REP PoR vol1 - Pacific Communityprdrse4all.spc.int/system/files/final_draft_100106.doc · Web viewPacific Islands Climate Change ... There was some limited opportunity to update the

UNDP Asia-Pacific Regional Energy Programme for Poverty

Reduction (REP-POR)

Pacific Rapid Assessment and Gap Analysis

DRAFT FINAL REPORT

NOVEMBER 2005

Prepared by:

Herbert Wade and Peter Johnston, Consultants

Prepared for:

UNDP Regional Centre in Bangkok

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ACRONYMS

AC Alternating current (usually 120 or 240 volts)ACP African, Caribbean and Pacific countries (associated with EU)ADB Asian Development BankADO Automotive Diesel OilAFD Agence Française de Développement (French Development Agency)AusAID Australian AidBPfA Beijing Platform for Action (for gender equality)BP British PetroleumCCA Common Country Assessment (of the UN)CDM Clean Development Mechanism (UNFCC)CEDAW Convention for the Elimination of All Forms of Discrimination Against WomenCROP Council of Regional Organisations in the PacificCROP also, Comparative Research Programme on PovertyDC Direct current (usually 12 or 24 volts)DSM Demand Side Management (for efficient energy use)EC European CommunityEEZ Exclusive Economic ZoneEIA Environmental Impact AssessmentEESCO Energy Efficiency Service CompanyESCAP Economic and Social Commission for Asia and the Pacific (UN)EU European UnionEWC East-West Center (at the University of Hawaii)EWG Energy Working Group of CROPFIC Forum Island CountryFY Fiscal YearGDP Gross Domestic ProductGEF Global Environment Facility (UNDP, World Bank & UNEP)GHG Greenhouse Gas(es)GNP Gross National ProductHDI Human Development Index (UNDP)HIES Household Income and Expenditure SurveyHPI Human Poverty Index (UNDP)IMF International Monetary FundIPP Independent Power ProducerJICA Japan International Cooperation AgencyLPG Liquefied Petroleum GasMDG Millennium Development GoalsNGO Non Governmental OrganisationNZAID New Zealand AidO&M Operation and maintenanceOTEC Ocean Thermal Energy Conversion

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PDMC Pacific Developing Member Country (of ADB)PEDP Pacific Energy Development Programme (UNDP/ESCAP, 1983-1992)PEG Pacific Energy and Gender Network (SOPAC)PIC Pacific Island CountryPICCAP Pacific Islands Climate Change Assistance Programme (GEF/SPREP)PIEPP Pacific Islands Energy Policy and Plan (CROP EWG)PIEPSAP Pacific Islands Energy Policy and Strategic Action Planning (DANIDA/UNDP/SOPAC)PIFS Pacific Islands Forum SecretariatPIREP Pacific Island Renewable Energy Project (GEF/UNDP/SPREP)PPA Pacific Power Association (Suva); also Power Purchase AgreementPPP Parity Purchasing PowerPREA Pacific Regional Energy Assessment (WB/PEDP/PIFS/ADB; 1992)PREFACEPacific rural Renewable Energy France-Australia Common Endeavour (SPC)PREGA Promotion of Renewable Energy, Energy Efficiency and Greenhouse Gas Abatement (DANIDA/ADB, Samoa and elsewhere)PV Photovoltaic(s)REEP Renewable Energy and Energy Efficiency Program for the Pacific (ADB)REM Regional Energy Meeting (of Pacific Islands)RESCO Renewable Energy Service CompanySHS Solar Home SystemSOPAC South Pacific Applied Geoscience CommissionSPC Secretariat of the Pacific CommunityS.P.I.R.E South Pacific Institute for Renewable Energy (Tahiti - now closed)SPREP Secretariat of the Pacific Regional Environment ProgrammeSWH Solar water heaterUN United NationsUNDESA United Nations Department of Social and Economic AffairsUNDP United Nations Development ProgrammeUNEP United Nations Environment ProgrammeUNEP/RISØ Joint UNEP/Danish Centre on Energy, Climate and Sustainable Development UNESCO United Nations Educational, Scientific and Cultural OrganisationUNFCCC United Nations Framework Convention on Climate ChangeUNIDO United Nations Industrial Development OrganisationUS United StatesUSAID United States Agency for International DevelopmentUSDoE United States Department of EnergyUSP The University of the South PacificVAT Value Added TaxWB World Bank

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TABLE OF CONTENTS

SECTION 1: PACIFIC REGIONAL OVERVIEW

I. Overview of The Pacific Region...................................................................................1A. Geography and Population.......................................................................................1B. Major Problems Faced by the PICs..........................................................................4C. Economic Development...........................................................................................5D. The Pacific Plan.......................................................................................................7E. Energy and the PICs.................................................................................................9F. Agencies Involved in the Energy Sector in the Pacific..........................................12

II. The Special Case of Melanesia..................................................................................16A. Introduction: Characteristics of Melanesia............................................................16B. Rural Electrification...............................................................................................17C. Biomass Cooking...................................................................................................19D. Liquid Fuels for Lighting and Cooking.................................................................19E. Demonstrating Practical Approaches.....................................................................20

III. Data quality and availability regarding poverty and energy in the PICs.................21IV. Linkages Between the Provision of Energy Services and Poverty in the PICs........24

A. What is Poverty in the Pacific?..............................................................................24B. How Does Poverty or Hardship Relate to Energy Use in the PICs?......................25C. What Energy Sector Interventions Can Help Reduce Poverty in the PICs?..........26D. Will Better Rural Energy Services Lead To More Rural Income in the PICs?.....27

V. Energy and Rural Income Generation for Poverty Alleviation................................28A. “Productive uses” of Energy..................................................................................28B. Productive Uses and the Pacific Island Countries.................................................30C. Conclusions............................................................................................................32

VI. The Linkages Between Gender Equality and Energy Access.................................33A. Gender Equality Issues in Pacific Island Countries...............................................33B. Gender and Poverty................................................................................................34C. Traditional Stereotyped Roles: Household Cooking.............................................34D. Community and Other Household Energy Use: Energy for Lighting...................36E. Energy for Household Appliances.........................................................................36F. Gender Impacts of Improved Energy Services to Low-Income PIC Households..37G. Energy Gender and the Pacific Plan......................................................................39H. Conclusions............................................................................................................39

VII. General Recommendations.....................................................................................40A. Recommendations from the Pacific Rapid Assessment and Gap Analysis...........40B. Recommendations from the REP-PoR Meeting, November 10, 2005, Suva, Fiji.43

SECTION 2: RAPID ASSESSMENT AND GAP ANALYSIS TABLES

VIII. Assessment and Gaps in Institutional Arrangements............................................44IX. Assessment and Gaps in Program Framework.........................................................44X. Assessment and Gaps in Access to Energy...............................................................44XI. Assessment and Gaps in Technology Efficiency and Fuel Options.........................44XII. Assessment and Gaps in Energy-Based Entrepreneurship......................................44XIII. Assessment and Gaps in Access to Finance..........................................................44

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XIV. Assessment and Gaps in Monitoring and Evaluation............................................44XV. Assessment and Gaps in Access to Information.....................................................44

SECTION 3: COUNTRY OVERVIEWS

XVI. Cook Islands..........................................................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

XVII. Federated States of Micronesia..............................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

XVIII. Fiji..........................................................................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

XIX. Kiribati...................................................................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44

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E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

XX. Marshall Islands......................................................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

XXI. Nauru.....................................................................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

XXII. Niue........................................................................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

XXIII. Palau......................................................................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44

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C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

XXIV. Papua New Guinea................................................................................................44Introductory Comment...................................................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

XXV. Samoa....................................................................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

XXVI. Solomon Islands.....................................................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

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XXVII. Tokelau..........................................................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

XXVIII. Tonga.............................................................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

XXIX. Tuvalu....................................................................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

XXX. Vanuatu..................................................................................................................44A. Background............................................................................................................44B. Institutional Arrangements for Energy Management.............................................44C. Programme Framework..........................................................................................44D. Access to Energy Services.....................................................................................44E. Technology Efficiency and Fuel Options...............................................................44F. Energy-Based Entrepreneurship.............................................................................44G. Access to Finance..................................................................................................44H. Monitoring and Evaluation....................................................................................44I. Access to Information.............................................................................................44

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J. Conclusions.............................................................................................................44K. Recommendations..................................................................................................44

XXXI. ANNEX A – References........................................................................................44

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Introductory CommentThe purpose of this assignment was to undertake a rapid needs assessment and gap analysis of the fifteen Pacific Island Countries that potentially can participate in the UNDP Asia-Pacific Regional Energy Program for Poverty Reduction (REP-PoR). Ideally such a study would involve travel to each country to allow extensive local input and as much discussion in-country as possible. However, due to timing and budget limitations, the Pacific assessment was restricted to quick desk studies based on readily accessible materials. For data and information, the assignment relied heavily on the fifteen country reports and a regional overview prepared during 2004 by the UNDP/Global Environment Facility (GEF) “Pacific Islands Renewable Energy Project”(PIREP), which was carried out by the Secretariat of the Pacific Regional Environment Programme (SPREP) based in Samoa. There was some limited opportunity to update the PIREP findings through work carried out during 2004/2005 by the South Pacific Applied Geoscience Commission (SOPAC) and through input from two PICs. Although much of the analysis is based on 2004 studies, which in turn relied on data from the early 1990s to 2003, the national and regional energy sector issues, opportunities and constraints have not changed. An earlier version of this document was discussed during the Pacific REP POR workshop held on 10 November 2005 in Suva, Fiji and it has been modified to take into account the comments from the PIC representatives and others present. The Terms of Reference are attached as Annex 1 and a list of documents used in the preparation of this report is Annex 2.

This REP PoR Pacific Rapid Assessment and Gap Analysis report is presented in three parts:

This overview, Section 1, which summaries key issues and findings and acts as an introduction to the Pacific Regional Synthesis;

The Pacific Regional Synthesis, Section 2, in the form of a table prepared in a format specified by the Lead Consultant of the REP-PoR Rapid Assessment and Gap Analysis for ease of integration of findings into a combined Asia/Pacific REP-PoR rapid assessment and gap analysis report; and

The Pacific Island Country Summaries, Section 3, which provides background information in the REP PoR-specified format and country-specific conclusions and recommendations for the fifteen PICs.

A stand-alone “Gender and Energy Add-on Consultancy Report: Pacific Rapid Assessment and Gap Analysis” written by Ms. Ravesi Johnston has also been prepared. It expands on Ms Johnston’s coverage of gender issues presented in chapter VI.

Herbert Wade Peter JohnstonBangkok, Thailand Suva, Fiji

30 November 2005

SECTION 1: PACIFIC REGIONAL OVERVIEW

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I. OVERVIEW OF THE PACIFIC REGION

The Pacific Island Countries

Source: University of Texas website: www.lib.utexas.edu/maps

A. Geography and Population

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http://www.lib.utexas.edu/maps

The Pacific Islands Region encompasses around 1/3 of the Earth’s surface but less than 1/1000 of its population. The population is distributed over many hundreds of islands with most of them having less than 10,000 persons. The Pacific Islands region as considered by REP PoR, called the Pacific Island Countries (PICs)1 in this report, is limited to the fourteen Forum Island Countries plus Tokelau and does not include the French overseas territories of New Caledonia, Wallis and Futuna and French Polynesia, that are major components of the geographically defined region. The PIC region is dominated in area by the eastern half of the huge island of New Guinea (the second largest island in the world), that comprises Papua New Guinea (PNG) which when combined with three other Melanesian countries, Solomon Islands, Vanuatu and Fiji make up well over 95% of the total land area and around 90% of the population of the PIC region. Physically, there are three broad classes of islands in the Pacific:

Atolls. Chains of low lying coral islands typically encircling a large lagoon. With low land biodiversity, poor soils and no standing or running water, atoll dwellers are traditionally dependent on the sea with taro, coconuts, pandanus, breadfruit, chickens and pigs the main land food sources. Atoll islands are resource poor and have few sources of cash income, often the main one being the sale of coconut products and fish or seaweed. Rainwater collection is the major source of potable water though most atoll islands have a fresh water “lens” that forms in the island core and can be tapped by wells. Droughts and the oceanic effects of cyclones are the main natural disasters. Many PICs include atolls but Tuvalu, Kiribati, the Republic of the Marshall Islands (RMI) and Yap State of the Federated States of Micronesia (FSM) are made up almost entirely of atoll islands.

Raised coral islands. These are typically flat islands that rise fairly quickly out of the sea to heights of less than 100 metres. Generally the islands are small, the largest being Niue at 259 km2. There often is a small lagoon, sometimes connected to the sea by a reef passage passable by boats and sometimes only connected below ground. With better soils than atolls and usually more land area, the sea still remains a primary food source with a wider variety of food available from the land than available in atolls. Agricultural products and fishing provide the main sources of cash income. Running water and fresh water lakes are few or non-existent but the porous limestone that makes up the island usually contains a large amount of trapped fresh water that can be tapped to support the population though the collection of rain water for drinking and cooking is still common. The most common natural disaster for a raised coral island is a cyclone. Raised coral islands are found in many PICs though only three countries have most of the population on this island type. Niue and Nauru are single island countries, both raised coral islands, and many of the islands of Tonga, including the capital island of Tongatapu, are raised coral islands.

Mountainous volcanic islands. Most of the land area in the Pacific region was formed by volcanic activity with most of the population of PNG, Solomon Islands, Vanuatu, Fiji, FSM, Samoa, Palau and Cook Islands resident on volcanic

1Cook Islands, Fiji Islands, Federated States of Micronesia (FSM), Kiribati, Marshall Islands (RMI), Nauru, Niue, Palau, Papua New Guinea (PNG), Samoa, Solomon Islands, Tokelau, Tonga, Tuvalu and Vanuatu.

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islands. These islands are resource rich with good soils, running and standing fresh water, more consistent rainfall and often rich mineral deposits, including petroleum in PNG. Natural disasters are common, however, with floods, earthquakes, volcanoes, droughts and cyclones frequent problems.

The population fits into three broad ethnic and geographic classes: Melanesian, Micronesian and Polynesian.

Melanesian PICs include PNG, Solomon Islands and Vanuatu with Fiji a transition country with strong Polynesian links. All consist of relatively large volcanic islands.

Polynesian PICs include Cook Islands, Niue, Samoa, Tonga, Tokelau and Tuvalu. These are mostly atoll or raised coral islands though volcanic islands dominate Samoa and the most populated of the Cook Islands.

Micronesian countries include Kiribati, FSM, Marshall Islands, Nauru and Palau. Micronesia is a mix of atoll, raised coral and volcanic islands with all islands relatively small.

Pacific Island Countries, Their Land Area and Population

Country Land area(km2)

Population’000 (2004) Physical Description

CookIslands 240 14

14 islands. 90% of people and 88% of land on 8 southern islands (volcanic & raised coral). Northern islands mostly small atolls. Population declined by 17% from 1996-2001.

Federated States of Micronesia

702 112.7607 islands varying from mountainous to atolls spread over four states extending 2500 km east-west & 1000 km north-south. Population growth of 0.2% per year from 1994-2000.

