Samoa Expression of Interest to Participate in SREP 1

Transcription

1 Samoa Expression of Interest to Participate in SREP 1 I. COUNTRY AND GOVERNMENT AGENCY SUBMITTING THE EXPRESSION OF INTEREST Samoa, Ministry of Finance II. DESCRIPTION OF THE COUNTRY AND ENERGY SECTOR CONTEXT Please provide a summary of the country and energy sector context, including resource potential for deploying renewable energy, status of energy access (population with access to electricity), renewable energy policies, targets, and implementation measures. Samoa is a small island nation in the southwest Pacific, consisting of four main inhabited islands and six smaller uninhabited islands with a total land area of roughly 2,900 km 2 and a population of about 187,000. The capital, Apia, is in the northern part of Upolu island where about 76% of the population reside. Samoa is a lower middle income country with a GNI per capita of USD 3,260. The level of serious or extreme poverty, measured by the proportion of the population falling below the food poverty line is 5% of the population whereas the average incidence of basic needs poverty, is 27% of the population. 80% of the population live in rural areas. Its size, remoteness from major global markets and vulnerability to natural disasters and the impacts of climate change are major constraints to its development. Its small economy is dependent on tourism, agriculture, fisheries, remittances and external development assistance. Economic growth is driven by commerce, construction, and transport and communications sectors; with the major exports being fresh fish, coconut oil, taro and nonu juice. The main imports are food items, petroleum and manufactured goods. Of total imports, about 21% are petroleum products. Samoa's climate is characterised by high rainfall and humidity, near-uniform temperatures throughout the year, winds dominated by the south-easterly trade winds. Samoa's wet season lasts from November to April and its dry season is from May to October. The annual rainfall is about 3,000 mm (varying from 2,500 mm in the northwest parts of the main islands to over 6,000 mm in the highlands of Savai'i) and about 75% of the precipitation occurs between November and February. Samoa commonly experiences tropical cyclones during the wet season, and is also vulnerable to anomalously long dry spells that coincide with the El Niño Southern Oscillation (ENSO). Samoa's greenhouse gas emissions totalled approximately Gg CO 2 -e in 2007 while CO 2 removals in forests and on croplands totalled Gg. 95% of Samoa's emissions come from six sources; Road transport (27%), Livestock farming (25%), Nitrous oxide from Agricultural Soils (13%), Electricity Generation (13%), Other Energy Consumption (10%) and Wastewater (7%). Carbon dioxide accounts for 51% of total CO 2 -e emissions of which more than 96% is attributed to the energy sector. 1 The expression of interest should not exceed 10 pages, including tables, charts, and annexes. 1

2 Samoa depends upon imported petroleum products for much of its energy needs. Total energy demand is met by three main sources, petroleum products (diesel, petrol, kerosene and LPG), biomass and hydropower. Currently approximately 80% of total energy used is derived from petroleum products, 17% from biomass and 3% from hydropower. The contribution of solar energy to Samoa s current energy mix is extremely small but is increasing. About 97% of the population have access to electricity. More than 85% of households are on prepayment electricity meters. The energy sector is categorised into three subsectors: Transport (54% of total primary energy) comprising of petrol and diesel not used for electricity (with a very small biofuels component), and essentially 0% renewable energy; Electricity (27% of total primary energy) comprising of non-transport diesel, all hydro and a very small solar component, with renewable energy sources for the subsector estimated at 13% of total but declining; and Heating (19% of total primary energy) comprising predominantly biomass (firewood) with lesser amounts of LPG, kerosene and a very small solar water heating component, with renewable energy for the sub-sector estimated at 86%. Sustainable energy supply is a key priority outcome in the Strategy for the Development of Samoa The main objective is to change Samoa's reliance on fossil fuels to renewable energy through promotion and increasing renewable energy investment and generation. The Energy Sector goal is to reduce the growth rate in the volume of imported fossil fuels by 10% by 2016, with the targets to increase the contribution of renewable energy to total energy consumption by 10% and the supply of renewable energy for energy services by 10% Renewable energy sources, currently estimated at 20% of Samoa s total energy market are comprised of biomass (firewood) for cooking, hydro, which constitutes approximately 13% of the energy required for generation of electricity, and a very small but expanding solar energy component. The unique characteristics of the Samoan electricity sector include the small size of the sector, existing electricity sector expertise exists mostly in the Electric Power Corporation, and competition is suitable only in electricity generation. Electricity generation, transmission and distribution are under the authority of the Electric Power Corporation (EPC) which is a government state owned enterprise. The Electricity Act 2010 established the role of the Electricity Regulator and has opened opportunities for Independent Power Producers to generate and sell electricity to EPC but as of now, no IPPs are operational. EPC has an objective to replace up to around 60m kwhr of diesel generation with generation from renewable energy sources. 2

