Costs of Renewables in Pacific Island Countries (PICs)

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IRENA Workshop Accelerated Renewable Energy Deployment in Islands with Emphasis on the Pacific Islands Costs of Renewables in Pacific Island Countries (PICs) Katerina Syngellakis Senior Engineer IT Power 26 28 October 2011, Sydney, Australia

Presentation Plan Intro on RE and the Pacific Resource available & limitations Relevant RE Technologies Why is information on costs important Cost data from RE projects in the Pacific Data gaps some ideas Conclusions

What does the Pacific need from Renewable Energy? PICs need to gradually diversify their energy portfolio almost all are 99% dependent on diesel Proven, reliable technologies that can be implemented today to reduce dependence on fossil fuels and increase reliability and access Solutions adapted to the Pacific economic, environmental, geographic and cultural context Systematic supporting mechanisms to build capacity before, during and after installation of RE infrastructure and to provide O&M in the long-term

Which RE? Some issues specific to PICs Limited RE resources and measured data Limited land availability and access Harsh environmental conditions and severe meteorological hazards (tsunamis / cyclones) Long distance supply chains and limited / unpredictable sea and air transport Limited human resources in energy sector vs growing demand for energy services Small markets / small private sector Limited capital investment available

Summary of resource potential Country Solar Wind a Biomass Hydro Geothermal OTEC Wave a Cook Is FSM???? Fiji Kiribati unlikely?? Marshall Is.?? Nauru unlikely?? Niue???? Palau???? PNG???? Samoa???? Solomon Is.???? Tonga?? Tuvalu unlikely???? Vanuatu???? Source: Adapted from Johnston, 1995

Renewable Technologies so what s relevant right now in the PICs? Solar Water Heating Solar PV Wind Hydro Biomass / biofuels / biogas (not proven in PICs) Geothermal (remote and very capital intensive) Hybrids remote applications & mini-grids

Why is information on cost important? Economic and finance information is a decision-making tool for Governments, utilities and private sector investors in RE The cost of renewables have declined rapidly in recent years = opportunity...but information on real, on-site costs of RE technologies in the Pacific is very limited

Cost information available in the Pacific to date Data is not systematically collected and/or is difficult to access from utilities and private sector A lot of RE projects done by tendering data on costs is confidential and/or there is no breakdown Cost figures date back a few years Decision making is often based on outdated numbers or on international data which does not take into account particularities of Pacific

Costs from RE programmes and projects in the Pacific

Resource assessment Components of cost Commercial Supplier Project management cost Equipment at site Installed cost USD/kW Lifecycle cost & Levelised cost of electricity USD/kWh Transport costs Import taxes Project implementation Site preparation Installation Grid connection Auxiliary equipment Other costs Operation & maintenance Cost of finance Resource quality Capacity factor Life span Cost of disposal

Collecting cost data complexities Cost figures are often not fact based and therefore coloured by opinion or assumptions of the author Cost are sometimes hard to breakdown between components: equipment, labour, logistics, tax, etc. Cost data vary by project, country & over time Not all costs have been calculated the same way assumptions, inclusions, exclusions A lot of info available on solar PV, not much on other RE technologies Capital costs available less data on O&M / Lifecycle

Installed cost of RE

Most common installation in the PICs All PICs have some experience with solar PV most info available but not as much as there should be Four main types: Solar home systems / lighting systems Small off-grid systems (schools, health centres) Grid-connected PV Hybrids Solar PV costs

Installed cost of solar PV USD / Wp 40.00 Solar PV - All types 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 0 200 400 600 800 1000 Installed capacity / kwp

USD / Wp 40.00 35.00 Off-grid Ground mounted grid connected Grid-connected SHS 30.00 25.00 20.00 15.00 10.00 5.00 0.00 0 20 40 60 80 100 120 140 Capacity installed / kwp

Solar PV costs over time 40.00 35.00 30.00 USD/Wp 25.00 20.00 Installed cost of Solar PV USD/Wp Grid-connected Pacific Off-grid Pacific Europe Japan US Australia Ground mounted grid-connected Pacific SHS Asia & Africa SHS Pacific Linear (Grid-connected Pacific) Linear (Off-grid Pacific) 15.00 10.00 5.00 0.00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year