Fiji Islands 18,300 836 320 islands, 1/3 populated. Largest two islands have 87% of land & ~ 95% of

population. Population growth ~1% per year.

Kiribati 811 93.132 widely scattered atolls in three groups plus one raised coral island stretching 4200 km east-west & 2000 km north-south. Population growth of 1.7% per year (urban + 5.2%, rural - 0.6%).

Marshall Islands 181 55.4

29 atolls (22 inhabited) and 5 raised coral islands (4 inhabited). No land higher than 5 m above sea level. Population growth of 1.45% per year 1988-1999. 69% of people in Majuro / Kwajalein.

Nauru 21 10.1Single isolated equatorial raised coral island. Two plateaus with ‘topside’ peak of 71 m, typically 30 m above ‘bottom side’. Population growth of only 0.15% per year from 1992-2002.

Niue 259 1.6Reputedly world’s largest raised coral island. Reef is close to land and no lagoon. Land rises nearly vertically to perimeter height of 25-40 m. Population has been stable at around 1,800 in recent years.

Palau 458 20.7200+ islands, most very small, only 9 permanently inhabited. 95% of islands & 90% of population within the main reef containing Babeldaob, Koror & Peleliu islands.

Papua New Guinea 462,800 5,695.3

600+ islands, with 80% of population in the eastern half of island of New Guinea. Reported population growth of 3.1%/year 1990-2000 & 2.3% 1980-1990 may be due to coverage errors

Samoa 2,934 182.7Volcanic islands of Savai’i (58% of land & 24% of population) and Upolu (38% & 76% respectively) plus 8 small islands. Population growth of 0.56% per year from 1991-2002.

Solomon Islands 28,450 460.1

Nearly 1,000 islands of which 350 are inhabited. 6 main islands account for 80% of land area and bulk of population. Population growth of 2.8% per year from 1986-1999, urban growth 3.8%.

Tokelau 12 1.5 Three atolls: Atafu, Fakaofo and Nukunonu. Highest land about 5 m above sea level. Population declined by ~ 7% from 1996-2001.

Tonga 748 98.3176 islands in 4 groups (Tongatapu, Ha'apai, Vava'u & Niuas) with 36 inhabited islands. Population growth of 0.35%/year 1986-1996, possibly slightly higher since then.

Tuvalu 26 9.6 6 atolls with large lagoons enclosed by a reef plus 3 raised coral islands without

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large lagoons. Funafuti with 22% of land has over 48% of population. Population grew 0.25% per year 1991-2002.

Vanuatu 12,200 215.8 Over 80 islands, mostly volcanic, 65 populated. 80% of the population, which is 76% rural, is on 7 islands. Population grew by 2.6% per year from 1986-1996.

Sources: PIREP Pacific Regional report (SPREP, 2005) with mid-2004 population estimates from Pacific Regional MDG Report (UNDP/SPC, 2004). Note: ~ is ‘approximately’

With the exception of Tonga, which is a Kingdom, the PICs are constitutional democracies with equal voting rights for men and women. The actual structure of government varies though most of the former British colonies have governments based on the British Parliamentary pattern while in the former UN Trust Territories, the US governmental model with separate Executive, Legislative and Judicial branches is more common. Tokelau has a unique form of government in that the position of head of government rotates annually through the elected heads of each of the three islands though the parliament remains the same for the three years between elections. FSM is also unique in that it is a federation of four states with the states constitutionally independent in most matters, including energy, and the national government is relatively weak.

B. Major Problems Faced by the PICsThere are a number of problems that face the PICs that are specific to island countries.

1. AccessFor the Polynesian and Micronesian countries, there are many small islands separated by long stretches of ocean. The cost of access is high and frequency of access for all but the main population centres low. This makes it difficult and costly to market local products, particularly those that have a relatively short life such as most agricultural and fisheries products. Economically, these countries made up solely of many small islands (Tuvalu, Kiribati, RMI, Tokelau) are often more like amalgamations of villages into a loose trading network rather than a tightly integrated economy such as can be the case for countries with a large island economic core. Though Melanesia has larger islands, they still include many small islands with the added problems of rough terrain, rivers that frequently flood and dense rain forests that also make access difficult and costly. The physical barriers of access in Melanesia have been great enough to cause the development of hundreds of different languages and cultures with contact between them only becoming common in the 20th Century.

The issue of access arises both within the countries internally and also between the individual PICs and their main trading partners, which are far distant. There is relatively little trade in goods and services among the PICs.

2. Small PopulationsSix of the 15 countries that potentially can participate in REP-PoR have populations of less than 25,000 persons and only six have a population greater than 100,000. Often these populations are spread over many islands or are separated by very difficult terrain. Therefore it is a major problem for the PICs to maintain the management and technical skills at both a national level and for individual islands or island groups, necessary for the provision of services, including energy, that are needed for the development of improved living conditions and increased economic activity.

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3. MigrationIn all the PICs there is a tendency of people to migrate from rural islands and remote areas of the larger islands to urban areas. This is most pronounced in the smaller countries where urban islands – only one or two such islands per country – have become overcrowded and serious problems are developing regarding the provision of public services, employment and maintenance of the environment. In many PICs, rural island populations are static or decreasing as a result.

In the smaller countries, especially those that have a special relationship with New Zealand or the USA, there is significant further migration from urban areas to those metropolitan countries. Australia and Canada also receive many PIC emigrants. Most of the migrants are skilled workers or experienced managers since they can best afford to move and they and their families are the ones most welcomed in the receiving country. This out-migration has benefited PICs, at least in the short term, as populations are not growing so rapidly and remittances sent back to families remaining in the PICs are a major source of cash income. Unfortunately, there has also been a lowering of the ability of the countries to maintain a pool of experienced, skilled people for businesses and government.

4. VulnerabilitySmall island states are particularly susceptible to external economic fluctuations, natural disasters and environmental shocks. A Commonwealth Secretariat vulnerability index (Commonwealth Secretariat, 2000) ranks the PICs among the most highly vulnerable of 111 countries studied, covering both physical and economic measures of vulnerability. Economically, the PICs are vulnerable due to economies based on a very small range of products (often low-value) and services (often fickle tourism). Physically, the atoll countries are particularly vulnerable to sea level rises and the projected increasing frequency and severity of tropical cyclones expected to arise from global warming. SOPAC has further documented the physical vulnerability of the PICs to naturally occurring disasters and their studies add strong support to the Commonwealth findings.

C. Economic DevelopmentAlthough the Melanesian countries are resource rich, most of the PICs are not and many are heavily dependent on donor support for government operating budgets, not just for the support of major capital investments. For the smaller PICs, development assistance can account for over half of GDP, dropping to 5% or less for more developed PICs such as Fiji.

Fiji and PNG have the most diverse economies with mining, export agriculture, small industry, tourism, fisheries and forestry as major components of the economy. Other countries, such as Palau, Tokelau and Tuvalu, export almost no island products.

Most of the PICs are ADB members and the ADB works with them to develop economic data. From 1995-2002, in local currency terms, ADB data indicate that the PIC economies declined by 1.2% per capita per year overall if PNG is included but grew by 0.9% annually if PNG is excluded. The ADB also reports that social indicators are

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declining for some PIC members and many will fail to achieve key MDG targets by 2015. Crime and ethnic tensions are growing in some areas, and the rule of law has come under pressure in some countries, notably the Solomon Islands and PNG, and with a series of coups, also Fiji. The environment and natural resource management concerns, mostly arising from population growth, urbanisation, and the need for cash income, threaten the sustainability of such development as has already taken place. Fresh water resources, waste management, coastal deterioration, fisheries depletion and forest degradation are identified by the ADB and others as key concerns.

Supporting the ADB reports that indicate that some PICs are losing development ground, from 1994 to 2005 the UNDP Human Development Index (HDI) ranking for Fiji slipped from 59 of 173 countries to 92 of 177, the Solomon Islands from 123 (in 1998) to 128 and PNG from 129 to 137. Vanuatu slipped from 119 in 1994 to 128 in 2003 before improving to 118 in 2005. Samoa, however, significantly improved its ranking, from 104 to 74 and Tonga improved the most dramatically to 54. Although the HDI rankings for any given year may be debatable, the trends are generally accepted by observers as accurate.

The limited competitiveness of the PICs has reduced the ability of the island nations to take advantage of globalisation including the opportunities emerging from new technologies and the growth of services in world trade. The ADB argues that natural and external conditions are real constraints but are not the determining cause of weak performance and worsening situations:

“ADB believes that significant constraints to growth and poverty reduction in the Pacific lie in the area of policy and institutions, especially weaknesses of economic and social institutions … [that] is broader than merely the organisations and structures that frame economic and social behaviour; it also encompasses the ‘rules of the game’ by which that behaviour is carried out. ... These include constitutions, laws and regulations as well as trust, informal rules and social norms.”

The governments of most PICs have developed and adopted national development plans, that are usually influenced and often supported financially by donor agencies, that emphasise more rapid economic growth, equitable distribution of the benefits of growth, increased emphasis on the private sector as an engine of growth, and the recognition of

Average Annual Changes in Real GDP, Population and GDP/Capita (Local Currency Terms) 1995 - 2002

ADB Member CountryGrowth from 1995 – 2002 (%)

GDP Population GDP / capita

Cook Islands 3.0 -3.1 6.3

Fiji Islands 2.4 1.1 1.3

Kiribati 4.6 1.6 2.9

Marshall Islands -2.5 2.4 -4.8

Fed States of Micronesia -0.5 0.2 -0.7

Papua New Guinea -0.1 3.2 -3.2

Samoa 4.4 1.0 3.4

Solomon Islands -2.2 2.9 -4.9

Tonga 2.1 0.5 1.6

Tuvalu 4.3 1.3 3.0

Vanuatu 0.8 2.6 -1.7

PDMCs, weighted ave. 0.9 2.4 -1.2Excl. PNG, weighted ave 2.0 1.1 0.9

Source: ADB (from PIREP Regional Report SPREP, 2005)

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poverty and gender equality as genuine problems which need to be addressed. The plans are broad indicators of desired directions of change but are often ignored in practice.Forum Island Countries: Summary of Key Economic Features

Country Area(km2)

EstimatedPopulation1996 (‘000)

GDP per capita (US$)

Imports(US$’m)

Exports(US$’m)

Principal Import Items

Principal Export Items

Net Aid Inflows (US$’m)

Share of GDP (%)

Primary Manuf. Tertiary

Cook Islands240 20.6 4,186

(1995)35.3

(1996)2.5

(1996)Food and live animals and machines transport

and equipment

Tourism; black pearls; pawpaw

9.4(1996-97)

18.8(1995)

2.7(1995)

78.5(1995)


705 110(1994)

1,967(1994)

164.5(1994)

69.6(1994)

Mineral fuels; manufactured goods;

machinery; food; milled timber and building

supplies

Copra; commercial fishing rights

113(1994)

N/A N/A N/A

Fiji Islands

18,272 773 1,698(1996)

718(1996)

546(1996)

Mineral fuels; manuf. goods; chemicals; machinery; food

Tourism; sugar and molasses; garment

manufacturing; gold; lumber; fish; coconut oil, ginger

86(1996)

(net official transfers)

23(1996)

15(1996)

62(1996)

Kiribati 811 78.3(1994)

447(1993)

22.3(1993)

3.6(1993)

Mineral fuels; manuf. goods; machinery; food

Copra; tuna fish; commercial fishing

rights

12.5(1993)

39.9(1992)

10.8(1992)

49.3(1992)

Marshall Islands

181 56(1995)

1,872(1995)

75(1995)

23(1995)

Mineral fuels; manuf. goods; machinery; food

Coconut oil and copra; fish; handicrafts

50(1993)

14.9(1995)

2.6(1995)

63.7(1995)

Nauru 21.1 10.7 4,145(1992)

15.4(1996)

25.1(1996)

Food; clothing; mineral fuel; machinery and other manuf items

Phosphate deposit Nil N/A N/A N/A

Niue 259 2.2 2,807(1994)

3.1(1996)

0.24(1996)

Mineral fuel; manuf. goods; machinery; food

Handcrafts and agricultural goods; taros and coconuts

1(1993)

19(1991)

7(1991)

74(1991)

Republic of Palau

487 17.2(1995)

8,000(1996)

79(1996)

14.3(1996)

Manuf. goods, machinery, food,

beverage & tobacco

Fish, garments N/A 24.4(1996)

0.8(1996)

74.8(1996)

Papua New Guinea

462,840 4,200 1,263(1996)

1,151(1996)

1,979(1996)

Mineral fuel; manuf. goods; machinery,

capital equipment; food; consumer goods;

industrial supplies; transport; equipment

Gold; copper; oil; coffee; copra;

cocoa; palm oil; logs

97.4(1996)

54(1995-6)

8(1995-6)

38(1995-6)

Samoa 2,934 170 896(1996)

110(1996)

65(1996)

Food; mineral fuels; manuf. goods; machinery

Coconut products; fish; beer; kava;

automobile wiring harnesses

15.8(1993)

37(1996)

13(1996)

50(1996)

Solomon Islands

28,369 380 685(1995)

120(1996)

146.5(1996)


Fish; timber; copra; palm oil; cocoa

23.4(1996)

N/A N/A N/A

Tonga 699 98.3 1,473(1995)

88.5(1996)

15.4(1994)


Squash; vanilla and live animals

55.1(1994)

3.5(1995)

5(1995)

60(1995)

Tuvalu 26 9.6 1,083(1995)

8.3(1995)

Neg Food and beverages; crude materials;

machinery and transport equipment; manufacture

goods

Stamps; copra; handcrafts; garments

7.5(1992)

21.2(1990)

5.1(1990)

73.7(1990)

Vanuatu 12,190 177.4(1997)

1,348(1995)

94.3(1996)

29(1996)

Food; mineral fuels; manuf. goods; machinery

Copra; beef; cocoa; coffee; kava; timber;

shells

49(1995)

23(1995)

13(1995)

64(1995)

Source: Overview of Foreign Investment Climate: Forum Investment Climate Study (PIFS, 2001) except Tokelau from Tokelau national PIREP report (2004) as presented in the PIREP Regional Report (SPREP, 2005)). Date from FIC Government Departments and IMF, World Bank, Asian Development Bank, National Centre for Development Studies.Notes: A) Primary Sector includes agriculture, forestry, fishing and mining. B) Tertiary Sector includes all services and construction.

D. The Pacific PlanAt the October 2005 Pacific Islands Forum held in Papua New Guinea, the leaders endorsed the Pacific Plan, an effort at cooperative planning and coordination among the

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Forum members (i.e. the 14 Forum Island Countries plus Australia and New Zealand) that has taken a great deal of the time and resources of the PIFS over the past year or so.

In summary, it is a ten-year framework intended to strengthen regional cooperation and integration built around four themes or pillars:

Economic Growth (defined as pro-poor and sustainable growth), with the key objective of improved income earnings and livelihoods through better access to goods, services, employment and other development opportunities;

Sustainable Development (defined as the integration and mutual reinforcement between economic development, social development and environmental conservation for wise use), with the key objective of enhanced capacity and resilience of Pacific people and societies;

Good Governance (transparent, accountable and equitable management of all resources), with a safe, enabling, inclusive and sustainable environment for economic growth and personal development and human rights; and

Security (stable and safe social and political conditions) to ensure safety and security of maritime and aviation and borders for the Pacific.

