NOTE: Some content may not display correctly, including tables and figures. See PDF for full details.
MALDIVES SREP INVESTMENT PLAN
2013 - 2017
Ministry of Environment and Energy
Republic of Maldives
H.E. Dr. Mohamed Waheed
President of the Republic of Maldives
To the people of the Maldives, global climate change and the resulting rise in sea levels are a serious challenge to theprospect of life and the well-being of our current and future generations. This is why more than 20 years ago the Maldives raised its voice on this impending threat to the survival of our nation. Since then, we are striving to improve the quality of life of the people of the Maldives and to provide environmental quality for those who visit our country for holidays and business. Climate change associated with greenhouse gas emissions coupled with the realization that the world oil reserves will run out, has given strong impetus for the Government to explore alternative energy sources not only for energy security but also for meeting the sustainable development aspirations of the people of our nation.
The Government of Maldives has committed the country to become carbon neutral by 2020. Thus, this Scaling-up Renewable Energy (SREP) Investment Plan will guide us in this endeavour for the years ahead as we strive to achieveenergy independence, setting our sights on the ultimate policy goal of carbon neutrality. This Investment Plan outlines the activities that we must implement to mitigate against climate change and it establishes specific goals, objectivesand targets that the government, businesses and community must achieve together. Special attention is given to energy security as one of the key challenges for an import dependent nation and to creation of an environment that makes investing in the Maldives renewable energy sector as straightforward and risk free as possible. Affordable access to sustainable electricity for all our citizens is another deliverable. SREP will support the Government in reaching its target towards transforming the economics of the energy sector and moving renewable energy from niche to mainstream.
I note, with satisfaction, that the SREP Investment Plan was developed through extensive consultations and with widestakeholder participation. The plan also benefited from the experiences and inputs of our development partners, theADB and the WBG. I would like to express my gratitude to both institutions for the critical role they have played in developing the SREP Investment Plan for the Maldives and I look forward to their support in the implementation of thisambitious and transformative program.
Male’, October 2012
7.1 Technical risks 60
7.2 Commercial risks 61
7.3 Institutional risks 61
7.4 Country risks 62
8. Results framework 63
9. Maldives SREP IP criteria 65
9.1 Maldives SREP IP co-benefits 67
Appendix 1 - Concept notes 69
Appendix 2 - Summary of stakeholder consultations 86
Appendix 3 - Ongoing or recently completed renewable energy projects 91
Appendix 4 - Energy efficiency projects 94
Appendix 5 - Electricity consumptions by island categories 95
Appendix 6 - Proposed feed-in tariff 96
Appendix 7 - Profile of a typical small/medium electricity consuming island 100
Appendix 8 - Assessment of country absorptive capacity 103
Appendix 9 - Independent review of the Maldives SREP IP 105
LIST OF TABLES
Table 1: Financing summary 13
Table 2: Financing by programmes 15
Table 3: Installed capacities by types 25
Table 4: Island categories and SREP interventions 29
Table 5: Key barriers abd challenges 36
Table 6: Summary of technology options considered under SREP and their
estimated potential 45
Table 7: Available PV potential in the isands of greater Male's region 48
Table 8: Island classification by electricity consumption 50
Table 9: Electricity and water production potential 51
Table 10: Impacts and mitigation measures for the technology options 57
LIST OF FIGURES
Figure 1: Schematic diagramme for various stages of IP formulation 19
Figure 2: Map of the Maldives 19
Figure 3: A typical island of Maldives 20
Figure 4: Price comparison of four major fossil fuel imports to Maldives over the past decade 22
Figure 5: Greater Male's region 26
Figure 6: Average population size among the outer island groups 27
Figure 7: Island categories based on electricity production and efficiency 27
Figure 8: Comparison of average fuel efficiency and unit cost of generation
for the different categories of outer islands 28
Figure 9: Fuel surcharge compared with generation costs and subsidies for Male' 31
Figure 10: Institutional framework for SREP implementation 32
Figure 11: Emissions by the major sectors in the country 35
Figure 12: Solar insolation in HA.Dhidhoo island 38
Figure 13: Solar innovation in Male' 38
Figure 14: Solar insolation in Gn.Fuvahmulah island 39
Figure 15: Spatial variation in solar power insolation 39
Figure 16: Wind resource map and the atoll names for the Maldives 41
Figure 17: Complementary solar and wind resource patterns throughout the year 42
Figure 18: Renewable energy potential capacity and unit cost of generation for outer islands 44
Figure 19: Levelised cost of savings from equipment replacement at end of life 54
Figure 20: Levelised cost of savings from immediate equipment replacement 54
ACRONYMS AND ABBREVIATIONS
ASPIRE Accelerating Sustainable Private Investments in Renewable Energy
CCTF Climate Change Trust Fund
EE Energy Efficiency
EPA Environmental Protection Agency
FENAKA FENAKA Corporation Limited
GDP Gross Domestic Product
GHG Greenhouse Gas
GoM Government of Maldives
GWh Gigawatt Hour
IDB Islamic Development Bank
IP Investment Plan
kWh Kilowatt Hour
MEA Maldives Energy Authority
MEE Ministry of Environment and Energy
MoFT Ministry of Finance and Treasury
MMS Maldives Meteorological Service
MVR Maldivian Rufiyaa
NDP National Development Plan
NSDS National Sustainable Development Strategy
POISED Preparing Outer Islands for Sustainable Energy Development
PMU Project Management Unit
PSOD Private Sector Operations Department
RE Renewable Energy
RWMF Regional Waste Management Facility
SREP Scaling Up Renewable Energy Program in Low Income Countries
TA Technical Assistance
toe Tonne of Oil Equivalent
TPD Tons Per Day
UNEP United Nations Environment Programme
USD United States Dollar
WTE Waste-To-Energy
Rooftop solarpanels at Male’
EXECUTIVE SUMMARY
The Republic of Maldives is one of the lowest lying countries in the world making the country particularly vulnerable to the effects of climate change due to rising sea levels. In addition, the country is entirelydependent on imported oil as the primary source of energy making it exposed to fluctuations and increasesin oil prices. This is further exacerbated by the lack of adequate oil storage facilities.
The Maldives is one of the six pilot countries participating in the Scaling Up Renewable Energy Program in Low Income Countries (SREP). As a requirement of the SREP an Investment Plan (IP) was prepareddemonstrating how SREP resources together with leveraging by co-financiers will be used to support scaling up renewable energy (RE) development in the Maldives. The IP was developed by theGovernment of Maldives (GoM) under the leadership of the Ministry of Environment and Energy. It identifies opportunities and presents a plan for achieving the objectives of SREP.
The IP has been prepared in line with the Maldives Vision 2020, Strategic Action Plan (SAP, 2008-2013),National Sustainable Development Strategy (NSDS, 2009), Maldives Energy Policy 2010, 3rd Environment Action Plan (3rd NEAP, 2008), as well as different Climate Change Policies especially with the objective of becoming a carbon neutral country based on a zero carbon electricity sector. Thus, this IP is an integralpart of the Maldivian Governments RE and climate change policies, programmes and initiatives.
Throughout the IP preparation process, a wide array of public stakeholders, private sector institutions and development partners were consulted extensively. The IP was presented and discussed at the Cabinet andit officially endorsed the investments proposed in the Plan. The IP also benefited from the experiencesand inputs of the Asian Development Bank (ADB) and the World Bank Group (WBG). In addition, the independent reviewer provided valuable comments and suggestions during the final stages of the preparation of the IP. Through this IP, Maldives is seeking USD 30 million SREP funding together with leveraging from other sources of a total investment of over USD 138 million to design and implement projects, and to support the transformation of the energy sector by scaling up RE in the country. All publicand private stakeholders are in agreement on the need to focus the Maldives SREP on the sustainable and socioeconomic development while highlighting the need to further develop and use RE technologies tosupport the overall objective of becoming a carbon neutral nation. Thus, common goals exist to reach the set targets.
OBJECTIVES FOR SCALING UP RENEWABLE ENERGY PROGRAMME
The main objective of Maldives SREP IP is to transform the electricity sector and to develop renewable energies on a large scale. Achieving this objective will support the socioeconomic development bygenerating new economic opportunities and widening the access to sustainable, clean and reliable energy; it will effectively contribute to poverty reduction and sustainable development - and thus benefiting the Maldives and its people as a whole. Investing in RETs has significant economic and financial benefits asit will not only displace the high fuel costs for diesel, but also contribute to lowering the amount of subsidies that go along with the diesel based electricity generation. The underlying principles guiding theMaldives SREP IP are in line with the 2010 National Energy Policy and Strategy, centred on the followingstrategic objectives:
- Create an enabling environment for the growth of a reliable and sustainable energy sector and meet the constitutional obligation of the Government in the provision of electricity to every inhabited island at reasonable standards commensurate to the island;
- reduce over reliance of the energy sector and the national economy on fossil fuels through thediversification of energy supplies;
- improve energy efficiency and conservation of energy use;
- encourage the adoption of low-carbon technologies in production, distribution and energyconsumption through promotion of a healthy lifestyle;
- exploit local energy resources and renewable technologies; and
- engage private sector participation in the development of the energy sector, energy services andquality assurance mechanisms.
MALDIVES SREP INTERVENTIONS
The Maldives SREP objectives are consistent with Government policies and priorities. The SREP investmentswere screened and prioritised taking into account technical, financial, economic and environmental criteria and are appropriate to Maldivian electricity use, population distribution, and socioeconomic aspects. The following components for SREP interventions have been identified:
Renewable Energy for Greater Male’ Region
This component consists of greater Male’ region’s solar PV, a Waste-to-Energy (WTE) programme inThilafushi and the region’s renewable power system integration study. The projects under the component are expected to require financing of about USD 69.5 million. Of this amount, the private sector willcontribute about USD 31.5 million as equity and debt to finance about 19MW of RE (this includes 11MW solar PV for the capital Male’, 4MW solar PV for surrounding islands that are part of the greater Male’ region and another 4MW WTE in Thilafushi). SREP and WBG financing will be used to provide riskmitigation facilities and/or incentives to private investors to implement these initiatives on a Feed-In Tariff(FIT) scheme.
Renewable Energy for Outer Islands
This component targeting the outer islands would finance full RE in about 10 small electricity consuming islands, power system upgrades in about 15 islands to be ready for large scale RE deployment, andincrease the share of renewable electricity up to 30% of total generation in
about 301 islands. Renewable electricity supply in these 30 islands would be through private sectorinvestments in RE through the FIT, and WTE supported by other incentive mechanisms. The projects under this component will require financing of about USD 62 million of which USD 16 million is expected to be financed by the private sector. SREP funding will be used in conjunction with ADB, IDB, GoM and WBGfor these investments.
Technical Assistance and Capacity Building2
This component will support the creation of an enabling environment for RE investments and human capacity building. It will also provide funding for project preparation and improved access to better quality and more comprehensive renewable resource data. The total resource allocation for the activities under this component is about USD 7 million. About USD 2.1 million will be used from SREP for preparing the projects and for supporting the Government and relevant stakeholders with capacity building activities.WBG, ADB, GIZ and other bilateral donors will be providing additional TA funds to supplement SREP’s contributions. Although SREP resources have been allocated for TA and capacity building, considerationwill be made to attract other bilateral and multilateral resources to fund this entire component with the view to reallocate released funds from this component to investments.
FINANCING PLAN
This IP envisages investments of around USD 139 million of which USD 30 million is from SREP funds while USD 109 million is from other sources with a leveraging ratio of about 1:4. The largest share ofinvestments is expected to come from the private sector amounting to about USD 47.5 million (34%). Asummary of financing sources for the components under the IP and associated technical assistances is shown in Table 1.
Table 1: Financing Summary (in USD ‘000 )
SOURCES OF FUNDING (USD 000)
Renewable Energy for Greater Male’ Region
Sub Total | 11,500 | 2,500 | 3,000 | 12,000 | 0 | 10,000 | 0 | 11,000 | 31,500 | 0 | 0 | 69,500 |
Renewable Energy for Outer Islands
Sub Total | 16,000 | 8,000 | 2,000 | 8,000 | 6,000 | 0 | 960 | 0 | 16,000 | 3,000 | 10,000 | 61,960 |
Technical Assistance and Capacity Building
Sub Total | 2,185 | 1,500 | 0 | 0 | 400 | 0 | 2,300 | 0 | 0 | 800 | 0 | 7,185 |
GRAND TOTAL | 30,000 | 12,000 | 5,000 | 20,000 | 6,400 | 10,000 | 3,260 | 11,000 | 47,500 | 3,800 | 10,000 | 138,960 |
1 These 30 islands include 15 that are already efficient and ready for RE with some minor adjustments + 15 islands which will be rehabilitated as mentioned.
2 In the subsequent sections this component has been further divided under four different programmes as appropriate.
PACKAGING THE COMPONENTS
The Maldives SREP IP is taking into consideration the unique geographical and demographicalcharacteristics of the Maldives, having a densely populated greater Male’ region surrounded by a large number of outer islands differing in size and population. Due to the inherent challenges associated withsmall populations, remoteness and high transaction costs for project development and implementation, theinterventions are designed and packaged in such a way to address these challenges:
- Accelerating Sustainable Private Investments in Renewable Energy Programme (ASPIRE): All projects under this programme will be based on a FIT with the use of appropriate WBG guarantee instruments as a risk mitigation tool for leveraging private investments. It will also target a number of WTE initiatives. This programme consists of greater Male’ region solar PV, solarPV/wind for 30 medium and large electricity consuming islands (about 15 islands will be made RE ready under the POISED programme), and WTE for outer islands. The WBG will be the lead agency.
- Preparing Outer Islands for Sustainable Energy Development Programme (POISED):Electricity generation from solar PV, and wind in some locations, is less expensive than energygeneration from diesel based on avoided cost of fuel. This programme will support achieving full RE systems on 10 small electricity consuming islands and make the power systems ready to accept a 20-30% share of intermittent RE on 15 large and medium electricity consuming islands throughrehabilitating inefficient generators and other necessary adjustments. The ADB will be the lead agency.
- Waste-to-Energy (Thilafushi) Programme: The programme will provide an up to 4 MW WTE power generation facility to replace the existing diesel-based power generator on the island. It is part of the broader Governments National Solid Waste Management Policy adopted in 2008. IFC/PSOD supports the development of an integrated waste management project for the Male’ catchment area as a public-private partnership (PPP). Under Maldives SREP IP, only the implementation of the WTE facility is considered, even though this is part of the larger scale waste management solution that includes the collection, processing and disposal of waste in the Greater Male region. IFC/PSOD will take the lead on this programme.
- Technical Assistance for Renewable Energy Scale up Programme (TA): These activities will support the strengthening of the enabling environment, strengthen human resource capacities andidentify additional RE investment opportunities and resource data collection. The WBG and theADB will each lead TA activities as appropriate.
Financing by programmes is shown in Table 2.
Table 2: Financing by programmes
SOURCES OF FUNDING (US$ 000)
ASPIRE | 10,750 | 2,600 | 5,000 | 20,000 | 0 | 0 | 1,160 | 11,000 | 42,500 | 0 | 0 | 73,010 |
POISED | 12,750 | 8,000 | 0 | 0 | 6,000 | 0 | 400 | 0 | 0 | 3,000 | 10,000 | 40,150 |
WASTE-TO-ENERGY THILAFUSHI | 5,000 | 0 | 0 | 0 | 0 | 10,000 | 0 | 0 | 5,000 | 0 | 0 | 20.000 |
TECHNICAL ASSISTANCE | 1,185 | 1,400 | 0 | 0 | 400 | 0 | 1,700 | 0 | 0 | 800 | 0 | 5,485 |
MODALITIES OF THE PROGRAMME
In accordance with SREP programming modalities, the IP will be implemented through an integrated approach that is led by the Government through policy interventions and incentive schemes to attract theprivate sector, and supported by technical assistance, financial instruments and physical investments from theMDBs with SREP funding playing a catalytic role in achieving the IP objectives.
The IP envisages implementation modalities that are tailored to the comparative advantage of each stakeholder. Where small-scale public investments may not attract additional private capital, the public utilities will assume responsibility for the design and implementation of the identified solutions. On theother hand, the private sector – both investors and developers – will have an important role to play in the supply of RE through a FIT. In addition, as significant investments will be undertaken by the state owned utilities and private sector, the MDBs will support the government on project preparation, implementation support, financing, tendering and awarding, and through innovative guarantee schemes to address prevailingrisks and barriers to scaling up RE investments in the Maldives. Regarding a timetable for theimplementation of the projects, it is expected that the Maldives SREP IP work will be spread over a 5 to 6 year period.
TRANSFORMATIVE OUTCOMES AND OUTPUTS
The main outcome of the Maldives SREP IP will be to transform the energy sector and increase energysecurity in the country. Maldives SREP IP will aim to improve the regulatory environment for investors supported by a strong legal framework to reduce risks and transaction costs and encourage investment inRE; support the strengthening of the capacity of Government institutions and other relevant stakeholders and create new employment and business opportunities in the RE industry. This can lead to more gender and social inclusiveness, climate change mitigation, and ensure sustainable operations.
Investments under Maldives SREP IP will result in the installation of 26MW of RE generation, a reduction in GHG emissions by approximately 56,000 tCO2/year and about 22 million litres of diesel avoided per year.
SUPPORT TO PRIVATE INVESTMENTS
The IP for the Maldives has been designed to generate strong interest from private investors making this a unique aspect. Out of the total USD 139 million the Plan envisages USD 47.5 million from private investments through various financial incentives and risk mitigation tools. This innovative aspect of the IPis expected to set a positive example for other countries. In order to attract relatively large financing from theprivate sector, a number of enabling policy measures have already been implemented and others are being planned. These include the elimination of the import duty on RE products as well as the introduction of a FIT. These positive measures coupled with strong commitment from the Government to realize the 2020carbon neutral target are expected to send a strong signal to those wishing to invest and to develop a strongRE sector. Introducing appropriate policies and regulations to encourage the use of RETs over diesel isexpected to mitigate the negative impacts that may arise during the phasing out of the FIT and guarantee instruments in the future. It is important to note that at today’s diesel prices, the FIT which would be introduced by the Government would still be lower than the avoided cost of diesel.
In order to make the investment environment even more favourable, a number of attractive instruments andmeasures have been proposed to be undertaken under the Maldives SREP IP. For projects under the FITregime favourable tariffs and standard power purchase agreements (PPA) will be in place, taking intoaccount perceived levels of risks and returns that are appropriate to this type of investments. The Maldives SREP IP will have a strong emphasis on utilizing guarantee instruments to cover payment, currency depreciation and related risks that may be of concerns to potential investors. The introduction of aFIT combined with incentives and guarantee facilities and strong regulatory framework is envisaged toencourage private investors to venture into the RE market. In addition, adequate resources have been allocated in the Financing Plan of the Maldives SREP IP for possible capital injection to make debt financing more attractive for private investor even at commercial rates. After the approval of the Maldives SREP IP, the Government, with support from the MDBs, will carry out an investment conference/roadshow to solicit feedback from investors on the level of guarantees needed as well as on the design of riskmitigation instruments to attract investment in the sector.
During the process of selecting the companies, suitable credibility criteria, substantial financial backingand appropriate experience will be considered.
CORE INDICATORS AND CO-BENEFITS
While the current share of RE in the electricity mix in the inhabited islands is estimated to be less than 1%, RE investments planned under the Maldives SREP IP are expected to generate 70GWh/year of electricity,therefore increasing the share of RE by approximately 16%. Currently contributions from the electricity sector on the national CO2 emissions are estimated to be 0.25MtCO2/year. With the full implementation of the Maldives SREP IP, 27% of CO2 emission reduction is expected compared to 2009 levels for electricity generation in inhabited islands.
Significant co-benefits are expected from the projects planned under the Maldives SREP IP including an increased energy security for small and vulnerable communities to enhance the socioeconomic conditions. Furthermore, WTE projects will improve local environment in the islands by better management of waste and by reducing the extent of land needed for waste disposal. This is also expected to bring significant health and tourism benefits to the local communities.
Reducing the operational costs of power systems, improving the country’s balance of trade due to reduction of diesel imports and potential tariff reductions as a result of lower power generation costs as well as building private sector capacities and creating more employment opportunities are considered assignificant fiscal co-benefits of the Maldives SREP IP.
The successful implementation of full RE in 10 small electricity consuming islands is expected to generate a strong demonstration effect which in turn can be translated for both other small islands in the Maldivesand other countries learning from this experience and applying it to their own context to meet the energyneeds of isolated populations.
THE MALDIVES SREP IP PROCESS
To identify the priorities, programmes and projects under the Maldives SREP IP and their investmentpotential, a strategic development approach was adopted:
Stakeholder Consultation 2nd Draft IP
Research nal IP
Concept Development Cabinet Endorsement
Figure 1: Schematic diagram for various stages of IP formulation
The multi-phase approach as shown in Figure 1 started with extensive research and analysis of existing data by national and international energy sector experts to assess the energy demand and supply for thegreater Male’ region and the inhabited islands that led into the preparation of the first draft of the IP. This first draft also included benefits and costs related to promising programmes and projects, the identification of incentive schemes and methods to attract, blend and leverage private sector finance for implementation,the selection of RETs best suited for the country’s needs as well the identification of programmes andprojects for implementation under Maldives SREP IP.
Based on extensive stakeholder consultations the second draft of the IP was prepared and shared with MDBs for extensive discussions and comments. To guarantee the most effective and efficient implementation the identified programmes and projects were packaged according to their potential to attract private investors. For RE ready islands, instruments such as the FIT and the guarantee facility would provide the necessary security for private investors (ASPIRE), island in need of power system upgrades or complete generator set replacement were packaged under POISED with the goal of making them RE ready to attract private investors under FIT and guarantee mechanism.
The resulting updated IP was published for review and after including comments from public and privatestakeholders as well as sector experts referred to the independent reviewer for further comments, questions and suggestions. After the final round of including additional information into the IP, it was presented anddiscussed with the cabinet and given endorsement as part of the overall RE strategy of the country.
1.
COUNTRY BACKGROUND
1.1 GEOGRAPHY
The Republic of Maldives is located 750 km South West of Sri Lanka and is made up of 26 natural atolls stretching 115,300 km2 North to South across the equator (Figure 2). Made up exclusively of corals and sand, no single point is higher than 2.3m abovemean sea level. The total land area is around 300 km2 and the average size of the islands is 25 hectares. The Maldivian islands experience a monsoonal climate, with little variation in temperature throughout the year. Daily temperatures range from 31oC in the daytime, to 23oC during night time. The Maldives on average receives over 2,700hours of sunshine each year3.
Of the total 1192 islands, 194 are inhabited and 105 are self-contained tourist resorts. The total estimated population4 in 2012 is 330,652 with an average annual populationgrowth rate5 of 1.69%. The largest urban centre is the greater Male’ region, which includes Male’, Hulhumale’’, Villingili, Thilafushi, Hulhulé and Gulheefalhu and has an estimated population of 114,686. Over one third of the nation’s population reside in the capital island Male’ which has an area of about 2 km2. Male’, Villingili and Hulhumale’’ are already inhabited islands and Gulheefalhu will soon be. Thilafushi is alandfill, waste management site and an industrial island, while Hulhule’ hosts the international airport.
Figure 2: Map Of The Maldives
The second largest population centre is Addu City in the South, with an estimated 19,940 residents. Besides Male’,only four islands have a population of over 5,000 and one fourth of the islands has a population less than 500.According to the Population and Housing Census 2006, there are a total of 46,194 households in the Republic, ofwhich approximately one third are located in Male’.
Maldives has been demonstrating progress in various indicators of
development. The per capita GDP6 of Maldives in the year 2010 was USD 5,273. On average,
6.2 persons live in one household, and monthly household income is MVR7 28,909 for Male’, and MVR11,200 for the other islands.
The islands of the Maldives are connected via a basic nationwide transportation system and therefore,transport between islands calls for investments to further strengthen and develop
3 Maldives Meteorological Service. Climate of Maldives. [updated 2010; cited 2012 Aug 1]. Available from: http://202.21.178.203/mms//
4 Direct Communication with Department of National Planning, July 2012.
5 Ministry of Planning and National Development. Population and Housing Census of Maldives 2006. Male’: Ministry of Planning and National Development; 2007.
6 Department of National Planning. Statistical Yearbook of the Maldives 2011. Male’: Department of National Planning; 2011 7 1USD=15.42MVR
Figure 3: A typical island of Maldives
this service. Access to almost all inhabited islands is supported by harbours and jetties (Figure 3). At present, a network of ferries enables affordable travel between the islands and atolls although the frequency remains anissue. Three regional ports have been established, one in the capital island Male’, one in the North inHDh.Kulhudhuffishi and a third in Addu City. For air travel, two international airports are in operation; one ingreater Male’ region and the other in Addu City. Furthermore, three additional airports throughout the countryserve domestic flights, and five more airports are currently
under development. The Maldives is also home to one of the largest sea plane operations in the world, with sea plane access facilities established in 56 locations throughout the archipelago8 since 2009. Telecommunications are excellent, with an affordable mobile phone service that covers the entire country.
