall Islands

Transcription

1 OUTLINE OF EXPRESSION OF INTEREST TO PARTICIPATE IN SREP I. COUNTRY AND GOVERNMENT AGENCY SUBMITTING EXPRESSION OF INTEREST Country: Government Agency: The Republic of the Marshall Islands Marshalls Energy Company, Inc. II. DESCRIPTION OF THE COUNTRY AND ENERGY SECTOR CONTEXT The Government and people of the Republic of the Marshall Islands (RMI) have been concerned about the country s dependency on electricity generated from imported diesel fuel, for which the RMI is spending about 30% of the country s GDP. The cost of diesel fuel in the RMI has nearly doubled over recent years and is likely to continue rising in the face of increasing global demand and shortage of supply. In order to reduce this vulnerability, the 20% substitution of diesel with renewable energy for the generation of electricity by 2020 is a policy firmly supported by the RMI Government. Currently, electricity in the principal centres of the RMI is totally generated using diesel generators. The applicant, the Marshalls Energy Company, Inc., (MEC) was granted a corporate charter by the Cabinet of the RMI in February MEC s principle lines of business are predominantly the generation and distribution of electricity and the buying and selling of petroleum products. MEC s articles of incorporation have authorized 75% of the company s shares to the Government of the RMI while MEC retains 25% of the shares. Thus MEC retains close ties with the RMI Government, especially in relation to the funding of capital projects and the setting of the company s electricity tariff. Since MEC diesel generators are no longer capable of further improvements in their operational efficiencies and as the price of fuel is expected to increase steadily in the future, and while electricity generation continues to be totally reliant on existing diesel generators, then any decrease in the electricity tariffs to an affordable level will not be feasible. MEC is therefore keen to shift from total reliance on diesel generation to a hybrid system of diesel and renewable energy generation. While it is not realistic for diesel generation to be totally replaced by renewable energy generation in the RMI, wind and solar are viable options for supplementing diesel generation and in doing so, significantly reducing the amount of diesel fuel consumed and making real monetary savings in less fuel purchased by the RMI. This in turn can reduce the electricity tariff as well as dispensing with the RMI government s subsidy to the electricity sector, thus freeing up more funds for other development projects. The RMI National Energy Policy (RMIEP) outlines three principal considerations namely: - i. Supply issues the provision of adequate, secure and cost-effective energy supplies through the promotion of indigenous energy resources, specifically renewable energy resources, using the least cost options and diversification of supply sources from both within and outside the country, is critical to ensuring security of supply;

2 ii. iii. Utilization issues efficient utilization of energy and to discourage wasteful and nonproductive patterns of energy consumption, is vital for a country that is so dependent on imported energy resources; and Environmental issues it is important that energy policies are targeted at minimizing the negative impacts of energy production, transportation, conversion, utilization and consumption on the environment. The electricity component of the RMINEP stresses the importance of establishing a reliable electricity supply to support socio-economic development. It also highlights the need for MEC to be nurtured and strengthened to ensure that electricity supplies are reliable and sustainable. Measures such as institutional strengthening, capacity development, asset management and promoting renewable energy technologies are given prominence. The link between energy and environment highlights the importance of having to place more efforts to the development of renewable energy resources available in the RMI. The development of renewable energy resources to diversify the energy mix in the RMI offers some degree of energy security. Renewable energy resources such as solar, wind and biofuel provide a good prospect to broaden the energy supply in the RMI. A 209kW grid-connected solar array on the roof of the National hospital has already been installed and commissioned in Majuro. A 209kW is not a small installation when compared to the size of the Majuro electricity system and represents 2% of the Majuro peak demand of 7.9MW. Monitoring, evaluating and training of MEC personnel in solar technologies is a continuing policy. Furthermore, through EDF9 and ROC Government funding, a centralized 21kW solar PV/battery systems and home solar systems have been installed and commissioned at several outer island secondary schools and homes throughout the Marshall Islands In its efforts to enhance energy security and to be a lead country in the use of renewable energy, the RMI Government has set a 20% renewable energy target for electricity generation by The MEC has a memorandum of understanding with the RMI Government through the Ministry of Resources and Development to oversee the management, implementation and maintenance of renewable energy projects within the Marshall Islands. This covers the solar home systems being provided to all outer island homes within the RMI including schools and health centers. MEC operates solar installations on twenty atolls and islands throughout the Marshall Islands. Typical Solar House Installation A typical solar house installation will consist of two solar panels mounted on an aluminium pole structure and connected to a deep-cycle battery, charge controller and circuit breaker, all mounted within a weatherproof box clamped to the support pole. Currently, there are a total of 2,675 houses throughout the Marshall Islands equipped with solar power installations. Installation sites are indicated on the following map of the Marshall Islands.