The Forum also endorsed an agreed roadmap to implement the plan for the three years from 2006 through 2008, with fifteen objectives, each of which has numerous specific initiatives. The structure will be familiar to anyone who has read a project document from any donor agency. Both gender and poverty initiatives are to some extent spread throughout the roadmap. For energy there are three objectives:

Implementation of the Pacific Islands Energy Policy and associated Strategic Action Plan to provide available, reliable, affordable, and environmentally sound energy for the sustainable development of all Pacific island communities;

Development of proposals or strategies for the bulk purchasing, storage and distribution of key import commodities, including petroleum.

Continued development of adaptation and mitigation efforts linked to the Pacific Climate Change Framework (which has renewable energy components).

The various objectives and initiatives have indicators of success applicable to each country, examples being:

Percentage increase (to be determined) of population a) with access to an electricity supply; and b) whose electricity is generated from renewable resources;

Percentage reduction (to be determined) in carbon dioxide emissions per capita; Percentage increase (to be determined) in Gender-related Development Index

(GDI) and percentage increase (to be determined) in Gender Empowerment Measure (GEM); and

20% reductions between 2006 and 2016 for several of the MDG poverty indicators.

Before the Pacific Plan was endorsed, there were a number of regional sectoral plans that often had no clear status. For example, the Pacific Islands Energy Policy and Strategic Action Plan, developed by the Council of Regional Organisations of the Pacific (CROP)

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Energy Working Group (EWG), provided some guidelines for the priorities and activities of the regional CROP agencies within the energy sector but the Forum had never considered it. The regional energy policy, the associated plan and the EWG have some formal recognition which may help in attracting funds for some of its programmes and for donors and, to a limited extent, possibly in allocating work responsibilities and regional funds among the EWG members. The regional energy plan remains a guideline for the EWG agencies has no binding authority over any national decisions, however it may, among other things, influence national statistics offices and energy offices to adopt some standard indicators for comparing progress in delivering energy services to the PIC populations.

E. Energy and the PICs

1. Institutional ArrangementsExcept for Niue, FSM and Nauru, the PICs have from one (e.g. Tokelau) to 25 persons (Fiji) working in government energy offices excluding those working in government owned or operated national electrical utilities or petroleum companies. With the exception of the Cook Islands, no energy offices are legislatively mandated. Most came into being in the early 1980s in response to the oil “shocks” of the 70s, donor pressures and the need to manage the renewable energy demonstration projects of that era. Their roles have changed little since then although most PIC public services have undergone some degree of reform. None of the energy offices has any regulatory authority over either electricity or petroleum suppliers (though several have membership on the board of directors of the national utility) and they mainly implement pilot scale renewable energy projects and at times work on policy issues. The Samoa Energy Unit within the Ministry of Finance develops policy and monitor the national petroleum supplier for adherence to the national supply contract. Niue, FSM and Nauru have no national energy office (though Pohnpei State in FSM has a part time energy officer).

The level of competency within energy offices varies among the PICs and is not necessarily related to the size of the country, its affluence or the number of employees. In general energy offices have limited capacity and need external assistance for policy development, project design, comparative economic analysis and the development of standards. Fiji is generally considered to have the most well developed energy office (Fiji Department of Energy). The Fiji DoE manages rural electrification (conventional and renewable), energy resource assessments, renewable energy projects, policy development, demand side management activities related to government facilities and sits on several committees and boards where energy has a component.

2. Petroleum Supply and PricingOnly Samoa maintains much real control over petroleum imports and pricing. By owning all storage and distribution facilities and by taking advantage of external petroleum expertise on a continuing basis since the 1980s, Samoa has maintained a competitive supply system that has given it the lowest landed prices (i.e excluding import duties and taxes) for the PICs. Several PICs have mechanisms for wholesale and retail price control on petroleum products but the price caps are established largely by the landed prices charged by the international suppliers and have little real regulatory effect.

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The figure below shows the July/August 2005 comparison of duty and tax-free prices of motor spirit (mogas or petrol) and automotive diesel oil (ADO) in most PIC capital cities. The price differentials often do not reflect the market size or cost of supply, suggesting that there may be opportunities – as Samoa has demonstrated – to lower prices.

Source: Pacific islands Forum Secretariat Pacific Fuel Price Monitor 12 (4 November 2005)

Most remote areas have substantially higher fuel prices than urban areas due to added shipping, handling and storage costs. However, except for very remote areas of Melanesia, fuel is generally available on demand. Outer islands, however, do often run short due to shipping irregularities.

A few countries have price subsidies or controls that are intended to lower or eliminate the price differential between urban and rural customers. Kiribati, for example, subsidises the shipping cost of fuel to outer islands and Fiji price controls are supposed to limit the maximum price charged in remote areas. In PNG, the four main ports have the same maximum fuel price, although supply costs differ substantially.

Diesel fuel is used in large quantities for electricity generation and sea transport with some also used for land transport. Petrol is used for land transport and in outboard motors for small boats. Excluding its use for aviation fuel, kerosene is mostly used for cooking in urban areas and lighting in rural areas. Liquid petroleum gas (LPG)is rising in use mainly to replace kerosene in urbanised areas for cooking.

The PICs with their small markets that are distant from sources of supply are particularly vulnerable to the international price and availability of petroleum. Petroleum imports are usually a significant percentage of all imports and because the shipping cost rises as the petroleum price increases, the PICs see a double increase when petroleum prices rise, an increase for the fuel it self and an increase for the shipping of that fuel. Since the markets

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are small and low in priority for oil companies, the PICs could be among the countries to be worst affected by shortages when international supplies are inadequate.

3. Electricity AccessThe PICs can be divided into three major electricity access groups. The Melanesians (i.e PNG, Vanuatu and the Solomon Islands but excluding Fiji) with less than 20% of the population with electricity access, those that range from 30% to 70% (FSM, RMI, Kiribati, Fiji) and those that have essentially full access (Palau, Tuvalu, Tonga, Nauru, Niue, Cook Islands, Tokelau and Samoa). The middle group all have programmes that can be expected to rapidly increase the percentage of access and, with the possible exception of Fiji, probably will exceed 90% access within 20 years. The increase in the percentage of households with access to electricity will be the result of a combination of increased urbanisation (bringing people to electricity supplies) and rural electrification programmes (taking electricity to the people).

4. Renewable EnergyThe high cost of fossil fuels, the isolation of the villages and the relative abundance of renewable energy resources prompted the early development of solar, hydro and biomass for energy production. In recent years, the interest in wind energy for supplementing utility generation by diesel has grown though thus far there is little actual experience within the PICs with the technology.

a. Hydroelectric PowerThe national power systems of PNG, Fiji and Samoa generate with hydro power along with petroleum fuels. Pohnpei (FSM) also has some small hydro development. PNG has a large undeveloped resource. By the end of this decade, Fiji will be approaching the limits of further economic hydro development and Samoa has few significant options for further development. There are also significant resources available for utility generation in the Solomon Islands and to a lesser extent in Vanuatu though most of the resource is located in areas where there is little potential demand.

Village scale (micro and pico) and individual household scale (pico) hydro systems have been installed in Melanesia though mostly for missions and plantations rather than villages. There is no organised approach to developing these small hydro systems and there have been no nationwide surveys of the resource except for Fiji but clearly there is significant potential throughout Melanesia.

b. Biomass EnergyBy far the main use of biomass energy has been as a traditional cooking fuel. Sawmill waste and sugar mill waste are used in PNG and Fiji (and formerly sawmill waste in Samoa) for power generation and there are plans for expanding generation from agricultural and forestry waste. Biofuels (ethanol from sugar cane and both palm oil and coconut oil) have been of interest to the region for decades but until recently have not been price competitive with petroleum. As far as poverty reduction is concerned, biofuels appear to have the greatest potential of any energy technology for the region since there is a potential economic benefit – including considerable employment – to rural, low income areas.

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c. Solar EnergyPhotovoltaics (PV) have been used for over 20 years for rural electrification in the Pacific. The governments of Kiribati, Tonga and RMI have committed to PV based rural electrification with Kiribati now supplying electricity to about 20% of rural households by solar PV. Tonga has around 1,000 households targeted for PV and RMI is in the early stages of developing rural electrification through solar energy.

d. Ocean EnergyWave energy and ocean thermal energy resources are present, and the magnitudes have been assessed by SOPAC programmes in a number of PICs, but to date there is no commercially available equipment for conversion of this resource to useable energy.

Overview of Electricity Supply in PICsCountry Utility organisation & reforms Cost of services HH electrified Quality of Service

Cook Islands

TAU is govt owned utility. Privatisation attempted in 1990s, but unsuccessful. Bids were much lower than govt had expected. 13 outer island systems run by island councils

Costs are high in Rarotonga and very high elsewhere. ADB unsure how prices are to be regulated

35 % in 1994;99% in 2004

Generally OK in Rarotonga. Generally poor O&M elsewhere


All four state utilities are govt-owned and corporatised: CPUC, KUA, PUC & YSPSC. ADB currently advising FSM.

Historically, free or supplied at very low cost. Even after corporatisation, prices do not fully cover costs

30% in 1993;54% in 2000

(46% via utilities)

Ranges from generally OK (Pohnpei & Yap) to very poor (Chuuk) on main islands of all states

Fiji Islands

FEA corporatised & fully govt. owned. Serves only islands of Viti Levu, Vanua Levu & Ovalau. Considering various private proposals for supply

ADB says relatively high charges but stable for 10 years. National tariff with heavy subsidies from Viti Levu to other two FEA islands

50% in 1994;67% in 1996

(57% via FEA)

Generally acceptable but some outages

KiribatiPUB is govt owned & supplies only South Tarawa. PWD supplies on Kiritimati. SEC supplies on other outer islands

Large, cross-subsidy from electricity to water and sewerage is long-standing financial drain on Tarawa.

29% in 1993;estimated at 60% in 2005

Good. Power system recently rehabilitated by JICA. 1700 New PV systems by EU

MarshallIslands

MEC operating on Majuro, Jaluit & Wotje, with govt meeting revenue shortfalls outside Majuro. KAJUR operates only in Ebeye

MEC is profitable; no longer receives govt subsidies for Majuro. Dispersion of islands over large distances means high cost for outer islands

50% in 1994;63% in 1999

(only 13% away from Majuro & Ebeye

MEC well managed with good electricity standard in Majuro; KAJUR has many problems.

Nauru NPC is govt owned and supplies the entire island A9¢/kWh (domestic) & 13¢ (other) is far lower than cost. No govt or hh bills paid since 2002

unknown in 1994;nearly 100% in 2003

Demand ≈ capacity & outages frequent. Most cooking is electric & heavy use of air conditioning

Niue NPC is govt-owned corporation reporting to Secretary for Govt.

NZ 30¢/kWh (48¢ for air con). This is heavily subsidised

unknown in 1994;~ 100% in 2003 Good

Palau Supplies Koror, Babeldaob, Kayangel, Peleliu & Angaur Complex national tariff with urban consumers subsidising rural islands

unknown in 1994;~ 97% in 2004 Generally OK in recent years

Papua New Guinea

Elcom corporatised into govt owned PNG Power. Responsible for power throughout PNG

Complicated tariff structure. Large tariff increases since 2000 but PNG Power under considerable financial stress

22% in 1994:< 10% in 2003

(P Moresby ~ 63%)

Unreliable. High & growing losses. Frequent breakdowns

Samoa EPC is govt-owned & corporatised. ADB advising on staff & finance

Charge is below cost & gap is widening; Upolu subsidises Savai’i

90% in 1994;93% in 2001

Generally OK; about 4 outages per month

SolomonIslands

SIEA is govt owned. No corporatisation plans yet formulated

High cross subsidies from Honiara to all other areas. Charges do not cover costs.

15 % in 1994;16 % in 1999

(11% via SIEA)

Power supply unreliable; Honiara peak demand exceeds capacity by ~20%; many businesses self-generate

Tokelau Power separate for each of 3 islands. Procedures & structure being developed

Charges of NZ 30-50¢/kWh but costs NZ$1.0 - 1.8 excluding capital costs

unknown in 1994;~ 100% in 2003

upgraded in late 2004 to good quality

TongaShoreline private utility serves Tongatapu & main islands of Ha’apai, Vava’u & ‘Eua. In principle, TEPB regulates

Charges cover costs & differ by island. Tariffs rose at AAGR of 11% mid 1998 - mid 2003

unknown in 1994;~ 79% in 199680 % in 1999

estimated ~ 95% 2005

High quality and reliability in areas served by Shoreline. Electrified HH include those using solar

Tuvalu TEC is govt-owned & corporatised; serves nearly all islands

Tariffs below full cost on Funafuti & much below cost away from Funafuti. In real terms, charges far less than in 1982

unknown in 1994;> 95 % in 2003

Generally reliable on Funafuti until recent rapid growth

Vanuatu UNELCO is private sector monopoly operating on Efate, Santo Tanna & Malekula islands

ADB describes charges as among highest in world (but actually comparable to many PICs)

unknown in 1994;19% in 1999

(61% of urban hh)

Service quality away from Efate has improved under private sector operation

Utilities: Cook Islands: TAU = Te Aponga Uira, FSM: CPUC = Chuuk Public Utilities Corporation, KUA = Kosrae Utilities Authority, PUC = Pohnpei Utilities Corporation & YSPSC = Yap State Public Service Corporation); Fiji: FEA = Fiji Electricity Authority; Marshalls: MEC = Marshalls Energy Company; KAJUR = Kwajalein Atoll Joint Utility Resource & ASPA = American Samoa Power Authority; Kiribati: PUB = Public Utilities Board & SEC = Solar Energy Company. Nauru: NPC = Nauru Phosphate Corporation. Niue: NPC = Niue Power Corporation, Palau PPUC = Palau Public Utilities Corporation; PNG Elcom = Electricity Commission. Samoa: EPC = Electric Power Corporation, Sol Isl SIEA = Sol Islands Electricity Authority, Tonga: TEPB = Tonga Electric Power Board Tuvalu: TEC = Tuvalu Electricity Corporation; Vanuatu: UNELCO = Union Electrique de Vanuatu.

Sources: PIREP Regional Report (SPREP, 2005) with changes and updates by REP-PoR consultants.

F. Agencies Involved in the Energy Sector in the PacificThe various programmes of regional agencies, bilateral donors and multilateral agencies in energy sector assistance to the region are vital to the Pacific Region. The small size of most of the PICs makes donor assistance, both technical and financial, a more important component of energy development than in Asia.

Multilateral. The key international agencies and programmes active in the PICs are:

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ADB. Currently ADB supports the Promotion of Renewable Energy, Energy Efficiency and Greenhouse Gas Abatement (PREGA) project in Samoa and additional technical assistance includes the Renewable Energy and Efficiency Programme for the Pacific (REEP) that covers Fiji and Samoa. ADB has funded a number of power utility studies and investments throughout the Pacific. ADB power sector support through grants and loans is important to most of the PICs.