Despite the many challenges posed by the geographically dispersed nature of the islands and itsinhabitants, the Maldivian population enjoys universal access to electricity. In fact, electricity generation is one of the fastest growing sectors in the Maldives, with the annual electricity production in 2011 reaching over 428GWh9 in inhabited islands. Since it is not possible to install a single national grid toprovide electricity to the population, each inhabited island in the Maldives, as well as resorts and other industrial islands are required to install their own power generation and distribution facility and aretherefore, self-contained. This results in high costs for installation and maintenance of such systems.
Almost half of the population in the country resides in the greater Male’ region and Addu city. These two regions account for half of the installed electrical capacity in inhabited islands. In the year 2011, Male’ consumed roughly 217GWh of electricity which accounts for nearly half of the total electricity generated for inhabited islands. The power demand increases at a rate of 11% per year for Male’10. Tourist resorts produce and consume 60% of the national electricity production.
The Maldives relies almost exclusively on imported petroleum to meet its energy demands, and the cost of importing fossil fuels for the year 2011 accounted for roughly 20% of the national GDP.
8 The President’s Office.“Aneh Dhivehiraajje” - The Strategic Action Plan 2009 - 2013, Male’: Government of Maldives; 2009
9 Based on data from utilities
10 Male’, being the capital of the country, has a lot of on-going developmental activities such as new buildings, businesses etc.
1.2 ENVIRONMENTAL POLICY BACKGROUND
Article 22 of the Constitution of the Republic of Maldives provides the basis for the environmental policyformulation. The Constitution stipulates the fundamental duty of the State to protect the environment for present and future generations, and to ensure that the pursuance of economic and social development goals is not at the cost of the natural environment. The Environment Protection and Preservation Act (Law No.4/93) further reiterates the need for the protection of the natural environment for present and future generations. The Third National Environment Action Plan (2009-2013) highlights goals towards carbonneutrality, advancement of energy security and establishment of an efficient transport network. The NationalSustainable Development Strategy adopted in 2009 sets out the targets for achieving carbon neutrality for theenergy sector.
As one of the most low-lying countries in the world, Maldives is exceptionally vulnerable to the impacts of climate change. Although the contribution of the Maldives to global climate change is negligible, the government wants to demonstrate international leadership. It has declared a policy commitment to become a carbon neutral country by 2020. This carbon neutral objective is supported by a number of policy decisions, including the National Energy Policy (2009- 2013) and the National Energy Action Plan (2009-2013) that have been adopted to guide the development of the energy sector in the Maldives. In addition, a number of policies have been developed to encourage private investments in the energy sector - including a zero import duty for RE related merchandise and the introduction of FIT regulations.
1.3 ECONOMIC POLICY BACKGROUND
Tourism and fisheries are the mainstays of the Maldivian economy. These two sectors directly account forapproximately 40% of the national GDP and are the main sources of foreign exchange earnings11 . The Government, recognizing the role of the private sector in the development of these two vital industries,encourages its greater involvement in all development activities12.
Foreign direct investment in the Maldives employs very simple procedures, whereby prospective investorsmay be granted permission to commence operations within a very short period of time from submission ofnecessary documentation13 . Furthermore, transfer of profits through foreign investment is not subject to restriction.
As part of the Government tax reforms, the Goods and Services Tax Act was introduced in 2011. TheGoods and Services Tax (GST) became operational in October 2011, and the Tourism Goods and Services Tax (TGST) was raised from 3.5 % to 6 % from January 2012 and to 8% from January 2013.
Maldives has an open economy and is highly dependent on imports. In the past five years, imports have averaged 61% of the GDP while exports ranged between 11-15 %, resulting in a large trade deficit.
11 Maldives Monetary Authority. Overview of the Maldivian Economy [homepage on the Internet]. Male’, Maldives: Maldives Monetary Authority. [updated 2011 May 24; cited 2012 Aug1]. Available from: http://www.mma.gov.mv/stat.php
12 Shareef F, Sodique H. Baseline Study on Corporate Social Responsibility Practices in Maldives, Male’: UNDP.
13 Invest Maldives. About Invest Maldives [homepage on the Internet]. Male’, Maldives: Ministry of Economic Development. [updated2009; cited 2012 Aug 1]. Available from:http://www.investmaldives.org/aboutus.html
In 2011, the Maldives spent USD 340 million on oil based imports (excluding bunker fuels) and in 2012 thisis expected to reach USD 450-500 million, which would be approximately 33-36% of GDP. If the oil price rises to USD150/bbl by 2020, and consumption grows by 8% per annum, oil imports are expected to reacharound USD 700 million – or almost USD 2,000 per capita by 2020. This is clearly unsustainable. Therefore, the twin objective of the carbon neutral policy, other than being a flagship for climate change, is to make the economy largely independent of oil. Decarbonisation is as much a matter of national economic security and social welfare as it is a matter of environmental concern.
Figure 4 below shows the price comparison of 4 major fossil fuel imports to the Maldives in the past decade (2001 to 2010). In 2011, Maldives spent USD 261 million to import 316 thousand toe of diesel which is about 20% of the GDP of the country. Approximately 81% of the fuel import is diesel and morethan 44% of the diesel imported is used for electricity generation.
1,000
900
800
700
600
500
400
300
200
100
Petrol Aviation LPG
Diesel
Figure 4: Price comparison of four major fossil fuel imports to Maldives over the past decade
1.4 ENERGY POLICY BACKGROUND
The Government has formulated and adopted policies to provide affordable and reliable electricity to its citizens while at the same time introduced some necessary interventions to diversify its energy mix byfocusing on other alternate sources. This includes measures to diversify the energy mix by introducing RE and by concentrating on the feasibility of installing solar, wind, WTE and ocean energy generation based projects across the country.
RE resources will be developed to optimum levels to minimize dependence on fossil fuel, subject toresolving economic, environmental and social constraints. In order to minimize the vulnerability of energysupplies to external factors such as international socio-political problems, the use of indigenously availableRE resources will be maximized. In addition, the use of RE resources in energy generation will reduce the pressure on the country’s balance of payments. The Energy Action Plan (2009-2013) includes a series ofactions, measures, programmes and targets to be met over five years to achieve greater energy efficiency andconservation awareness,
together with reductions in CO2 emissions. The Plan intends to persuade private organizations and individual citizens that energy conservation is the responsibility of all. The key strategies that have been envisaged in the action plan are as follows:
- Provide all citizens with access to affordable and reliable supply of electricity through:
- Developing utilities to upgrade and manage power infrastructure on the islands and improvethe efficiency and quality of services;
- encouraging private sector participation to develop, manage and sustain electric services;
- encouraging national and international investments to develop and sustain energy; and
- introducing incentives to power sector developers to ensure affordability of energy supply byfacilitating access to grants and concessional finance.
- Achieve carbon neutrality by year 2020 through:
- Developing plans for energy sector to include forecast of energy usage by different sources,GHG emissions and assessing status of carbon neutrality;
- setting and monitoring targets to track energy sources, composition, efficiency and losses to achieve carbon neutrality and sustaining it;
- adopting standards for exhaust emission for power plants, vehicles and vessels that use fossil fuel in order to improve air quality; and
- promoting carbon capture and sequestration.
- Promote energy conservation and energy efficiency to reduce costs through:
- Promoting energy efficiency and energy conservation to achieve economic use of energywithout lowering the quality of service rendered;
- promoting energy efficiency in electricity production, distribution and usage via workshopsinvolving necessary stakeholders;
- promoting demand side management with focus on large energy users;
- identifying all areas of improvement and provide technical advice in fuelconservation and efficiency in different modes of transport; and
- introducing incentives to encourage greater use of electric vehicles by establishing chargingstations using RE sources.
- Promote RE technologies through:
- Introducing and demonstrating new renewable technologies application;
- facilitating and promoting research opportunities for locals and international parties byinforming about potential of RE sources within the country;
- developing human resource capacity for RE throughout the country by introducing RE related courses in college curriculum;
- encouraging and promote bio fuels; and
- encouraging the development of power generation capability by utilizing the householdwaste and bio fuels.
1.5 ELECTRICITY SECTOR BACKGROUND
Provision of electricity as a service in the Maldives started 63 years ago. In 1949, a generator set of 6kW was installed in the capital Male’ to produce electricity for the first time. Initially, electricity was supplied to presidential palace and a few Government office buildings; this was later extended to the entire population of Male’. Recognizing the importance of providing electricity to the outer islands for socialand economic development and poverty eradication, a state-owned company (STELCO) with a mandateto provide electricity was formed in 1997.
STELCO developed electricity facilities on 32 of the most populated islands and developed human resource capacities to an acceptable level. Although most power systems are set up, operated and managedby state owned utilities, a few were developed and are being operated by either the community or privateparties.
Due to the geographic formation of the archipelago, each island has its own infrastructure including powergenerating facilities with several diesel generators of varying ages and capacities. Some of these systems were not properly designed and continue to be manually controlled with each island having only onesupplier. In addition, where there are industrial facilities such as ice- making plants for the fishing industry,private generation is the norm. The physical dispersion of the islands makes it virtually impossible to connect the entire country on a single grid.
Diesel generators have been chosen as the primary mode of power generation as the initial investment required is less and these systems provide a relatively reliable source of energy. On the other hand, thismakes the nation completely dependent on fossil fuel imports, as the country does not have proven fossil fuel reserves. Limited demand and storage capacity does not allow the importing of large quantities of fuel which makes the import of diesel relatively expensive. As a result, the country purchases its fuelrequirements at the prevailing market rates.
In 2009, six new utility companies were formed to provide affordable and quality utility services to therespective populations in six regions of the Maldives. In addition, STELCO’s mandate was expanded to include the islands in the North Central Region. The idea behind this change was to develop and manage utility services by qualified and trained personal to avoid inefficiencies and losses caused due to lack of knowledge and necessary skills. On formation, these utility companies took over most of the power systems operated by the island councils and private parties.
With the recent changes in the Government’s administration structure, the former regional utilitycompanies have been merged into one company; FENAKA Corporation Limited. FENAKA provides electricity to 115 out of 194 inhabited islands, STELCO currently operates and manages power systems on 10 islands, the island councils provide electricity to 63 islands and private parties provide electricity to 6islands. It is expected that FENAKA will take over all power systems that are currently managed by councils or private parties as this would make the management more efficient and effective and save operational as well as maintenance costs by pooling resources.
1.6 ISLAND CLASSIFICATION BASED ON ELECTRICITY DEMAND
Energy consumption in the Maldives increased from 224,000 in 2002 to 396,000 toe in 2011 due to a rise in the demand for electricity and transportation. Electricity generation is by far the single largest consumer of imported fuels. Diesel accounts for 81% of the total primary energy demand in the country. In 2011,316,000 toe of diesel was consumed of which 44% was utilized for electricity generation.
The production of electricity is the fastest growing energy consumption sector led by increasedelectrification of inhabited islands and growth in the tourism industry. Electricity generation for the capital Male’ and the islands in its vicinity (collectively called as greater Male’ region) accounts for approximately 51% of the total electricity generated for all inhabited islands in the country.
Electricity demand in the Maldives is expected to continue to grow at more than 8.5%/year, with this growthrate being influenced most significantly by the increase in electricity demand for the greater Male’ region.
Rising fuel prices prompted the Government to subsidize the operational cost of electricity generation to maintain the stability of the price of electricity which in turn has imposed a significant burden on theGovernment’s budget in 2011, USD 25 million was spent on electricity subsidy.
Today Maldives has a total installed capacity of approximately 245MW of diesel generators to cater for electricity demand. Electricity generation in the Maldives is in three main types of Islands: inhabitedislands, tourist resort and industrial islands. Table 3 below shows the installed capacity for the different types.
Table 3: Installed capacities by types
Types | Installed Capacity (MW) |
Inhabited Islands | 120 |
Tourism Resorts (estimated) | 105 |
Industrial Islands | 20 |
Total | 245 |
Male’ accounts for 48 MW which is approximately 20% of the total installed capacity of the country orone third of the installed capacity on inhabited and industrial islands combined.
Since Maldives SREP IP will be targeted towards transforming the electricity sector of the inhabited islands only, the current situation of the electricity sector was analysed and the inhabited islands have been divided into two main categories: the greater Male’ region and the outer islands.
Greater Male’ region:
Greater Male’ region consists of the capital island Male’, Thilafushi (Industrial and waste management island), Gulheefalhu (newly reclaimed island), Villingili, Hulhule (airport) and Hulhumale’’ (Figure 5). The greater Male’ region is the largest consumer of electricity with an consumption of about 225 GWh/year (excluding Hulhule). Of this, Male’ with approximately one third of the entire population has an electricity demand of 217GWh/year with an installed capacity of 48 MW. The electricity demand in Male’ is increasing at an average rate of 11% annually.
However, Male’ does not have enough space to expand the power generating capacity and hence, it is important to find alternative options to supply electricity to Male’ to meet this demand. STELCO, does not have enough capacity to provide electricity to all its customers, some businesses in Male’ operate standbygenerators, and some have their own private full time power supply. Since the lack of any interconnection between islands means there is no opportunity to generate electricity on one island and supply to another.
Outer islands:
Figure 5: Greater Male’ region
For the purpose of this IP, the islands outside greater Male’ region are referred to as outer islands. Out of a total of the 194 inhabited islands, power systems on 113 islands were analysed on an island-by-islandbasis, regarding their electricity production/consumption, installed capacities, and associated costs. Annual electricity consumption varies significantly, ranging from 8,000MWh to less than 95MWh. Similarly, the fuel efficiency varies from 0.68l/kWh to 0.26l/kWh. The average population14 among the island groups ranges from 5700 people to less than 550 people (Figure 6). Based on these factors, the outer islands havebeen divided into four sub-categories: large electricity consuming islands, medium electricity consumingislands, small electricity consuming islands and very small electricity consuming islands as shown inFigures 7 and 8.
14 Based on population and housing census of Maldives 2006
8100
7100
6100
5100
4100
3100
2100
1100
100
Large electricity consuming islands
Medium electricity consuming islands
Small electricity consuming islands
Very small electricity consuming islands
Figure 6: Average population size among the outer island groups
0.70
0.60
0.50
0.40
0.30
0.20
75000 750000 7500000
Electricity Production (kWh/year)-log Scale
Figure 7: Island categories based on electricity production and efficiency
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Large electricity
consuming islands
Medium electricity
consuming islands
Small electricity
consuming islands
Very small electricity
consuming islands
Figure 8: Comparison of average fuel efficiency and unit cost of generation for thedifferent categories of outer islands15
Large electricity consuming islands:
Outer islands that consume electricity exceeding 3GWh/year have been classified as large electricity consuming islands. Power systems operating on these islands have been properly designed and are considered reasonably efficient with an average fuel efficiency of 0.35l/kWh. In addition, the average costof electricity production on these islands is considered to be lowest at USD 0.31/kWh while the cost varies between USD 0.30/kWh and USD 0.32/kWh. Even though these islands have the lowest average electricity tariff among all outer island clusters, the unit cost of diesel electricity is still higher than that of solar/wind generated electricity. The islands under this category have an average population of 5,723 people. All nine islands that fall under this category are considered as RE ready under the FIT with some possible system upgrading (See Appendix 5 for more details).
Medium electricity consuming islands:
Medium electricity consuming islands have electricity consumption between 1GWh/year to 3GWh/year. This category includes 21 islands with a fuel efficiency between 0.26l/kWh to 0.52l/kWh. In addition, theaverage cost of electricity production on these islands is considered to be USD 0.34/kWh while the costvaries between USD 0.28/kWh and USD 0.43/kWh. Power systems on some of these islands have been upgraded in the past and are considered efficient and RE ready for FIT. Also several islands can be identified where the power houses and the distribution systems would need to be upgraded to reduce the diesel usage per unit of electricity consumed and to make the islands ready for RE through the FIT. Theislands under this category have an average population of 2,447 people (Appendix 5).
Small electricity consuming islands:
Electricity consumption in these 62 islands is in the range of 250MWh/year to 1GWh/year with a fuel efficiency between 0.27l/kWh to 0.68l/kWh. In addition, the average cost of electricity production onthese islands is considered to be USD 0.40/kWh while the cost varies between
15 Displays error bar for selected series with standard deviation.
USD 0.31/kWh and USD 0.49/kWh. Even though there are efficient power systems on some of the islands inthe category, on most of these islands power systems are considered inefficient. In addition, the electricitydemand as well as the electricity growth rate are relatively small. Due to small size, low return on investment, small population coupled with small growth in electricity demands these islands are not very attractive for private investors. This makes them potential candidates for complete RE transformationincluding necessary power system upgrading16. The complete RE transformation will have a strong demonstration effect that would potentially inspire others to follow the model both on other Maldivesislands, but also on a global scale. The islands under this category have an average population of 1,141people (Appendix 5).
Very small electricity consuming islands:
All islands that have a consumption of less than 250MWh/year are considered as very small electricityconsuming islands. The fuel efficiency on those islands ranges between 0.311/ kWh to 0.67l/kWh which indicates extremely inefficient power systems. The 20 plus islands under this category all have a very small demand and have virtually no potential for further growth. Investments in these islands are not considered to be economical and will therefore not be considered under Maldives SREP IP. The Government is considering promoting voluntary relocation programmes for these small populations to islands where development potential and other opportunities are greater. The islands have an averagepopulation of 519 people (Appendix 5). Based on the above assessments, Table 4 summarizes those outer islands selected under the Maldives SREP IP for RE investments.
Table 4: Island categories and SREP interventions
Category | Total No. ofIslandsstudied | No. of islandsselected underMaldives SREPIP | Mechanism ofintervention | Additional comments |
Greater Male’ region | 6 | 3 (Male’, Thilafushi& Hulhumale’’) | FIT | Some minor adjustments tothe power systems |
Large electricityconsuming islands | 4 | 4 | FIT | Some minor adjustments tothe power systems |
Medium electricityconsuming islands | 21 | 26 | FIT | Power system of 15islands may need completereplacement or majorupgrading |
Small electricityconsuming islands | 62 | 10 | Completepower systemtransformationto full RE withstorage | Power distribution systemsupgrading is needed. |
Very small electricityconsuming islands | 20 | Not considered underMaldives SREP IP |
Total | 11317 | 43 | |
16 These islands would have solar PV installed with batteries at a generation cost of around USD 0.35/kWh, whereas the current cost of generation for the diesel systems is at around USD 0.40/kWh. Based on the difference a decrease in subsidies for the fuel surcharge might occur, even though there might be the need for keeping diesel generatorsas backup which as a result would lower the cost reductions .
17 Greater Male’ region is counted as 6 islands, Addu central power station provides electricity to 4 inhabited islands that are interconnected and therefore, counted as one island(107 outer islands and 6 islands in the greater Male’ region)
Tourism sector:
All 105 islands that are operated as tourist resorts (one island one resort exclusively) have their own private generating facilities. Although there is no accurate record of the installed capacity at these resorts, a reasonable working estimate is 1 MW per island, making the tourism sector as big as the state sector. The tourism sector was not considered under Maldives SREP IP due to the fact that grant financeallocated for the Maldives should benefit the local populations as a priority as opposed to lucrative businesses that can afford to invest own finance to run similar programmes. Maldives SREP IP will however share lessons learnt to tourist islands to motivate and encourage them to follow a similar path. Thismay be important to deepen the opportunities for PV sales, providing an additional attraction for investmentwhen there is a clearer path to an increase in the scale of the market.
1.7 ELECTRICITY PRICING AND SUBSIDY
The tariff methodology and structure currently applied by the regulator, Maldives Energy Authority (MEA) was introduced in 2009. Electricity tariffs are determined based on average tariff, dividing customers into three categories: residential, business and governmental (see Figure 9).
Tariffs for each group are fixed by using an ad-hoc method (trying to produce small adjustments to previously existing tariffs) and a reconciliation test (assuring that with the approved tariffs each region is capable to collect the allowed revenues). Tariffs are single part (only energy) and increase with consumption.
With the current tariff a correction mechanism was introduced in order to adjust end-user tariffs to the variation in fuel prices (the latter currently represents above 80% of total costs in the Maldives). This adjustment is carried out monthly through a fuel surcharge mechanism which is added to the monthlyinvoices. The fuel surcharge is calculated according to a formula, which assumes an average efficiency ofthe generation sets of USD 0.35l/kWh of fuel.
When the tariff was first introduced the price for a litre of diesel was around USD 0.5. Today, this price has almost doubled to about USD 1 per litre. As a result of this increase, the fuel surcharge amounts to about 45% of the final bills.
With the current tariff, the Government also introduced a subsidy scheme for domestic consumers. This is part of the social welfare protection, to make access to electricity affordable to average households. The tariffs actually paid by end-users are reduced by the application of subsidies. Two types of subsidies exist asshown in Figure 9.
Cross subsidies (among customers or customer categories): Governmental and business tariffs are higher than residential ones, although the costs imposed by these customers are roughly similar than domestic consumers.
Direct subsidies are paid for domestic customers as Fuel Surcharge Subsidies and Usage Subsidies. Fuelsurcharge for domestic customers (although reflected in the customer’s bill) is paid in full by theGovernment. Customers have to claim (individually) to receive this subsidy. In addition to this, as a Usage Subsidy, lower energy blocks up to 400 units are subsidized for those customers who claim it under the social welfare scheme. On average, 57% of the domestic customer’s bill is written off assubsides and paid to the service providers.
Figure 9 depicts the average tariff and fuel surcharge compared with the generation costs using diesel and solar PV. The average cost of generating a unit of electricity in the greater Male’ region is around USD0.30 using diesel compared with USD 0.23 using solar PV.
40
35
30
25
20
15
10
5
0
Domestic
Business
Consumer Catagory
Government
Figure 9: Fuel surcharge compared with generation costs and subsidy for Male’
Current tariffs are based on existing (historical) costs rather than expected (future) ones: Severalimportant investments are currently being evaluated which, if materialize, may lead to a further increase inelectricity costs making future overall costs even higher than the historic ones and therefore RE even morefavourable18.
The requirements of important investments in the short term (islands interconnection, replacement of old, inefficient generators etc.): As investments (capital costs) are not a factor explicitly incorporated into the current tariff methodology, it is not possible to guarantee that these costs will be properlyrecovered, which challenges the overall sustainability.
To find a balance between the right incentives for sector investors and the appropriate level of subsidies,major structural change to the system are required. Recognising this, the Government has initiated several programmes, with the assistance of the WBG’s economic stabilization and recovery credit programme, to stabilize the economy and to put in place some key elements needed for a sound recovery including laying the foundations for a harmonized national social protection system to better target subsidies prevalent inthe current electricity structure.
In parallel, and to remedy the challenges identified above, a comprehensive new tariff structure for bothconventional and RE will be introduced under ongoing technical assistance from ADB. The proposed FIT structure is provided in Appendix 6.
18 The current tariff is based only on one variable which is the cost of fuel. It does not take into account other variables such as staff costs, inflation, etc. In addition, the on-going FourthPower Development Project is being carried out under a loan scheme of up to USD 30 million. When these costs are considered in the tariff setting, the true costs could increasesignificantly.
2.
INSTITUTIONAL FRAMEWORK FORMALDIVES SREP IP IMPLEMENTATION
In order to improve governance and sector management, the Government has restructured the former Ministry of Housing and Environment, which had a mandate for energy amongst other sectors, and created a new Ministry of Environment and Energy (MEE). The new Ministry has a more focused mandate on energy, climate change, environment and water resources. Within MEE, a dedicated Energy Department is responsible for development and implementation of policies, legislation, and project/programmes including Maldives SREP IP. In addition, the Ministry coordinates directly with other stakeholders andgovernment agencies on cross-sectoral initiatives. The government through its existing institutions hasdevised a mechanism to design, develop and implement investments in the energy sector and specificallyfor Maldives SREP IP. The proposed institutional relationships are described in Figure 10.
Advisory Groups
SREP IP
Ministry of Finance & Treasury
Regulator
Island councils
PMU
MGF
MEA
Public Utilities
Private
Private Financiers
Figure 10: Institutional framework for SREP implementation
2.1 MINISTRY OF ENVIRONMENT AND ENERGY
The Minister of Environment and Energy represents the energy sector in the President’s Cabinet of Ministers. A Minister of State solely dedicated to the energy sector has also been appointed to help the Maldives bolster its energy security and create important RE and energy efficiency policies and reduce greenhouse gas emissions. The Government has appointed the Permanent Secretary of MEE as the Focal Point for SREP coordination.