3 Wotho Atoll Kwajalein Atoll Likiep Atoll Ailuk Atoll Mejit Island Lib Atoll Ujae Atoll Wotje Atoll Lae Atoll Jabot Island Ailinglaplap Atoll Namu Atoll Maloelap Atoll Aur Atoll Arno Atoll Mili Atoll Namdrik Atoll Ebon Atoll Jaluit Atoll Majuro Atoll MEC Solar Installation Locations throughout the Marshall Islands

4 The following table details the locations and the number of households currently equipped with solar power installations installed by MEC throughout the atolls and islands of the Marshall Islands. LOCATION HOUSEHOLDS LOCATION HOUSEHOLDS Ailinglaplap Atoll 450 Likiep Atoll 130 Ailuk Atoll 84 Majuro Atoll 27 Arno Atoll 385 Maloelap Atoll 136 Aur Atoll 80 Mejit Island 80 Ebon Atoll 100 Mili Atoll 110 Jabot Island 23 Namdrik Atoll 121 Jaluit Atoll 270 Namu Atoll 164 Kwajalein Atoll 297 Ujae Atoll 73 Lae Atoll 51 Wotho Atoll 28 Lib Island 23 Wotje Atoll 42 The RMI Government s overall objective is to reduce the country s reliance on fossil fuels for electricity generation and to reduce greenhouse gas emissions by integrating photovoltaic electricity generation into the network. This is consistent with the priorities and strategies entailed under RMIEP, which is to promote the use of renewable energy resources through the implementation of cost effective, equitable, reliable, accessible, affordable, secure and environmentally sustainable energy systems. The action plan has been structured to increase the share of renewable energy in the RMI from 20% against the overall available generation capacity and will contribute towards achieving the renewable energy target by To achieve this and to address the various related issues and concerns, the following are the key intervention areas that would be carried out under the RMI action plan for implementing renewable energy projects. TYPE OF INTERVENTION 1. Solar PV grid-connected power systems. 2. Institutional Strengthening 3. Capacity Development Educational & Awareness Enhancement Monitoring & Evaluation of the Project DETAILS The installation & commissioning of 800kW of grid-connected Solar PV systems in Majuro and 200kW system in Ebeye. Support to the Renewable Energy and Energy Efficiency Unit of MEC and KAJUR, which will subsequently strengthen the action management mechanism that will contribute to the successful implementation of activities. Mobilize additional resources to develop the capacity of MEC and KAJUR to maintain and support the operations of Solar PV grid-connected systems. Feasible, practical and visible use of renewable energy for remote islands. To assess the overall performance of the action plan after 12- months operation following installation and commissioning.