3 Hydro and diesel power are the main sources of electricity production, and the generation sources and contributions of three years to 2011/2012 are shown in the table below: Location/Source Generation 2009/10(kWh) Contribution 2009/10 (%) Generation 2010/11(kWh) Contribution 2010/11 (%) Generation 2011/12(kWh) Contribution 2011/12 (%) Hydro Upolu Island 47,737, ,248, ,774, Diesel Upolu Island 51,662, ,709, ,078, Coconut Oil Upolu 155, Solar Apolima Island 3, , , Diesel Savai i Island 11,794, ,063, ,363, TOTAL 111,353, ,029, ,226, Electricity is generated primarily from reciprocating diesel engine generators from facilities on Upolu, Savai i and Manono Island. Hydro generation consists of one major dam-fed generator and a number of runof-river hydro generators on Upolu. A small (13.5kW) solar PV facility with battery storage is the sole generation source on Apolima Island (~100 residents). Maximum demand on Upolu is currently around 18MW with a minimum current demand of around 8MW. Maximum demand on Savai i is currently around 2.6MW with a minimum current demand of around 0.6MW. There is considerable potential for expanded renewable electricity generation in Samoa with hydropower opportunities, solar photovoltaic opportunities due to an abundant solar resource, and some biomass opportunities (via gasification and/or biofuel technologies), being the most advanced. There is a largely unassessed geothermal potential given Samoa s volcanic origins, and potential wind resource opportunity. Solar photovoltaic can substantially change Savaii island's renewable energy contribution in electricity generation while new hydropower can do the same for Upolu island. III. RATIONALE FOR SELECTED SECTORS FOR SPREP FINANCING Please identify barriers for the deployment of renewable energy, potential sector, sub-sectors, and technologies for possible SREP financing as well as the rationale for prioritising them for SREP interventions. Barriers to the deployment of renewable energy include high cost of technology transfer (equipment, transportation) and lack of access to appropriate technology, local skills to match the demands of operating and maintaining new technologies, weather conditions presenting uncertainties for some sources of renewable energy, insufficient data on energy sources/baseline data, technology tests and quality control mechanisms for technology, lack of awareness about energy efficiency and alternative energy sources, absence of incentives for the development of clean energy technologies and measures. The strategic direction of the Electricity Sub-sector is dominated by the potential for an immediate step change to a substantially renewable generation situation. This presents significant opportunities for the private sector to be more actively involved as Independent Power Producers (IPPs), as network operators and, by means of Interconnection Agreements, at the individual consumer level. The options of hydro, solar and wind are commercial but do not offer the economic advantages potentially available via biomass but biomass options are significantly more challenging to bring to market. 3

4 A comparative analysis of each of Samoa s renewable generation options for electricity generation is indicated in the following figure. Levelised Generation Cost sene/kwh (SAT/USD ) CapEx O&M Biomass gasification 0.5kW Indicative Biodiesel $3.40/litre Hydro 1.1MW Hydro 0.36MW Hydro 0.53MW Photovoltaic + batteries + diesel Photovoltaic + batteries (100%) Wind only Photovoltaic Only Diesel $2.60/litre old machines Diesel $2.60/litre new machines Upolu marginal cost of generation (new machines) Potential technologies for SREP financing in order of priority are hydropower, solar and wind. There are two hydropower sites that lack funding for deployment. There is available land for the installation of solar photovoltaic. There is also a viable wind power site. New renewable energy deployment will assist Samoa get closer to its energy sector targets of increasing the renewable energy contribution to total energy consumption and the supply of renewable energy for energy services, thereby increasing the access of the population to electricity generated by renewable sources that are secure, clean, affordable and sustainable, and reducing the country's reliance on imported diesel for power generation. IV. ENABLING POLICY AND REGULATORY ENVIRONMENT Please provide an overview of the existing policies, legal framework, market and regulatory structure for renewable energy development and the potential impacts of public and private sector interventions in addressing the barriers. Discuss the existing regulatory environment for attracting private sector investments in renewable energy technologies and governance within the energy sector, including commercial performance of the relevant institutions, pricing and tariff practices, competitive procurement of goods and services, the transparency and accountability of these practices and the degree to which they are subject to public oversight. The Strategy for the Development of Samoa (SDS) , focuses on strengthening economic resilience and encouraging inclusive growth. One of the key pillars of the strategy is to have a sustainable energy supply (Priority Area 3, Key Outcome 12), and supported by the strategies of i) promotion and increasing renewable energy investment and generation; ii) efficient, affordable and reliable electricity supply. 4