The key priorities of the Ministry with regard to energy sector development are to:
- Promote energy security by increasing the use of RE and diversifying the fuel mix;
- devise innovative financing for the development of the energy sector;
- advocate policies for efficient energy use by households, private and public sector;
- reform the energy market to ensure a diverse, safe, secure and affordable energy system; and
- tackle climate change internationally through ambitious international agreements.
MEE will be advised by Climate Change Advisory Council (CCAC) which is a high-level body setupunder a Presidential decree and chaired by the Vice President of the Maldives. This council will advise, facilitate and enhance inter-agency cooperation and strategic guidance on climate change related issues. It will also play a strategic role in ensuring the timely implementation of Maldives SREP IP.
Within MEE, the Energy Department is responsible for overall coordination, management and implementation of Maldives SREP IP activities and projects. The Energy Department will also draw on expertise and technical inputs from proposed Energy Task Force comprising of experts from key Maldivian institutions as well as necessary experts from the public sector and internationally.
2.2 MALDIVES SREP IP IMPLEMENTATION
Day to day implementation of the Maldives SREP IP within the Energy Department will be handled by the PMU. The PMU is currently operational within the Department and is responsible for managing a number of externally-funded projects and programmes including four ongoing WBG operations. Theexisting PMU will be strengthened through Maldives SREP IP to handle the increased workload especially inthe early years during the preparatory activities. Eventually, lead responsibility for RE and energy efficiency projects and programmes will be transferred to the Maldives Green Fund (MGF) which is beingestablished. Once operational, it is expected to become a key element of the environmental management system of the Republic of the Maldives. MGF is expected to become the Maldives Government’s dedicated institution for financing and enabling a wide range of priority projects/investments in the areas of climatechange, environment and energy.
Project implementation will be led by the public sector utilities, private sector and other national agencies asoutlined below:
- State Electric Company (STELCO): provides electricity service to the greater Male’ region. The company has a comparatively long history of existence and technical capacity to handle projects inthe region. The role of STELCO in Maldives SREP IP implementation would be to purchaseelectricity from private suppliers as well as public sector investments in the power sector.
- FENAKA Corporation: is mandated with providing electricity and other utility services to all inhabited islands in the Maldives, with the exception of the greater Male’ region. The role of FENAKA in Maldives SREP IP implementation is similar to that of STELCO but for the outer islands. Presently, the company lacks sufficient technical and financial capacity to implement largescale RET projects. Therefore, in the initial phases of Maldives SREP IP, the PMU will be supporting FENAKA in implementing the relevant Maldives SREP IP programmes and projects, while simultaneously strengthening FENAKA’s capacities. Eventually FENAKA will assume full responsibility for Maldives SREP IP implementation and RE expansion in the outer islands.
- Private Sector: domestic and international private investments are central for achieving Maldives SREP IP and national goals. They bring financing, advanced technologies, strong technical and professional business management expertise. Recognizing their importance, the government of Maldives through its own initiatives and Maldives SREP IP will be addressing investment barriers and risks of concern to these investors and pro- actively reaching out to them through road shows and investor conferences. Domestic commercial banks are currently not financing RE investments,but may do so as experience in the sector builds up.
- Other National Stakeholders: The Government through the Ministry of Finance and Treasurywill support the programme through contributions from the national budget as well as structuring Overseas Development Assistance guarantees through MDBs to cover commercial and non-commercial risks. The Ministry of Economic Development will support and assist local and foreign investors and provide incentives for private sector engagement. The Central Procurement Agency will carry out tender processes for larger procurement packages. The Maldives Meteorological Service (MMS) will lead RE resource data collection and management required for Maldives SREPIP funded projects and beyond. At island levels the projects will be implemented with the consent of the Island Councils who will play a major role in implantation of the projects.
2.3 REGULATING FUNCTIONS
Maldives Energy Authority (MEA): as the regulator, will have a critical role to play in establishingtariffs, issuing guidelines and regulations to ensure the reliability, security of the grids, and that the rightsand obligations of consumers and service providers are safeguarded. MEAs role is crucial for the success of Maldives SREP IP implementation as the programme envisages significant private investmentin delivering renewable electricity. In this regard, MEA is developing a comprehensive energy sector regulatory framework with technical assistance from WBG and ADB. Through this support, regulations on licensing, standards of performance, energy efficiency labelling, investment approvals and technicalregulations are being developed.
Environmental Protection Agency (EPA): will be responsible for implementation of the MaldivesEnvironment Act and the Environmental Impact Assessment Regulation. This will ensure that investments under Maldives SREP IP are compliant with Maldivian Law as well as applicable MDB safeguards requirements.
3.
MALDIVES SREP IP AS A KEY STRATEGIC TOOL
3.1 MALDIVES SREP IP CONTRIBUTION TO CARBON NEUTRALSTRATEGY
The carbon neutral policy has multiple benefits in terms of CO2 emission reduction, energy security, electricity cost reduction and ecosystem conservation. According to the Carbon Audit 200919 the present status of emissions is at 1.3 MtCO2 equivalents which, by 2020 will increase up to 2.5 MtCO2equivalents under a usual business scenario (Figure 11). Maldives SREP IP is targeting the electricity sector which contributes 19% of the total CO2 emissions. Maldives SREP IP also has a very significant demonstrative effect to the tourism sector which is one of the largest emitters of CO2 in the country. There are number of Government led programmes targeting various sectors (see Appendix 3 and 4 for details).Therefore, the Maldives SREP IP is part of a larger programme tackling the climate change agenda.
3 000 000
2 500 000
2 000 000
1 500 000
1 000 000
500 000
Others Electricity
(residentials,commercial & institutional)
Transport for
inhabitants
(excl. tourism & fishing)
Waste Fishing
(industry & transport)
Tourism
(resort & transport)
Figure 11: Emissions by the major sectors in the country
Reaching the target of a carbon neutral energy sector by the year 2020 is of high priority to theGovernment. Even though there is universal access to electricity in the Maldives, it is based entirely ondiesel generators. Maldives SREP IP will complement the overall RET development programme stated inthe National Sustainable Development Strategy from 2009 that sets out the targets for achieving carbonneutrality for the energy sector.
Maldives SREP IP will support the RE development in the greater Male’ region and the outer islands witha strong focus on solar PV, wind and WTE, including public and private investment as well as relatedcapacity building of government bodies, utilities and other stakeholders.
MEE is in the process of formulating a Renewable Energy Law with a long term perspective for the RET development including a functioning FIT system. The Government is also supporting the establishment of a coherent and efficient structure for the electricity market through the following actions and policies:
19 BeCitizen, 2009 Carbon Audit, November 2010
- Establishment of an enabling legal framework and policies to alleviate barriers to RE and mitigateassociated risks;
- development of an institutional framework to support RE development by the private and public sectors;
- strengthening of MEE and related institutions and instruments such as the MGF; and
- development of a financing mechanism, including risk mitigation instruments, to address the needs ofproject developers and banks.
Maldives SREP IP will further strengthen the above actions and policies through appropriateinterventions.
3.2 USING MALDIVES SREP IP TO OVERCOME THE BARRIERS ANDCHALLENGES IN THE SECTOR
Table 5 outlines the key barriers and challenges which will be addressed through Maldives SREP IPinterventions.
Table 5: Key barriers and challenges
Barriers and Challenges | Maldives SREP IP interventions |
Inadequate information on the availability of RE resource – Presently with the exception of solar and apart from some data on wind speed, there is limited informationon the magnitude of RE resource potentials in the country, which could be utilized in designing anddeveloping RE-based projects either for electricity andnon-electricity purposes. | By collecting and supplying quality resource data to theRE community. |
People in the country, particularly in the outer islandsare not aware of the various aspects of the installationand operation of RE systems. In addition, many perceiveRE as a free resource and therefore may not have to payfor electricity service. | As a complementary activity to Maldives SREP IPthe government plans to introduce an RE module intraining programmes conducted for the islandcounsellors at the Institute of Local Governance andDevelopment to sensitise them of the socio-economicand environmental aspects of RE technologies. MEE will also carry out media campaigns using mass media to raise awareness of the public on RE benefits. |
Inadequate policies on the utilization of RE – Althoughthe GoM has committed itself to pursue the development ofRE resources as a means to sustainable development,inadequate policies are in place to support efforts toengage in RE-based projects in the country. There is aneed for policies and regulations regarding financial andeconomic incentives to undertake RET applications. | Through Maldives SREP IP technical assistance the REpolicy and the regulatory framework will be strengthenedby developing and implementing policies, laws,regulations, rules, standards and incentive schemesto integrate RE in the energy sector. Electricity FIT andtariff mechanisms, standardized PPAs, guidelines forinvestment approval, licensing of electricity operators,etc. to support RE development have been carried outand will continue to be supported under Maldives SREPIP. |
Inadequate capability of thekey players inthe governmentsector in the development, design, implementation andmanagement of RE technology application activities –Because of the complete dependence on fossil fuels,capacity among policy makers and technical people inRE development is very limited. Presently, there is verylimited trained manpower in the country to assess, plan,implement and monitor RE technology development and implementation on a significant scale. In addition,limited institutional mechanism exist to support thedissemination of RE technologies, as well as in thediffusion of knowledge and skills in the operation andmaintenance of RE. | By building the technical and commercial capacity toenable utilities to enter into and manage good contracts.In addition, skill development for the public sector will be developed for better planning, implementation and operation of RE systems. In addition to training,international expertise will be sought to supplementlocal capabilities for example on advisory services ontechnical design, procurement, packaging projects,bidding & awarding contracts, legal and commercialaspects, etc. for Maldives SREP IP. Furthermore, MEE is considering introducing a degreelevel programme at Maldives National University to build long term capacity and develop/retain a cadre of energyprofessionals that become the future catalysts of change and can help sustain these transformativeinvestments. Funding will be sought from other sources. |
Limited involvement of entrepreneurs in producing andservicing RE systems – Except for a few entrepreneursthat are interested in engaging in RE business, there is a general perception that the private sector is notinterested in investing in RE business. | By reducing commercial and sovereign risks throughguarantees, capital injection (where needed) and bymarketing RE projects in the Maldives and overseas thiswould make investments in the sector more attractive. |
Lack of significant field demonstration of RE technologyapplications – only few individuals have some knowledgeabout RE technologies, plenty are still doubtful if suchtechnologies will work in Maldives. There is a need forsuccessful demonstration of actual applications of theappropriate RETs in order to convince potential users. | Although a few pilot projects have been implemented,they are often too small and do not demonstrate theneeded scale to bring transformative change to thesector. |
Lack of financing available for RE applications as wellas for RE-based livelihoods projects. | The introduction of the FIT, incentives and guaranteefacilities and strong regulatory framework will encourageinvestor to venture into this market. Maldives SREP IPprovides the opportunity to target vulnerable island communities where cost of financing is usuallyprohibitive. |
Small scale and high complexity of transactions. | By aggregating projects, providing regulatory clarity, and by providing technical information and support todevelopers to reduce pre-investment costs. |
Power station readiness- a sizable group of islandscurrently requires significant upgrading of the dieselgenerators, grid system and controls. This is prerequisiteto transitioning to increased share of solar/wind. | By adapting power stations to accept high levels ofintermittent RE on a ‘plug and play’ basis. This will bedone in conjunction with a major power station upgradeprogramme to reduce fuel use. |
3.3 RENEWABLE ENERGY RESOURCES IN THE MALDIVES
3.3.1 SOLAR ENERGY
Solar energy will play a crucial role for the RET development in the Maldives. There are already somesuccessful installations of solar PV and solar heating applications in the Maldives20.
Maldives is blessed with an abundance of sunshine year round. As it is located on the equator, solar declination is not an issue throughout the year. As shown in Figures 12-14, there is a constant level ofsunshine throughout the year taken from a sample of three islands in the north, central and south ofMaldives, respectively.
Figure 12: Solar insolation in HA.Dhidhoo Island (source: www.gaisma.com)
Figure 13: Solar insolation in Male’ (source: www.gaisma.com)
20 Such as the STELCO Six Island Solar PV Project - the first project that has been completed under a PPA signed between STELCO and Renewable Energy Maldives (REM).
Figure 14: Solar insolation in Gn.Fuvahmulah Island (source: www.gaisma.com)
The spatial distribution shows little variation of sunshine, indicating that solar declination is not an issue when the geographic span of the islands is considered. Therefore installation of the solar PV units would be easier compared to other parts of the globe where the units have to be south or north facing to get themaximum output from the units.
Figure 15: Spatial variation in solar power insolation
Figure 15 shows the spatial variation in solar power insolation in Maldives. It shows maximum of approximately 7kWh/m2/day and a minimum of 4.5kWh/m2/day. This shows that there is little spatialvariation of the sunshine received throughout the country.
Rooftop areas of randomly selected islands were considered to seek the availability of rooftop space of individual households and public buildings for solar panel installation. The calculation shows roof space availability to meet 30% of the electricity demand in some islands while it reaches 80% in some otherislands. Further surveys are likely to identify additional suitable roof space for solar PV installations.
Solar photovoltaic: Photovoltaic technology is generally used for power generation as an alternative toconventional methods. The technology was introduced to the Maldives as a power generation technology fairly recently in 2005. Since then, popularity of the technology rose with multiple private companies providing PV solutions and increased number of utility projects embracing this technology. This wasdriven mainly by the high cost of generation from diesel coupled with falling solar PV prices. For instance inthe case of large electricity consuming islands the unit cost of diesel based electricity production is USD 0.35/kWh while the cost of electricity generation from solar PV is USD 0.23/kWh. Even with battery storage, in the case of small electricity consuming islands, the cost of electricity generation using solar PV is found to be USD 0.35/ kWh which is lower than diesel based electricity generation (USD 0.40/kWh) making this a viable technology for consideration under Maldives SREP IP.
Solar heating technologies: Solar heating technologies are a commonly used technology in the world and well known in the Maldives. Solar energy is used for water heating as an alternative to electric heaters and even air conditioners to increase its efficiency. Although the technology is widely available, lack of awareness, limited service providers competent in dealing with the technology and quality assurance is still an issue. The technology is currently used in tourism industry for water heating and has little or noapplication in local islands due to limited demand. Further, since Maldives SREP IP projects are mainly targeting local inhabited islands and solar water heating is currently serving a niche market this technologyhas not been selected under the Maldives SREP IP.
3.3.2 WIND ENERGY
According to preliminary assessments based on satellite data (Figure 16), the wind resource in Maldives is found between 4.5o N Lat. and approximately 6.5o N Lat. Covering the following atolls: NorthMaalhosmadulu, South Maalhosmadulu, North Miladhunmadulu, South Miladhunmadulu, andFaadhippolhu. This information would to be verified through meso-scale mapping to improve the qualityand accuracy of the data throughout the country.
Figure 16: Wind resource map and the atoll names for the Maldives
Figure 17 shows that wind has a particular advantage and that the resource is most plentiful for the period of the year when the solar resource is at its weakest. Thus, wind power may be important tomaximize diesel savings in the short term, and minimize the cost of energy storage in the longer term. Windwill therefore be supported under the Maldives SREP IP when used in conjunction with solar PV to providea more consistent RE supply over the year.
Although predominantly focused on solar PV investments, where the conditions allow, Maldives SREP IP can support a material proportion of small scale wind to be used to supplement solar PV during the windyand cloudy months of the year.
Jan Feb Mar
Apr May Jun
Jul
Aug
Sep Oct
Nov Dec
Figure 17: Complementary solar and wind resource patterns throughout the year
3.3.3 WASTE TO ENERGY
Waste management in the Maldives, just as with energy, is an unequivocal environmental issue which requires immediate and sustained investment to resolve. The National Solid Waste Management Policy(2008) and the Government’s Strategic Action Plan identify that in order to overcome the lack of economy of scale for investment in waste management, up to 7 Regional Waste Management Facilities (RWMF)should be established within the Maldives. Such facilities are expected to promote integrated waste management in the Maldives and demonstrate waste as a resource that can benefit both economically and environmentally. The waste management policy encourages use of waste to generate electricity using sound technologies. There are considerable potential synergies between waste technology solutions and energy generation which are mutually beneficial.
A pre-feasibility study supported by UNDP and undertaken by IT Power India in 2007 identified that theincineration of waste to generate electricity is a suitable waste treatment technology for the Maldives. The pre-feasibility study considered that WTE technologies are viable for regional incineration facilities with a throughput of 15 ton/day or more. Principally waste heat extracted in the flue gas cooling process iscaptured and used for power production as well as in commercial enterprises such as desalinated water plants. The heat extracted from incinerator flue gas cleaning represents equivalence to the imported fossil fuel which would otherwise be required to produce the same quantity of water. Heat produced in the flue gas cooling process is an intermediate by-product of the incineration process and if it is not utilized for some other purpose it is simply vented to the atmosphere.
Currently the GoM is investing USD 4.5 million in R.Vandhoo RWMF. The waste treatment technology under consideration is incineration with a heat exchanger for flue gas cooling. The waste throughput isapproximately 40 tons/day.
The IT Power India study identified that conversion of low pressure steam heated by the waste incineration process into electricity is technically feasible for RWMF with a throughput of 40tons/day or more. The technological options for developing WTE incineration facilities are more complex and come at a cost. Unlike waste for energy where heat is extracted from a heat exchanger which is an integral part of the flugas cleaning technology, additional technology is required to produce low pressure steam and toproduce electricity through a low pressure
steam generator. In addition, given the air quality constraints with locating incineration facilities near populations, additional investment may be required to transfer electricity produced from the incineration facility to potential users. Such investment would reasonably involve undersea cabling. Given the cost constraints potential for WTE incineration is likely to be limited to population centres where the demand is likely to be greatest such as in Male’ and Addu.
Another technical WTE solution that may have potential in the Maldives is the syn gas technology. Rather than convert steam into electricity through a low pressure steam generator, syn gas technology uses pyrolysis toproduce combustible gasses which are captured and introduced into a syn gas generator. Air emissions fromsuch technology are generally more acceptable, and such technology can be provided in modules potentiallymaking it more accessible to smaller regional populations. The constraints with such technology are that the capital cost is proportionally higher than more conventional technology, besides the complexity of thetechnology.
While it has limited potential, appropriate WTE technology is found to be technically and financially feasible in the Maldives and is the only technology which is not intermittent. Cost is highly competitive, much lower than diesel and hence has been selected under Maldives SREP IP.
3.3.4 BIOGAS
Biogas can provide a clean, easily controlled source of RE from organic waste materials, replacing firewood orfossil fuels. Since small scale units can be built and operated relatively simply, biogas can be used directly forcooking, heating or lighting. On the other side, both electricity generation and the compression of the gas(for storage or for use in vehicles) needs large amounts of energy compared to a relatively small output ofuseful energy. Therefore, biogas might only be an option when it can be used directly at the source, i.e.where waste is treated, or sludge is reused locally, and will not be considered under Maldives SREP IP.
3.3.5 OCEAN ENERGIES
Deep Sea Water Cooling: This technology utilizes the supply of cold sea water from depths over 1000 meterwhich can be used for offsetting electricity generated for cooling purposes. Maldives Water and SewerageCompany (MWSC) is studying a potential project at the new International Airport terminal in Hulhule Island.
Tidal and Currents: A preliminary desktop study by Robert Gordon University of Scotland in 2011 concluded that there was limited potential for tidal energy in the Maldives given topographical features. These may be some potential in channels between islands; however this would need to be systematically surveyed.
3.3.6 BIOMASS
There are only very limited biomass resources available in the Maldives. At a smaller scale, biomass gasifiers operate successfully in many countries. However, they require considerable maintenance, theconversion from biomass to electricity can be very low, and they are generally run only for a limitednumber of hours per day.
Introducing biomass powered electricity at small scale in the outer islands would requireconsiderable investment in fuel preparation equipment, mobile equipment for transport (most
islands have little or no motorized traffic), maintenance facilities, etc. In addition, agricultural residues or wood needed are not available in the Maldives and are not likely to be growing in required quantities. IfMaldives is to generate energy by utilizing biomass as fuel source at a large scale, it has to depend onimported biomass. Impacts of importing biomass for large scale energy generation will be studied further as a possible option under the feasibility study for the greater Male’ region power integration.
3.4 ENERGY EFFICIENCY
Given the high cost of power generation, energy efficiency will play an important and complementary roleto the development of RET in the Maldives. On the supply side, increasing the efficiency of generatorsand distribution network would offset and defer the requirement for upgrading diesel generation capacity. Similarly, on the demand side there exist several opportunities for efficient air conditioning,lighting, motors, appliances, industrial processes etc.
45
40
35
30
25
20
15
10
5
0
0 20 40 60 80 100 120 140 160 180 200 220 240 260
Resource Potential (MW)
Figure 18: Renewable energy potential capacity and unit cost of generation for outer islands21
As shown in Figure 18, which presents a comparison of unit generation cost for the various RE sources that have been studied in some level of detail and their potential capacities in the country, WTE is the most cost effective but it has resource limitations followed by wind with similar shortcomings. Solar hasimmense potential and is economically favourable compared to generation cost using diesel. In small electricity consuming islands solar is found to favour over diesel even with battery storage. Table 6 sets out a summary of technology options considered under Maldives SREP IP and their estimated potential.
21 USD 0.23 is at lower levels of penetration of solar in the system, USD 0.35 cents is based on storage of 1 day using conventional batteries. Depending on days of storage (1 or 2)and storage technology used – cost will be from USD 0.35 to USD 0.50.
Table 6: Summary of technology options considered under MaldivesSREP IP and their estimated potential
Technology | Potential in Maldives | Cost (USD) | Focus forMaldivesSREP IP | Justification |
Solar PV | Unlimited | 0.23 w/obatteries 0.35 w/batteries | Yes | RE technology with the largest potential and scalability. Solar radiation throughout the year with little variation throughout thecountry. Modular approach would allow gradual roll out. Bothsmall and large investors might find their niche. |
Solar heating | Limitedapplication | | No | Limited demand mainly focused in the resorts which are notcovered in the IP. Technology is mature and does not requiremajor subsidies. |
Biogas | <1MW | | No | The studies conducted show very little potential for the technology. |
Tidal and currents | ~10MW | | No | Technologies are not commercially available and costs seem to be prohibitive for the time being. Tides and currents have seasonal nature which would not help to address the problem. Still, studies are underway to explore the potential. |
Waste-to-energy | 20MW | 0.20 | Yes | While it has limited potential, it is found to be technically andfinancially feasible in the Maldives and is the only technology which is not intermittent. Cost is highly competitive and is much lower than diesel. It has major environmental benefits in term of utilization of waste which often ends up in the ocean damagingfragile marine ecosystem |
Wind (small-medium) | 10-20MW | 0.25 | Yes | The technology has limited potential and significant seasonalvariability. Large wind farms are unlikely feasible due to the variability and intermittency. However, small wind turbines can be a good complement to solar PVs in areas with goodwind resource reducing the overall costs. |
Deep sea waterutilization forcooling | Feasible | | No | Due to lack of distribution network the technology can currently serve only large industrial users (there is one pilot project underpreparation). Expansion of the technology will be analysed as partof the study for Male’ generation options. |
Heat recovery | 0-10MW | | No | The technology can be used for desalination of water and some industries but it is not considered RE and will not be qualified forMaldives SREP IP support. Some heat recovery for desalinationwill be used in WTE projects. |
Biomass | | 0.20 | No | No local biomass is available. Feasibility of building a biomassplant for Male’ based on imported fuel will be analysed as part of the Male, study on generation options to be supported by Maldives SREP IP. |
4.
RATIONALE FOR MALDIVES SREP IPINTERVENTIONS
In selecting components for Maldives SREP IP interventions, consideration was given to such initiatives that have the potential to be scaled up, can leverage private investments, have transformational impact, innovation,poverty reduction, gender/social inclusiveness, and contribute to climate change mitigation. The IP takes intoconsideration the unique geographical and demographical characteristics of the Maldives having a densely populated Male’ region surrounded by a large number of outer islands differing in size and population. The Maldives SREP IPwill support the following three main components:
4.1 RENEWABLE ENERGY FOR GREATER MALE’ REGION
As the national capital, the main industrial and economic growth point and the largest electricity consumer, Male’ needs a large and reliable source of power. Current barriers for reaching a higher RET penetration are:
- Lack of awareness and capacity among stakeholders on RETs;
- risk and high costs of appraisal;
- lack of interest among the private sector to invest in RETs;
- inadequate policies, financial and regulatory mechanisms to promote RETs; and
- weaknesses in the overall and financial management capacity of local institutions combined with limitations of capital for accessing loans, along with the incapacity of local financial institutions to analyse RE projects.
This intervention aims to reduce above mentioned barriers. It will support successful portfolio development of the sector and lower risks by means of demonstration and through training and experience gaining and sharing provided to stakeholders in the market such as developers, financial institutions and communities to enable the transformationof the energy sector.