EU. The EU has supported a number of regional energy initiatives in the past and overall have been the primary funding agency for rural renewable energy efforts. Currently there is a large programme of support for rural electrification through photovoltaics in Kiribati that is in its final stages. Starting in early 2006 is an EU project directed toward the five new ACP countries of the Pacific that focuses on renewable energy and energy efficiency. The EU Energy Initiative (that sets the context for the Government of Denmark funded UNDP/SOPAC PIEPSAP project) via the coming ACP-EU Energy Facility is likely to be a significant source of energy sector support for the PICs in the years to come.

GEF. The GEF system, in the PICs mostly managed through UNDP, financed a Medium Size Project (MSP) to reduce barriers to renewable energy in Fiji and the current PIREP MSP at SPREP. In addition it is considering a larger scale PIREP follow-up on renewable energy, the Pacific Islands Greenhouse Gas Abatement through Renewable Energy Project (PIGGAREP). Currently UNDP/GEF are providing preparatory funds for the development of three separate MSPs: one on environmentally sustainable transportation in the Pacific Islands (which is currently being developed by SOPAC targeting several PICs), one in Palau to promote and develop solar energy-based power generation to support the country’s rural electrification program and finally one in RMI that will identify and implement cost-effective ways of overcoming and removing barriers to the development and widespread use renewable energy in meeting the energy demands As noted below, the World Bank (WB) is proposing a GEF regional project on financial mechanisms for energy development.

The UN system. In addition to managing GEF initiatives, UNDP, UNESCO and ESCAP are all active in supporting a range of energy activities in the region.

The WB was active in energy in the region in the 1980s and early 1990s but has had no energy programmes in the Pacific for some time. The WB has recently (2004) supported rural electrification studies and a solar lighting programme in PNG. The Bank is currently assisting the Solomon Islands with power utility management and financial matters, is negotiating with Fiji for power sector loans, and has proposed a concept for a GEF supported energy finance mechanism for renewable energy and energy efficiency, initially covering PNG, the Solomon Islands and Fiji.

Bilateral. Various bilateral agencies have supported energy activities in the region in the past but are not currently active (e.g. Germany, Norway, USAID). Those currently active with significant programmes are:

Australia. Australia has been active in energy programmes over the years, though on a small scale, and was a co-funder of the renewable energy demonstration

13

programme PREFACE through the SPC. AusAID provided an energy policy adviser to PNG in 2004 and is working with Fiji on energy efficiency labelling and standards for electrical appliances.

Denmark. The Danish government via UNDP supports the PIEPSAP project based at SOPAC. In addition via the United Nations Envionment Program (UNEP) the government of Denmark supports the "Capacity building on wind energy for Pacific Island Countries" project executed by SOPAC and USP. Finally a trust fund from Denmark also support the ADB REEP project in Samoa and Fiji.

France. In addition to co-funding PREFACE with Australia, the French government has supported a number of solar PV systems and biofuel demonstrations in the Pacific and is co financing some of the USP/SOPAC wind energy training and demonstrations. France is now funding a Fiji PV rural electrification feasibility study with possible follow-on funding for a major project managed through a renewable energy service company (RESCO) approach.

Japan. The Japanese government has assisted several PICs with hydro resource assessments and has funded several hundred solar PV systems. JICA recently completed rehabilitation of the South Tarawa (urban Kiribati) power system and is funding improvements for the Tuvalu power system.

New Zealand. Expansion of the Tonga rural electrification programme to the Niuas group of islands is underway with New Zealand funding the photovoltaic systems.

USA. The American government is active in the previous UN Trust Territories in the north Pacific, mainly through the US Department of the Interior but also other agencies that FSM, RMI and Palau can access through the Compact agreements.

The People’s Republic of China (PRC) has provided about 50 small hybrid solar/wind energy systems to PNG and is currently financing the PIFS’s petroleum advisory service.

Regional agencies. The agencies and organisations that are members of the CROP EWG are the main regional payers. In general their funding for energy comes from those listed above and other donors:

SOPAC is the lead member of the EWG, with broad responsibilities. There has been support from numerous agencies including GEF, the Danish government, and UNDESA.

SPREP deals with environmental and climate change aspects of energy which suggests a continuing role in reducing CO2 emissions. Key programmes include PIREP and, if approved by GEF, the proposed PIGGAREP.

The PIFS was the lead energy agency some years ago and retains an advisory service for petroleum supply and pricing.

PPA provides various services for its member power utilities, about 20, in the region.

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Although not a formal member of the EWG, USP has had a long-standing interest in energy training and has a small energy park demonstrating renewable energy technologies.

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II. THE SPECIAL CASE OF MELANESIA

A. Introduction: Characteristics of MelanesiaMelanesia, illustrated below, stretches nearly 6,000 kilometres from the huge island of New Guinea, the second largest island in the world, in the northwest to New Caledonia to the south through Fiji to the southeast. In terms of land mass, resources, and people, the Melanesian countries clearly dominate the Pacific. As the reduction of hardship through energy initiatives within the PICs is at the core of REP PoR, the main targets in Melanesia should be Papua New Guinea, the Solomon Islands and Vanuatu, as Fiji ranks considerably higher in UNDP’s Human Development Report indicators and New Caledonia is not included in REP-PoR.

Map Showing Melanesia

The dominance in the Pacific region of the three poorest Melanesian countries, PNG, the Solomon Islands and Vanuatu, in terms of land and population and in the measures of relative hardship (for instance by looking at the Human Poverty Index, the Human Development Index and biomass cooking) relative to the other PICs are summarised in the table below. Hereinafter, PNG, the Solomon Islands and Vanuatu will be referred to as the “Melanesian Three”.

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Melanesia Relative to the Other Forum Island Countries

CountryLand Area Population

(in mid 2004)Electri-fication

HPI *ranking

HDI ** Ranking

Biomass cooking

‘000 km2 % ‘000 % % of hh Pacific

1999Global

2005% of rural households

PNG 462.8 87.7 5695 72.9 < 10 15 137 87

Sol Islands 28.4 5.4 460 5.9 ~ 16 14 128 89

Vanuatu 12.2 2.3 216 2.8 ~ 20 13 118 95

Melanesian Three 503.4 95.3 6371 81.6 ~ 10-20 13-15 118-128 87-95

All other FICs 24.6 4.7 1436 18.4 ~ 55-100 1-12 54-92 a 0-79

Total 528.0 100 7808 100 ~ 19 1-15 54-137 –

* of 15 PICs ** of 177 countries a Only others ranked were Fiji (92), Samoa (74) and Tonga (54) ~ = approximately < = less than

The Melanesian Three contain about 95% of all land area of the PICs and 82% of the population. In UNDP’s 1999 Pacific Human Development Report, they held the bottom three HPI positions. In the 2005 Human Development Report, the three ranked well below all other PICs considered. If the lack of household electrification and extent of cooking with biomass can be considered proxies for relative rural hardship, the three again rank lower than all other PICs.

The Melanesian Three differ from the rest of the PICs in other ways as well. Because of the rugged terrain and isolation, they have the highest density of languages in the world. PNG has over 830 languages and the Solomons and Vanuatu about 65 and 100 respectively, making an average of only 6400 speakers per language. Each of the countries has several official languages, a lingua franca that is a pidgin form of English in which technical information is poorly communicated, a minority of people who speak English or (in the case of Vanuatu) French, and the cultures are largely verbal with low literacy rates. There is understandably to some extent a “wantok” (“one-talk” meaning members of the same language group) mentality in which one’s own language, and therefore kinship, group is the most trusted source of information and authority.

The Melanesian countries are also among the least stable politically of the PICs. With their cultural fragmentation, they can be difficult to govern effectively and there is often little continuity in policies as new Cabinets or coalitions form around personalities. Compared to other PICs, the transport of goods, services, people and information can also be expensive and irregular. Finally, the Melanesian Three suffer from high rates of Malaria infections, a scourge that is absent elsewhere in the region.

The above characteristics can make the effective delivery of energy services to rural areas very challenging. Clearly any energy sector interventions that seek to make a discernible impact on hardship and poverty within the PICregion as a whole must specifically address the special case of the Melanesian countries.

B. Rural Electrification

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In PNG, the Solomon Islands and Vanuatu overall, rural electrification by all sources is about 11 or 12%. This is very low by both Pacific Islands and global standards. According to World Energy Outlook 2002 (chapter 13, Energy and Poverty) in 2000, 73% of the global population, and 64% of those in developing countries, had access to electricity, although the latter estimate is skewed by China’s claim of a 98% electrification rate. In the Melanesian Three, the rural population is spread among large, rugged mountainous islands and many smaller remote islands. Electrification of a large area by a utility grid is generally impractical and even village mini-grids are expensive. There is little reliable information on the true cost of rural electrification in these countries but in early 2004, before the current period of rapid fuel price rises, the typical cost of generation was over US$1/kWh for small diesel generators. In Fiji’s remote government outposts, where the cost of installing and operating stand alone village diesel systems is lower than in the other Melanesian countries, in 2002 – when fuel costs were considerably lower than those now prevailing – the true cost of generation (including capital replacement) was estimated by a GEF study to be F$2.44 (US$1.44) per kWh generated or US$1.62/kWh including transmission losses. Despite the very low extent of rural electrification in the three countries, a widespread programme that rapidly expands the proportion of rural households with electricity access will be very expensive and quite difficult to manage.

Although rapidly expanding household access to electricity may be beyond the financial and management capacity of the countries, rural hardship for many Melanesians could be appreciably reduced by programmes that expand the electricity supply to rural government stations and nearby facilities, especially health centres but also schools. A recent ESMAP (World Bank/UNDP Energy Sector Management Assistance Programme) study, New Approaches to Rural Electrification in Papua New Guinea (2004) estimates that 75% of PNG’s schools, mostly rural boarding schools, are without electricity, as are a high percentage of health centres. Yet, the study notes, “for most Papua New Guineans, the only benefit received from the government is access to certain critical services, including basic health care, children’s inoculations and maternity care … and primary school education. … All of these services require electricity to be effective.” The ESMAP paper further argues that in rugged remote parts of PNG, health centres have the most critical power needs of the public facilities since they must safely store vaccines, provide for night time medical emergencies, and have reliable telecommunications in case of emergencies. These statements also hold in the Solomon Islands and Vanuatu.

A useful service for donors, international development agencies and regional organisations would be to provide to these countries up-to-date information, case studies and advisory services on effective policies, institutional arrangements, and financial arrangements for sustainable electricity services at remote government posts, health centres and schools.

The information needed includes the following:

policy guidelines and examples for central governments on approaches that have been successful elsewhere;

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assistance to central governments in establishing clear rules regarding subsidies (capital and operating, if any), technical standards, and support that the central government can provide to provincial and local authorities;

clear guidelines on the services which are appropriate for diesel gensets, solar PV and microhydro and the relative capital and operating costs of each (although generic case studies may be misleading for micro-hydro which is so location- specific);

guidelines (for central government agencies, local governments etc.) for setting tariffs that are transparent and cover true costs;

effective mechanisms for bill collections (including pre-payment metering and community levies for services);

improved methods of training operators in operations and maintenance; and

effective ways of reducing costs by more efficient uses of small amounts of electricity (including efficient compact fluorescent lamps, simple time switches, efficient refrigeration units, etc.).

Available technical and policy reports are often filled with jargon and strange acronyms. The above reports should be prepared in plain English and translated as far as practicable into at least the local lingua franca.

C. Biomass CookingCompared to other PICs, biomass in the form of wood and woody wastes is overwhelmingly the main fuel used in Melanesia among rural households for cooking. As the gender chapter of this overview notes, ”improved” household wood stoves have failed throughout the Pacific, presumably due to inappropriate designs and high costs. Not enough attention has been paid to simple means of keeping smoke away from indoor cooking locations to reduce chronic chest and eye problems among women who cook for years with biomass. Infant respiratory infection is a major cause of infant death and is especially the case in the PNG highland areas where women cook indoors and the huts are windowless and chimneyless fully enclosed structures. Nursing women generally carry children in “billums” from their breast or on their back while they cook, so both the baby and mother are exposed to significant amounts of smoke.

Case studies or examples would be useful on simple ways of reducing smoke in cooking areas where biomass is the main cooking fuel.

D. Liquid Fuels for Lighting and CookingLiquid petroleum fuels can be particularly expensive in parts of Melanesia, though costs are generally high in remote islands throughout the Pacific. With crude oil hovering around US$60 per barrel and unlikely to drop significantly, it would be useful to provide advice on how these fuels can be used more effectively and replaced practically with local products for lighting and cooking. In rural Melanesia, wick-type kerosene lighting and cooking appliances are frequently unsafe and have caused many household fires and

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serious burns, particularly affecting women and children. There are no easy or obvious solutions:

Perhaps there are safer and more efficient, yet inexpensive, kerosene appliances available and better ways of providing spare parts;

Perhaps safe and efficient appliances could be developed using coconut oil or other local fuels for lighting and cooking.

E. Demonstrating Practical ApproachesIt would be appropriate to demonstrate effective models for improving energy access to rural Melanesia, not as stand-alone projects, but integrated with NGO or government programmes. The effort could include broad ranging public awareness engaging provincial and local politicians, linking with other community-based infrastructure, and other local programmes to improve health, education, ustice etc.

Although such studies, guidelines, etc. would be especially appropriate for Melanesia, most would also be useful generally for other PICs.

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III. DATA QUALITY AND AVAILABILITY REGARDING POVERTY AND ENERGY IN THE PICS2

The PIC regional report on MDGs (UNDP/SPC, 2004) notes that it is difficult to compare levels of hardship among PICs in part because no reliable economic data are available in parity purchasing power (PPP) terms. However, the problem of data in the Pacific, and thus practical indicators for measuring performance in meeting development goals, extends well beyond economic measures. In general, because of assistance from the ADB, IMF, WB and others, the economic data over time are probably considerably more accurate within the region than most other data, including energy data.

Clearly a wide range of timely, accurate and consistently collected data is needed for the accurate assessment of key development issues, the status of natural resources and the environment, the formulation of development policies, the practical implementation of polices and programmes, and for monitoring results and impacts. Donors have devoted considerable resources to the collection and analysis of data and to improving the statistical capacities of PICs and their regional organisations. However, much of the assistance has been ad hoc, short term and incomplete. There are data for most PICs sufficient for “snapshots” that indicate reasonably well the development situation at the national level for a given time. In general, however, there are few consistent time series datasets that allow accurate indications of trends, and there are very few breakdowns of available data of all sorts by gender, age, geographic location or income group.

Social statistics are particularly hard to locate and difficult to use because they are often unreliable or outdated. Without better information on trends and more disaggregation there is danger of speculation regarding which issues are most serious (and require immediate attention) and which trends are genuinely improving. For some PICs, not even poor data obscure the issues of poor economic management, poor governance and social conflicts arising from uneven development. For others, the poor data can confuse analysis. Better data are needed at three levels:

Primary, as in census surveys or health information systems;

Secondary, as in better and more relevant tabulations and compilations; and

Tertiary, that is more and better interpretation and policy analyses.