5 The Energy Sector Plan has efficient, reliable, safe, affordable and sustainable electricity services as a key policy outcome for the electricity sub-sector. The key strategies are improving the tariff structure; encouraging private sector involvement in electricity production; promoting electricity generation from proven renewable energy technologies; and promoting demand and supply side-management strategies for all consumers and EPC; promoting energy efficiency strategies across all consumer sectors; and Greenhouse gas abatement through renewable energy in the electricity sector. The National Policy on Combating Climate Change 2007, and the Greenhouse Gas Abatement Strategy both refer to greenhouse gas mitigation strategies and objectives that include renewable energy and energy efficiency. The key Acts and Regulations applicable to the energy sector are as follows: 1. Electric Power Corporation Act 1980; 2. Electricity Act 2010; 3. Petroleum Act 1984; 4. Planning and Urban Management Act 2004; and 5. Land Transport Authority Act The two key Acts governing the Electricity Sub-sector are the Electricity Act 2010 and the Electric Power Corporation Act The Electricity Act 2010 provides a new legislative framework for regulating the electricity sector, the establishment of the post of the Electricity Regulator and the Office of the Regulator, and for related matters. It also provides for the participation of the private sector in both generation and provision of electricity networks, with licensing the responsibility of the Electricity Regulator. The Regulations currently being drafted under the Act will determine electricity tariffs. The National Energy Co-ordination Committee (NECC) was established in 2010 in recognition of the somewhat dispersed nature of decision making in the energy sector, and the need to achieve a coordinated pragmatic approach recognising the substantial importance of the energy sector to the future of Samoa. The Energy Policy Coordination and Management Division (EPCMD) in the Ministry of Finance coordinates and monitors the Energy Sector Plan, policies and programmes, administers the Petroleum Act and is also the technical arm of the NECC. The Climate Resilience Investment Coordination Division of the Ministry of Finance coordinates national climate related investments and initiatives. The Electricity Regulator, a newly established division, in the Office of the Regulator, has the mandate to set/review tariffs, establish, monitor and enforce quality of service standards, issue and enforce licenses, and provide consumer protection. The Ministry of Natural Resources and Environment houses a Renewable Energy (RE) Division that undertakes feasibility studies and research into RE sources for Samoa whilst ensuring that environmental sustainability is maintained. The Electric Power Corporation is the sole provider of electricity and establishes and maintains all the infrastructure for both electricity generation and distribution. It also houses projects for the testing and piloting of RE technologies that feed into the country s grid. 5

6 The Scientific Research Organisation of Samoa (SROS) also conducts and pilots RE technologies to test their feasibility given Samoa s context. SROS has researched, developed and successfully piloted the use of biodiesel and currently have a total of 8 vehicles using this resource. The Ministry of Women, Community and Social Development (MWCSD) plays a key role as mediator between all the line agencies and the communities. They are key in ensuring that ownership is developed at the community level when RE and EE projects are established at this level. Hydro generation is the cheapest source of energy with a current direct cost to generate electricity (including repairs, maintenance and operational costs) estimated at 14 sene (US 6 cents) per kwh. The cost to generate does not significantly vary over time. The direct cost to generate electricity from diesel (including cost of diesel, repairs, maintenance and operational costs) is currently estimated at 82 sene (US 36 cents) per kwh. The electricity tariff consists of a base tariff and a variable fuel surcharge that is adjusted monthly based on fluctuations in the price of diesel. In December 2012, domestic customers on prepayment meters were charged US 36 cents for the first 50 kwh and US 43 cents for each kwh in excess of 50, based on a monthly billing cycle. The table below shows the movement in EPC electricity tariffs in Base Tariff (US cents) Monthly Fuel Surcharge Final cost per unit (US cents) Induction meters Cash Power (Prepayment meters) 50 kwh kwh kwh Upwards kwh Upwards kwh Jan % kwh Upwards Feb % Mar % Apr % May % Jun % Jul % Aug % Sep % Oct % Nov % Dec % The instruments pertaining to the procurement of public goods, works and services exist as part of the overall financial management of public funds, including the Public Finance Management Act 2001 (PFMA 2001), Treasury Instructions 2013, National Tenders Board Guidelines for Government Procurement by Public Tender, June 2008 (Tenders Board Guidelines) to name a few. The PFMA 2001 gives the ministries and state-owned enterprises responsibility for their own procurement but the Tenders Board holds responsibility for approving award of contracts within the range of SAT 50,000 and SAT 500,000 (USD 21,700 and USD 217,000) as well as for establishing rules and procedures relating to provisions contained in the Instructions and Regulations. Contract awards over SAT 500,000 are approved by the Cabinet. An outstanding deficiency in the procurement system is the absence of an independent complaints review mechanism. In 2013, the government through the Ministry of Finance began publishing full details of all 6