Scope
Greater Male’ Region Solar PV: it is possible to feed solar PV generated electricity amounting to 20-30% of the peak day time demand in greater Male’ region without significant investment in sophisticated systems upgrading. Considering the respective peak demands for various islands in the region as shown in Table 7, 15 MW of solar PVcan be safely fed in to grid systems in the greater Male’ region by 2015. Additional solar generation potential exists onrooftops of industrial sites in Thilafushi, Gulheefalhu, Hulhule, Hulhumale’ and transmitted to Male’ via submarinecable. This will relieve the pressure of providing the capital Male’ with a huge standalone power supply, which would be physically impossible to install within the capital. Additional benefits include improved system efficiency andreliability with larger and more diverse power sources.
Table 7: Available PV potential in the islands of greater Male’ region
Island | Peak Demand by 2015 (MW) | Existing & PlannedPV (MW) | Available PV potential (MW) |
Male’ | 37.2 | 0.7 | 13 |
Hulhumale’’22 | 4.9 | 0.06 | 5 |
Villingili | 1.1 | 0.3 | 1 |
Thilafushi22 | 1.9 | 0 | 1 |
Hulhule (Airport) | 13.7 | 0 | 4 |
MWSC | 5.2 | 0.05 | 2 |
Total | 18.9 | 1.11 | 26 |
The FIT mechanism will be used in deploying the solar PV on greater Male’ region. FIT is already in place and MEA is updating it. The final draft of the standardized PPA is ready and drafts with solar PV - grid connection specifications and guidelines are available at MEA. Off taker is STELCO as mandated by MEA.
Financing requirement of this component is expected to be about USD 49 million, of this the private sector will contribute about USD 26.5 million as equity and debt to finance the installation of about 11MW in Male’ andadditional 4MW on other islands in the greater Male’ region. USD 11 million for investments will come from JICA,SREP and WBG financing will be used to provide risk mitigation facilities and/or incentives to private companiesduring the early stages of the implementation of the FIT scheme.
Waste-to-energy (Thilafushi): will be considered under the greater Male’ region electricity supply. Thilafushi receives more than 200 tons of combustible waste per day, which would allow the installation of a facility to generateup to 4MW. The electricity produced can be used to meet the demand of the island and will generate additionalrevenue from the sale of water.
The project is part of a larger scale integrated waste management system including waste collection and transportation to Thilafushi and waste processing and disposal on Thilafushi (segregation, recycling, composting, gasification and inert waste disposal in the landfill). Under the Maldives SREP IP, only the construction of an up to 4MW WTE power generation project to replace the existing diesel-based power generator on the island is considered. Itwill be developed under a Public-Private Partnership (PPP) arrangement. The investor is expected to self-finance the project. This project is expected to cost around USD 20 million, of this the private sector will contribute about USD 5 million to finance the installation of about 4MW, USD 10 million will be provided by IFC and ADB’s PSOD. Maldives SREP IP financing will be used to cover electricity payment risk. SREP funds may be required to meet thefinancing gap described above or cover the incremental costs or risks of project implementation. ADB and IFC will consider the following options for deploying the SREP funds: (i) parallel concessional loans; (ii) partial credit or risk guarantees or other risk sharing mechanisms; (iii) buying down of fees and/or risk premiums from the commercialpolitical risk insurance market; (iv) covering the risks associated with electricity off-take under a GoM FIT scheme; and (v) other forms of subordinated or mezzanine finance.
Greater Male’ Region Renewable Power System Integration: In order to further displace the use of diesel generation, additional RETs are required. A feasibility study will be carried out under Maldives SREP IP to identify RE options to deliver large-scale dispatchable power for greater Male’ region and achieve economies of scalethrough inter-island connectivity. The study will
22 Only STELCO-operated plants are considered; does not include additional private generating plants recommend further initiatives to be supported by Maldives SREP IP and from other resources. The feasibility of a submarine cable to connect the islands of the greater Male’ area will be studied. The region will profit from animproved energy infrastructure, which in turn will support the social and economic development of the region.
Phase 1 (attracting investors for solar PV) and WTE in Thilafushi will serve as learning platforms for RE for outer islands, they will show the effectiveness of the new institutional set-up and can provide the necessary insight forMEE and MGF.
Last but not least, successful implementation will improve the investment climate in general and might lead to more competition between RE producers and a better understanding of the banking sector to strengthen its capability inproviding project finance for the RET sector.
4.2 RENEWABLE ENERGY FOR OUTER ISLANDS
Electricity generation from solar PV, and wind in some locations, is less expensive than energy generation from diesel based on avoided cost of fuel in the Maldives. Given that these are intermittent generation technologies these wouldbe supplemented by either energy storage and/ or diesel back up.
Based on island classifications as detailed in Section 1.6 the RE development strategy for these islands is summarized below in Table 8. For the small electricity consuming islands installation of solar/wind with battery storage is economically justifiable based on the fact that generation cost of electricity using diesel is found to be USD0.4/kWh while solar PV with adequate battery storage unit cost of generation is USD 0.35/kWh. This being the case, proper assessments will be necessary in order to identify the best RE mix for each of the selected islands, includingpotential savings due to energy efficiency measures, additionally considerations will also be given to take the advantage of gradually decreasing world market prices23 for battery storage and solar PV systems. Hence, a 2-step approach will be adopted in order to optimize the use of the available financial resources. Under this phase-wiseapproach, 70% of electricity demand of 10 small electricity consuming islands will be converted to RE within the first 2 years and subsequently leading up to 100% RE conversion in the next 3-4 years of the Maldives SREP IPimplementation. The lessons gained in the first step would serve the purpose of gaining valuable experience that can belater used to convert remaining 30% to RE more efficiently and effectively and it would also serve as a best practice forother islands, resorts and islands in other islands in SIDS, where RE transformation is possible24.
For medium to large electricity consuming islands with inefficient energy generation power system, upgrading is a prerequisite to increase the share of solar/wind. On efficient medium and large electricity consuming islandsincreasing the share of solar/wind can start immediately minor adjustments to existing power systems. The share of solar/wind in the energy mix is dependent on the cost of storage and cost of diesel.
23 Renewable energy technologies: Cost Analysis Series Volume 1: Power Sector Issue 4/5 solar photovoltaic, International Renewable Energy Agency, 2012.
24 Project preparatory studies would assess technology options, cost curves for solar power and storage batteries to arrive at the transition path to implementation of full RE on small electricity consumingislands.
Table 8: Island classification by electricity consumption
Small electricity consuming islands (~10) | 1 - Full solar/wind with batteries |
Inefficient medium and largeelectricity consuming islands (~15) | 2a - Upgrade power system with newefficient generators, controls to be ‘plug and play’ and distribution networkcompatible with up to 30% of peak demand. | 2b - Install sufficient solar PV and/or windto meet up to 30% of peak demand. |
Efficient medium and large electricity consumingislands (~ 15) | 3 - Install sufficient solar PV and/or wind to meet up to 30% of peak demand. |
The objective of this is to achieve full RE systems on small electricity consuming islands and upgrade power systems on medium to large electricity consuming islands to make them RE ready and install sufficient solar PV/wind.
Scope
Small electricity consuming islands RE: Approximately 10 power stations (between 250-350MWh/ year) will beconverted to full RE (approximately 2MW) in two steps, using an optimum mix of wind and solar PV, with batteriesto provide energy storage. On average diesel electricity supply costs on those selected islands are high (~USD0.40/kWh). In addition, they have been selected for implementation because they are the most difficult to fund commercially and they involve tight integration - at small scale - of wind, solar, energy storage and generator control. This will be implemented by the state-owned utility, FENAKA, and will support the design of operationalsystems for the eventual full RE penetration across all islands. In addition, distribution system improvements, energy efficiency measures and productive usage of energy would be explored on these islands.
A 2-step approach for full RE on the identified small electricity consuming islands would be developed during the project preparation phase that will be based on the assessment of demand on the islands, RE resource assessments, potential for energy efficiency, space constraints, environmental and social safeguard aspects etc.
Power system rehabilitation: This is a necessary pre-cursor to the introduction of high levels of RE on the large electricity consuming islands. This is a necessary pre-cursor to the introduction of high levels of RE on the medium electricity consuming islands that have inefficient generators. It involves the refurbishment and/or replacement of inefficient generators in about 15 medium electricity consuming islands (>1GWh/year), with a range of modern,electronically controlled, generators as well as installing improved control systems to enable generators to run efficiently at low loads and to stabilize the grid. Distribution system upgrades and energy efficiency measures wouldbe attempted where appropriate. Once the refurbishment/replacement is done, those islands can attract privateinvestors under the FIT supported by the guarantee schemes. In addition, there are nearly 15 islands with efficient power generation and distribution systems that have been developed in recent years. These systems would be assessed for readiness to integrate RE additions. Necessary investments would be identified and undertaken to attractprivate investors to meet 30% of peak demand. This will be implemented by FENAKA.
The financing requirements of this component are expected to be about USD 13 million (ADB USD 3 million, IDBUSD 5 million and the Government USD 5 million) required for preparing power systems to accept RE. These funds will be on-lend to FENAKA by the government and repayments will be used to replenish MGF which in turn will be used to scale up further RE investments.
RE investments under the FIT: Installation of about 3MW of combined solar and wind is envisaged on medium tolarge electricity consuming islands (>1GWh/year) under the FIT mechanism to offset up to 30% of peak daytime demand. This will be carried out by the private sector on a commercial basis with the electricity sold to FENAKA at the FIT. This is a precursor to investments in a greater share of RE on these islands once storage costsdecline. SREP resources may be used to mitigate against payment or currency risk and/or providing initial subsidizedcapital for the first movers. The exact modalities will be finalized during the project preparation and will be based on feedback received from potential investors collected during the planned investor conference and other consultations.
The financing requirements of this component are expected to be about USD 12.9 million, of this private sector will contribute about USD 9 million as equity and debt to finance the installation of about 3MW. USD 1 million ofSREP, USD 0.9 million of GIZ and USD 2 million of WBG financing will be used for guarantee and/or investments, inaddition WBG will provide risk mitigation facilities and/or incentives to private companies during the early stages of the implementation of the FIT scheme.
Waste-to-Energy (WTE): Based on technical, financial and economic assessments carried out, there is potential for utilizing waste management solutions on islands where the waste streams exceed 15 tons/day (TPD). Three islands have been identified as candidates for this, namely: HDh Kulhudhufushi, R. Vandhoo and S. Hithadhoo wherediesel used for electricity and water production will be displaced by WTE. Table 9 shows the electricity and waterproduction potential on these islands. These private sector projects will sell water and electricity to FENAKA underpurchase agreements.
Table 9: Electricity and water production potential
| S. Hithadhoo Kulhudhufushi | R.Vandhoo |
Proposed solution | Combustion basedsolution to provideelectricity and potable water | Combustion based solutionto provide potable water | Incineration based solution toprovide electricity |
Capacity – input waste | 50 TPD 20 TPD | 40 TPD |
Capacity – output electricity + water | 1 MWe + 95 TPD | 76 TPD | 1 MWe |
Diesel electricity avoided(kWh/year) | 635,000 175,000 | 613,000 |
The financing requirements of this component are expected to be about USD 10 million, of this private sector will contribute about USD 7 million as equity and debt to finance the installation of about 2MW. USD 3 million will come from SREP, in addition, WBG financing will be used to provide risk mitigation facilities and/or incentives to privatecompanies.
4.3 TECHNICAL ASSISTANCE AND CAPACITY BUILDING
This is a critical pre-requisite of any significant development of the RE sector. Lack of skills has been a major factorin holding back progress to date, and needs to be addressed as an urgent matter. Technical assistance and capacity building is therefore one of the important task to be managed and funded under Maldives SREP IP.
Without the necessary training and technical support, the existing institutions in the Maldives will face significantchallenges in delivering the ambitious Maldives SREP IP targets and beyond. While the country has set up a cabinetlevel Ministry responsible for energy sector development, the Maldives Energy Authority for the enforcement of the sector related regulations, and state owned utilities to manage and operate utility services throughout the country, theseorganizations are constrained by human resource shortages.
The knowledge of island specific RE resources in the Maldives remains nascent. Given the sparseness of the Maldivian islands and low availability of funding for such country-wide exercises, there has been little or negligible work carried out in the past to systematically collect RE resource data. In general, knowledge of RET exists mainly on solar and slightly on wind, though the country has not experimented with such technologies on a broader scale.There are no known biomass resources indigenous to the Maldives, conventional hydro-power is not an option asthere are no rivers, streams, or inland water bodies suitable for harnessing such energy. However, there is huge interest in the country to explore other renewable resources such as Ocean Thermal Energy Conversion (OTEC), tidal andmarine currents, etc.
Objective
To create an enabling environment, strengthen human resource capacities and improve access to credible data in orderto achieve the long term objectives in the RE sector.
Scope
Creating an enabling environment: through Maldives SREP IP technical assistance the RE policy and the regulatory framework will be strengthened by developing and implementing policies, laws, regulations, rules, standards and incentive schemes to integrate RE in the energy sector. Electricity FIT and tariff mechanisms, standardized PPAs, guidelines for investment approval, licensing of electricity operators, etc. to support RE development have been carried out and continue to be supported by the WBG and ADB. This will increase the efficiency and speed of project development. Additional SREP resources may be utilized.
Financing requirement of this component is expected to be about USD 2.2 million. USD 0.2 million of SREP funding will be used in conjunction with ADB, GIZ and GoM to create an enabling environment for RE investments.
Human capacity building: will be developed for planning, implementation and operation of RE systems. In addition to training, international expertise will be sought to supplement local capabilities for example on advisory services on technical design, procurement, packaging projects, bidding & awarding contracts, legal and commercialaspects, etc. for SREP investments. Resources from SREP will be used where needed. The German cooperation projectimplemented by GIZ is supporting institution building for the energy and climate change sectors, and will offerimportant synergies.
Financing requirement of this component is expected to be about USD 1.7 million. USD 0.485 million of SREP funding will be used in conjunction with GIZ and GoM to develop human resource capacity in the country.
Improved access to quality data: The proposed activity is expected to finance the construction of a nationalnetwork of wind and solar data collection stations that will allow the optimization of wind, solar and energystorage components of the island power systems. Wind data will be collected at a range of heights up to ±80m, and solar data will include direct and diffuse radiation, and radiation reflected off lagoon surfaces. Funds will be used for real-time data collection, monitoring and analysis. In addition, ocean energy data will be gathered.
The MMS will be strengthened and supported under the Maldives SREP IP in managing a national network of RET measuring stations, capable of providing reliable data to allow proper planning and design of RET based power systems across the islands.
Financing requirement of this component is expected to be about USD 1.1 million. Funding from multilateral donors channelled through the WB in addition to funds from GoM will be used in improving RE resource data collectionand management system in the country.
4.4 ACTIVITIES COMPLEMENTARY TO MALDIVES SREP IP
4.4.1 DEEP SEA WATER UTILIZATION
Detailed planning is underway by Maldives Water and Sewerage Company for a district cooling project at the newInternational Airport terminal in Hulhule Island. The project will supply cold sea water from a depth of 1,400m for AC/cooling, offsetting electricity generated by diesel. An intake system and chiller plant will be installed atHulhumale’ which will allow future expansion into residential housing. The project is expected to supply about 2,500refrigerant tons, will result in an estimated GHG reduction of approximately 14,000 tCO2/year, and will saveapproximately 5 million litres per year of diesel fuel. The anticipated date of commissioning is 2014; the project will be privately financed.
4.4.2 ENERGY EFFICIENCY
Abatement costs are difficult to derive for many classes of consumption because the variables are so great, and deriving reliable samples across the islands is difficult. Nonetheless, data has been measured for three crucial areas of demand which represent the bulk of night time energy use. These are air conditioners, fridges, and street lighting. Normal domestic lighting is universally provided by compact fluorescent lamps and offers little potential for energy saving.
The estimated costs and scale of abatement opportunities, based on replacing equipment at the end of its life with more energy efficient units are shown in Figure 19. Even if equipment were to be replaced immediately, levelisedcosts of the savings the net benefit would still be lower than the avoided cost of electricity as shown in Figure 20.
It is clear that potential energy savings are highly cost effective and significant in scale. By focusing on these three items of equipment, energy use at night will be significantly reduced – thus reducing the overall cost of providing 24 hour RE.
0.30
0.25
0.20
0.15
0.10
0.05
Diesel power costs
Refrigeration Air conditioning Street lighting
0.00
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
MWh saving
Figure 19: Levelised cost of savings from equipment replacement at end of life
Savings for both graphs are shown in MWh/year. The scale of savings is based upon extrapolation from limited data, andmay well underestimate the actual savings possible.
0.35
0.30
0.25
0.20
0.15
0.10
0.05
Diesel power costs
Refrigeration Air conditioning Street lighting
0.00
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
MWh saving
Figure 20: Levelised cost of savings from immediate equipment replacement
While Maldives SREP IP may not directly finance energy efficiency initiatives, the government believes that there willbe significant benefits complementing RE investments. Therefore, funding opportunities are expected be sought fromthe Governments budget, MDBs and other financing sources. There is a potential role for MGF in reinvesting savings from programmes which may likely be funded in the future.
4.4.3 TOURISM INDUSTRY
The tourism industry being a large consumer of energy in the Maldives, has a significant role to play in transforming energy sector. It has to increase activities on renewable energies and energy efficiency. In order to betterengage tourism industry, demonstrative effects on low carbon investments, proper regulations and incentive mechanism have to be established. Examples of good practice and cost saving from the public utilities projects coupled with technical support available from MEE will be used persuade the resort sector to move from diesel tosolar PV and higher levels of energy efficiency. An energy conservation programme assisted by IFC has been initiated to support resorts in identifying energy wastage and in assisting them making their investments greener.
4.4.4 TRANSPORT SECTOR
Marine transport accounts for approximately 22% of current GHG emissions. The high cost of fuel is a major factor in the economics of both fishing and public inter-island transport. In order to explore feasibilities of introducing RETs and fuel efficiency in the transport sector the government, in collaboration with bilateral partners, will undertake necessary studies and pilot projects.
5.
ENVIRONMENTAL AND SOCIALMANAGEMENT FRAMEWORK
The Environment and Social Management Framework (ESMF) will outline the positive impacts on the island’senvironment as well as remedial measures, preventative and control strategies for potential negative environmentaland social impacts due to proposed project activities.
Community consultation and engagement will be an integral part of identifying potential environmental and social impacts and mitigation measures to address any adverse impacts associated with projects. In implementing theproposed projects under the IP, EPA will ensure that all projects are carried out in accordance with Environmental ImpactAssessment Regulations of the Maldives. Where applicable, projects will comply with WB/ADB Safeguards Policies.
The following illustrates the ESMF stages for the approval of projects to be implemented under the IP. The process would consist of:
a) Screening for projects requiring significant environmental/social impact assessments;
b) scoping to identify potential positive and negative environmental and/or social impacts on the communities and natural environment;
c) determining the likely negative environmental and social impacts;
d) undertaking stakeholder consultations and public disclosure;
e) setting and implementing the appropriate mitigation and management measures; and
f) monitoring and reporting on environmental and social parameters during the implementation of project activities.
5.1 ENVIRONMENTAL AND SOCIAL IMPACTS
Environmental impacts are expected as a result of the proposed Maldives SREP IP projects. Due to the nature ofactivities, investments will result in minor civil works from the construction and installation of new RE generation systems, future decommissioning of RE installations, batteries, rehabilitation and expansion of existing power generation systems, and disposal of inefficient or old appliances.
Further risks may be associated with minor impacts to biodiversity, land or other assets, generation of solid waste from construction debris, oil spill from motorized construction equipment, accumulation of used batteries, etc. Some ofthese impacts may be unavoidable especially during construction and installation. Nevertheless, impacts would likelybe of a temporary nature and can be prevented, minimized or mitigated using appropriate mitigation and management measures. Potentially identifiable environmental and social impacts and mitigation measures for thetechnology options used in the proposed projects in the IP are summarized in Table
- While there are negative impacts, the majority of proposed projects is expected to have substantial positive environmental and social benefits.
Table 10: Impacts and mitigationmeasures for the technologyoptions
Types of Impacts | Solar PV | Wind Energy | Waste-to-Energy |
Environmentalimpact /construction and operation | - Construction waste andnoise
- Disposal of components at end of life(Batteries, PV panels,inverters, etc.)
- Possible impact on the marine environment due to fixing poles in theshallow lagoon for lagoon mountsschemes.
- Dealing with construction waste and impacts from work force.
- Bird strikes
- Visual impact as any windenergy system will be mounted ontall masts in clear spaces.
- Noise and dust during theconstruction may be nuisance tothe neighbourhood.
- Noise during operation of windturbine .
- The construction will involveactivities that will create environmental disturbancesnormally encountered in majorconstruction projects.
- Improper storage/handlingof, waste dumps and othersources of contaminants maylead into ground water pollution.
- Noise and dust during the construction may benuisance to theneighbourhood.
- Construction waste
- Emissions from thecombustion of waste
- Management of fly ash.
| | |
Social Impacts | - Disruption to households during installation of solarpanels and cables.
- Reduced fossil fuel-based power generation and reduced dependency on fuelimport costs
- Increasingcommunity resilience tochanges in fuel prices.
- Encouraging productive usage ofenergy in small electricityconsuming islands.
- Reduced fossil fuel-based power generation and reduced dependency on fuel import costs – increasing community resilience.
- Loss of land or other immovableproperties
- Reduced primary fuel costs will help reduce energy costs and improve communityresilience.
- Increased surface waterrunoff
| | |
Types of Impacts | Solar PV | Wind Energy | Waste-to-Energy |
Mitigation Measures / Environment(Anticipatedenvironmentalimpacts ofprojects will be minor, localized andmanageable.) | - Proper disposal ofconstruction waste
- EPA will be developingand enforcing regulations on safe disposal ofcomponents at end of life,
- To minimise the socialimpacts, efforts need to employ Maldivians during theconstruction and operation stage of the projects.
- Proper sitingdecisions can help to avoid aesthetic impacts to the landscape andseascape. Siting
decisions will be taken inconsultation with all localstakeholders. - Good construction management practices inplace that reduce negativeimpacts to the environment.
- Arrangements forsafe disposal of solarpanels and batteries on
decommissioning or replacement. | - Siting of turbines to avoid areasof live coral cover and marine life.
- Proper disposal of constructionwaste and avoiding marine spillage.
- Chances of bird strikes areextremely rare but may not becompletely avoidable.
- Proper siting of the wind farms to avoid aesthetic impacts to the landscape and seascape. Sitingdecisions will be taken in consultation with all localstakeholders.
- Carrying out the work duringacceptable hours of the day, contractor prepares schedule of activities and keeping publicinformed.
- Maintaining coastal vegetation belt.
- Selection of site that hasleast impact on biodiversityand water.
- Best practicabletechnology to effectivelycontrol gaseous emissions need to implemented tocontrol the air quality.
- Effective storage mechanism that addresses ground watercontamination, odour, etc.
- Acceptable disposal site inplace for ash disposal.
- Good construction management practices inplace that reduces negativeimpacts to the environment.
| |
Mitigation: Social Impacts | - Maintaining site cleanliness duringconstruction.
- Carrying out the work during acceptable hours of theday, contractor prepares schedule of activities andkeeping public informed.
- Equipment and machinery kept in good condition inmeeting acceptable noisestandards.
- Public complains registration.
- Place wind turbines away fromthe community as much aspossible.
- Replacement of lost assets.
- Construction site fencing.
- Careful management of siteoperations.
| | |
6.