The box below, taken from earlier analyses and Forum deliberations, argues for a better regional capacity to assist PICs improve the collection, analysis and use of data at national and sub-national levels. The regional organisations are often frustrated by inadequate data for analysis, though in some cases they themselves are not always effective in compiling and analysing their own data.

2 This chapter borrows heavily from similar coverage in the Common Country Assessments for Kiribati, Solomon Islands, Tuvalu and Vanuatu (Office of the UN Resident Coordinator, Fiji, 2002), which one of the current consultants helped prepare and oversee.

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PIC Data Limitations as a Constraint to Analysis and MonitoringIn the mid 1990s, the difficulty of monitoring “Sustainable Human Development” (SHD) was assessed for Fiji (Chung 1995), which had, and still has, a relatively well trained and staffed statistics office: “Although the institutional capacity for [data collection and] monitoring in Fiji is perhaps as good as anywhere in the South Pacific, official data often are unreliable or inaccurate, have important gaps or uneven coverage, are over-aggregated, and out-dated.” Official statistics said little about salient SHD issues, there was little continuity in data collection, data were not timely, and data were fragmentary and scattered. In addition, there was only limited analysis of the data that do exist: “Policy requires multiple data-sets (national, community and household) but linking available data-sets is nearly impossible. … Lousy data give lousy results.”

In most other PICs the capacity for data collection and analysis is even more limited. In 2000 the Pacific Islands Forum Economic Ministers’ Meeting (FEMM) resolved to strengthen the collection of economic statistics in the region. By mid 2001, assessments of statistical needs were underway in several PICS and the ADB was considering a Regional Technical Assistance programme (RETA) in economic statistics. In 2001, the Ministers noted the need for:

a coherent reform strategy for statistical operations in the region based on a systematic assessment of country needs;

establishing a regional capacity to coordinate and conduct and/or provide technical assistance for national censuses, and large-scale social and economic surveys (as PICs such as Solomon Islands are too small to justify, develop or sustain such services);

reducing the heavy demands of donor agencies on national statistical offices; and

improving the quality and coordination of the variety of regional databases.

Since then there have been efforts to improve data collection and analysis including assistance to the SPC through British aid. The SPC is the regional agency with the formal mandate for the collection of statistical data and support to PICs but it still lacks the resources to address all-important PIC needs.

Sources: PIFS FEMM papers (June 2001), Chung (1995) & Pacific CCAs (UN Country Team, Fiji, 2002)

Within the energy sectors of PICs, basic data are often misleading, incomplete or simply wrong. The following examples were found during the 2004 missions to fifteen PICs for the Pacific Islands Renewable Energy Project (PIREP): Despite considerable effort over many years, including PIC-specific database

development and training and previous PIFS efforts, SOPAC has been unable to develop an accurate and consistent national energy sector database for any PIC, though some datasets are far better than others.

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In one of the countries with relatively good statistical services, the data on retained petroleum imports by volume for the past five years turned out to be wrong by as much as 20% and internally inconsistent. However no one preparing or analysing the data apparently noticed. In most PICs, petroleum fuel consumption by sector, and even total consumption during a year, was unavailable or clearly wrong.

In no country was there accurate information on the total cost of providing rural electrification to remote sites from diesel generators based on actual records and operational experience. Without this, it is difficult to estimate the relative costs of rural diesel power supply compared to other technologies.

In one of the more affluent countries, the data from all outer islands on electricity production and fuel use was obviously inconsistent for several years but data were accepted for publication and use without question.

With few exceptions, and these on a small scale only, there have apparently been no household, commercial or industrial energy end-use surveys in the region for about a decade, and for most countries far longer. Although PIC economic structures have changed considerably in recent years (shifting toward services), analyses when done at all assume the energy use relationships of a decade or more ago. In general, estimates of biomass energy use per household are based on surveys from the early 1980s.

In general, there is little regular monitoring and evaluation of the performance of existing energy services (e.g. rural electrification, energy efficiency projects). Equipment installed years ago is often assumed to be still functioning as designed.

Almost no PIC public service maintains accurate records of which energy staff have received specific short-term training in energy technologies, energy policy analysis, etc. It is hard to recommend specific training needs when information on who has received past training, and its relevance, is inaccurate.

In general the staff of PIC energy offices, and often national planning offices, do not do a great deal of analysis and possibly therefore may be unconvinced of the practical value of good data. It may be possible to devise a useful and practical set of indicators for measuring the impact of various energy sector interventions on poverty, but without ongoing efforts to maintain development and energy sector databases, these are unlikely to be effective or used.

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IV. LINKAGES BETWEEN THE PROVISION OF ENERGY SERVICES AND POVERTY IN THE PICS

A. What is Poverty in the Pacific?

During 2001 and 2002, the United Nations system prepared a series of evaluations of development issues and constraints in six PICs, the “Common Country Assessments” or CCAs for Kiribati, PNG, Samoa, the Solomon Islands, Tuvalu and Vanuatu. In each country, there were extensive consultations with a range of government ministries, NGOs and private individuals, including in most countries workshops to discuss the Millennium Development Goals (MDGs) and their applicability to the country. There were very spirited discussions regarding the nature, and even existence, of poverty in the countries. Although there was no clear consensus within any country, most people argued that extreme poverty was rare in the region, that international definitions based on an income of US$1/day were inappropriate, that the generic MDG goal of halving the proportion of people living in extreme poverty was irrelevant, and that ‘poverty’ itself needed to be more clearly defined.

In Kiribati, for example, it was generally agreed within workshop discussions involving NGOs and civil servants that extreme poverty was not an issue relevant to the country, but that poverty was an emerging problem particularly in overcrowded South Tarawa, and that an assessment of the extent of poverty should be undertaken. ‘Poverty of opportunity’ was felt to be more appropriate a term than poverty. There was a consensus that the appropriate MDG goal for Kiribati should be to ‘reduce poverty’ or ‘reduce relative poverty’ not to halve extreme poverty. In other PICs, the response during the CCA consultations was similar.

The subsequent ADB series of poverty assessments in nine PICs from 2002-2005 (Fiji, FSM, Kiribati, PNG, Samoa, RMI, Tonga, Tuvalu and Vanuatu) all include surveys of attitudes of urban and rural households regarding their own perceptions of poverty. In general, the ADB reports that Pacific Islanders prefer to discuss ‘hardship’ rather than ‘poverty’. The ADB has estimated the percentage of households living in poverty, according to a basic needs poverty line, i.e. incomes necessary to meet the level of expenditures required to provide basic needs. This tends to be defined by a lack of access to basic services, lack of opportunities or adequate resources (including but not only cash) to meet basic household needs and customary obligations. Where possible, information from recent Household Income and Expenditure Surveys (HIES) was used to estimate urban and rural poverty. However, it seems safe to say that some PIC governments and many NGOs are not fully convinced of validity of the assessments or the extent to which meaningful comparisons can be made between different PICs. There is still no agreed definition of poverty in the PICs or how to measure it.

The PIC regional MDG report recommends (among other things) that the PICs should: develop official measures of national per capita consumption adjusted for purchasing

power parity;

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develop additional poverty-related indicators specific to the region that will assist in measuring the prevalence of poverty as defined for the Pacific; and

recognising the sub-national differences in poverty levels, disaggregate all MDG poverty goal 1 indicators geographically (rural and urban, islands and provinces).

Without agreed definitions of poverty (or hardship) in the Pacific, and agreed methods of measuring it, it may be difficult to demonstrate that specific energy sector interventions actually reduce poverty or hardship levels.

B. How Does Poverty or Hardship Relate to Energy Use in the PICs?

Internationally there seems to be a strong correlation (up to a point) between increased use, or at least access to, modern forms of energy and wealth as measured by GDP per capita or development as measured by the UNDP’s Human Development Index (HDI): Some years ago, rural household energy use surveys in Fiji showed a strong

correlation between household expenditure (orto a lesser extent income) and the consumption of modern energy forms such as kerosene, LPG and electricity. Those who used the most fuel wood were the poorer households.

Within the Pacific, PNG, the Solomon Islands and Vanuatu have the lowest HDI rankings and also the highest percentage of households that cook primarily with wood or other biomass.

Several of the ADB’s PIC participatory assessments indicated energy, particularly provision of electricity, as a specific service that had reduced hardship in recent years. Other services that implicitly required improved energy services were also listed.

It is not clear whether increased wealth causes the expenditures to be made to provide access or if providing access is a significant factor in causing increased wealth. However, it is clear that people do not want energy per se to improve their lifestyles or reduce hardships, they want the services that energy can provide: improved and cleaner cooking, better lighting and longer hours of lighting, improved transport, water pumping, access to entertainment through radio or TV, cooling for food preservation, night time emergency medical services, etc. Reducing hardship requires access to affordable, reliable, and productive energy services, which in turn provides access to better basic development services.

In remote islands of the Pacific, hardship might well be reduced far more by providing a small amount of low voltage DC power for a few hours per day to many households through solar PV to meet basic lighting needs and radio access, than by providing the same families with the superior service of essentially unlimited, 24-hour grid-connected AC power or even gensets which provide ample power for 6 hours daily. They may be able to afford the monthly charges for a basic PV system with high-efficiency lights but not the much higher costs of a superior service.

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To help reduce poverty, the provision of energy services in the PICs should focus on the cost of providing an affordable basic service, not the cost of providing a kWh (the unit metered and sold) of electricity or a litre of kerosene.

C. What Sorts of Energy Sector Interventions Can Help Reduce Poverty in the PICs?

There are examples in the Pacific of the provision, or lack of provision, of energy services have led to increased hardship, have stymied provision of affordable energy services or have attempted to help the poor but mostly subsidised the reasonably well off: Communities have provided cash and labour toward (for example) microhydro

schemes that initially provide electricity but soon fail for various reasons including inappropriate designs or lack of maintenance and repair services, leaving the households with less money than before but no energy service.

Surveys have shown that rural households sometimes pay more per month for kerosene and batteries – for lighting and radios respectively – than the monthly cost of superior services such as a community diesel system but the latter is not provided through government programmes because the cost per household, if charged at full cost or provided through a private company, would exceed the national tariff per kWh for those connected to the urban grid. The households end up paying money more for a lesser service.

PIC governments have established “lifeline” electricity tariffs – an initial block of kWh units provided below cost specifically to assist low-income consumers. However, the subsidised block is set so high (100 kWh or even far more) that mainly middle-income consumers benefit. A higher subsidy (i.e. lower charge per kWh) for a much smaller initial block (say 30 kWh/m) would provide basic lighting and radio access, cost the utility less, and benefit the poor more.

There are some examples of energy sector interventions that may ‘obviously’ improve the lives of the poor. For example, a national biofuels programme to replace a significant proportion of imported diesel fuel or petrol might be justified in part because it creates a great deal of rural employment. The renovation of the oil palm plantations in Guadalcanal in the Solomon Islands, which could be used to produce biofuel, will create as many as 7000 new jobs and thus in principle should reduce poverty.3 However, locally produced fuels will not necessarily be cheaper for the public than imported petroleum fuels due to higher costs than expected, government awarding a monopoly concession for local production or distribution or other reasons. The wages of rural people producing the feedstock may be held low so that the fuel produced is affordable relative to imported petroleum fuels. Biofuel production could be financially and economically successful for the country but have a positive or negative impact on poverty depending on how production is organised or regulated.

3 In Guadalcanal, the possible impact of oil palm will also depend on the province that plantation workers come from, a contributing factor to the crisis of the late 1990s.

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In principle, allowing private independent power producers (IPPs) to establish new rural electrification grids or manage existing rural power plants at government centres (e.g. PNG’s C centres or Fiji’s PWD-managed provincial power systems) could result in both improved quality of existing rural electrification and significant expansion of rural electrification. However (as a SOPAC PIEPSAP analysis warned in a Solomon Islands review in 2005), the PICs must also establish practical regulatory mechanisms to assure that these services are provided at an affordable and fair price to rural consumers. As the regional development NGO ECREA has warned (‘Is Poverty the Issue in the Pacific?’; 2005), too often the experience of other countries indicates that commercialisation or privatisation “ultimately (but not always initially) … puts utilities and basic services out of the reach of the poor and the working class. What were once essential services provided at little or no cost by governments are fast becoming a commodity for sale by multinational companies out to make big profits.” IPPS understandably are profit-oriented so some form of regulation is necessary if the rural poor are to benefit from their services.

D. Will Better Rural Energy Services Lead To More Rural Income in the PICs?

Probably based in part on Asian experience, it is sometimes assumed that the provision of electricity to rural communities within PICs, perhaps coupled with micro-credit finance opportunities and basic business training, will increase incomes in rural areas. Some village based microhydro schemes and several recent rural biofuel concepts in the PICs have included the assumption that improved energy sources will result in the production of more or better goods and services, in turn resulting in cash income for the community. However, while these approaches may have worked in some developing countries, there is evidence that they may not be equally relevant to the Pacific. Before any widespread programmes of improved energy provision to PICs are carried out based on the expectation of energy access generating new employment and cash income, it would be useful to assess past PIC attempts of this sort and apply any appropriate lessons. In general the PICs need to establish improved energy services in a manner which genuinely helps alleviate poverty, and that will require a good deal of case-by-case analysis. This is discussed in more detail in the next chapter of this overview.

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V. ENERGY AND RURAL INCOME GENERATION FOR POVERTY ALLEVIATION

Rural electrification has the potential to increase the well being of rural dwellers and to help support economic and social development but it also tends to increase the flow of cash out of rural communities due to the need to purchase fuel or to pay electric bills and to buy and maintain the appliances that make the electricity useful. Although providing electrical services does reduce the cash outlay for kerosene for lighting and for batteries in radios and other appliances, providing electricity access almost always results in increased cash outlay for the community over the un-electrified condition unless the energy is heavily subsidised as in the case with energy from grid extensions where rural users are frequently cross subsidised by urban users.

If poverty or hardship is related to the availability of cash, as the MDG indicators imply, then providing communities with access to energy can sometimes increase poverty because of the net increase of cash flowing out of the community. For the provision of energy to result in a positive benefit to the community, either there must be sufficient wealth already present to allow the increased cash outflow to be accepted without increasing hardship or there must be new income generation to cover the increased outflow of cash.

Increased cash outflow is not the only issue that needs to be considered. Projects that use local energy resources, such as biofuel production in the village to provide fuel for electrical generation, may not directly affect the cash flow of the community but can result in decreased time available for other economic activities, such as gardening or fishing, that are important to the well being of the community but do not involve money transactions. Time is a finite resource and if that resource is used to make biofuel then that time is not available for another productive use, e.g. growing food for the table.

A. “Productive uses” of EnergyThis problem of cash flowing out of the community due to the addition of rural electricity is generally understood by the international development community and their response has been to try to associate energy delivery projects with the development of income generating activities (usually called “productive use” activities) that can pay the cost of the energy supply and even result in increased cash income relative to the pre-electricity conditions. Unfortunately, just earning additional money through the use of energy does not necessarily reduce poverty in the community; it can make the problem worse. For example, if a shop owner is able to use the energy to chill soft drinks and increase their sales volume, the shop owner is using the energy “productively”. Unfortunately, the money that is given to the shop owner comes from other villagers so the shop owner gets richer and the other villagers become poorer. For a “productive use” to result in a positive net cash flow into the community, the energy must be used to create a product or service that is sold outside the community, not just shifting cash around within the community. The cash spent on appliances and fuel (or utility fees) leaves the community economy

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and any replacement cash needs to come from outside the community in at least an equal amount if the net cash condition (MDG poverty level) of the community is not to become worse.