Installed cost of Hydro USD / kw 25000 20000 Hydropower 15000 10000 5000 0

Installed cost other RE USD / kw 25000 20000 Other Renewables 15000 10000 5000 0 Samoa Biomass 250kWe 2010 Samoa Biomass 500 kwe 2010 Fiji Wind 10 MW 2006 Cooks Small Wind 40kW 2003 Average Pacific Grid-connected PV Average Pacific Off-grid

Summary of installed costs Technology Cost range in USD / kw Grid-connected solar PV 4500 14000 Off-grid solar PV 10000 34000 Micro-hydro 4000 23000 Small-hydro 1800 4000 Small-scale wind 4000 Large-scale wind 3300 Small-scale biomass 3500-6000 Diesel 800-1500

Breakdown of costs

REP-5: Whole programme cost example Total cost = 12.3 million Euro Total Expenditure PMU Service Contract Other Services Equipment Local project staff Audit and evaluation 6% 2% Policy development consultancy 5% Training and capacity building 2% Miscellaneous services 1% Audit and evaluation 3% 13% Travel and per diem 14% Installation services 46% 54% 30% Programme Management 24%

REP-5: Equipment + installation + transport cost REP-5 Solar PV Project Costs Euro/Wp 25.00 20.00 15.00 Euro/Wp 10.00 Total cost Euro/Wp Euro/Wp - Equipment only Cost for installation Euro / Wp Transport cost Euro/Wp 5.00 0.00

Breakdown of cost for grid-connected PV 70.0% 60.0% 50.0% 40.0% Grid-connected solar PV 6kWp Grid-connected solar PV - 45kWp REP-5 Grid-connected PV 30.0% 20.0% 10.0% 0.0% Panels Inverters BoS installation

Typical size: 100 200Wp Typical cost: 2000-3000 USD per system Connection fee: 100USD Monthly fees: 5 12 USD Breakdown of cost Solar Home System Solar Home System 12% 12% 11% 2% 7% 8% 7% 28% 13% Modules Batteries Controller Lights Post Wire Transport Labour Other

Micro-hydro typical costs Other costs Land lease cost EIA Access to site 6% 7% 10% 36% Micro-hydro 33% 9% Plant Installation and commission Civil engineering Electrical engineering Design and management Contingency

Small wind PIC example Very few wind systems installed in PICs Limited resource Cyclones and land issues Cost of transport to site vs size of turbine & tower 3% 5% Small-scale wind 17% 24% 36% 3% 3% 4% 4% 20 KW wind turbines Control connection boxes Remote control system Transformer Freight Taxes Civil works 11 KV grid connection Installation and commissioning

Generation costs

Generation costs USD / kwh 0.8 0.7 0.6 0.5 0.4 0.3 Diesel Wind Hydro Grid-connected PV Biomass gasification Landfill Gas Coconut oil PV with battery storage 0.2 0.1 0 2004 2005 2006 2007 2008 2009 2010 2011 Year

Grid-connected PV Grid-connected PV Grid-connected PV Large scale grid-connected solar PV Grid-connected Wind Large-scale grid-connected Wind Diesel Diesel Diesel Diesel Diesel Diesel Diesel Landfill Gas Coconut oil Coconut oil 15MW pv+battery storage Biomass gasification Biomass gasification Off-grid PV Off-grid diesel USD / kwh 2.5 2 Generation costs: 2008-2010 1.5 1 0.5 0 Nauru Palau Kosrae Tonga Fiji Tonga Fiji Fiji Fiji Fiji Nauru Samoa Tonga Tonga Tonga Tonga Samoa RMI Rural

Summary of generation costs Technology PICs range of cost in USD / kwh Grid-connected solar PV 0.35 0.70 0.17 0.34 Large-scale PV + battery storage 0.75 0.25 1.00 Off-grid solar PV 1.50 2.50 0.40 0.60 Large-scale Wind 0.14 0.18 0.05 0.09 International costs (REN21) USD / kwh Coconut oil 0.34 0.38 0.30 0.80 (biofuel/biodiesel) Biomass gasification 0.16 0.22 0.08 0.12 Landfill gas 0.18 - Urban diesel 0.15 0.49 - Rural diesel 1.00 2.50 -