FINANCING PLAN
The following table provides a detailed overview of the Maldives SREP IP costing and financing plan by componentand sources of funds:
Renewable Energy for Greater Male’ Region
Greater Malé Region Solar PV Investments | 6,000 | 2,500 | 3,000 | 12,000 | | | | 11,000 | 26,500 | | | 49,000 |
Waste-to-Energy (Thilafushi) | 5,000 | | | | | 10,000 | | | 5,000 | | | 20,000 |
Greater Malé Region Renewable PowerSystem Integration | 500 | | | | | | | | | | | 500 |
Sub Total | 11,500 | 2,500 | 3,000 | 12,000 | 0 | 10,000 | 0 | 11,000 | 31,500 | 0 | 0 | 69,500 |
Renewable Energy for Outer Islands
Small power station RE | 12,000 | 3,000 | | | 3,000 | | | | | 3,000 | 5,000 | 26,000 |
Power system rehabilitation | | 5,000 | | | 3,000 | | | | | | 5,000 | 13,000 |
Outer island solar and wind investments(under FIT) | 1,000 | | 2,000 | 8,000 | | | 960 | | 9,000 | | | 12,960 |
Outer island Waste-to-Energy investment | 3,000 | | | | | | | | 7,000 | | | 10,000 |
Sub Total | 16,000 | 8,000 | 2,000 | 8,000 | 6,000 | 0 | 960 | 0 | 16,000 | 3,000 | 10,000 | 61,960 |
Technical Assistance and Capacity Building
Creating an enabling environment | 200 | 1,000 | | | 400 | | 600 | | | | | 2,200 |
Human Capacity Building | 485 | 100 | | | | | 1,100 | | | | | 1,685 |
Project Preparation and feasibility studies | 1,500 | 100 | | | | | 600 | | | | | 2,200 |
Imporves access to quality data | | 300 | | | | | | | | 800 | | 1,100 |
Sub Total | 2,185 | 1,500 | 0 | 0 | 400 | 0 | 2,300 | 0 | 0 | 800 | 0 | 7,185 |
GRANDTOTAL | 30,000 | 12,000 | 5,000 | 20,000 | 6,400 | 10,000 | 3,260 | 11,000 | 47,500 | 3,800 | 10,000 | 138,960 |
Allocation between components is indicative and will be adjusted based on feedback from Investors Total doesnot include WBG Guarantee
7.1 TECHNICAL RISKS
7. RISK ANALYSIS
The principal technical risks and mitigation measures associated with this programme are as follows:
- Outputs may be lower than expected due to environmental factors or performance reliability issues. For private power projects, where revenues are based on performance, developers have a strong incentive to ensureproject function as designed. Supply of waste resources will be based on agreements between the island counciland the WTE developer. In the case of the small electricity consuming islands 100% RE generation projects in the outer islands, diesel generators will continue to be used as a backup. A phased approach would be adopted to study the impact of a high proportion of RE with batteries and diesel prior to a transition to eventual 100% RE. In small electricity consuming islands existing diesel generator sets will remain as redundancies. For REprojects under the FIT mechanism the electricity generation is a small proportion, therefore, any shortfalls willbe met with existing diesel generator sets.
- Technology may not perform as expected. The German GIZ project is contributing to evaluate alternative power station configurations (specifically diesel-PV hybrid systems), with a view to testing the best solutions under the project on Support for the Climate Neutral Strategy of the Maldives. SREP and MDB counterpartfunding will be used to design and specify projects for tendering and to make sure best practice technologysolutions appropriate to the Maldives will be specified.
- Corrosion is a potential challenge. This risk can be reduced by using marine grade equipment.
- Designing and implementing systems for high levels of RE in small electricity consuming islands would be a challenge. System design would need to factor in renewable resource assessments, load profile, expected growth in demand over the medium term, productive energy usage, necessary distribution system improvements etc. In addition, regarding storage - there would be maintenance and battery replacement issuesthat would need to be studied. This would be undertaken under the feasibility studies in the project preparatoryphase with SREP and MDB counterpart funding.
- Rapid increase in demand. Previous investment projects in the outer islands have seen significant growth in load (annual growth of 20% in some cases) on completion of installations. This is a challenge that would need to be considered during the project design. Efficiency in energy usage including through tariff signals andenergy labelling by MEA and load management measures would be assessed.
7.2 COMMERCIAL RISKS
Key commercial risks are as follows:
- Insufficient interest by developers, many are likely to be foreign investors, in projects targeted for private sector investments. For projects, that sell electricity under the FIT regime, MEA will devise tariffs and purchase agreements taking into account perceived levels of risks and returns that are appropriate to this type ofinvestments. Maldives SREP IP will explore guarantee instrument to cover payment, currency depreciation andrelated risks that are of concerns to potential investors.
- Individual installations may be too small to be of interest to investors. MEE will support investors and utilities to aggregate projects to offer suitable scale.
- The regulatory frameworks for RE investments are inadequate. MEA (with support from ADB and WBG) is putting in place required planning criteria, technical codes and standards, as well as tariff regulations tosupport private sector RE investments.
- Lenders may have limited capacity and/or interest in lending for RET investments. Appropriate financingfrom SREP and from MDBs will be available to mitigate risks that international investors may perceive in lending for RET projects in the Maldives. The power purchase agreements and other legal documents will be drafted taking into consideration that many of the developers and investors will be from offshore.
- Selection of the small electricity consuming islands for RE would include criteria on the financial and economic cost of supplying diesel based power to such islands and the replacement cost with solar and batteries. A phased approach to RE for small electricity consuming islands would be adopted based.
7.3 INSTITUTIONAL RISKS
The principal risks are as follows:
- There is a small pool of technically qualified staff with experience in RETs;
- a few senior civil servants are highly experienced and capable administrators, but they are overloaded already; and
- the electricity sector has no tradition of either strategic planning or technical innovation. Even the largest utility, STELCO, has no experience outside its traditional area of diesel generation.
SREP and MDB partners are working closely with MEE and will be working with utilities in order to overcome theseshortcomings. Under the Maldives SREP IP resources have been allocated to further strengthen the capacities within the MEE, the MEA and the Utilities. There are no restrictions in bringing in expatriate experts where investors perceive skill shortages for design, installation and operation of their power plants. The ongoing organisationalrestructuring of
the MEE and MEA will create additional opportunities to recruit civil servants to both these organisations.
7.4 COUNTRY RISKS
- Political risks: Changes in the administrative structure within the Government may create uncertainty for developers. The creation of an enabling environment (through Maldives SREP IP and other initiatives)independent of political consideration and greater transparency in decision making mitigates this risk.
The provision of training and capacity building would enhance the efficiency and effectiveness of the workforce in the sector.
- Fiscal constraints: Maldives, as a small island State, has limited access to external financial resources. This is coupled with high borrowing rates that in turn translates into high investment cost.
Blending SREP funds with leveraged resources may reduce the cost of capital and associated risks.
- Geographic constraints: Dispersed islands and lack of sufficient land mass leads to high logistics and transportation cost. In addition, it offers limited opportunities for building large scale power generation facilities which are often more economic than small scale applications. RETs such as solar PV are inherentlymodular and well suited to meeting the needs of relatively small dispersed communities. The limited transport network linking most of the population centres, increases cost to investors. During the construction phaseavailable bulk transport strategically used can reduce transport costs. During operations, difficulties associated with inter island transport, is lessened as RETs do not require regular fuel shipments.
Seasonal exposure to rough seas and stormy weather can disrupt inter island transport. However, rough weather conditions are short and can easily be avoided through proper planning.
8.
RESULTS FRAMEWORK
For future monitoring and evaluation of the results of the Maldives SREP IP funded activities, an indicative resultsframework for the IP is presented below. The Ministry, through the PMU, will have overall
Results | Explanation of the resultstatement | Indicators | Baseline | Targets | Assumptions | Means ofverification |
Maldives SREPIPTransformativeImpact |
Support low carbon | SREP is the major intervention | Share of RE in thenational | <1% | 100% | Carbon neutrality | National |
developmentpathways | in the Maldives supporting the | electricity mix in the | | | by 2020 assuming | Statistics |
by reducing energy | government’s carbon neutrality | inhabited islands. | | | adequate resources | |
poverty andincreasing | goal. In addition to the global | | | | are available, lower | |
energy security | benefit of CO2 reduction, the | | | | technology costs and | |
| projects contribute significant to | | | | human capacity is in | |
| energy security both at thenational | | | | place. | |
| level and in the most vulnerable | | | | | |
| islands by displacing dieselrequired | Annual electricity output | <7GWh | 1700 GWh25 | Carbon neutrality | National |
| for electricity generation. | from RE in GWh | | | by 2020 assuming | Statistics |
| | | | | adequate resources | |
| | | | | are available, lower | |
| | | | | technology costs and | |
| | | | | human capacity is in | |
| | | | | place. | |
| In order to achieve the above | Increased public and | USD 3M | USD 100M | National M&E system | Increased public |
objective, GoM will need tomobilize | private investments(USD) | | | and M&E framework | and private |
significant resources fromprivate | in RE sector per year | | | of the implementing | investments |
and public sources over thenext 20 | | | | agency | (USD) in targeted |
years. | | | | | sub-sector(s) per |
| | | | | country per year |
25 1700GWh is needed to achieve carbon neutrality by 2020 in the inhabited islands (excluding tourist resorts) based on the assumptions of 10% growth, and a plant factor of 0.8.
Results | Explanation of the resultstatement | Indicators | Baseline | Targets | Assumptions | Means ofverification |
SREPProgrammeOutcomes |
1.Increased supply of | In order to achieve the | Additional energy output | < 1GWh/year | ~70 GWh/year | Electricity production | Government M&E |
RE | transformation to increasedenergy | from new RE (GWh) | | | based on resource | framework |
| supply and demand based onRE the | | | | characteristics | |
| economic viability of the REsector | | | | and technology | |
| will need to increase. Thismeans | | | | performance of the | |
| that the sector will need togrow | | | | Maldives. | |
| in size and provide the benefitof | | | | | |
| increased employment. | CO2 emissions avoided | | | GHG emissions | |
| | (tCO2/yr) | <1,000 tCO2/yr | 56,000 tCO2/yr | calculated based | |
| | | | | on avoiding diesel | |
| | | | | generation and | |
| | | | | transmission lossesfor | |
| | | | | distributed solar PV. | |
2. Improved macro-economic andfiscal situation. | Presently diesel import is about 350 million litres (20% of the GDP). One importantbenefit is to replace dieselelectricity with RE to reduce the impact on the balance of trade and governmentsubsidies. | Quantity of dieselavoided. Amount of subsidyprovided to publicutilities for diesel relative to 2011subsidy. | Nil Nil | 23 million litresper year (6% of total dieselimport) ~USD 7 millionper year (30% of subsidyprovided) | Based on 2011 fuelprices. | GovernmentM&E framework |
3. New andadditional | The SREP will involve theleveraging | Leverage factor ofSREP | N/a | USD 100M/year | These would beactual | Government |
resources for RE | of new and additionalresources, | funding; USD financing | | | investment amounts | M&E framework |
projects | clean production andconsumption | from other sources | | | committed orprovided | |
| technologies. This will occur inthe | (contributions fromMDBs, | | | for total SREP. | |
| context of projects wheremultiple | governments, multi-laterals | | | | |
| sources of funding will be leveraged | and bi-laterals, CSOs, | | | | |
| by SREP for particular investments. | private sector) | | | | |
9.
MALDIVES SREP IP CRITERIA
Increased installed capacity from renewable energy sources: Annual energy consumption in the outer islandsis estimated to be 428GWh. Almost all of this is generated from diesel based sources with the exception of small RE demonstration projects that generate less than 1GWh/year. The RE investments planned under the Maldives SREP IPare expected to generate 70GWh/year which is approximately 16% of the annual electricity demand of the inhabitedislands.
Increased access to energy through renewable energy sources: At the moment there is no inhabited islandin the Maldives providing electricity entirely on RE sources. Maldives SREP IP is envisaged to install RE in 10 inhabited islands that would be completely transformed from diesel based energy to RE. In addition, 24% of all inhabited islands will have a greater share of RE in their energy mix as a result of the Maldives SREP IP. Furthermore, 71% of the population will be benefiting from the RE installations.
Low Emission Development and “leap-frogging” technologies: Currently Maldives depends entirely on diesel fuel for electricity generation, to a cost of which is equivalent to approximately 20% of the GDP. By installing RE electricity generating facilities under the Maldives SREP IP, approximately 22 million litres of dieselwill be avoided annually. This will help to avoid emission of approximately 56,000 tons of CO2/year. The current RE installed capacity in the Maldives is approximately 2MW, at the end of the Maldives SREP IP this will increase to 26MW. The ambitious Maldives SREP IP is expected to bring state of the art RE technologies and expertise to the Maldives within a relatively short period.
Affordability and competitiveness of renewable sources: The unit cost of electricity generation in theMaldives is believed to be the highest in the South Asia region due to its dependence on imported diesel for energygeneration. Electricity generation cost (or diesel costs) ranges from USD 0.31/ kWh to USD 0.46/kWh. Highelectricity generation costs translate into heavy subsidies in order to make electricity affordable to the population. In the year 2011 alone, the Government spent about USD 25million through fuel subsidies. With the increased penetration of RE into the energy mix under the Maldives SREP IP it is expected to save at least USD 7million/year onfuel subsidies while in addition saving the cost of some 22 million litres of diesel fuel.
Productive use of energy: Although all islands have access to electricity service in most islands the power systems are very poorly designed and maintained. As a result, the quality of the electricity supply on these islands is very low and does not allow the consumer to use modern electrical appliances. The implementation of the power system rehabilitation programme under the Maldives SREP IP will improve the performance of the power systems aswell as the overall system efficiency and make the systems RE ready. With better and more reliable electricity serviceprovided at an affordable price due to better systems and increased share of RE the productivity of the beneficiary communities will be further improved.
Economic, social and environmental development impact: Access to sustainable, affordable and reliable energy will not only foster economic, social and environmental development but it will also enhance the national energy security. The savings achieved due to reduced cost of energy generation can be used to stimulate developmentsin other socioeconomic sectors for the betterment of the local population. Diesel based energy generation isconsidered to be environmentally
unsuitable due to its associated potential for negative environmental impacts on sensitive island environments. Noise, associated with operation and maintenance of diesel generator sets on small islands, is often seen as highlydestructive for the vulnerable members of the communities. These impacts can be largely mitigated and/or avoided through the introduction of RE based energy generating facilities. In addition, opening up the RE market to attract private sector and to increase foreign investments, a cadre of green jobs which in the Maldives are virtually non-existent will be created.
Economic and financial viability: Comparison of the generation costs for RE based and that of diesel basedelectricity clearly indicates competitive advantage of RE based electricity over diesel based electricity generation in the Maldives. The current FIT structure has been found to be open to improvement, but still attractive to private investors. The further strengthening of the FIT together with the overall regulatory framework under the Maldives SREP IP is expected to generate significant interest among the potential investors.
Leveraging of additional resources: The proposed investments are expected to be leveraged by more than USD 4for each dollar invested by SREP - making this a total investment of over USD 138 million. The largest share of theleveraging is expected to come from the private sector followed by contributions from the Government of Maldives and MDBs. The significant investments expected from the private sector would be a unique, an innovative aspect ofthis IP and a positive example for other countries.
Gender: In principle, there is no gender disparity in the Maldives with regards to access to electricity service isconcerned. However, the energy sector is largely male dominated with very few trained female professionals. Thetechnical capacity building component under the Maldives SREP IP will focus on bridging this gap through providingopportunities in particular to women interested to work in this sector.
Co-benefits of renewable energy scale-up: Significant co-benefits will include an increased energy security to vulnerable and small communities and enhance socioeconomic conditions. Furthermore, the proposed WTE projects will improve the local environment in the islands by a better management of waste and by reducing the extent of land needed for waste disposal. The WTE components are expected to bring significant health and tourism benefits to the local communities.
The reduction in operational costs of the power systems, an improved country’s balance of trade due to reductions of diesel imports and potential tariff reduction as a result of lowered power generation costs and the creation of more employment opportunities are considered as significant fiscal co-benefits of the Maldives SREP IP.
Last but not least would the successful implementation of full RE systems on small electricity consuming islands generate a strong demonstration effect to be translated to other island or countries to learn from this experience and apply it to their own context to meeting the energy needs of isolated populations.
9.1 MALDIVES SREP IP CO-BENEFITS
Significant direct benefits, such as lower cost of electricity, enhanced energy security, reduction in CO2 emissions were described previously. The following are some of the co-benefits of the Maldives SREP IP implementation:
Social and economic: The programme envisages significant investments in small, more vulnerable islands by transforming their electricity supply to be 100% RE based. Increased energy security should contribute to enhanced socioeconomic (and environmental) conditions in these small communities.
Energy security: The country is entirely dependent on imported oil as the primary source of energy, making itexposed to fluctuations and increases in oil prices. The cost of importing fossil fuels in the year 2011 accounted forroughly 20% of the national GDP. Diversifying the fuel mix not only contributes to an increase in RE generation but also contributes to energy security by reducing the Maldives dependence on oil imports as a large percentage of theireconomy and by utilizing indigenous resources of energy.
Improvement in local environment: Waste management is one of the most pressing environmental concerns for the government. Unsustainable waste management practices on the islands have been resulting in damage to marinelife and degradation of the fragile ecosystems including coral reefs, wetlands, and beaches. In addition, groundwater becomes contaminated as a result of waste oil penetration and toxic chemicals given the sandy nature of island soils and the shallow water lens. The WTE projects, in particular, will improve the local environment in the islands by better management of waste and reduce the extent of land needed for waste disposal. In islands where solar and wind displace diesels local benefits will accrue due to reduced risk of oil spills during transport and lessening problems associated with improper waste oil disposal.
Health benefits: Due to the unsustainable waste management practices, in particular open burning at the largest dump sites in the Maldives, workers and residents (including school children) are exposed to associated health hazards. Forexample, people working in Thilafushi and other waste disposal islands and those living downwind have been sufferingfrom respiratory diseases caused by open burning of waste, which often required treatment overseas. As a result of sustainable waste management and disposal, coupled with power generation and water production, these hazardswould be eliminated.
Tourism benefits: Maldives is seen as a clean, beautiful environment that is visually appealing to tourists from all over the world. One of the major deterrents of tourism is the image of waste disposal on some of the inhabitedislands neighbouring the resorts. For example, Thilafushi is located in an area where there are many existing tourist resorts. Tourist complaints of open burning and unsustainable waste management practices at Thilafushi have become a cause of concern for the Government needing urgent attention and intervention given the importance oftourism on the economy of Maldives.
Fiscal benefits:
a) State-owned utilities – reduction in operational costs, power systems efficiency, less volatility, andtransfer of power generation risks to the private sector.
b) Budget – improving the country’s balance of trade due to reduction of diesel imports and the government willrequire less funds for diesel fuel subsidies to the public utilities.
c) Households – potential revenues from renting of the rooftops to investors and revenues from sale ofelectricity through FIT.
Global demonstration effect: Small island States are often faced with many challenges to promote RETs. The Maldives’ determination to demonstrate leadership in overcoming those - including the pledge to become carbon neutral by 2020 - can show that if small island States can take significant strides towards achieving greater energy security, other countries can follow this examples. Maldives wants to encourage other countries to learn from itsexperience and apply it to their own context.
Creation of green jobs: The programme emphasises significantly enhancing institutional and human capacity in the sector. The emergence of healthy and growing RE and energy efficient sectors will contribute to the creation ofintellectually stimulating high quality green jobs around the atolls where most of the work will take place.
APPENDIX 1 - CONCEPT NOTES
ACCELERATING SUSTAINABLE PRIVATE INVESTMENTS IN RENEWABLEENERGY PROGRAMME (ASPIRE)
Background
This programme will cover distributed PV and wind RE investments under the FIT, private investments in WTE andassociated technical assistance.
Public sector financial resources are limited, thereby constraining RE investments that are typically capital-intensive. Therefore, the ASPIRE programme aims to address this by encouraging and facilitating private investments in thesector through targeting the following key barriers:
- Investment climate uncertainties due to currency and payment risks as well as those related repatriation ofprofits. This leads to premiums which affect the economic viability of RE projects;
- regulatory frameworks are at a nascent stage;
- domestic capital has little experience and/or appetite for investing in this sector; and
- small scale of power distribution and dispersed investment projects make it difficult to attract private sectorand to reach economies of scale.
As a result of these barriers, distributed RE supply has been happening on an ad-hoc and opportunistic basis.
Objective
For the Maldives to achieve the scale of RE deployment and make greater strides into its policy objectives on thecarbon neutral strategy, it must put in place the required safeguards that would lead to the scale-up of RE in the country.
Project Selection
The ASPIRE Programme will consist of the following projects:
- Project 1: Renewable Energy Investments under a Feed-in Tariff
- Project 2: Utilization of Waste-to-Energy Technologies in Outer Islands
- Project 3: Implementation Support and Institutional Development
Project 1: Renewable Energy Investments under a Feed-in Tariff
- Sub-Project 1.1: Greater Male’ Region Solar PV investments - it is possible to feed PV generated electricity amounting to 20-30% of the peak day time demand in greater Male’ region without significant investment insophisticated systems upgrading. Considering
the respective peak demands for various islands in the region, 15 MW of solar PV can be safely fed in to gridsystems in the greater Male’ region. PV installations will be undertaken for Male’ (11MW) and in Hulhumale’ (4MW). There is the potential for more, once the submarine cable is in place. The FIT is already in place withMEA updating it and will be the basis for deploying the solar PV programme.
- Sub-Project 1.2: Outer island solar and wind investments (under FIT) - combined RE investments in solar PVand wind will be undertaken on the outer islands. Some 15 out of 30 of the islands selected will be made RE ready under the POISED programme funded through ADB and IDB. The project envisages an installation ofabout 3 MW on medium to large electricity consuming islands (>1GWh/year). The installed RE will offset up to 30% of peak day time demand.
This will be carried out by the private sector on a commercial basis with the electricity sold to FENAKA at the FIT.This is a precursor to investments in a greater share of RE on these islands once storage costs decline. SREP resources,blended with IDA, may be used to design guarantee instruments to mitigate sovereign, currency and counterpartyrisks.
Project 2: Utilization of Waste-to-Energy Technologies
There are islands in the Maldives where WTE has been found to be technically, financially and economically feasible based on assessments which were carried out. These are: S.Hithadhoo, HDh. Kulhudhufushi and R. Vandhoo. Through this investment, diesel used for electricity and water production will be displaced by the WTE systems. The private sector will finance the installation of about 2MW, SREP and WBG financing will be used to provide risk mitigation facilities and/or incentives to private companies.
Project 3: Implementation Support and Institutional Development
Support to MEE, STELCO and FENAKA for preparation and implementation of FIT scheme including mobilization of private investors. Some support may be needed for improving the technical requirements for successful RET deployment as well as developing standards for interconnection and performance monitoring. Funds will be sought from SREP and other bilateral sources for preparing the utilities for planning for the future phases of RE expansionbeyond Maldives SREP IP.
In addition to training, international expertise will be sought to supplement local capabilities of decision-makers andimplementation staff. Support is envisaged for human resource development at MEE and the public utilities for strengthening their technical, planning and management capacities.
Financing Plan
SOURCES OF FUNDING (USD 000)
ASPIRE
Greater Malé Region Solar PV Investments | 6,000 | 2,500 | 3,000 | 12,000 | | | | 11,000 | 26,500 | | | 49,000 |
Outer island solar and wind investments (under FIT) | 1,000 | | 2,000 | 8,000 | | | 960 | | 9,000 | | | 12,960 |
Outer Island Waste-to-Energy investments | 3,000 | | | | | | | | 7,000 | | | 10,000 |
Implementation Support & Institutional Development | 750 | 100 | | | | | 200 | | | | | 1,050 |
Sub Total | 10,750 | 2,600 | 5,000 | 20,000 | 0 | 0 | 1,160 | 11,000 | 42,500 | 0 | 0 | 72,010 |
Implementing Arrangements
Preparation activities as well as technical assistance required to implement the Maldives SREP IP programmes andprojects will be carried out by PMU/MEE. Guarantee facilities and channelling of subsidies, soft loans, and grants to private developers are envisaged to be administered by MGF when fully operational. An interim arrangement will be considered while MGF is being setup. This will be evaluated and decided during project preparation stage.
Outer island investments will be implemented by FENAKA with PMU support if required. Grant agreements between WB and MoFT will be executed with on lending agreements to the utilities. Technical assistance, monitoring, evaluation and oversight will be the responsibility of MEE/PMU together with the implementing utility.
RE investments under the projects will be implemented by the private sector with risk mitigation
/ guarantee facilities by the WBG. STELCO and FENAKA will be the buyers of electricity under the FIT. MEE will provide policy, promotion and implementation support coupled with regulatory support from MEA.
The WTE investments will be developed under a Public-Private Partnership (PPP) arrangement where the investor is expected to self-finance the project(s). SREP funds could be used to cover electricity payment risks. The following Figure gives an overview of the proposed guarantee arrangements.
Guarantee arrangements under SREP
Lead Agency
WBG
Transformative Outcomes and Outputs
The outcome of ASPIRE will be to tap into the full potential of RE development and implementation in theMaldives. This will support portfolio development for the sector and serve as learning platform for moving towards theachievement of the carbon neutral strategy.
The following outputs are expected to be achieved under ASPIRE:
- 20MW of RE generation installed (approximately 15MW (solar PV) in the greater Male’ region and 5MW(3MW solar PV/wind26 and 2MW WTE) in the outer islands);
- increased energy security;
- reduced cost of electricity generation with possible reduction to tariff;
- creation of new employment and business opportunities in the RE industry;
- about 12 million litres of diesel avoided per year; and
- reduction in GHG emissions by approximately 31,000 tCO2/year.
26 This includes islands that will be made RE ready under the POISED programme Power System Rehabilitation funded outside the SREP though ADB and IDB.