While it is relatively easy to develop energy related income generation activities that allow one community member to make money from another community member, using the energy to develop activities that increase income from outside the community are more difficult, particularly in isolated communities. As with any business development process, there are many factors that must come together before there can be a success. These include the following seven critical factors:

1) Access to market at an acceptable cost. In general markets for products that are to be sold outside the community are in urban areas. There must first of all be a market for the product. Secondly the cost of the product delivered in the market place must be competitive with equivalent products already for sale in the market. Isolated communities face high costs in getting products to urban markets and that often drives the cost of their products up to the point where they are not competitive in the market.

2) Adequate business skills to develop and manage the activity successfully. Most businesses in all countries fail. Rural businesses have a higher failure rate than urban businesses because the business climate is less forgiving and there is less access to the financial, management and marketing skills needed to make a business a success.

3) Technical skills are adequate. Almost any product that is to be sold outside the community will require some technical input. To keep transport costs from destroying the hope for profit, as much value as possible must be added to the product. For example the cost of shipping fruit to market from a remote village often makes it impossible to compete in the urban market. Processing fruit (into juices, jams, dried fruit, etc.) concentrates the value into a smaller package that is less costly to ship and also may have less competition in the urban market. But this processing requires technical skills and sometimes equipment that are not ordinarily present in a rural community.

4) Adequate investment and working capital. To be in business requires capital for equipment, storage facilities, work space and other fixed investments. It also requires working capital to prepare the products and get them to market, costs that are recovered only after the products are actually sold. Capital for fixed investments is often available since it is a one-off investment in something tangible but getting money for working capital is often quite difficult since it is a continuing requirement and one that has no obvious tangible result.

5) Adequate time to do the necessary “productive” work. A subsistence and barter economy often does not leave a lot of free time for money making activities. To take time away from fishing or gardening to make extra money to pay for new energy services may endanger the security of the food supply and result in greater hardship even though there is money being made. Only rural villages that have underutilised human resources can improve their economic

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condition through increased energy access. If the village is truly a poor one, barely surviving, there is no capacity available to meet the added burden of paying for the newly accessed energy.

6) A long term commitment. Many “productive use” projects get off to a good start but as problems occur and the initial enthusiasm fades, the willingness to invest the money and time that is needed to continue the production also fades. Even in remote rural communities there are many different possible uses of the time and money resources. For the “productive use” project to continue for the long term, it must remain a priority activity relative to the other uses of the community’s human and financial resources.

7) Sufficient resources, including energy, to maintain production profitability. There is a tendency to over estimate the availability of resources available at an acceptable price when planning for productive use projects. What is often not understood is that when pressure is put on any resource there is a tendency for the price of that resource to rise. So having a surplus of coconuts today may not mean there are sufficient nuts readily available for continuous production of a coconut product. As soon as the surplus is used, coconuts will be harder to get and the price will go up.

These seven critical factors are universal. If any one of these factors is missing, the income generating activity can be considered doomed to failure. In addition there are cultural factors that have to be considered but which change from place to place. For example, in many PICs the culture does not allow rejection of a request by a family member if it is at all possible to fulfil. Many rural shops and other businesses have failed because family members take the shop’s goods and do not pay or borrow money from the working capital of the business. Income generation schemes that require input from many people in the community often fail because a few people are believed to get more than their fair share and the rest refuse to do their part. Intertribal friction in Melanesia can result in one tribal group vandalising the income generating equipment of another. Any income generating activity must fit into the cultural conditions at the site of the activity so an activity that works well in, for example, rural India may be a total failure in a PIC even though the seven critical factors are present.

B. Productive Uses and the Pacific Island CountriesIn many countries, the problem of products from remote sites being uncompetitively high in price is solved by reducing the transport cost. New roads, rail access, rural airstrips, even better quality walking trails and new bridges can greatly reduce the cost of getting goods to market and help make the products from remote villages more competitive in urban markets. In the Pacific where the access barrier is often hundreds of kilometres of ocean, there are few options available to decrease the cost of sending local products to market. For that reason, it is important for productive use projects in the rural Pacific to focus on products that have high value and small volume so that the shipping cost will be a smaller percentage of the overall product cost. Since agricultural and fishery based products are the main products that a rural community can develop, local processing of the agricultural products and fishery products into higher value goods is the major

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opportunity for productively using energy for community income generation. Some examples of these energy based productive activities that have been tried are:

Processing coconuts for coconut cream, desiccated coconut or virgin coconut oil.

Processing fruit into juices, jams, jellies and dried fruit.

Processing root crops into chips.

Drying fish, seaweed, jellyfish and other sea products.

Using coconut husks to make geotextiles and door mats.

Drying of vegetables such as beans.

Another way to reduce price in the market place is to lower the production cost. Some ways energy has been used in rural PIC villages to accomplish this are:

Powering aerators to increase production of high value fish and shrimp in aquaculture farming.

Powering lights to keep chicken houses illuminated all night to increase the rate of weight gain through increasing the length of time per day that the chickens eat.

Moveable electric fencing that allows moving grazing stock from one controlled pasture to another so pastures are not overgrazed and can be kept at maximum productivity.

A third way to improve the net cash flow for the community is to make locally some of the items that had to be purchased from outside the community. Examples of this are:

Using hydro energy for a small sawmill and wood working equipment to lower the cost of production of handicrafts, home construction, small furniture items and decorative wood products.

Making biofuel in the community to run diesel engines for pumps, power generation, outboard engines, vehicles and other uses.

All of these activities have the potential for increasing income from outside the community or reducing external expenditures and helping maintain a net inflow of cash to the community. However, all must be developed in a way that properly considers all of the previously listed factors that are critical to success and also fit into the cultural environment. If any of the factors are not present or if cultural rules are not followed, the business has a high probability of failing.

A number of activities that have been suggested as “productive uses” related to energy access only serve to move money around within the community with no net community cash flow gains and tend to increase the spread between rich and poor. Some examples of these are:

Showing videos for a fee.

Renting out Video Tapes, VCDs or DVDs to people who have purchased video equipment.

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Using electric hair cutting and styling equipment to fix hair for pay.

Increasing the production of mats and other handicrafts for local sale.

Using electric machines to increase the production in a local bakery.

Power tools for handymen in the village.

Motorcycle or water taxi service.

Adding refrigerators and freezers to shops to increase sales of cold drinks and frozen treats for children.

While these types of activities can increase income to the individuals using the energy for productive use, and can lead to perceived improvements in the quality of life, the net effect on poverty in the community as measured by cash levels can be negative.

C. ConclusionsThe provision of energy access to low income rural communities by itself is unlikely to result in a reduction in poverty (at least as measured by income). If the provision of energy is to result in increased income to the community through “productive use” then a specific effort is necessary to ensure that all seven critical factors are somehow accounted for in the project and that the project is culturally acceptable so that when the energy is available the income generating business has some hope of success. Each of the seven factors for achieving a successful rural business must be present for the income generating activity to succeed. If any one factor is missing, failure is highly likely. Therefore in designing projects that are intended to increase energy access to low-income communities, if poverty alleviation is an objective it is important to coordinate the energy supply project with other rural development activities that support development of the capacity of the recipient community to use the energy for generating income from outside the community that is sufficient to offset the resources that are expended for obtaining and using the energy supply.

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VI. THE LINKAGES BETWEEN GENDER EQUALITY AND ENERGY ACCESS

Central to the achievement of the MDGs is the recognition and implementation of the Convention for the Elimination of All Forms of Discrimination Against Women (CEDAW) and the Beijing Platform for Action both of which advocate gender equality and women’s empowerment as an effective tool for tackling poverty, and thence for stimulating sustainable development. Other global conferences4, prior to CEDAW and BPfA, had stressed the human development benefits that gender equality and the empowerment of women will bring.

The endorsement by PICs of the Millennium Declaration, CEDAW, BPfA, as well as the adoption of the Pacific Platform for Action and other international and regional conventions and agreements demonstrates in principle the region’s commitment to addressing issues of gender equality, women’s empowerment and poverty alleviation. Addressing these will also have positive effects on achieving the other seven MDGs, not just goal 1 on poverty. Most of the governments of the PICs have formulated national plans to address gender issues. International and regional bodies and aid agencies can play a role in helping governments address gender issues if they themselves have a better understanding of them, especially as some issues are common to all PICs. The issues are summarised below.

A. Gender Equality Issues in Pacific Island Countries

Common gender equality issues – or more accurately inequality issues – in the PICs include:

traditional and cultural roles and expectations. accessibility to services and infrastructure. Domestic violence. HIV/AIDS. participation in decision-making personal safety during civil strife, ethnic clashes and civil war

Though prevalent to some extent in all PICs some of these issues do not directly relate to energy and therefore will not be discussed.

Improved access to services, including those provided through better energy supply, can contribute toward gender equality and empowerment of women, reduce poverty and improve the overall development of Pacific Island people.

4 World Conference on Education for All (Jomtien, 1990); World Summit for Children (New York, 1990); UN Conference on environment and Development (Rio de Janeiro, 1993); World conference on Human Rights (Vienna, 1993); and International conference on Population and Development (Cairo, 1994).

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B. Gender and Poverty

The Asian Development Bank report Hardship and Poverty in the Pacific – A Summary (ADB, 2004) defined poverty (or hardship) for PICs as “an inadequate level of sustainable human development manifested by:

a lack of access to basic services such as primary health care, education and potable water;

a lack of opportunities to participate fully in the socio-economic life of the community; and

a lack of adequate resources (including cash) to meet the basic needs of the household or the customary obligations to the extended family, village community and/or the church.”

Similarly, Father Kevin Barr, a well-known anti-poverty activist in Fiji, says “Poverty in most Pacific Island countries is really about poverty of opportunity or poverty of access. As the UNDP Pacific Human Development Report of 1999 “Creating Opportunities” states, ‘this is where people’s talents, skills and aspirations are frustrated and wasted, denying them the opportunity to lead productive and satisfying lives’’.5

Feminisation of poverty is a reality in traditional patriarchal societies of the Pacific as prescribed women’s roles deny them the opportunity of ownership, especially ownership of the right to make decisions for themselves or the family, which in turn reduces women’s capacity to improve their lifestyles. In some matriarchal societies of the Pacific, like parts of the Solomon Islands and Vanuatu, women frequently hand over decision making to the men, even where inheritance of traditional titles is through women.

C. Traditional Stereotyped Roles: Household Cooking

In traditional Pacific Island societies, it is the women’s responsibility to gather fuel wood and prepare food. Women may spend up to three hours collecting wood and an additional six hours in food preparation. In general, the demand on women using wood as the main energy source for cooking is enormous in terms of time and health risks.

A shift from fuel wood to liquid fuel (i.e. kerosene and liquid petroleum gas (LPG) and electricity in many of the PICs has provided women with cleaner and more efficient energy for cooking but traditional biomass based cooking is still almost universal in rural areas of Melanesia and parts of Micronesia. The use of LPG for cooking is gaining popularity among women in urban communities, as it is convenient and clean. However, LPG is not affordable by all women, only those with access to a regular household income. It seems likely that a more educated and employed female workforce could result in more use of a cleaner and safer cooking fuel.

5 On defining poverty - “Making Poverty History” by Father Kevin J Barr, MSC

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With access to more efficient energy sources for cooking, less time needs to be spent on food preparation, so women can have time to attend meetings with the men at community level and participate more equally in making decisions that will affect the development of their families and community. Women may also have the opportunity to pursue income-generating activities like baking and confectionery (assuming that the critical factors of the previous chapter are met) which could allow them to contribute to the family’s income and share responsibility in its use.

Women’s health is also an issue when biomass is the primary cooking fuel. Although no statistics are readily available, a study conducted in Fiji and Gujerat, India in the 1980s by Dr Kirk Smith and his students at East-West Center, and later the University of California at Berkeley, found that women exposed for long hours to wood-smoke from cooking are liable to suffer far more than average from emphysema and eye diseases.

Although cooking in the PICs is shifting slowly away from wood and toward kerosene and even LPG in more affluent communities, wood and other biomass is still predominantly the main cooking fuel used by women in many PICs, as documented by the UNDP/GEF/SPREP PIREP as shown in the table below.

Main Energy Source for Cooking by % (census years except PNG)Country Year Elec LPG Kero Wood Other CommentsFiji 1996 national 3 28 21 48 <1 Fiji data not separated into urban & ruralMarshall Islands

1999 nationalrural

266

21

4011

3079

13 ‘Other’ is mainly charcoal

Palau 2000 national 23 * 21 * 22 * - - * These are exclusive use of the fuelPNG 1996/97 Moresby

national293

193

377

1387

< <1<1

Survey of 22,156 households nationally (about 2% of total).

Samoa 2001 national 11 12 14 62 - For wood, Apia area 24%, Savai’i 85%Solomon Islands

1999 Honiara national

1<<1

6710

62

2589

--

Honiara accounts for nearly 11% of all households

Tonga 1996 national 11 55 23 74 - Appears to be all fuels used to cookVanuatu 1999 national

rural<1

<<1124

<1<<1

8395

<<1<<1

Urban cooking 51% LPG & 42% woodHouseholds are 77% rural & 23% urban

Source: PIREP Regional Report (SPREP, 2005)

PIREP also refers to other studies from the early 2000s that show that biomass is still used exclusively in 55-60% of households in Kiribati. Even in the affluent Cook Islands, wood is still the main cooking fuel for 11% of all households, ranging from under 1% in Rarotonga to 29% in the southern group of islands and 34% in the northern group.

Access to biomass for fuel is not a problem in most rural areas of the PICs but access is becoming a problem in urbanised atolls (e.g. the southern parts of South Tarawa) and in cities such as Port Moresby in PNG and Honiara in the Solomon Islands. Where fuel wood must be purchased in urban markets, women may have more free time – as they are not out gathering wood – but they also must spread their limited household budgets further to pay for the fuel, and it is the poorer urban households which are the main users of wood for cooking.

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D. Community and Other Household Energy Use: Energy for Lighting

The use of liquid fuel for lighting is common in those PICs with largely unelectrified rural areas. Although these fuels are cleaner than biomass, which is still widely used for lighting in PNG, they still pose health and safety risks that particularly affect women in their role as caregiver for children and the elderly. Apart from exposure to the unpleasant smell of inefficient kerosene and benzine appliances, there have been many incidences of fires, particularly caused by wick-type kerosene lights.

The table below summarises data from various PIC census reports on household energy use for lighting. In general, there are clear differences between urban and the less-electrified rural households. In PNG, in 1996/1997nearly 30% of rural households used wood fires as the main source of lighting.