7 procurement tenders, notices and awards for contracts above SAT 500,000 on its website, in a timely manner. This has strengthened transparency, efficiency and probity in the use of public resources, by facilitating public scrutiny of government procurement. From July 2014, the government plans to reduce the threshold for publication to SAT 100,000 (USD 43,400). On the legal framework, organisation, policy, and procedures for internal and external control and audit of public procurement, a recent assessment was of the view that the system in the country provides for adequate independent control and audit mechanisms and institutions to oversee the procurement function. There is reasonably well functioning private sector but competition for large contracts is concentrated in a relatively small number of firms. V. INSTITUTIONAL AND TECHNICAL CAPACITY Please provide an analysis of the institutional and technical capacity for implementation, including the government's ability to effectively absorb additional funds. Please also provide a preliminary assessment of potential implementation risks. The implementation of the current portfolio of projects of the Electric Power Corporation is progressing satisfactorily. Capacity constraints have been a key limiting factor in implementation, but the absorptive capacity of both the government and the overall economy has gradually increased, contributing to a stronger base for assistance. A Financial Management Assessment of EPC s internal controls and accounting and audit procedures was undertaken in 2013 by the Asian Development Bank (ADB) for a proposed project and found that EPC s financial management practices and procedures are considered to be generally adequate for both the implementation and operational phases of the project. EPC s accounts and reporting structures are based on international financial reporting standards. The procurement capacity assessment done for the same project indicated that Samoa s procurement regulations and procedures are comprehensive, as and per usual, ADB will review the project s procurement processes. The PMU which is responsible for a major project under implementation has recent experience with ADB procurement policies. Some potential implementation risks are provided below: Risk Reduction in diesel use by the power sector may be offset by increases in other sectors. Land ownership and environmental issues delay implementation. Small Hydro Plants/Wind/Solar technology are customized equipment, which can cause long delivery times. Risk Assessment Moderate Moderate Moderate Risk Mitigation Measure Motivation of small industries and tourism sectors to use secure and affordable electricity instead of diesel generation; assumption that the growth of fossil fuel consumption in the transport sector will be stable in the future, due to the high migration overseas of Samoans. Engagement of a turnkey contractor staffed with social and environmental safeguards specialists, to coordinate closely with MDB and Implementing Agency(EPC) on conducting all safeguards policies. Inclusion of positive incentives in turnkey contract and bidding documents, such as price bonuses for early commissioning; advance procurement; adequate contingencies, e.g., price variation to be built into the bid 7

8 Therefore, implementation could be delayed leading to cost overruns. Possible shortage of technical qualified staff in implementing agencies could adversely affect the implementation schedule of the project. EPC staff might leave the company after completing the knowledge transfer program. Support, performance, and coordination at EPC could be inadequate. exposure to development of RE projects of counterpart local agencies can adversely affect project implementation. Integrating the new systems into the existing grid and achieving grid stability could pose technical challenges. The systems and equipment may not be operated and properly maintained. Decommissioning of equipment could adversely affect the environment. Overall -Moderate documents before initiation of procurement actions. The staffing shortage can be mitigated by the capacity augmentation provided by the project management consultant team, including a project manager to administrate the project, a project leader to implement the project, a project coordinator to coordinate logistics, a safeguards expert to facilitate land and resettlement aspects, and a financial specialist for managing financial aspects during tender process. Provide newly qualified staff with monetary and professional incentives to remain in the company, such as bonuses, and possibility to manage the newly constructed plants. Adequate capacity building program provided by the consultancy component of the turnkey contractor, which can be conducted for at least 2 years after commissioning. EPC has good field experience in implementing hydropower systems, some experience will also be provided in the current solar and wind projects which are/soon to be operational. For other RE technologies, project owner s engineers engaged for the project can support the learning process and facilitate the necessary coordination. Technical risks regarding stability of the integration of hydropower energy systems into the existing grid do not exist. For other technologies, adequate synchronizing and protection devices should automatically disconnect the equipment from the grid. This risk can be lowered through a long-term capacity development program to be implemented right after the tender process. A long-term service agreement with a reputable international services firm will reduce the risk to a minimum level. In addition, EPC is requested to report regularly on its O&M activities. The training to include EPC and project management teams, and to be carried out by the project owner s engineers. The project to include an environmental management plan. VI. PROGRAMS OF MDBS AND DEVELOPMENT PARTNERS Please describe briefly the ongoing and planned programs of the relevant multilateral development banks (MDBs) and other development partners relevant to energy access and renewable energy and how the proposed interventions for SREP would link to and build upon these programs. Samoa s development partners continue to play an important role in supporting the energy sector. The main development partners in the sector have been ADB, the Government of Australia, the Government of Japan 8