CONCEPT NOTE
PREPARING OUTER ISLANDS FOR SUSTAINABLE ENERGY DEVELOPMENTPROGRAMME (POISED)
Background
As of today, almost all outer-islands produce their electricity by diesel generators. Several of these systems especially onthe smaller islands have evolved rather than being designed. In most cases, generators were added ad-hoc without regard for maintenance issues, or the cost of operation. Maintenance is carried out by able and resourceful localpersonnel, but there is no provision for a national spares stock, or any centralized expertise. In consequence manygenerators are wrongly sized for their load and most are consuming much more fuel than necessary.
In addition to problems with generation, there are major issues with the distribution grids on some small islands where losses are estimated to be high27.
For small electricity consuming islands, immediate installation of solar/wind with battery storage is economically justifiable for offsetting nearly 100% of diesel in a phased manner. For medium to large electricity consuming islands with inefficient energy generation, power system upgrading is a prerequisite to increasing the overall share of solar/wind. In the case of efficient medium and large electricity consuming islands the transition to an increased share of solar/ wind can be brought about almost immediately. In the latter cases, the share of intermittent solar/wind is expected to be maintained at under 30%. Further increase in share of RE will be considered, once solutions for addressing grid stability issues associated with greater share of RE are available28.
Objective
As electricity generation from solar PV, and wind in some locations, is less expensive than energy generation fromdiesel based on avoided cost of fuel in the Maldives, this programme will support achieving full RE systems on 10 small electricity consuming islands and deploying RE-diesel hybrids on some medium to large electricity consumingislands.
Project Selection
POISED will consist of the following projects:
Project 1: Small Power Station RE
Approximately 10 small power stations (between 250-350MWh/year) will be converted to full RE (approximately2MW) using an optimum mix of wind and solar PV, with batteries to provide energy storage. Diesel electricity supply costs are in high on small electricity consuming islands (~USD0.40/kWh). These have been selected for implementation by the state-owned utility FENAKA. They are the most difficult to fund commercially and theyinvolve tight integration
- at small scale of wind, solar, energy storage and generator control. In addition, distribution systems on theseislands would need to be assessed and upgraded to handle high levels of RE
27 Distribution losses were appraised at around 25% or more in some of the small and medium electricity consuming islands that were covered under the ADB financed Outer Island Electrification Project.These were brought down to 4-10%.
28 Assessment of Grid Stability for Increased Renewable Energy Integration in the Pacific Region. 15 July 2012, Vanuatu. Joint IRENA-PPA workshop (www.irena.org/documentdownloads/events/VanuatuJuly2012/Summary.pdf)
penetration. The project would look into measures to address surplus RE and spillages (for e.g. can be used for ice making to support the local fishing industry). Measures to support energy efficiency including through tariff signals by MEA and load management would be assessed and supported. In addition, productive usage of energy on such islands would be supported including through linking up with ongoing ADB/IDB supported investments in theMaldives.
The phase-wise plan for full RE on the identified small electricity consuming island would be developed during theproject preparation phase and will be based on assessment of demand on the islands, RE resource assessments, potential for energy efficiency, space constraints, environmental and social impact.
Project 2: Power System Rehabilitation
Up-gradation of power systems is a prerequisite to introducing high levels of RE to the medium- and large electricityconsuming islands’ power stations that have inefficient generators and grids. Under this project, about 15 powersystems that are least efficient will be replaced and made ready for RE installations. The replacement of inefficient generators and up-gradation of distribution systems in 15 islands with a small range of modern, electronically controlled generators will be funded through an ADB loan possibly blended with other sources of financing.
Another 15 power systems developed under ADB outer islands electrification project will be assessed for additionalinvestment requirements in control systems to make them ready for about 30% RE installation by capacity. Preparatory grants from SREP would support these studies while required investments could be supported by MDBs.
Private sector investments of about 3MW on these 30 outer islands would be supported through a FIT set by MEA.There is ongoing technical assistance support from ADB and WBG to MEA on a FIT, standardized contracts etc. Theseinvestments would benefit from guarantees under the ASPIRE programme. At a subsequent phase, taking on larger capacities of RE can be tackled once energy storage costs have fallen.
Project 3: Implementation Support and Institutional Development
Support will be provided to FENAKA to design and implement these projects, to train FENAKA staff in operating andmaintaining these systems, to monitor performance and to support planning for greater RE scale up on these islands. International expertise will be sought to supplement local capabilities within FENAKA.
Financing Plan
SOURCES OF FUNDING (USD 000)
POISED
Small power station RE | 12,000 | 3,000 | | | 3,000 | | | | | 3,000 | 5,000 | 26.000 |
Power system rehabilitation | | 5,000 | | | 3,000 | | | | | | 5,000 | 13,000 |
Implementation support & institutional development | 750 | | | | | | 400 | | | | | 1,150 |
Sub Total | 12,750 | 8,000 | 0 | 0 | 6,000 | 0 | 400 | 0 | 0 | 3,000 | 10,000 | 40,150 |
Implementing Arrangements
The implementing agency will be FENEKA. The power station work is closely integrated with the operations and equipment already installed in power stations. It will therefore be carried out by FENEKA, supported and advised by MEE (and later MGF). Actual engineering work will be done either by FENEKA or under Engineering Procurement and Construction (EPC) contracts where initially the utility would lack the skills and resources needed to carry out this task. Support relevant for energy efficiency initiatives under POISED for small and mediumelectricity consuming islands to MEA and MGF or would be provided through MDB funding.
Lead Agency
ADB
Transformative Outcomes and Outputs
The outcome of POISED will be to demonstrate 100% RE based systems starting with 2MW of RE with storage on the 10 small electricity consuming islands that would be made 100% RE based systems in phases. In addition, 3MW of RE will be developed in 30 medium islands by private sector under the FIT to be announced by MEA with about 12 million litres of diesel avoided per year and reductions in GHG emissions by approximately 31,000 tCO2/year. The ASPIRE programme would provide guarantees that would support the FIT.
The following outputs are expected to be achieved under POISED:
- 2MW of RE generation installed with adequate storage on 10 islands;
- reduction in GHG emissions by about 5,000 tCO2/year;
- approximately 2 million litres of diesel avoided/year;
- power systems on 15 islands will be upgraded to reduce the generation and distribution losses;
- power systems on 15 islands will be assessed and made ready to accept about 30% RE;
- productive use of power supported in small and medium electricity consuming islands linked to employment creation and business opportunities; and
- capacity would be developed in FENAKA to design, procure, implement and maintain renewable projects on a larger set of islands.
CONCEPT NOTE
THILAFUSHI WASTE-TO-ENERGY PROGRAMME
Background
Growing urbanization and the importance of tourism explain the critical need for an efficient and sustainable waste management system in the Maldives. The capital Male’ is one of the most densely populated cities in the world with around 47,000 inhabitants per km2. As such, Male’ cannot afford inefficient waste collection and disposal. In addition, many tourist resorts are located in the islands surrounding Male’, and the preservation of a pristine environment is an absolute condition for the continued ability of these resorts to attract tourists and to sustain growthof any economic largely driven by tourism. The current practice where waste is collected in an ad-hoc manner and dumped at the shore, disposed of in the ocean, or transported to Thilafushi, where it is burnt openly destroys the marine environment, pollutes the air and puts people’s health at risk.
The WTE power facility under this programme will be part of the larger waste management framework and contribute to the National Solid Waste Management Policy which provides a vision for an efficient wastemanagement system. In September 2009, the Government appointed Advisory Services from the International Finance Corporation (IFC) to help structure and competitively tender an integrated waste management project for the Male’catchment area as a public-private-partnership (PPP). A competitive engagement process with the private sector iscurrently underway for implementation.
Objective
Implementation of an effective PPP waste management solution for the collection, processing and disposal of waste in the greater Male’ region catchment through the implementation of a WTE facility.
Project Selection
The implementation of the WTE facility will be part of a solid waste management system for the greater Male’ region and the neighbouring resort islands. The overall system will include waste collection and transportation to Thilafushi, waste processing and disposal on Thilafushi (segregation, recycling, composting, gasification and inertwaste disposal in the landfill); and an up to 4 MW WTE power generation facility to replace the existing diesel-basedpower generators on the island – the latter being considered under the Maldives SREP IP.
The project is designed as a concession agreement where the project company will receive tipping fees andtransportation fee, adjusted annually for certain factors. The rates will be applied to the quantity of waste handled and processed. The project company will need to serve greater Male’ region, the outer islands and resorts that are withinthe catchment area identified by the MEE. In addition to the tipping and transportation fees, the project will sellcompost, recyclable materials, and electricity.
As is typical with such projects, project financiers will analyse the various risks to the project including, but not limited to, sponsor’s experience and track record, suitability of technology, waste supply arrangements, power off-take arrangements, foreign exchange risk, contractual arrangements, legal and regulatory environment,creditworthiness of contracting parties include state and state-owned entities and support structures. The current fiscalposition of the Maldives government creates a counterparty risk for the project and the lenders that will need to besufficiently addressed to provide necessary comfort to potential financiers.
Financing Plan
For all of the components of the integrated waste management system, the estimated total cost is approximately USD 58 million. This will likely be financed through an optimal mix of debt from lenders (e.g. 70%) and equity (30%) from the private sector sponsors. Both ADB’s private sector operations department and the IFC have indicated theirinitial interest to consider funding up to USD 15 million each (USD 30 million total) of the long-term senior debt financing for the project(s). Additional sources of debt financing or commercial risk participations (through a B-loan or other structures through ADB and IFC) are likely to be needed to complete the financing of the project.
The WTE facility is considered under SREP, even though it will remain part of the waste management operations.Therefore, the financing plan for this programme is adjusted accordingly and based on estimated costs of approximately USD 20 million.
SOURCES OF FUNDING (USD 000)
Waste-to-Energy Thilafushi | 5,000 | | | | | 10,000 | | | 5,000 | | | 20.000 |
Sub Total | 5,000 | 0 | 0 | 0 | 0 | 10,000 | 0 | 0 | 5,000 | 0 | 0 | 20.000 |
Implementing Arrangements
Local banks are unable to provide long-term financing for projects, and the country risks have constrained the international commercial banks from actively considering financing projects without extensive political risk insurance. Such insurance may not be available for the tenors required for this project to be viable. As this projectwill have a strong developmental impact on the Maldives and promote the use of PPP structures to promote RE generation, SREP funds may be required to meet the financing gap or cover the incremental costs or risks of projectimplementation. ADB and IFC will consider the following options for deploying the SREP funds: (i) parallel concessional loans; (ii) partial credit or risk guarantees or other risk sharing mechanisms; (iii) buying down of feesand/or risk premiums from the commercial political risk insurance market; (iv) covering the risks associated with electricity off-take under the FIT scheme; and (v) other forms of subordinated or mezzanine finance. Once the feasibility study has been completed and a project structure determined in conjunction with the investors, a morespecific financing plan will be proposed by the joint ADB-IFC team.
Lead Agency
IFC and ADB’s Private Sector Operations Department (PSOD).
Transformative Outcomes and Outputs
The project will contribute to a reduction in pollution and greenhouse gas emission through the generation of electricity from indigenous RE resources, greater private sector participation in municipal services, and improved economic conditions through the provision of efficient urban infrastructure. It will provide electricity generation forthe greater Male’ area complementary to the Maldives SREP IP solar PV initiatives and support the Government’s carbon neutral goal, while helping it comply with good global practices on the treatment and disposal of solid waste.
The following outputs are expected to be achieved under the Thilafushi WTE project:
- Up to 4 MW of the generation capacity;
- reduction of CO2 emissions by 20,000 tons of CO2 /year;
- approximately 7.5 million litres of diesel avoided/year; and
- environmentally safe disposal of 200 tons of waste/day.
CONCEPT NOTE
TECHNICAL ASSISTANCE FOR RENEWABLE ENERGY SCALE UPPROGRAMME (TA)
Background
The primary mandate of the MEE is to ensure the delivery of reliable, low cost and environmentally sustainable energy tosupport the economic development and enhance energy security of the islands. MEE is in the process of formulating a Renewable Energy Law with a long term perspective for RET development including a functioning system of FIT as well as supporting the establishment of a coherent and efficient structure for the electricity market.
The state-owned utilities and the proposed MGF will play an important role in the successful implementation ofMaldives SREP IP and future RE expansion in the country. Furthermore, the MEA, as the regulator for the sector, is critical to the success of the FIT and private investment in the sector. Therefore, there is a strong need for building thecapacities of these institutions and improving the access to quality and reliable data to inform future policy decisionsand investment opportunities.
Objective
The TA activities will support the strengthening of an enabling environment, strengthen human resource capacitiesand identify additional RE investment opportunities.
Project Selection
The following TA activities will be supported through the Maldives SREP IP:
Project 1: Greater Male’ Area Renewable Power System Integration
In order to further displace use of diesel generation additional RE is required. A feasibility study will be carried out under Maldives SREP IP to identify the RE options to deliver large-scale dispatchable power for greater Male’ regionand achieve economies of scale through inter-island connectivity. The study will recommend further initiatives to besupported from other resources.
Project 2: Improved Access to Quality Data
Country-wide RE resource mapping is needed to inform strategic policy decisions and support future development of RE programmes. The activity is expected to finance the construction of a national network of wind and solardata collection stations that will allow the optimization of wind, solar and energy storage components of theisland power systems. Wind data will be collected at a range of heights up to ±80m, and solar data will include direct and diffuse radiation, and radiation reflected off lagoon surfaces. Funds will be used for real-time datacollection, monitoring and analysis. In addition, ocean energy data will be gathered as well as strengthening of the MMS.
Project 3: Creating an Enabling Environment
Through Maldives SREP IP technical assistance the RE policy and the regulatory framework will be strengthened bydeveloping and implementing policies, laws, regulations, rules, standards and incentive schemes to integrate RE in the energy sector. This includes the FIT, standardised PPAs, guidelines for investment approval, licensing of electricity operators etc. to support RE development. MEA is already in the process of carrying out those tasks and will continue to do so with the support from the WBG and ADB. In addition, business models for RE projects to attractprivate investments will be developed.
Project 4: Human Capacity Building
This project provides the necessary support for any significant development of the RE sector. Human resourcecapacity will be developed for planning, implementation and operation of RE systems. In addition to training, international expertise will be sought to supplement local capabilities. In addition, the project will provide support for setting up the MGF and MGFs spending policies in the RET and energy efficiency areas by providing necessary information, training, knowledge sharing, operational procedures and financial support for projects to increase their bankability. Assistance with the formulation of a suitable electricity tariff and mechanism to support RE including technical standards and information required for project financing is being provided by ADB.
Financing Plan
SOURCES OF FUNDING (USD 000)
T/A for RE Scale Up
Greater Malé Region Renewable Power SysIntegration | 500 | | | | | | | | | | | |
Improved access to quality data | | 300 | | | | | | | | 800 | | 500 |
Creating and enabling environment | 200 | 1,000 | | | 400 | | 600 | | | | | 1,100 |
Human Capacity Building | 485 | 100 | | | | | 1,100 | | | | | 1,685 |
Sub Total | 1,185 | 1,400 | 0 | 0 | 400 | 0 | 1,700 | 0 | 0 | 800 | 0 | 5,485 |
Implementing Arrangements
The implementing agency will be MEE. SREP resources will be channelled through the WBG to carry out Project1. Funding for Project 2 is being sought from bilateral sources through the WBG. SREP funds may be used to supplement, where needed. ADB will also carry out a number of TA activities under Maldives SREP IP.
Lead Agency
WBG and ADB
Transformative Outcomes and Outputs
- The greater Male’ region renewable power system integration study will identify RE options to deliverdispatchable power including energy storage and to achieve economies of scale through island connectivity;
- a strong legislative framework will reduce risks and transaction costs and encourage investment in RE;
- strengthening of the capacity of government institutions and other relevant stakeholders as well as a clearer definition of responsibilities to improve regulatory environment for investors; and
- a network of masts and solar measuring stations covering the country in a representative fashion to provide real time data collection and distribution.
PROGRAMME PREPARATION GRANT REQUEST
SREP PROGRAMME
Project/Programme Preparation Grant Request
1. Country/Region: | Maldives | 2. CIF Project ID#: | (Trustee will assign ID) |
3. Project Title: | Preparing Outer Islands for Sustainable Energy Development (POISED) |
4. Tentative SREPFunding Request (inUS million total) forProject29 at the timeof Investment Plansubmission (conceptstage): | Grant: USD700,000 | Loan: N/A |
5. Preparation GrantRequest (in USD): | | MDB: ADB |
6. National ProjectFocal Point: | Ahmed Saleem | |
7. NationalImplementing Agency(project/programme): | Ministry of Environment and Energy |
8. MDB SREP FocalPoint and Project/ProgrammeTask Team Leader (TTL): | Jiwan Acharya | Len George |
Description of activities covered by the grant:
The grant will provide institutional support and training to FENAKA to develop projects for approval under SREP for
- Conversion of 10 power station on small electricity consuming islands to full RE.
- Replacement of the inefficient power systems in 15 medium electricity consuming islands to prepare them forinstalling 30% of demand from RE.
- Readiness assessment of 15 efficient power systems in medium electricity consuming islands to prepare them forinstalling 30% of demand from RE.
- The grant will also support MEA and other stakeholders (including MEE and MGF) on POISED related preparation, design,implementation aspects.
The activities covered under the grant would support
a) Review of technically suitable options for RE scaling up on the different island groups and preparation of feasibility studies.
b) Strengthening of FENEKA and other stakeholder implementation capacity to design and implement the POISEDprogramme.
c) Preparation of project for review by SREP and MDBs.
d) Development of technical specifications and configuration for bid process and initiation of bid process related support.
e) Stakeholder consultations and support.
Suitable international expertise would be sought to supplement local capabilities within FENAKA operational and managerial staff tocarry out the identified tasks.
9. Outputs: |
Deliverable | Timeline |
Completion of feasibility studies | Within a 10 month period |
FENEKA and other stakeholders develop capacity todesign and implement POISED | Over a 15 month period |
Project prepared for approval from SREP sub-committee and ADB Board | Over a 12-15 month period |
Bidding documents prepared for initiating theProgramme | Over a 12-15 month period |
Support for stakeholder consultations on POISEDdesign aspects including transition path to prepareislands for RE integration | Over a 12-15 month period |
10. Budget (indicative): |
Expenditures30 | Amount (USD) – estimates |
Consultants | 460,000 |
Workshops/seminars | 50,000 |
Travel/transportation | 70,000 |
Others (admin costs/operational costs) | 50,000 |
Contingencies (max. 10%) | 70,000 |
Total Cost | 700,000 |
Other contributions: | |
| 0.00 |
| 0.0031 |
| 0.00 |
| |
11. Timeframe | (Tentative) Over 15 months. |
Other Partners involved in project design andimplementation: | Funds will be sought from other multilateral, bilateralsources to prepare the utilities for planning and implementation of the projects while planning forfuture RE expansion. |
12. If applicable, explanation for why the grant isMDB executed: | Will be executed through ADB coordinating with MEEfor project preparatory activities. |
Implementation Arrangements (incl. procurement of goods and services): | The implementing agency will be FENAKA, supported and advised by MEE (later MGF) and ADB. Supportto MEA would be provided on POISED relatedelements. |
29 These expenditure categories may be adjusted during project preparation according to emerging needs.
30 Funds are expected to be confirmed for preparatory support in 2012 at ADB concept clearance.
PROGRAMME PREPARATION GRANT REQUEST
SREP PROGRAMME
Project/Programme Preparation Grant Request
1. Country/Region: | Maldives | 2. CIF Project ID#: | (Trustee will assign ID) |
3. Project Title: | Accelerating Sustainable Private Investments in Renewable Energy (ASPIRE) |
4. Tentative SREPFunding Request (inUS million total) forProject32 at the timeof Investment Plansubmission (conceptstage): | Grant: USD1.000.000 | Loan: N/A |
5. Preparation GrantRequest (in USD): | | MDB: WBG |
6. National ProjectFocal Point: | Ahmed Saleem | |
7. NationalImplementing Agency(project/programme): | Ministry of Environment and Energy |
8. MDB SREP FocalPoint and Project/ProgrammeTask Team Leader (TTL): | Gevorg Sargsyan | Abdulaziz Faghi |
Description of activities covered by the grant:
The grant will provide technical assistance and institutional support to MEE, MEA, STELCO and FENAKA to:
- Develop FIT and WTE projects for approval under SREP.
- Strengthen the institution’s technical, planning and management capacities to attract national and internationalinvestors and lenders.
- Carry out the feasibility study for greater Male’ region.
The activities covered under the grant would support:
a) Set up of guarantees facility for political, regulatory and commercial risks.
b) Strengthening of MEE, MEA, FENAKA and STELCO.
c) Development of technical specifications, legal and commercial aspects, FIT and tariff mechanisms, standardized PPAs,guidelines for investment approval, licensing of electricity operators.
d) Development of marketing strategy to promote the Maldives SREP IP to national and international investors and lenders(incl. an investor’s conference and/or roadshow for the first half of 2013).
e) Carry out of feasibility study for greater Male’ region.
f) Carry out consultations with sector stakeholders.
31 Including the preparation grant request
9. Outputs: |
Deliverable | Timeline |
Set up guarantees facility | 18 months from approval |
Strengthened capacity within MEE, MEA, STELCOand FENEKA to develop and implement the projects | 1-2 years |
Projects prepared for approval from SREPsub-committee and WB Board | 1 year from approval |
Consultation with sector stakeholders | 1-2 years |
Marketing strategy and mechanisms | 1-2 years |
Investors Conference | 6 month from approval |
Feasibility Study | 12 months from approval |
Stakeholder consultations | 2 month from completion of study |
10. Budget (indicative): |
Expenditures33 | Amount (USD) – estimates |
Consultants (study) | 500,000 |
Consultants (project preparation) | 150,000 |
Consultants (marketing activities) | 100,000 |
Workshops/Seminars | 50,000 |
Travel/Transportation | 50,000 |
Others (admin costs/operational costs) | 50,000 |
Contingencies (max. 10%) | 100,000 |
Total Cost | 1,000,000 |
Other contributions: | |
GIZ | 500.00 |
11. Timeframe | (Tentative) 18 month from approval. |
Other Partners involved in project design andimplementation34 | Funds will be sought from other multilateral and bilateral sources for preparing the nationalinstitutions for RE expansion beyond SREP. |
12. If applicable, explanation for why the grant isMDB executed: | |
Implementation Arrangements (incl. procurement of goods and services): | MEE will provide policy, promotion and implementationsupport combined with regulatory support from MEA. |
32 These expenditure categories may be adjusted during project preparation according to emerging needs.
33 Other local, national and international partners expected to be involved in design and implementation of the project.
APPENDIX 2 - SUMMARY OF STAKEHOLDER CONSULTATIONS
A number of stakeholder consultations were carried out between September 2011 and January 2012. The following is a summary of the discussions and feedback received from public and private stakeholders. Prior to the submission of the IP for approval, a third and final round of consultations was carried out in September 2012 which is alsosummarized below.
Summary of 3rd Public Consultation (12th September 2012)
A public consultation meeting was held on September 12, 2012, inaugurated by Dr. Mariyam Shakeela, Minister ofEnvironment and Energy. She highlighted the importance for stakeholder participation for the successfulimplementation of the Maldives SREP IP and thanked the WBG and ADB for their support and assistance provided during the process of the IP formulation. Minister Dr.Shakeela then requested the participants to critically commenton the document and to provide their inputs to improve the document.
Opening remarks were also made by the representatives from MDBs highlighting the importance of stakeholder participation and their inputs to the IP followed by the presentation of the Maldives SREP IP by Mr. Ahmed Saleem,Permanent Secretary of the Ministry of Environment and Energy.
Stakeholders gave their inputs on the overall structure of the Maldives SREP IP as well as on the proposals for RE for greater Male’ region, RE for outer island and institutional arrangements. The following comments and feedbackswere received from the stakeholder.