Main Energy Source for Lighting by Percentage (census years except PNG)

Country Year Elec Wicklamp

Pressurelamp Other Comments

Fiji 1996 62 29 8 1 No rural / urban data available

Marshall Islands

1999 national rural

6313

— 31 kerosene —— 78 kerosene —

515 ‘Other’ is solar

Palau 2000 ~100 0 0 0

PNG 1996/97 Moresby national

7612

1857

44

-28

’Other” is mostly open fire.

Samoa 2001 93 - 7 kero or benzine - 0

Tonga 1996 79 36 4 7 ‘Other’ includes solar 3% & genset 2%

Vanuatu 1999 national rural

197

— 74 kerosene —— 85 kerosene —

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‘Other’ is mostly wood & coconut waste; Overall, households are 77% rural & 23% urban

Source: PIREP Regional Report (SPREP, 2005)

There have been several other small-scale surveys or estimates of lighting fuel used in PICs but data were unavailable.

Today, in Nauru, Niue, Palau, Samoa, Tonga, Tokelau and Tuvalu, nearly all lighting is electric, except for kerosene during outages or when the diesel generator is turned off. Nearly all the rural lighting in Kiribati and much of Tonga is powered by solar energy, providing added environmental and health benefits over diesel powered electrification.

E. Energy for Household AppliancesAccess to efficient and reliable sources of energy for modern household appliances affects the general well-being of the family. As primary caretakers of the family’s welfare, women can have more time available for personal development and greater participation in the community if their households have access to electrical appliances

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such as refrigerators for food preservation, electric irons, efficient stoves for cooking, sewing machines and other labour saving appliances.

The availability of reliable electricity can open up opportunities for small scale cottage industries for women involving sewing, baking and handicrafts, although (as already noted) many factors other than access to energy can restrict such opportunities. Women’s capacity to earn an income and be more economically independent can elevate their position in the family and community. Even access to television news can enhance women’s capacity to make their own better-informed decisions about community issues and be less dependent on the opinions and ideas of the men in the household.

It would be ideal if all households had access to reliable and affordable electricity. In much of the rural Pacific, particularly outer islands, however, this is not an option because of the high cost of operation of diesel-powered generators or the provision of solar power. Even when provided by governments on highly subsidised terms, as in Fiji, supply is often intermittent, irregular or is only available for a few hours each day. In the remote island of Rotuma, for example, electricity is only provided in some villages from 5-6 am and from 6-9 pm, assuming fuel is even available. In Naila village, about 10 kilometres from the town of Nausori in Fiji, as in many other villages fortunate enough to be connected to the grid and have electricity for twenty-four hours a day, the supply is still irregular; the village can be without electricity for a day or more without prior notification from the power utility.

This inadequacy in power supply, whether availability is for only several hours per day or there are frequent outages of 24 hour supply, poses a serious problem for households with refrigerators as well as for women with a community based income generating business that depends on electricity.

F. Gender Impacts of Improved Energy Services to Low-Income PIC Households

Although in general there has been improvement in energy services in PICs over the past decade, there are still large areas where the services are not generally available and are limited to affluent households or shopkeepers that can afford a private energy supply. Electrification has had only a small impact on Melanesian households because it is either unavailable or unaffordable. On the other hand, Polynesian and Micronesian PICs are generally more affluent and are well on the road to full electrification with several countries in each group (Palau in Micronesia and Cook Islands, Niue, Tokelau, Tonga and Tuvalu in Polynesia) already providing electricity access to nearly all households.

Although solar telecommunication would be ideal for remote rural communities and outer islands, and is understood to be widely used, its impact on gender issues in the PICs is not known.

The table below summarises the likely effects on gender of improved energy services for low-income families in the PICs.

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Gender Impacts of Improved Energy Services to Low-Income PIC Households

Improved energy service Likely gender impactLocation

PICs in general

Mela-nesia

Poly-nesia

Micro-nesia

More efficient biomass cooking Less time and energy collecting fuelwood ++ +++ ++ ++

Healthier biomass cooking (e.g. system to keep smoke away from kitchen)

Less lung and eye disease among women n.a. n.a. n.a. n.a.

Switch from biomass cooking to kerosene Less time spent on food preparation and cookingMore money spent on fuel - so less available for family shopping?

++o

++o

++o

++o

Switch from kerosene cooking to liquid petroleum gas Cleaner, more efficient cookingFar more expensive – so less money for family expensesSafer - less serious burns of women & children; less house fires

+o ++

+o ++

+o ++

+o+

Switch from wick-type kero stoves to pressure type More efficient in fuel use ++ ++. ++. ++

Switch from wick-type lamps to pressure type Far better lighting ++ ++ ++ ++

Provision of electricity: small amount; 3-4 hours/day(evening lights, radio, TV, stereo, etc.)

Better lighting especially for children’s evening studyFirst hand information and news from TV and radioNot enough for women in sewing business

o +

+++

o + n.a.

o + ++

o +

+++

Provision of electricity: larger amount; 24 hours/day(electric irons, daytime power, refrigeration)

Better lighting Household appliances make life easier and more comfortableWomen can operate home-based baking and sewing businessPoor cannot afford high cost for electric services

o ++++++

o

o ++++++

o

o +++++o

o +++++o

More efficient use of electricity (e.g. lights) Lower electricity bills o o o o

‘Lifeline’ electricity tariffs Basic services more affordable (lights, radio, etc.) o o o o

Prepayment electricity metering Less chance of power being disconnected o n.a. n.a. o

Solar electricity (solar home systems) Small appliances only but inexpensive monthly cost? o n.a. n.a. o

Solar telecommunications Easier communications o o o o

Solar water heating Easier to clean clothes + + + +

Electricity for health centres Medicine cooling; night time service o o o o

Community outdoor night time lighting Safer for women to walk at night ++ +++ ++ ++ Positive impacts: +++ Major impact ++ Some impact + Small impact n.a. not available o gender neutral? Negative impacts: – – – Major impact – – Some impact – Small impact

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G. Energy Gender and the Pacific PlanThe Pacific Plan has been accepted, though not without reservations, by the leaders of the PIC governments. The plan includes little regarding energy and gender and those services that require energy. Criticism has been leveled against the plan due to its lack of inclusiveness regarding gender, in particular as relates to the problems of using wood for cooking and the continuing lack of electricity and communications for rural health services in many PICs.6

H. Conclusions

Conclusions

Women should be viewed as equal partners in development and should be included in the planning, implementation and management of energy projects.

National energy policy should address women’s and household energy use and their impacts on the lives of their family and community.

Access to energy should be analysed at the household level in terms of accessibility, availability, affordability, environmental impact, security and sustainability.

6 Pacific Plan – gaps are summarised in a SCO Forum Vision Statement – October, 2005, supporting the call for Pacific Island leaders to make the plan more gender inclusive – ‘feml.INK pacific: Media Initiative for Women’

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VII. GENERAL RECOMMENDATIONS

The PIC country summaries of Volume 3 include a number of country-specific recommendations for areas in which follow-up assistance is warranted so that energy sector initiatives might assist low-income PIC households. This overview lists high-priority recommendations that are applicable for the PICs in general or for a significant number of countries. These recommendations are based both on the rapid assessment and gap analysis study and on the outcomes of the consultations with Pacific stakeholders held during the REP-PoR meeting the 10 November 2005 in Suva, Fiji.

A. General Recommendations from the Pacific Rapid Assessment and Gap Analysis

Poverty and energy. Conceptually, REP PoR assumes links between the type and availability (including cost) of energy services and poverty, with some types of initiatives believed to be likely to assist households that suffer hardship.

Based as far as possible on existing studies (e.g. Household Income & Expenditure Surveys; recent household energy use surveys; census data) there should be a study within the PICs documenting the relationship(s) between poverty and energy services (use, cost, availability) and between household income an/or expenditure and energy services. As far as possible, the analysis should assess whether there are cause and effect relationships. If so, there should be an analysis of implications for national energy policies and plans on likely effects on poverty.

Biofuels. Most PICs are interested in relatively large-scale local production of biofuels, primarily to reduce the volume and cost of imports of refined petroleum fuels. However, the way in which biofuel industries are developed and structured could have a large impact on long-term viability, rural employment and poverty reduction.

A study should be carried out on the viability of biofuel production in the PICs emphasising economic and financial viability and mechanisms to assure decent conditions of employment for those who produce the feedstock and the fuels. This should be technical (e.g. the scale of production required to be viable; the suitability of various crops as fuels including coconut, oil palm oil, jatropha (Jatropha curcas) alone and intercropped, etc.), logistics, likely impacts on the cost and availability of vegetable oils at various petroleum price levels, employment creation, etc. The study would investigate warranty issues for generators and technical problems with various biofuels and mixtures as diesel and petrol replacements for power and transport. As far as possible, the report would incorporate findings of other national biofuel studies underway. The result should be information and guidelines that could allow for the rational development of the biofuel industry in the PICs.

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Safety of kerosene cooking and lighting. Several PICs may be considering the production of ethanol as a biofuel (e.g. PNG and Fiji). Considering the concerns over the safety of kerosene as a lighting and cooking fuel in the appliances widely used in the region, it would be appropriate to carry out a study of the practicality of gelled ethanol (gelfuel) as a kerosene replacement, including experience elsewhere (e.g. Africa), the costs of jellification, its actual safety compared to liquid fuels, the types (and costs) of cooking appliances needed for their use and issues regarding its distribution and marketing in rural areas and remote islands.

The use of specially designed but inexpensive pressure stoves to burn coconut oil or other vegetable oils has been demonstrated in India and Africa. It would be useful to gather the existing information and if the process appears practical for the Pacific prepare a pilot project to develop and do trials of cook stoves that can use village prepared fuels.

Melanesian initiative. Any PIC programme which is serious about reducing poverty through energy interventions must have a strong focus on Melanesia, i.e. PNG, the Solomon islands and Vanuatu.

There should be a special initiative to help the Melanesian countries assess policies, mechanisms, financial arrangements, etc. which can result in a large increase in the percentage of government posts, health centres and especially rural households in Melanesia which are electrified with high quality services.

RESCOs. For Fiji, RMI, Vanuatu, Solomon Islands and PNG there is little likelihood of large scale rural electrification being carried out without government subsidy. The RESCO concept used in Kiribati, Tonga, Fiji and RMI provides for capital subsidy but does not subsidise all other components of rural electrification (installation, maintenance, repair, fee collection, etc.) and is particularly suited to private sector participation in the operation and maintenance of rural electrification systems. Since the primary barrier to private sector entry is the lack of experience with privately operated rural electrification which is perceived to have a high risk, the RESCO approach places the capital risk on the government. As experienced is gained the risk will decrease and the subsidy can be lowered.

Examine Solomon Islands, Vanuatu, PNG and Fiji for applicability to using the RESCO rural electrification model on a large scale including determining the appropriate level of capital subsidy and regulatory structure needed to allow it to provide reliable and cost effective energy to unelectrified rural areas.

Energy efficiency. The highest efficiency of use of energy should be by those who have the least resources to pay for it. Unfortunately surveys indicate that it is the poor who have the least efficient lighting and appliances.

Prepare a programme that addresses this issue and assists low income households and those on limited energy supplies in rural areas to make the most efficient use of the available energy.

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Petroleum fuels. There are ways in which the landed cost of petroleum fuels within PICs can be reduced, benefiting the population overall and the less well-off consumer. There are also opportunities to reduce the price differential between the urban consumer and (generally) less well-off rural population for petroleum fuels.

Assist the petroleum import and pricing advisory service of the PIFS investigate, and advise PICs, on mechanisms to lower the prices of basic petroleum products (especially kerosene) for the rural poor.

Policy and LegislationWithout reliable, consistent and recent data regarding energy imports, electricity generation by locations, electricity use by sector, energy exports and the status of renewable energy use it is impossible to properly plan or to establish regulatory and tariff policies that are appropriate. There has been considerable effort by SOPAC and others to assist energy offices create and maintain energy databases but if the original source of the data (oil companies, custom offices, electricity suppliers, etc.) do not provide consistent, accurate and up to date data in the needed format, the quality of the data available remains poor.

Assist governments in developing an energy data policy that establishes the requirement that oil companies, public and private generators of electricity and other energy importers, exporters or generators to periodically submit the appropriate data in the required format to the organisation responsible for the national energy database. Continue to support capacity building for that organisation.

Power sector. Key constraints to wide scale rural electrification (and therefore provision of energy services to the poor) in many PICs is the existence of a national power tariff which may be possible through cross subsidisation on the main grid but necessitates large discrete subsidies for suppliers away from the main grid. There is also lack of legal, transparent and fair arrangements for IPPs to participate either as stand-alone power suppliers or as suppliers to the national utility. Lifeline tariffs often cost the power utilities an excessive amount of income but do not significantly benefit the poor.

There should be a study of the effects of national electricity tariffs on the extent of rural electrification of the PICs, recommendations for tariff structures that are likely to lead to widespread rural electrification, and mechanisms to protect the interest of low-income consumers. There should be a portion of the study (or a separate linked study) analysing appropriate policies and legal tools to encourage IPPs in rural electrification including mechanisms for tariff establishment and regulation in the interest of consumers.

There should be an analysis of ‘lifeline’ electricity tariffs in the PICs to determine the extent to which they really benefit low-income consumers. The study should recommend structures that genuinely benefit the poor at reasonable cost to the utilities.

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Capacity Development

There are several initiatives under development for enhancing the capacity PIC training institutions for improving energy sector training services at various levels covering policies, renewable energy, entrepreneur/management training specifically for RESCOs energy efficiency, etc.

There should be support for the work of ESCAP and others who are developing such initiatives.

Gender

Specific gender recommendations are provided in a separate report7. In general: Initiatives to improve gender equality should be incorporated into all energy

service development activities.

B. Additional Recommendations from the REP-PoR Meeting, November 10, 2005, in Suva, Fiji

Capacity building through short-term attachments on energy.

Assist in putting in place legislation to get data;

Improving affordable energy access in the rural and remote islands e.g. one main cause of hardship in Kiribati – people drifting to urban centres, if access to electricity is improved bright lights will be in rural areas and people might be encouraged to return to their communities;

Opportunity to focus on alternative sources of energy depending on applicability in different PICs

Awareness/action plan to promote & implement energy efficiency activities to the public to enable transitions e.g. Nauru, electricity tariff is subsidised and it needs to be taken to full payment.

Focus specifically on data; in the short-term, the obtaining of data, and in the long-term, a policy for enforcing the collection of data.

Better links and understanding of existing activities between the institutions (institutions felt that recommendations would be strengthened if they were linked to existing activities e.g. the PEG network, the work SOPAC is doing), and also in the bigger picture to tie it to the PICs strategic action plans (PIEPSAP) to ensure there is a level of understanding of the linkages that occurs in all of those things so institutions know where the recommendations sit in the bigger picture).

7 “Gender and Energy Add-on Consultancy Reportf or the Pacific Rapid Assessment and Gap Analysis”, REP PoR, UNDP November 2005

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SECTION 2: RAPID ASSESSMENT AND GAP ANALYSIS TABLES

VIII. ASSESSMENT AND GAPS IN INSTITUTIONAL ARRANGEMENTS

Institutional arrangements with

respect to poverty and energy linkage

Assessment/ Evaluation Gap analysis

Way forward

Mechanisms Modalities

MappingExisting institutional framework for energy services, roles and responsibilities at the regional, national and local level.