9 through the Japan International Cooperation Agency (JICA), and the Government of New Zealand through the New Zealand Aid Programme (NZAP). The Ministry of Finance (MOF), through the Aid Coordination and Debt Management Division, manages the flow of external financing, and coordinates and harmonizes donor processes and systems to ensure integrated assistance toward meeting Samoa s national development objectives. The effective and efficient coordination and management of the energy sector is the responsibility of the Energy Division of the MOF, in collaboration with relevant stakeholders. The government has achieved an acceptable level of development partner coordination for the energy sector. In addition, there are quarterly development partner meetings, and sector specific meetings which also assist in the coordination of development efforts. The support towards the development of the energy sector is delivered through technical assistance, loans and grants from different development partners. The most significant program in the power sector has been the ADB-led Power Sector Expansion Project, which included a number of capacity building and reform activities, and has strengthened governance and improved infrastructure in the electricity sub-sector. ADB has solid and extensive experience in the Samoa Energy Sector. The table below summarises on-going and new development projects in Samoa's Energy Sector related to energy access and renewable energy. Project Power Sector Expansion Project ( ) Development Partner ADB AusAID JICA Total Cost USD 100 million (ADB m AusAID - 8m JICA - 38m Government of Samoa - 12m) Objectives/outputs Improve the capacity of the sector to provide sustainable and reliable electricity services to all consumers at affordable prices. - supports EPC's Investment Plan to meet growing demand - improving operational efficiency and financial performance of EPC - regulatory and policy reform. Solar PV ( ) JICA (Pacific Environment Community Fund) USD 4 million Installation of 400kWp solar PV grid connected system Renewable Energy Development and Power Sector Rehabilitation Project ( ) ADB USD million (ADB m Government of Samoa m) Increased access to a higher share of electricity generated by hydropower - Rehabilitation and reconnection of three small hydropower plants (SHPs) in Upolu damaged by Tropical Cyclone Evan, producing a total installed capacity of 4.69 MW - Build and connect to the existing grid three new SHPs with a combined capacity of 0.81 MW - Operation and maintenance knowledge transfer program. Samoa Wind Power Plant ( ) United Arab Emirates (UAE-Pacific Partnership Fund) USD 5 million kw wind power plant -O&M Capacity Building Program to build EPC capacity for the operation and maintenance 9

10 Renewable Partnership ( ) Energy New Zealand Aid Programme NZD 14.5 million - Support to the Energy Sector (development of a least-cost energy investment plan for the energy sector, TA Office of the Regulator on PPAs and tariff pricing) - Investment in Photovoltaic Electricity Generation (1.5MW of PV generation capacity in EPC to be completed before the SIDS conference 2014, facilitation of private sector investment in additional PV generation capacity, funding of up to 4MW of PV generation capacity) - Feasibility, Design, and Potential Investment in Wind Energy Generation (feasibility and design work to confirm the viability, dependent on viability, installation and implementation) - Potential investment in ADB-led Renewable Energy Development and Power Sector Rehabilitation Project The proposed interventions for SREP would complement the current programs in support of achieving Samoa's development objectives of increasing access to clean, affordable and sustainable electricity and increasing the share of electricity generated from renewable energy sources and reducing reliance on fossil fuels. SREP interventions would support the Electricity Sector Investment Program in advancing the achievement of national renewable energy contribution targets. 10