Comments | Actions taken |
Concerns were raised for not having a strong regulatoryframework including a transparent tariff structure with a FIT that reflects the proper costs of electricity forconsumers and foreign investors. The importance ofhaving FIT regulation in place prior to the implementationof SREP activities was highlighted by all participants. | Has been explained, it already one of the main pillars ofMaldives SREP IP. |
Participants suggested other options to be considered toutilize access to energy from RE sources other than Solarand Wind, as well as new forms of storage other thanbattery storage. To scale up RE in the greater Male’ regionin particular, additional investments in infrastructure(submarine cable) might be needed. | Is already included as part of the Feasibility study forgreater Male’ region. |
Clarity was requested regarding the role of the proposedinstitutions to be created. Suggestions were made to alsoinclude MED into the structure in addition to develop astrong evaluation and monitoring mechanism. | Was explained during the meeting, MED is included as partof the institutional structure. |
Participants requested the overall strengthening andclarification of private sectors role in the development andimplementation of RE projects as well as the inclusion ofcivil society organizations and island councils. | New chapter was added to Maldives SREP IP to includethe different stakeholder better into the implementationactivities. |
Concerns were raised regarding lack of technical know-how among utility staff and private sector stakeholder,following by suggestions to include technical training toutility staff and private sector. In general, the importance of building more local expertise for the RE sector washighlighted. | Training and capacity building is already an integratedpart of the Maldives SREP IP. |
Concerns were raised regarding the energy security forsmaller communities related to the proposed shift fromdiesel based electricity generation to 100% RE. | Will be work out during the actual project preparationphase. The existing diesel generator sets will act asredundancy in case of PV system failure. |
Concerns were raised regarding some of the technicalrisks such as corrosion, following suggestions to consideradditional factors to address these risks in the technologyselection. | Have all been covered under the risk assessment andappropriate considerations will be made during detaileddesign phase. |
Suggestions were made to supplement SREP byprogrammes and projects on energy efficiency. | Energy efficiency is a necessary supplementaryactivity for the successful implementation of the SREP.There are already a number of on-going programmes, theGovernment will further strengthen this sector and seeksupport from other multi- and bilateral sources. |
To better include the population, participant suggested that the government should carry out a number of awarenessraising programmes on RE advantages or the proposed tariff structure. This could also educate people to why theyshould pay their electricity bills. | Government plans to introduce an RE module in trainingprogrammes conducted for the Island counsellors at the Institute of Local Governance and Development tosensitise them of the socio-economic and environmentalaspects of RE technologies. MEE will also carry out mediacampaigns using mass media to raise awareness of thepublic on RE benefits. |
Summary of prior consultations:
- A public consultation meeting was held on September 7, 2011 to solicit comments on the Renewable EnergyInvestment Framework (REIF) – which forms the basis of government policy and thinking on RE and underliesthe preparation of the Maldives SREP IP.
- The following aspects were highlighted by the participants:
Comments | Actions taken |
a. RE sector developments in the Maldives were to focus on energy efficiency and use of solarphotovoltaic for RE generation. | |
b. Concerns were raised regarding energy security in theproposed shift from dependence on diesel imports to imported biomass which is proposed for the Male’region. | Based on concerns raised, IP was revised and biomassinvestment removed. |
c. Emphasis on local private sector playing a role cameacross strongly in the consultations and stressedthat private sector should play a greater role in thedevelopment and implementation of RE initiatives. | IP took into consideration of this concern and the reviseddocument now reflects the important role private sector is expected to play in the IP. In fact 34% of the totalinvestment is expected from the private sector. |
d. Concerns were raised regarding the role of theproposed institutions to be created, namely MaldivesEnergy Services Company (MESCO) (then referred toas Maldives Energy Finance Corporation (MEFCO)and Maldives Energy Technology and Support Unit(METSU) with respect to ensuring that competitionwill be enhanced and that these organizations do notbias project development and technology selection. | This concern was seriously taken into consideration andeliminated creation of new organisations and emphasisput on use/strengthening of existing institutions in theimplementation of IP. |
e. Concerns were raised on whether MESCO and METSUwould be creating new bureaucracies and that priorityshould be given to strengthening existing institutions. | See above |
f. Highlighted that there is a strong need to build localexpertise and have less dependence on foreignconsultancies to roll out the RE programme. | This concern too was considered and emphasised trainingof locals on the revised IP. |
- The REIF was placed on the web for public comment in October 2011.
- A consultative meeting was held on November 28, 2011 with all the major Male’ area power producers to understand better the forecasts of demand and plans for supply. The following key points were highlighted by the participants:
Comments | Actions taken |
a. Reflected the uncoordinated nature of powerplanning in Male’ area and importance ofoperationalising a coordination mechanism toestablish a holistic approach to power planning forthe greater Male’. | A detail study will be conducted under SREP to identifybest options to meet the electricity need for the greaterMale’ region. |
b. Highlighted the importance of a strong independentenergy sector regulator to ensure sector development in an orderly fashion to safe guard interests of bothproducers and consumers of power. | MEA is developing a comprehensive energy sectorregulatory framework with technical assistance from WBGand ADB. Through this support, regulations on licensing,standards of performance, energy efficiency labelling,investment approvals and technical regulations are being developed. |
c. Establishment of an Energy Ministry or a Ministry whichhas “Energy” in its title was proposed to reflect thesignificance of the sector and establish a centralauthority that will provide information and direction onenergy sector development. | The Minister of Environment and Energy represents theenergy sector in the President’s Cabinet of Ministers. AMinister of State solely dedicated to the energy sectorhas also been appointed to help the Maldives bolsterits energy security and create important RE and energyefficiency policies and reduce greenhouse gas emissions. |
d. Suggestions were made to establish more clarity onwhich government agency is driving the energy sectorto ensure roll out of a consistent and coherent energypolicy framework nationwide. | See comment c. |
- A draft of the Maldives SREP IP was placed on the Ministry of Economic Development web site on January 8, 2012. No formal comments were posted online.
- A consultative meeting for all the major power producers (utilities and private) outside the resorts was held inMale’ on January 17, 2012 to review the latest draft of the Maldives SREP IP. The discussions mainly surroundedon the proposal for having a biomass plant as a base- load power for Male’ region and building local capacity ofutilities to implement RE projects. The following key points were highlighted in the meeting:
Comments | Actions taken |
a. To undertake an independent detail study todetermine the best technology option for Male’ base-load. | A detail study will be conducted under SREP to identifybest options to meet the electricity need for the greaterMale’ region. |
b. Not to discount totally the future prospects of Oceanthermal and marine currents as possible futuretechnology options for base-load or backup power. | See comment a. |
c. To integrate STELCO as a key player in implementingthe base-load power project for the Male’ region. | STELCO will be playing key role in implementing projectrelated to greater Male’ region. |
d. Considering the many developments planned for theMale’ region, it was highlighted that timing when tocommission the proposed base-load power plant wascritical. | It will be identified once the activity on comment a iscompleted. |
- A public consultation on the Maldives SREP IP was held in Male’ on January 18, 2012 open to all comers. It wasattended by a wide selection of stakeholders including NGOs, the Bank of Maldives, major power generators andconsumers, RE entrepreneurs, and senior ministers. The meeting revealed that most of the concerns addressed by stakeholders on September 7, 2011 have been reasonably addressed in the draft IP that was published in the MEDwebsite for public consultation on January 8, 2012. In the consultation session, the following were highlighted;
Comments | Actions taken |
a. Mild levels of concerns were expressed purely onenvironmental grounds to the proposal to considerbiomass as a reference case for Male’ base-load.Participants were reassured that the technologyoption for Male’ area will be determined based on an independent study to verify the best technologyoption. Most participants were satisfied with theapproach and expressed support for the study. | Based on concerns raised, IP was revised and biomassinvestment removed. |
b. Suggestions were made not to discount the availabletechnology options, particularly ocean thermal andmarine currents. | A detail study will be conducted under SREP to identifybest options to meet the electricity need for the greaterMale’ region |
c. Proposals were put forwarded to consider micro- gridsand adopt a cluster approach to deliver power in someof the outer islands. | In parallel to SREP implementation detail studies will beconducted with the assistance from other sources tocluster potential islands to interconnect. |
d. The need for strengthening the regulatory frameworkwas highlighted to facilitate take up of both REprojects and EE measures. It was also highlighted theimportance of integrating these aspects in the designphase with better and improved building codes, FITetc. Discussions also surrounded in using incentivesand regulatory options to increase the complianceand take up of RE/EE pathways by the tourism sector.The importance of building and engaging local talentwas highlighted during the discussions. | MEA is developing a comprehensive energy sectorregulatory framework with technical assistance from WBGand ADB. Through this support, regulations on licensing,standards of performance, energy efficiency labelling,investment approvals and technical regulations are beingdeveloped. |
APPENDIX 3 - ONGOING OR RECENTLY COMPLETED RENEWABLEENERGY PROJECTS
Project for Clean Energy Promotion in Male’
The main objective of this Japanese grant aid project is to implement grid connected electricity generation through Photovoltaic technology. This would serve as an alternative means of producing electricity to cater for the growing electricity demand in Male’, and also promote adaptation of clean energy as a means of Climate Change Mitigation.Under the project total of 395kWp of Solar PV systems has been installed at rooftops of 5 public buildings in Male’.These systems have been operational since March 2012.
Installation of additional amount of 280 kWp of solar PV systems will start in September 2012 and will be completed in March 2013. On completion of this project Male’ will have approximately 775kWp solar PV rooftop mounted electricity generating facilities. This is approximately 1/12 of the absorption capacity of the Male’ grid.
Clean Energy for Climate Mitigation (CECM) Project
Under the multi-donor Maldives Climate Change Trust Fund (CCTF) the Clean Energy for Climate Mitigation (CECM) Project has been developed to have a RE and energy efficiency demonstration activities on GDh.ThinadhooIsland.
Under the project 300kWp solar PV grid tied system will be installed on the various public buildings ofGDh.Thinadhoo Island. This is almost one third of the maximum electricity demand of the island. By installing this amount it is expected to produce 500 MWh annually from solar PV and will avoid approximately 270 tCO2 perannum.
In addition to the above installation energy efficiency and conservation activities will be carried out in the island together with additional studies on potential RE technology which could be used for electricity generation forGDh.Thinadhoo and nearby Islands.
STELCO Six Island Solar PV Project
This is the first project in its kind in the Maldives which have been completed under a power- purchasing agreementsigned between State Electric Company (STELCO) and Renewable Energy Maldives (REM). Under the project total of 652kWp PV panels were installed in five different islands where STELCO provide electricity service. 294 kWp were installed in K.Villingilli, 64 kWp were installed in K.Guraidhoo, 78 kWp were installed in K.Himmafushi, 120 kWp were installed in K.Maafushi, 48 kWp were installed in K.Kaashidhoo and 48 kWp were installed in K.Thulusdhoo.
Support of the Climate Neutrality Strategy of the Maldives
This joint undertaking of the Maldivian-German cooperation of MEE and GIZ operates on three levels in order to improve the conditions for the implementation of a climate neutrality strategy in the Maldives. The project provides advisory services for ministries, governmental agencies and utilities in order to promote private sector engagementfor increased use of RE technologies
for electricity generation as well as measures on energy efficiency. Training measures for public and private decision makers as well as for engineers or project developers will be carried out under the project in close cooperation with Maldivian training institutions.
Low Carbon Development Project- GEF
A project to promote low carbon energy and energy efficient technologies is under implementation by MEE in collaboration with United Nations Environment Programme and United Nations Office for Project Services. Theproject is co financed by various partners including a USD
3.9 million grant from the Global Environment Facility, and USD 21.2 million co financing leveraged from variouspartners.
The project is specially targeted towards the building sector. Under the project, an assessment and monitoring systemfor Energy Efficiency Road Maps for the building sector focused on small island tropical environments will beestablished and new design parameters for Energy Efficiency (EE) & Low Carbon Energy (LCE) buildings selected and recommended. The project aims to develop local technical expertise and facilitate technology transfer in the sector. Furthermore, the project will undertake commercial-scale demonstration of EE & LCE technologies andfinance EE and LCE building technologies. The project will also contribute to the formulation of policies fortransformation of markets for EE & LCE technologies.
At present, a memorandum of understanding to be signed between MEE and UNEP is being negotiated to managethe operational aspects of the project. The contract is expected to be signed within four weeks time.
Energy Efficiency Project- UNIDO
The MEE and MEA are currently working with United Nations Industrial Development Organization to develop a project on improving energy efficiency in the Maldives. The overall objective of this project is to establish a sustainable mechanism for promoting energy efficiency in the tourism and manufacturing industries in Maldives. Under the project, it is planned to develop national policy, guidelines and programmes on energy management standards in the Maldives, and facilitate voluntary commitments and companies policies to implement EnMS in selected tourism and manufacturing industries. The project will facilitate the adoption of national EnMS based on ISO 50001. In addition, a curriculum for energy audit certification scheme conforming to international standards will be developed, and a system for certification of national experts as EnMS auditors will be established.
The project is currently being designed with assistance from UNIDO. The project is expected to utilize 1.1 million US dollars from GEF from its STAR allocation to Maldives, and will be co financed by the various project partners.
Ongoing or recentlycompleted renewableenergy projects
ONGOING PROJECTS
PROBABLE/POSSIBLE PROJECTS
SUCCESSFULLY COMPLETED PROJECTS
APPENDIX 4 - ENERGY EFFICIENCY PROJECTS
Energy Efficiency
In order to deliver the highest possible level of GHG reductions at the lowest possible cost,a series of activities parallel to those funded by SREP will be pursued. The objectives will beto reduce the costs to society of energy use by increasing energy efficiency, and to reduce theabsolute amount of power used at night, in order to reduce the costs of providing solar powerthrough energy storage devices. (Solar power delivered through batteries can cost 250% as muchas the cost of using power in the day when the sun is shining). Much of the technical supportfor this work will be carried out by Energy Department of the Ministry of Environment andEnergy.
Energy Efficiency In Government Estate
The GoM spends of the order of USD 10 million a year on electricity. Major potential savingshave been identified in this sector. These savings will be used to support energy efficiencyprogrammes elsewhere to reduce subsidies and emissions. In addition, significant wastageoccurs at night when demand should be low, but lighting, cooling, and appliances that areleft running unnecessarily. MEE will initiate and implement a 20% Savings Campaign to useuntapped efficiency and to lift saving potential for government buildings as this is the singlemost effective step in achieving greenhouse gas reduction at the lowest cost to the economy. Thiswill not only save money because it lowers the energy bill of the government, but can also raisepublic awareness for clean energy and serve as a best practice example for other private buildingsor industry.
Domestic Energy Efficiency
Domestic energy efficiency is a key target for reducing emissions and the energy costs forconsumers. Research in one of the islands shows that 25% or more of electricity is used forcooling devices (air conditioners and fridges) and that these are frequently grossly inefficient.
Complementary work on building insulation will contribute significantly to reducing air-conditioning load.
Promotion To Resort And Industrial Sectors
The resort and industrial sectors are one of the major power generators and consumers. One key objective of Energy Department will be to offer these sectors working examples of energyefficiency and RE generation – with complete transparency of costs – and to actively promotethese to private energy generators and users. This will help to persuade and encourage thesesectors to take their own steps to becoming oil independent.
The GoM may support this activity by making fiscal adjustments to encourage the transition tolow carbon. Even now Government is working together with IFC in conducting Cleaner Auditprogrammes at resort.
Financing Energy Efficiency
The principal energy efficiency measures identified have very rapid paybacks. These will befunded through a combination of GoM budget support, MDB loans, and private sector capital(on a shared saving basis). Savings made will be returned to MGF and re-invested in furthersavings programmes.
12. | Kendhikolhukulhudhoo | 706,718 | 13. | Makunudhoo | 701,112 | 14. | Dharavandhoo | 692,186 | 15. | Maamendhoo | 687,593 | 16. | Madaveli | 655,088 | 17. | Gemanafushi | 637,704 | 18. | Maavah | 585,228 | 19. | Baarah | 556,452 | 20. | Isdhoo | 554,352 | 21. | Miladhoo | 534,413 | 22. | Kurendhoo | 532,465 | 23. | Faresmaathodaa | 519,003 | 24. | Hoadedhdhoo | 518,652 | 25. | Kendhoo | 513,644 | 26. | Madifushi | 506,688 | 27. | Meedhoo | 474,028 | 28. | Gan-Mukurimagu | 458,704 | 29. | Maamendhoo | 457,560 | 30. | Neykurendhoo | 456,668 | 31. | Bilehdhoo | 450,704 | 32. | Innamaadhoo | 417,641 | 33. | Landhoo | 406,594 | 34. | Maalhendhoo | 398,139 | 35. | Hithadhoo | 394,272 | 36. | Nellaidhoo | 390,812 | 37. | Fiyoree | 389,972 | 38. | Vaadhoo | 378,960 | 39. | Hithaadhoo | 359,838 | 40. | Rathafandhoo | 359,292 | 41. | Hulhudheli | 350,468 | 42. | Ukulhas | 342,932 | 43. | Kamadhoo | 341,869 | 44. | Magoodhoo | 341,220 | 45. | Nolhivaram | 338,098 | 46. | Maafaru | 337,456 | 47. | Nadella | 335,744 | 48. | Maalhos | 326,100 | 49. | Rasgetheem | 320,058 | 50. | Kanduhulhudhoo | 314,564 | 51. | Filladhoo | 311,748 | 52. | Kudafari | 307,192 | 53. | Olhuvelifushi | 306,400 | 54. | Bandidhoo | 305,748 | 55. | Rasmaadhoo | 302,730 | 56. | Lhohi | 301,450 | 57. | Kandoodhoo | 294,776 | 58. | Dhevvadhoo | 289,212 | 59. | Buruni | 287,272 | 60. | Meedhoo | 250,723 | 61. | Dhiyamigili | 245,276 | 62. | Inguraidhoo | 330,525 |
|
|
APPENDIX 5 - ELECTRICITYCONSUMPTION BY ISLAND CATEGORIES
Large electricity consuming islands
| Island | kWh/year |
1. | Kulhudhuffushi | 8,078,052 |
2. | Fuahmulah | 7,627,596 |
3. | Thinadhoo | 5,437,900 |
4. | Addu City (per island) | 3,648,335 |
Medium electricity consuming islands
| Island | kWh/year |
1. | Villingili | 2,752,160 |
2. | Kudahuvadhoo | 2,663,828 |
3. | Naifaru | 2,620,240 |
4. | Hulhumeedhoo | 2,480,760 |
5. | Hinnavaru | 2,414,704 |
6. | Dhidhdhoo | 2,246,440 |
7. | Maafushi | 2,047,932 |
8. | Eydhafushi | 2,000,408 |
9. | Hanimaadhoo | 1,825,748 |
10. | Manadhoo | 1,824,520 |
11. | Velidhoo | 1,709,440 |
12. | Thimarafushi | 1,667,728 |
13. | Hoarafushi | 1,500,156 |
14. | Gadhdhoo | 1,308,976 |
15. | Himmafushi | 1,281,688 |
16. | Milandhoo | 1,231,496 |
17. | Alifushi | 1,183,642 |
18. | Holhudhoo | 1,167,316 |
19. | Ihavandhoo | 1,158,264 |
20. | Vilufushi | 1,103,908 |
21. | Gan-Mathimaradhoo | 1,052,908 |
Small electricity consuming islands
Island | kWh/year |
1. | Guraidhoo | 992,880 |
2. | Thulusdhoo | 991,600 |
3. | Gan-Thundi | 909,000 |
4. | Gan-Maahinna | 857,372 |
5. | kanditheemu | 853,336 |
6. | Kashidhoo | 846,252 |
7. | Kolamaafushi | 811,020 |
8. | Kelaa | 789,552 |
9. | Dhaandhoo | 759,456 |
10. | Maduvvaree | 737,351 |
11. | Hulhudhuhfaaru | 728,588 |
APPENDIX 6 - PROPOSED FEED-IN TARIFF
Proposed Feed-in Tariff
The proposed FIT and Net Metering regime is expected to form the core of RE development inthe Maldives, and be the catalyst in scaling up RE technologies. To support this objective it isproposed that the existing FIT regime is supplemented with a new FIT regime aimed at meetingthe needs of larger developers as well as small rooftop systems.
The Existing FIT Programme
To encourage private investments in RE, the Government instructed the 7 regional utilities inMarch 2011 to purchase electricity sold to the grid from RE sources at the rates shown below. Toincentivise the utilities, it was decided, that the government would provide the utilities with USD0.03/kWh purchased from RE source.
Utility Services Provider | Existing FIT (USD/kWh) |
1. State Electric Company Limited: Greater Male’ Region | 0.22 |
2. Upper North Region (Ha, Hdh, Sh) | 0.29 |
3. North Region (N, R, B, Lh) | 0.29 |
4. Central Region (M, F, Dh) | 0.26 |
5. South Central Region (Th, L) | 0.35 |
6. Upper South Region (Ga, Gdh) | 0.35 |
7. South Region (Gn, S) | 0.26 |
To demonstrate the commitment to this policy, state owned utilities were quick to participate inthis programme even without a mandatory Renewable Portfolio Standard (RPS). Immediatelyafter the FIT order was issued, STELCO singed a PPA with Renewable Energy Maldives PvtLtd to install 652kW of Solar PV on rooftops of 6 selected islands operated by them. Though thegovernment approved FIT was USD 0.22/kWh, the agreed tariff under this 20 year contract wasUSD 0.25/kWh. To satisfy the investor STELCO had to sacrifice its share of USD 0.03/kWh.
It was evident at the time if the government forced STELCO to apply the official approvedFIT of USD 0.22, there was a good possibility that the contract would not have materialised asUSD 0.25/kWh was the absolute minimum Renewable Energy Maldives Pvt Ltd was willing toaccept despite the first mover advantage and full market capitalisation in these 6 islands.
As this FIT failed to have desired effect, the government decided to revise the tariff. The newexisting FIT (henceforth eFIT) was introduced in September 2011. The eFIT was set after takinginto consideration regional fuel prices variations and fuel efficiency variations prevalent in therespective regions. As an incentive for utilities, the eFIT was set 10% lower than it would cost toproduce a kWh using diesel from their existing power plants.
The new eFIT also failed to materialise into contracts. To date, the only installation which hasbeen successfully implemented under the eFIT is the “Project for Male’ Clean Energy Promotion”funded under a Japanese grant. Therefore, commercially the eFIT cannot be considered asuccess, as private investors have shown little or no interest.
In the Maldives, electricity costs could be reduced considerably through the use of solar. Manyexisting diesel generators on the islands are extremely expensive to run as they have a capacityfar above the demand of their islands, with electricity costing up to USD 0.70/kWh in someareas.
Despite its obvious commercial appeal, the lack of general awareness and success stories continueto hamper new project development in the sector. There are also clear indications that very fewMaldives have funds to invest in rooftop solar PV systems, even if such systems were to cut theaverage electricity bill in half and pay for itself in 5-6 years. Therefore, to make the FIT successful,financial incentives such as concessional loan arrangements to cover part of initial investmentsand long term price guarantees are considered to be introduced as necessary preconditions asutilities and investors are now requesting the revision of the eFIT as they cannot continue furthercontracts based on just good will alone without financial and regulatory safeguards.
Proposed Modified FIT and Net Metering Programme
To remedy these weaknesses and to provide a low cost, streamlined and effective way ofdecarbonising the national electricity system the following modified FIT (henceforth mFIT) willbe introduced for large scale installations taking into consideration cost-based compensation forRE generation, with different prices offered to different technologies, project sizes, and regions.
In addition, the Government is also planning to allow electricity customers that generateelectricity using a RE source, to connect its facility to the distribution network under a NetMetering scheme. Unlike in the mFIT programme, these customers owned facilities are expectedto be of small capacity, and hence they would be allowed to be connected through the existingelectricity connection of the customer’s premises.
The distinguishing feature of this approach is that there will be no payment for the electricityfeed in by the customer into the grid. All feed ins will be set off against the customer’s ownconsumption, first in the current billing period, and if there are any further access credits, infuture billing periods.
The mFIT and Net Metering programme will be backed by a Renewable Portfolio Standard(RPS) policy and subsequent regulations to obligate the utilities and large power consumers togenerate part of their energy from RE source.
The following specific features will be considered in the design of the mFIT that would bereviewed under the ongoing technical assistance by ADB to MEA to formulate a new RE tariffstructure for Maldives.
Proposed mFIT Tariff Components
Balancing the needs for efficient land use, maximum penetration of renewables into the grid,and minimum cost of power, mean that the mFIT needs to be slightly more complex than asimple payment per kWh. Although it may seem overly complex for relatively small projects,these projects are potentially very large in proportion to any individual island grid.
Three components are proposed, a land rent and a capacity reservation charge payable by thedeveloper, and the tariff itself payable to the developer. The tariff will be set high enough tocompensate for the rent and capacity reservation charges in a well performing project.
Land Rent
Due to the scarcity of land available, a substantial land rent is needed to ensure the projectdevelopers use land efficiently. There should be active encouragement also to use space thatcannot be used for other future developments.
Capacity Charge
The Utility needs to have a clear understanding of how much power any developer is likely toproduce and the capacity to absorb it. By taking up a slice of capacity a developer is denying thisslice to another potential developer. Thus, there needs to be a mechanism to ‘reserve’ capacity,and to provide strong encouragement to a developer to actually deliver their reserved capacity,or alternatively to release it if a project is not performing to specification.
In addition, the Utility has a need for power over as long a period of the day as possible insteadof in a single peak. This will reduce storage and voltage stabilisation requirements. With solarPV this can be achieved either by tracking, or with some interesting new mounting geometries.
Therefore a Capacity Reservation Charge is proposed. To be effective, the Capacity Reservationcharge needs to be high; six months Capacity Reservation charge will be payable immediatelyupon the signature of the agreement with the utility in order to secure the commitment of thedeveloper. After six months the charge will be levied monthly.