5 III. RATIONALE FOR SELECTED SECTORS FOR SREP FINANCING The Government of the Marshall Islands is fully committed to National Energy Policy (RMIEP) which stresses the importance of establishing a reliable electricity supply to support socioeconomic development throughout the country. In its efforts to enhance energy security and be a lead country in the use of renewable energy, the RMI Government has set a 20% renewable energy target for electricity generation by As such, with the Government s full commitment to renewable energy projects, which in the Marshall Islands is principally solar, the only barrier preventing the Government from achieving its renewable energy target is finding sufficient funding agencies to finance all of its renewable energy projects. Essentially, the renewable energy program has been operating since 2008 and now only needs additional funding to complete the solar installation projects in the capital Majuro and in the outer atolls and islands in order to achieve the aforesaid goal. IV. ENABLING POLICY AND REGULATORY ENVIRONMENT The applicant, MEC s legal authority is derived from Article II of the company s Amended and Restated Articles of Incorporation which provides in part that: The purposes for which the Corporation is formed are to engage in all aspects of the business of generating and transmitting electricity and the buying and selling of fuel and all related products, along with any and all activities related thereto,.. In this respect MEC has the legal right to establish and promote renewable electricity generation which is what the company has been doing with its solar household program in the outer atolls and islands throughout the Marshall Islands. At present there are no existing policies in place, legal frameworks or market and regulatory structures governing renewable energy development in the Marshall Islands. However, this situation is currently being addressed under Japanese grant aid by the Okinawa Enetech Co; who are mandated to (1) develop a legal system for implementing renewable energy technologies, and (2) to determine the maximum permissible amount of renewable energy that can be connected to the MEC Majuro distribution network by independent renewable energy generators before the network becomes unstable. Once this threshold has been established, the Japanese consultant will draft legal statutes to be adopted by the RMI, governing the introduction and operation of independent grid-connected renewable energy investments from the private sector. It is envisaged that the regulatory environment for attracting private investments in renewable energy technologies, the governance of private investors and the setting of pricing and tariffs within the energy sector will be implemented by late

6 V. INSTITUTIONAL AND TECHNICAL CAPACITY The implementation agency, MEC, has a dedicated section responsible for solar all installations. The Renewable Energy Section comprises a number of trained and experienced engineers and technicians, having successfully installed to date some 2,674 solar home installations as well as larger solar arrays for secondary schools in many outer atolls and islands of the Marshall Islands. The Renewable Energy Section staff chart appears below. Damien Milne RENEWABLE ENERGY ENGINEER Billy Schutz SOLAR ENGINEER David Riklon Ned Nathan Mike Note Local MEC SOLAR TECH. SOLAR TECH. SOLAR TECH. ASSISTANTS MEC Renewable Energy Section Staff Chart Based on the MEC s successful implementation of its solar house installation program in Majuro and the outer atolls and islands of the Marshall Islands, it must be stated that potential implementation risks are minimal or insignificant. VI. PROGRAMS OF MDBS AND DEVELOPMENT PARTNERS The RMI s 30% renewable energy target by 2020 has been greatly assisted with grant funding from its development partners, namely the Government of the Republic of China, the Government of Japan and the European Union. The following table summarizes these grants. DEVELOPMENT PARTNER KEY PROJECT ACTIVITIES FUNDING Government of the ROC Home Solar Unit systems for rural households. $2,000,000 Government of Japan EU EDF 9 Program Installation and Commissioning of a 205kW solar PV grid-connected system for Majuro. Home and school Solar Unit System for rural communities $5,000,000 $4,000,000 EU EDF 10 Program Home Solar Unit Systems for rural households. $5,500,000 TOTAL (USD) $16,500,000 6

7 These funded projects have either been completed or near to completion. However, the goal of achieving the RMI s 20% renewable energy target by 2020 still needs considerable funding to accomplish. The MEC on Majuro Atoll and the Kwajalein Atoll Joint Utility Resources (KAJUR) on Ebeye Island operate sizeable diesel power station, and are therefore keen to shift from total reliance on diesel generation to a hybrid system of diesel and renewable energy generation. To this end, both MEC and KAJUR are planning to implement a solar PV gridconnected power system with generation capacity of 800kW and 200kW respectively. The peak demand for MEC in the RMI capital of Majuro is around 7.9MW. A solar installation with generation capacity of 800kW will replace diesel generation by 10% during daylight hours. This is significant as when added to an already installed 209kW solar array will account for close to 14% of Majuro s peak demand. In comparison, world power generation capacity using renewable energy is only about 2% of which solar power makes up just 0.1%. Percentage wise, this will make the RMI one of the world s leading countries employing solar generation. Although MEC has received considerable funding assistance from its development partners, these funds have been practically exhausted such that other funding sources are now required to continue the RMI s transition from diesel generation to renewable energy generation. Should the possible intervention by SREP become a reality, this will greatly assist the Republic of the Marshall Islands to achieve its goal of providing 20% of the country s energy needs with renewable energy by