A few more comments on costs because there s not enough time to cover everything

Woefully underestimated for most RE projects in the PICs Not planned for O&M costs Often do not include full replacement of failing parts during project lifespan Biggest area needing improvement in knowledge and data availability

Transport & Logistics RE face same supply chain issues as fuel Singapore - 90-95% of cost Freight Costs to Primary Port: + 4.5-9.5% Insurance and Loss: + 0.5-0.6% Transport, handling and distribution costs to ship to secondary ports: + 15-30% to total cost Not to mention delays and unreliable/ unpredictable shipping / flight schedules

Confirming the resource assessment / feasibility costs Wind Monitoring system on Kiritimati 2009 (Line Group), USD105,000 Wind monitoring studies 30 100k USD Hydro/biomass feasibilities 5%-10% of capital cost Geothermal exploration and drilling very capital intensive

Taxes & duties on RE equipment Some countries have already waived taxes on renewable energy equipment E.g. Fiji no import duties on RE equipment 10 year tax holiday on biofuels Tax relief for RE under consideration in Tonga (2009)

Let s not compare apples with oranges Solar PV capacity factor = 10 20% 14-15% in Nauru, Kosrae, Palau Wind = 15 30% 7.5% in Fiji, Vanuatu? Hydro = 50-60% 30% in Fiji, Samoa? Biomass??

Data gaps A few ideas

Data gaps O&M / lifecycle costs More emphasis on lifecycle cost and inclusion of equipment replacement costs in O&M Start taking into account environmental / end-of-project disposal costs Donor RE projects should have O&M / post-installation monitoring component

Data gaps what can be done Systematic collection and publication of cost of RE projects / technologies in the PICs as is done for fossil fuels More investment in post-installation monitoring technologies/ analysis / skills (capacity building) More contact with suppliers = better info on costs to Pacific Ask utilities to make data available in some format Ask Governments to make tender data available

Conclusions

Conclusions: Costs influenced by many other factors Cannot judge costs in isolation Cannot generalise across PICs as there is so much variability across countries Institutional & regulatory environment and technical capacity have a big impact Transactions costs are high and hard to predict

Conclusions: Economic / Financial viability Generalisations across PICs for the same technology should be avoided as financial viability can vary significantly depending on location even within the same country Transport and logistics Labour costs Competing uses of the energy resource Environmental Impact Population income and willingness to pay for electricity services

Economic / Financial viability Recommendations: Ensure all necessary preliminary studies are carried out Project and site selection should be based on the results of the appropriate studies and not forced by other external considerations Different companies should be contracted for the feasibility and implementation phases Environmental costs should always be factored PICs must move towards full cost recovery tariffs - users must pay for O&M and government, cabinets, parliaments should not arbitrarily reduce charges

Institutional frameworks Lack of regulations creating an enabling environment: IPPs / PPAs / Feed-in-tariffs / Net-metering Non-transparent subsidies / unsustainable subsidies, particularly for outer island electrification Many utilities are also the regulators Recommendations: Create independent regulation of power utilities Layout clear rules regarding PPAs, IPPs, feed-in tariff, access to grid, etc. to encourage private sector participation

Technical capacity RE technologies still relatively new to utilities / Government staff = more training and capacity building of staff in all aspects of RE technologies = more able to manage RE / negotiate projects Recruitment of more (qualified) staff and measures taken to retain staff who attend training Recommendations: Focus first on the most viable technologies & seek independent advice Insist on donor support for post-installation training Establish training in technical colleges and universities to nurture the energy professionals of the future

Cross-sectoral coordination As energy affects all sectors of the economy efforts have to be increased to coordinate planning and projects Ministries of Environment Ministries of Agriculture Ministries of Education Ministries of Health Ministries of Industry, Tourism, etc. Multi-lateral, bi-lateral donors, CROP agencies, NGOs and technical cooperation

Although diversification of energy supplies is a priority for PICs time should be taken to plan strategically so that the conditions are in place for new RE infrastructure to be functioning as desired for many years to come Thank you! Any questions?