The Capacity Reservation Charge will apply equally to wind or solar PV. Combined wind andsolar installations may be managed by the developer to ensure that when operated together theydo not exceed the capacity booked even if the sum of the nameplate capacity of the devicesis greater than the booked capacity. They can do this by shedding some power generation atinfrequent times of year in case they exceed the booked capacity.
The Reserved Capacity will be fixed at the time of application by the developer for the mFIT.The amount of capacity reserved must be supported by technical details of the planned schemeand expected generation.
The developer may change the Reserved Capacity subject to 3 months notice and, in the event ofincrease, there being sufficient grid capacity to accept the increase. The capacity that the Utilityguarantees to take will change accordingly.
Penalties will be imposed on developers whose project fails to achieve at least 80% of reservedcapacity within 24 months of contract signature.
Tariff
The disadvantage of FIT mechanisms is that they do not offer price discovery through competitivetendering. The tariff needs to be set at a level that attracts developers, without giving away morethan is necessary. This can only be ascertained by careful market research and discussion withpotential developers.
Tariff and Charge Reviews
Once established, the tariffs and charges for a project will not be changed over the lifetime ofthe project. For new projects, the Government of the Maldives may review tariffs upwards atany time. Review tariffs downwards, and rents or Capacity Reservation charges upwards, at anytime, subject to a six month notice that such a review may take place.
New Regulation on mFIT Power Purchases
New regulations on power purchases need to be introduced. Regulation is proposed to ensurethat the Utilities are the ultimate buyers of all privately generated electricity, except where asupplier and consumer are not connected to any Utility and place no burden on the public pursefor the provision of power. This covers all installations except resorts and possibly some isolatedbusinesses. This ensures that all installations are separately metered, and that the Utility canmanage the balance of supply and demand over seasons, days, and within any day and nighteconomically.
Utilities should have a duty to publish their power purchase capacity. This will be a time seriesbased on average current demand profiles, and the sum of contracted power purchases andexpected power purchases. This will allow project developers to see what scope exists for newprojects in any island.
Stakeholder Perspectives on themFIT Developer Perspective
The developer will have a strong incentive to build the project rapidly as the Capacity ReservationCharge will be levied whether the project is performing or not. The provision of guarantees willallay most of the concerns related to investment in the Maldives.
Utility Perspective
The payment of the capacity charge up front will give the Utility time and funds to prepare theisland to accept the new project, and to put in place such measures that are necessary to ensuregrid stability, energy storage, and load deferral.
The initial years of the mFIT regime will see electricity generating costs fall compared to existingdiesel generation – thus allowing the utilities to build their balance sheets and become viableeconomic units.
Subsequently, utilities will be in a much stronger position to invest in the energy storage capacityneeded to deliver the second round of RE penetration – lifting total RE supply to around 90%.
Government Perspective
This tariff regime will save money immediately for all the power systems not operating atmaximum efficiency. Donor funding will help secure guarantees in the first years of the FITregime. Over time, as its reputation and some capital base is build, the amount of the guaranteesneeded will decline.
APPENDIX 7 - PROFILE OF A TYPICAL SMALL/MEDIUM ELECTRICITY CONSUMING ISLAND
Socio-economics
The main economic activities on these islands include fishing and small scale agriculture. However, there is an increasing trend of employment in tourism sector due to development of resorts in close by islands.Moreover, the government offices, schools, healthcare facilities also provide some employment to theresidents. In addition, small industrial activities exist in some islands. The infrastructure of the typicalsmall-to
A healthcare centre
An aerial view of a typical inhabited island
medium electricity consuming islands consist of an island office, a school, a health post, a mosque, a power house, few retail shops, harbours and breakwaters and boat building sites.
Natural water resources are limited to rain water collected from roofs and ground water which is boiledor treated before consumption. Few islands operate desalination plants to produce potable water.
Generally all islands are staffed with a
healthcare worker while health centres/hospitals are found in islands with larger population.Similarly schooling up to grade 10 is found within the atoll but the highest level of educationtaught varies from island to island.
Electricity production and use
As of today, all islands of the Maldives are electrified through diesel based generation, and the powersystem of the island is operated either by government owned companies (STELCO or FENAKA Corporation) or by the Island Council. Although the electricity service is available in all islands, thereliability and quality of the service as well as general operating condition of the power systems are poor in some of these outer islands. This is mainly due to the lack of trained persons availability as well as limited resources and most apparent in islands where powerhouses are operated by the island councils.
A diesel generator installed at a powerhouse
The typical powerhouse is generally composed of the diesel based generation units, fuel system, control panels and distribution cables connections enclosed within one building. Thedistribution cables extend underground and go into distribution boxes in the street, and goes intothe household/building.
Despite the regulations of MEA which enforce the power quality and safety measures, and regulationsrelated to environmental protection enforced by the EPA, some powerhouses in these islands do notfully comply with all regulations. This is mainly attributed historically due to lack of proper feasibilitystudies and future planning, resulting in ad-hoc basis of power system installation in various islands. Moreover, in general there is only one technician at the powerhouse to oversee the operation of the system and rarely can attend major faults from the generation side.
Distribution box at an island
In addition to this, fuel handling processfrom the operation side is not very wellmonitored, which sometimes lead to contamination of the fuel and lube oil by salt water (while being unloaded from the boats) and leakage of oil from the containers during transport and storing, all of which indirectly results in enhanced degradation of the generator sets which results in decreased performance ofelectricity production.
Fuel storage at the back of the power house at an island
Some islands were observed to have large amounts of loss in generated units where losses from the generation side was possibly due to running of oversized generators and poor maintenance. There is also loss on grid side, which is possibly due to aged or undersized distribution cables and poor correctivemeasures taken to improve quality of the system such as phase balancing, harmonics, etc.
The operation of powerhouse also has various impacts on the environment mainly due to the noise, emissions and fuel handling. Moreover, spillage of fuel and lubricating oil during handling have diverse impacts the fresh water lens which is used as a source of drinking water in many communities.
Black smoke emitted from a small powerhouse
Economics of electricity production
The average demand of these islands varies from 30kW to 300kW while the installed generatorcapacity of the island may be undersized or oversized which hinders the quality and efficiencyof the electricity production process. These are factors which are generally difficult to addresswhen the system is in operation due to high costs involved and the customers end up paying forthe losses.
Tariff for the electricity service provided varies from one island to the next based on the generationcost, and is approved by the MEA. Electricity users are categorized into Domestic, Business andGovernment Customers, where Government and Business categories are charged at a highertariff. Although the approved tariffs are applied, there is a large amount of subsidy provided bythe government to cover the fuel costs.
As fuel costs is the main portion of the running cost of the power system, the increase of fuel costdue to the fuel being transported from long distances adds burden to the economics. Moreover,fuel reserve/ storage is very limited on these islands and there is always the potential of badweather delaying fuel shipments from farther island, which adds to the risks of fuel security.
600
500
400
300
200
100
0:00
1:00
2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00
11:00
12:00
13:00
14:00
15:00 16:00
17:00
18:00
19:00
20:00
21:00 22:00 23:00 0:00
Time
Load profile of a medium size electricity consuming island of the Maldives
APPENDIX 8: ASSESSMENT OF COUNTRY ABSORPTIVE CAPACITY
Overall Fiscal Outlook
- The overall macroeconomic situation in Maldives continues to be challenging. Thebudget deficit (after grants) is expected to reach 30 percent of GDP in 2012 while theprimary deficit is estimated to register 20 percent of GDP. Total revenue collection for2012 is likely to fall short by around MVR1.2 billion34 against the budget. Financing therising budget deficit is also challenging as commercial banks showing reluctance to holdgovernment paper that leads to a cash flow constraint for the government which it hadmet with domestic borrowings35. Given that domestic sources of finance are limited, thegovernment is turning to foreign financing. A significant portion of the public debt is aresult of the country borrowing significant amounts of foreign currency (largely to payfor fuel imports). The Indian government has agreed to provide USD 25 million in budgetsupport36 while the ADB is also expected to disburse USD 17 million as part of theireconomic reforms package (ERP) program. Both these inflows are expected in the 2012(Q4) – which will provide some respite to the Government cash flow.
- A number of debt service commitments are coming up in the next 3-5 months which mayrequire some form of refinancing to reduce the public debt management burden. Twobonds of USD50 million owed to the Indian State Bank of India come for redemption inDecember 2012 and February 2013, respectively, and the Government is likely to seek anextension for payment of debt to keep an adequate balance of usable foreign exchangereserves which now stand at about 1 month of imports.
- Against this backdrop, the government has taken a number of measures to prevent further escalation of the macroeconomic outlook. In June 20, 2011 the government presented four bills –collectively referred to as the ERP to the Majlis (Parliament). The ERP comprised of: (a) a (general) Goods and Services tax (GST) bill (b) a Corporate Profits Tax (CPT) bill; (c) a Personal Income Tax Bill (PTB) and (d) an amendment bill to the Tax Administration Act. Of the measures the GST was passed by the house in endAugust and was ratified into law in early September. The tax will come into effect inOctober. The GST Act also had provisions to raise the hitherto applicable TGST rate to 6percent in 2012 and thereafter to 8 percent37 in 2013. The proposed SREP interventionsare also aimed at relieving public expenditures on diesel imports, subsidies and foreignexchange.
- Inflation has also been rising since the currency depreciation in April 2011 and has beentrending upwards as of May 2012. High food prices are mainly due to rising global foodprices –given that Maldives depends heavily on imported food – as well as increase indomestic fish prices. From the second half of 2011, significantly higher international oilprices have also driven up domestic diesel prices, particularly on transport-related costs.In a bid to limit the pass-through, the government in January 2012 lowered customs dutieson gasoline and diesel which in turn adversely affected revenue collection. Investment inrenewable energy through SREP is expected to offset some of these adverse effects as thecountry reduces its exposure to volatile oil prices and external shocks.
34 Total revenue projections of MVR 9.2 billion against a budget of MVR 10.4 billion.
35 Such as the borrowing from Bank of Maldives in May at a rate of 9 percent –roughly 200 basis points above the Treasury bill rate.
36 There is a likelihood of another USD 25 million that would come later in the year.
37 The rate was 3.5 percent in 2011 – the first year of implementation.
- The trade balance is skewed with high import growth outstripping export growth. Totalimports reached USD884 million during the first seven months of 2012 largely due tohigher imports of public enterprises, notably the State Trading Organization (STO),which accounted for around 27 percent of total imports. Fuel imports – the single largestimport item in the country accounting for nearly 30 percent of total imports38 rose 28percent (year-on-year) during the period to July 2012 with average oil prices remainingmore or less same levels as in the corresponding period in 2011 (around USD 102 perbarrel). Support to offsetting diesel fuel by using solar, wind and waste to energy forpower generation will contribute significantly to an improving the trade balance. Thesuccessful implementation of SREP investments would contribute to a reduction of about23 million liters of diesel per year (or 6% of total diesel imports).
Absorptive capacity and SREP Implementation
- The Government has a reasonably good track record in terms of implementation of projectson the ground through its line ministries. In particular, the Ministry of Environment andEnergy has four active World Bank assisted projects under implementation, each at variousstages of the project cycle. The ministry has capable staff to manage the procurementand implementation which they coordinate with the relevant national agencies (utilities,island/atoll councils, etc.) but will need additional support and strengthening as theprogram of activities increases under SREP.
- As state-owned utilities, both STELCO and FENAKA have similar constraints on capitalexpenditures and limitations on their balance sheets. Under the SREP IP, the government(with support from the MDBs) would take appropriate measures to ensure that the utilitiesare able to carry out the public programs and disburse funds accordingly. The formationof FENAKA is expected to streamline decision making, standardize project design andfacilitate procurement and installation activities for the outer islands under the SREP.Capacity strengthening and implementation support for the ministry and utilities will bepart and parcel of the overall Maldives SREP IP.
- The expected level of SREP resources is comparable to the envelope of IDA39 and ADFallocations for the country. This may present a challenge if these were to be channeled to a single Ministry; however, the design of the program is informed by the political andmacro-fiscal risks in the country and thus inherently contains risk mitigation measures.The proposed SREP interventions are designed to enable the program to be implementedand financed largely by the private sector, with the ministries and utilities undertakingthe critical public sector activities necessary to facilitate private sector investments and tofinance investments where private sector participation is not likely.
- Furthermore, one of the key attributes of the Maldives SREP is the provision of a portionof available resources to be used as some form risk mitigation instruments, such asWorld Bank partial risk guarantees or other similar facilities. Through this approach, theGovernment would limit its exposure to using SREP and leveraged resources for directinvestment into public-sector projects which would otherwise significantly limit its abilityto absorb all of these funds and disburse/implement in a timely manner.
38 In value terms.
39 IDA and ADF allocations for the Maldives are about $20m each for a 3-year period in comparison to about $30 million proposed from SREP over a 5 year period.
APPENDIX 9 - INDEPENDENT REVIEW OF THE MALDIVES SREP IP
Dr Mike Allen
27th September 2012
1.0 INTRODUCTION
This review of the Maldives SREP IP has been undertaken in a number of steps. A limitednumber of versions of the draft document have been reviewed, with the final version receivedon 25th September 2012. On 26th September a call was arranged with representatives from theMaldives Government, WBG, ADB and the IFC in response to points raised during the reviewof the final draft IP.
It should be noted that the reviewer has not had the opportunity to visit the Maldives, nor tomeet face to face with any of those listed above who are involved in this opportunity. He washowever engaged during the preparation and review of the previous IP in January 2012 whichcovered many of the aspects in the current, updated IP.
As noted during the review of the previous IP, it is clear that considerable effort has beendirected at the preparation of this Investment Plan. The Maldives provided one of the morecomprehensive packs of information in originally seeking consideration under the SREP. Againthis all highlights the focus that the Government of the Maldives has on moving to RE and theissues that are faced by the island nation with such wide spread centres of population. Importantlythe approach being suggested in this IP has removed some of the complexity around governmentagencies that was apparent previously.
While there are no major concerns with the Investment Plan as presented, there are a number ofpoints that have been raised and were addressed in writing from GoM and thoroughly discussedduring the call on 26th September. These are included here for completeness and a record. Thereviewer is confident that these issues have been noted and will be reflected as appropriate in thefinal version of the IP to be submitted to the SREP Sub Committee.
It is not the intention to present step by step comments on the Investment Plan. A summary ofinitial comments are included in the Appendices and various discussions are summarised therefor the record.
2.0 COMPLIANCE WITH GENERAL AND SPECIFIC CRITERIA
In the review undertaken of the prior IP the notes below were included to briefly summarise thecompliance of the Investment Plan with the General and Specific Criteria as specified in the TOR for that review. They are retained in this report with some modification as they provide animportant gauge of the overall interpretation of the IP within the SREP aims and objectives.
2.1 Catalyse increased investments in renewable energy:
The plan does outline how it is anticipated that SREP investments and programme support willhelp attract other public and private funding. This is explained in some detail. The leadership of government agencies is expected to assist in establishing strategies that will provide publicfunded examples in remoter and smaller market segments and help aggregate the markets so thatprivate investors have larger scale opportunities to develop.
2.2 Enabling environment:
The plan clearly elaborates the Government’s commitment to drive as quickly as possibletowards a low carbon economy. There is acknowledgement that there is a need for a simple,transparent but robust set of policies and regulations to attract and hold the interest of investors
/ developers. Experience to date with FITs is providing guidance as future FIT arrangementsthrough a modified approach are being evaluated.
2.3 Increase energy access:
Access to electricity is not a major issue as power is available to most households. It is howeverdiesel generation and the programmes under the SREP funding will allow displacement of dieselwith predominantly solar PV, improving the cost of generation, eliminating a portion of thegovernment funded subsidies to offset increasing diesel cots and offering longer term securityand sustainability.
2.4 Implementation capacity:
The limited local capacity is clearly recognised and programmes reflect how this will be addressed.There is a determination to move away from long term dependency on consultant support and to build a national capacity drawing on local and international alliances. The private sector is seen as a key element of this development and various financial incentives to buy down risk areanticipated to encourage their participation.
2.5 Improve long-term economic viability of the renewable energy sector:
Specific funding allocations for guarantees and mechanisms to reduce the exposure to sovereignand payment risks are a central part of the financial plan. An adjusted FIT is proposed to ensureadequate returns while making sure that the overall commercial structure does not disadvantagethe Maldives’ economy. The need to build capable local enterprises to underwrite the needs ofan expanding market is well defined and considered.
2.6 Transformative impact:
The Investment Plan describes in detail how it will initiate transformative change in achievingnational-scale outcomes and the delivery of SREP aims and objectives. It also clearly identifiesthe contribution of programmes funded through other sources to complement this change.
3.0 RECOMMENDATIONS
It is believed that a number of features of the Investment Plan deserve comment. As noted abovethey are not major issues but points that should be considered as the programmes supported bythe SREP investments are implemented.
3.1 Private Sector Engagement
The encouragement of private sector participation is a key focus of the SREP. The Investment Planrecognises this and has several initiatives directed at attracting private investment. Discussionssuggest that only limited, and somewhat anecdotal, information has been gathered to determinewhat the market sees as hurdles to investment. The obstacles to raising capital (whether by thepublic or private sector) that are suggested are common – sovereign risk, the resultant cost ofcapital, the high transaction costs for small scale investments, lack of familiarity/experience inthe Maldives for many investors. It is suggested that this may need to be more rigorously testedin the finance markets.
The differences between reasonable IRRs determined in an analytical model and the real cost ofdoing business and actual returns are often quite large. Where there is limited investor interest insmaller (island) markets care needs to be exercised to ensure that entities invited to participate inthe market have credibility, appropriate experience and substantial financial backing. There are anumber of examples (outside the Maldives) where offers have been accepted from entities withquestionable capacity largely because they were the only groups showing interest – offers arewell intended but cannot be backed up with real experience and an ability to perform in what areoften challenging environments. Subsidised costs and aggressive FITs for example can attractentrepreneurial groups with limited experience. The situation in the Maldives is complex andwill require well experienced partners to ensure effective implementation of the plans as nowenvisaged.
It is noted that marketing of the opportunity will be a key requirement – this marketing shouldnot hesitate to be selective in soliciting interest from those who have real value to offer. It willalso be important that these marketing exercises provide feedback to build a better understandingof what will really attract private investment. A simple and transparent process for engaging theprivate sector will be build confidence in the market.
3.2 Technologies
The discussion on the selection of technologies appears well balanced. The options are limitedas all appreciate. The extensive use of solar PV over lagoon sites (mentioned in the earlier IPbut not reiterated in the current version) may well present some issues around corrosion, panelcleanness and maintenance. These are obviously being considered but their impact should notbe underestimated. While there is extensive experience with the construction of accommodationfacilities above lagoons there may no doubt be some opposition to extensive coverage of lagoonswith solar panels.
3.3 Engagement of the Tourism Sector
With no in-country experience there is some reluctance to challenge the approach being promotedin the IP. However as the tourism industry represents almost 50% of electricity consumption,moving to a low carbon economy must involve this sector. It is suggested in the IP that if the
current programmes are a success and the solar PV industry opens up in the Maldives then thetourism sector will naturally follow. This may not be the case given their varied interests and it isrecommended that the sector be engaged as early as possible to ensure that as the approaches toincreased renewables evolve they reflect strategies that the tourism industry will adopt withoutresistance. This may also be an important pro-active opportunity to deepen the opportunities forPV sales within the Maldives, providing an additional attraction for investment when there is aclearer path to an increase in the scale of the market.
3.4 Economic and Financial Benefits
It is suggested that care be taken where analysis and reporting on anticipated cost and pricereductions for electricity are being undertaken. There is a moderately complex mix of diesel fuelcosts, fuel surcharge subsidies, FITs, residual O&M and amortisations expenses for upgradeddiesel installations (irrespective of their reduced load factor with RE in the grid) being balancedagainst the actual costs of hybrid operations. The economic benefits to GoM are clear; the longerterm impacts of FITs is to be considered and there may be some phasing out / reduction over time;the final pricing of electricity is not entirely clear and a caution is that whilst economic benefitsaccrue the real financial impact on end users may be muted. Raising unrealistic expectations isvery easy; recovering from failing to deliver on these expectations can have significant impactson the effectiveness of RE programmes.
APPENDIX 1
A1.1 Comments by reviewer and discussion Government of Maldives during call of 26thSeptember
Comment: There are many references to SREP and I wonder if in fact some of these should beadjusted to reflect that SREP is just part of a wider Maldives programme? This is just terminologybut may cause some confusion in any submission to SREP itself ?
Discussion: This has been noted and will be adjusted in the final text.
Comment: I can’t see any reference anywhere to a timetable for the projects. Given there is a grossbudget of USD131m it would be informative to understand the time frame of the expenditure toassess how realistic this is.
Discussion: The expectation is that the SREP work will be spread over a 5 to 6 year period.
Comment: In my earlier review I have raised my concerns around the private sector responseand how realistic it is to expect the levels of investment that are shown – 35% of the totalsourcing, more of the project investments. Is there a Plan B if this fails?
Discussion; It was acknowledged that there had been limited opportunity to test the interest ofthe private sector widely. It was noted that STELCO operates a number of operations underPPAs with private developers. It was also suggested that the “road-shows” to attract potentialinvestors will be targeted and are expected to generate wide interest, based on the response fromcontacts with a number of groups to date
Comment: I am also cautious about the variety of financial incentives, capital contributions,guarantees etc being proposed. It may not just be financial issues that discourage investors. In
addition I am concerned that where there are a range of incentives that you attract companiesthat may have limited experience and may not be able to complete the project. This all requires avery robust analysis of offers – not always so easy in a smaller, more remote market. There needsto be an equitable sharing of risks across the parties involved so that the interests are aligned.
Discussion: This point was noted and the risks appreciated. The intention is that there will be awell-managed and regulated process to engage the private sector.
Comment: I recognise that the IP is choosing not to engage early with the tourism sector but as ituses about 40% of electricity (and hence diesel used for generation) it must be a critical elementof any energy market improvement. I think that some effort should go into an early canvassingof the industry to formally test the opportunities. I am a bit uncomfortable that it is suggestedSREP should not support the (profitable) private sector – it may be the solution to getting anearly step change away from fossil fuels and that is what SREP is designed to do. In contrast thesmaller island initiatives may have less economic and environmental impact. The question is what are the benefits per USD invested from the various schemes, and I think that the tourism sectorshould be part of this assessment.
Discussion: There is reluctance to spend limited SREP resources on the tourism companies,many of which are foreign owned and well financed. The point was made however that a pro-active approach with the tourism sector could help build a larger and healthier overall market forRE and hence encourage broader participation by the private sector.
Comment: In my attached comments (marked up version of the IP) I note the issue around costsand prices. Given the heavy subsidies being provided to end users of electricity now, even witha reduction in the cost of production of electricity, it is likely that prices may in fact not fall.There is a danger in raising expectations around this. In a number of places there are commentsabout the fact that PV is cheaper than diesel generation – while in isolation this may be true,what is important is the effective cost in a hybrid system. All the major systems will still havediesel installations and their fixed costs (amortisation of upgraded plant, maintenance etc) willstill be required to be covered. This may mean that the cost of generation does not in fact dropsubstantially but that the fuel surcharge can be reduced, as will the diesel costs. These latter areeconomic benefits (as the surcharge is subsidised by GoM currently) but will not necessarily seeany reduction in power pricing to end users.
Discussion: The importance of these points was noted and the question of false expectationsdiscussed. The example of islanders expecting that solar PV would be free highlights the marketeducation that is needed
Comment: There are suggestions that national RE resources will be studied. In other areas thereare notes that there are a limited number of options. Perhaps the focus should be on PV andwind and other longer term options left until later. Coping with just two or three technologieswill be a challenge given limited national capacity at this stage.
Discussion: It is not intended to look beyond PV, wind and WTE at this stage. However theefforts to utilise deep cool seawater for cooling was noted
Comment: There is limited discussion about the MGF and how that will operate. The overallstructure being considered appears more straightforward than was outlined in the 2011 proposalbut the question needs to be raised as to whether there are still too many agencies in place giventhe small size of the population.
Discussion: The MGF will not be established immediately, rather once there is adequateexperience with RE roll out to justify its presence.
Comment: The FIT regime looks reasonable but simplicity will be important in making theopportunities more transparent to new participants.
Discussion: Had been discussed earlier. The ADB explained that it was working with GoMon reviewing the FIT structure / pricing and that it anticipates that there will be a progressivereduction of the FIT over time. Consideration is being given to a stepped sequence in whichaccelerated recovery of investment may be permitted in the initial (5) years.
A.1.2 Specific Comments on the IP Draft
A number of comments were provided in a marked up copy of the 25th September version ofthe IP. These were covered under various headings during the call of 26th September and thereviewer is confident that the matters raised have been addressed adequately.