Regional Level: The regional intergovernmental agency that supports energy analysis and development in the Pacific is the South Pacific Applied Geoscience Commission (SOPAC). SOPAC provides support for energy resource assessment, renewable energy technologies, energy efficiency efforts, policy development and national planning to its member countries—essentially all the Pacific Island Countries (PICs). It also has a working group on gender and poverty issues as relates to energy. The Pacific Power Association (PPA) is an association of most of the power utilities in the Pacific. It provides services only to its members and does not share information with other regional organisations. The Pacific Islands Forum Secretariat (PIFS)

There is no institutional framework or arrangement that addresses energy access and poverty although SOPAC has examined the issues through regional workshops and internal study. It has no specific programmes specifically oriented toward poverty reduction through improved energy access.

There are no PICs with institutional arrangements that focus on the energy access/poverty linkages. Niue, Nauru, Cook Islands, Samoa, Tonga, Tuvalu and Tokelau all have nearly 100% of households with both electricity and fossil fuel access so an energy access gap only exists in PNG, Solomon Islands,

Assist SOPAC in developing a regional programme that addresses the understanding of the linkages between energy access and poverty and acting on those linkages to reduce poverty in the seven PICs with poor access for large percentages of the population.

Develop institutional capacity in the Melanesian countries, the FSM states, RMI and Kiribati to increase access to energy in rural areas in a manner that supports poverty reduction.

Possibly assist the PIFS develop better petroleum supply arrangements, contracts, and fair price control mechanisms for

Work to understand the relationship, if any, between energy access and reducing poverty in the Pacific Islands. Establish programmes directed primarily toward PNG, Solomon Islands, Vanuatu, Fiji, FSM, RMI and Kiribati that focus on developing those areas where it has been shown that improving energy access will work to reduce poverty. Work with the target countries to avoid rural electrification programme approaches that tend to increase poverty.

Work to understand the complementary programmes that may be needed to allow poverty reduction through energy access improvement. Develop cooperative programmes that combine improving energy access

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respect to poverty and

Assessment/ Evaluation Gap analysis Way forwardMechanisms Modalities

has a petroleum monitoring service that tracks petroleum prices for the PICs and provides advice relating to supply, storage and contractual issues between the PICs and the oil companies. It has also provided some advice on biofuel / petroleum blends. Furthermore it is Contracting Authority for the EUR11 million Renewable Energy Program for 5 Pacific ACP countries (i.e. Niue, Nauru, RMI, Palau and FSM) funded by the EU. The Secretariat of the Pacific Environment Program (SPREP) deals with environmental and climate change mitigation aspects of energy specifically with regard to the promotion of the reduction of CO2 emissions.

National Level: Except for Niue, Nauru and FSM where there is no national government structure specifically focused on energy matters, all the PICs have a Department of Energy or Energy Planning Unit that has as its responsibility policy development, energy planning, renewable energy and demand side energy efficiency measures. The energy offices do not regulate or oversee either power

Vanuatu, Fiji, Marshall Islands and Kiribati with the Melanesian countries having by far the largest gap. There are, of course, low-income households in most PICs who use little petroleum fuel or electricity because of their high costs.

FSM, Niue and Nauru do not have any government agency that specifically addresses energy issues.

No PICs except for Fiji have a government unit dedicated to rural electrification although PNG’s energy office may soon have expanded access to rural electrification as a core function.

A few PIC power utilities have established “lifeline tariffs” for an initial block of household electricity consumed per month. These are meant to subsidise basic needs for low-income consumers. However, some utilities set the lifeline limit well above a basic needs level (e.g 100kWh/m

those PICs that have high landed costs relative to their market size and transport costs (Vanuatu, FSM, possibly others)

Assist SOPAC and PIC governments and utilities to develop policies on lifeline tariffs that actually have the intended effect of providing affordable electricity for the basic needs of low-income consumers.

with market development, entrepreneurial capacity development, infrastructure development and other factors that are found to be necessary before provision of energy access can work to reduce poverty.

Develop energy/poverty indicators appropriate to the Pacific that can be used to determine the level of improvement (or worsening) of poverty in areas provided with improved access. Include those indicators (e.g. money flow into/out of the community receiving energy access, average net household income, income inequality within the community) for long term monitoring of energy access improvement projects.

Capacity development for local governments in managing fuel purchases and distribution,

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utilities or oil company operations with the exception of Samoa where the energy unit monitors the contractual relationship between Government and the oil company contracted to provide fuel to Samoa. None of the national energy agencies has formal responsibility for any poverty-energy linkage although most are active in rural electrification programmes, which tend to benefit lower-income households.

Utility Companies in each PIC provide electric energy services primarily to urban areas and nearby rural areas that can be economically served from the urban grid.

Local level. FSM has a small state level energy office in Pohnpei state. No other PIC currently has a local-level energy office.

whereas 40 kWh/m might suffice) or have not assessed the impact of the tariff on the poor or the utility’s finances

Institutional arrangements at decentralised level for meeting local development

National utilities understandably accord rural electrification a low priority and typically extend the grid only where politically expedient or when an external agency pays the cost of the

The lack of institutions (except for Fiji) that focus on rural energy access has kept the pace of rural energy development slow.

Develop targeted finance, institutional development support and technical support for rural electrification efforts in the Melanesian countries and

The implementation of specific rural energy development processes (technical, financial and institutional) in PNG, Solomon Islands and Vanuatu.

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extension.

Only Fiji has a distinct government unit dedicated to expanding and supporting rural electrification (including grid extensions) though some countries include energy supply within general rural development agencies (e.g. Cook Islands).

Local Level: Except for Niue and Nauru where there is only central utility generation, rural areas where there is no grid supply typically manage energy on a community level through Island Councils, community committees or other local structures. RMI is developing a rural electrification mechanism that provides for technical support and general management through the utility but maintains a local administrative structure. Fiji has pilot projects (solar PV based) that contract private companies to manage the rural electrification projects (RESCO concept). The Cook Island is considering returning management of at least some rural energy delivery systems from the island authorities to the central Rarotonga utility (TAU).

Budgets for rural energy development have been too low to allow for 100% access to modern energy supplies in the Melanesian countries. In the case of PNG and the Solomon Islands, rural population appears to be increasing faster than the rate of per/capita increase of rural electricity access.

Kiribati (not required in RMI and FSM due to large EU energy projects just commencing and may not be needed in the Solomon Islands if proposed World Bank managed projects are implemented.)

Provide support to SOPAC for a rural energy development programme focused on PNG, Solomon Islands and Vanuatu. (Fiji and Kiribati have an established rural energy development modality while RMI and FSM development will come under the EU project)

Assist PNG, Solomon Islands and Vanuatu develop plans and goals for rural energy development.

Assist countries with rural islands (all but Niue and Nauru) develop improved petroleum purchasing, delivery and storage mechanisms to ensure a continuing supply of fuel at each island.

Plans and achievable goals for rural energy development using renewable and conventional energy and grid extensions are set by PNG, Solomon Islands and Vanuatu.

Island fuel needs are to be surveyed for all PICs except Niue and Nauru and adequate fuel storage is determined for each rural island that fits with local use patterns and shipping patterns. Local governments and energy offices (where applicable) in all PICs except Niue and Nauru will receive capacity development programmes to improve management of fuel purchasing, storage, fuel safety practices and fuel distribution. National governments will be encouraged to support investment in improved rural fuel storage facilities and to monitor island fuel use, storage safety and to investigate and alleviate the causes of fuel shortages that occur.

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Rural Petroleum Access: For many rural islands of all PICs except Nauru, Niue and Samoa, petroleum fuel shortages occur due to lack of management skills by local governments, storage facilities that are inadequate and shipping schedules that are irregular.

In some cases, fuel price control is supposed to be nationwide but is not effectively monitored or enforced in remote areas.

Rural biomass access for cooking and copra drying: No PIC has reported significant problems with biomass access where used for cooking or copra drying.

Where appropriate, advise on mechanisms to assure that fuel price control systems are functioning in remote areas.

Public-private partnerships Fiji and PNG are the only PICs with IPPs presently connected to the main utility grid or grids. In all PICs, the decision to accept IPPs for grid supply is solely with the utility, No PIC has specific legislation or regulations intended to support IPP development though none expressly forbids IPP development. A major problem is the lack of government regulation of IPP conditions and

There are no guidelines or sample agreements available to PICs for IPP contracting or Power Purchase Agreements (PPAs). PIC utilities do not have the analytical tools needed to determine the true financial or economic value of an IPP to the utility and therefore cannot establish a power purchase price that is fair to the IPP and helps to

The PIEPSAP project within SOPAC is developing policy and regulatory structures for the Fiji utility that includes reference to IPPs and their regulation. PIEPSAP has also suggested improvements to WB suggestions for IPP regulation in the Solomon Islands.

Countries will adopt regulations and legislation that help ensure that IPPs receive a fair power purchase contract from the national utility while also ensuring that the net cash flow of the utility will not be decreased by the acceptance of the IPP power.

Fiji will develop a large (2000+ households) “proof of concept” project for RESCO concept

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contracts. With the utility as the only possible buyer, the purchase price offered is typically well below the cost that is actually offset at the utility by the IPP generation. This specifically discourages IPP development of renewable energy resources even if the IPP generation is at a cost lower than the utility’s marginal cost of generation.

In Fiji, the Solomon Islands and PNG, the policy of maintaining a national tariff that is far below actual rural generation and distribution costs has effectively prevented the development of either state or private grid systems for the sale of electricity services to areas where the national utility (Fiji Electricity Authority, SIEA, or PNG Power) or the Public Works Department does not maintain a subsidised grid.

In Fiji the development of the Renewable Energy Service Company (RESCO) concept promised to put private technical management companies in partnership with government for renewable energy based rural

improve cash flow at the utility.

For countries that are considering private contractors for supplying small rural government stations that have mini-grids (possibly PNG & Solomon Islands), the government (PNG) and utility (SI) will need assistance in developing contracts suitable for that situation and mechanisms for regulation.

The RESCO concept in Fiji remains in a small pilot mode of about 400 households and needs verification with 2000 or more households involved.

Further programmes at the regional level to develop capacity within the utilities to understand, analyse the economics of IPP and competently negotiate contracts with IPPs are needed. Practical generic legislation to require utilities to accept IPP connections and to set rules for the terms of payment (e.g. relative to marginal cost of generation, type of power source, etc.) should be drafted and provided to PIC governments.

Through a regional programme, e.g. PIEPSAP, PIC governments should be advised of the effects of a national electricity tariff on the development of the private sector generation that is needed to improve electricity access outside the existing national utility system. Any advisory services on tariff reform should also assess the value to the utility of lifeline tariffs and advise on structures which meet the lifeline objective at least

verification, and if appropriate, modification.

Policies are put into place that allow independent, private power suppliers to charge the real cost of service to their customers. Mechanisms are put into place so that the IPPs, particularly for rural electrification, are effectively regulated in the interests of the consumer and do not abuse the system.

For all fuels except kerosene, market modality generally holds though duty free fuel is sometimes provided for diesel powered generation by the public utility (e.g. Kiribati and Tonga).

For those few countries that might still maintain an artificially low price for rural kerosene, a study should be prepared to analyse the real value of the subsidy to the local economy and the effect the subsidy has on preventing the entry of other energy forms.

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electrification (currently limited to solar PV). The concept has the public sector providing the capital investment and the private sector managing and maintaining the installations.

In all PICs there is a strong tendency for market-based pricing of landed petroleum products. Though several countries have price control laws, they are rarely if ever used to force the delivery of petroleum products below cost. The exception is that subsidies for rural kerosene do exist in a few countries and some countries subsidise the shipping cost of fuels to rural islands effectively forcing the price to the same level nationally.

cost to the utility.

Role of multilateral and bilateral organisations

The multilateral and bilateral organisations have been very important players in the institutional arrangements for providing energy and sustainable development to the PICs. In particular the ADB and the EU have provided strong financial and technical support for energy development and policy development. The World Bank has also played a role in energy development though most

Increased, honest information flow among countries in terms of project successes and project problems is needed. There is a tendency for project failures not to be made public or even claimed to be successes, a practice that encourages other countries to replicate mistakes instead of learning from them.

Countries should use the numerous meetings and forums to demand genuine cooperation and information sharing among regional energy organisations and refuse to take part in programmes that do not genuinely fit their needs.

Regional programmes are developed interactively

Programme menus are offered to countries so they can take advantage of the components of programmes that best fit their needs (as in PIEPSAP).

As was the practice in the past, sessions that are closed to non-country representatives are included in regional energy meetings to specifically develop criticisms of proposed and existing regional energy

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Pacific needs for support are too small for World Bank assistance.

The GEF has supported (and continues to support) the development of renewable energy measures, usually through UNDP or the Secretariat for the Pacific Regional Environment Programme (SPREP) although possible interventions through the ADB and WB are being developed.

UNDP and UNESCO have supported small energy development projects that fit the needs of the smaller PICs. UNDP has provided a broad range of energy sector advisory assistance.

Japan, France, Australia and New Zealand provide bilateral support for energy development.

SOPAC has been instrumental in providing support for renewable technology capacity building, policy development and in creating an environment for inter-country exchanges of experiences and development information.

With a number of regional agencies working in energy, there are “turf wars”, duplications of effort and repetition of work where results are not adequately shared.

There is a tendency for the projects to be donor - and technology- driven, particularly renewable energy projects financed by bilateral donors.

There is a proliferation of support for meetings, paper studies, reports and plans but little donor support for follow on hardware development.

There is a tendency for PICs to passively submit to whatever programmes are promoted by regional agencies whether appropriate to their needs or not.

Despite the existence of the CROP Energy Working Group (EWG) and its frequent meetings, regional programmes tend to be

with countries (not primarily developed internally by the regional organisation who then asks for country approval of the finished product) and should have programme delivery customised to fit each country’s need (as has been the case with PIEPSAP).

Programmes are designed to have long-term planned development with continuing advancement toward a specific goal even though programme segments may be funded through different mechanisms.

programmes and assess the needs for future regional programmes.

Programmes all include monitoring processes and country feedback during the implementation of the programme and post-programme independent reviews and country evaluations.

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The Forum Secretariat has for many years provided an important petroleum price monitoring service and assistance to the PICs in pricing negotiations with petroleum product suppliers. This was supported by Australia for some years but is now financed by the Chinese government.

developed and implemented in isolation and they neither progress from earlier programmes nor interact meaningfully with existing programmes.

PoliciesNational Energy Policies Although regional agencies have

actively promoted the concept of national energy policies for about twenty years, only a few PICs have actually formally adopted national energy policies and adhere to them in day-to-day decisions. Under pressure from the Forum Secretariat about ten years ago, several countries (e.g. Tuvalu, Kiribati, Niue) accepted a generic energy policy developed by the Forum but essentially ignored its application. The PIEPSAP project now underway has shifted the focus from proposing a generic policy to working with countries on policies specifically designed to fit their needs. Samoa and Fiji are in the final stages of national policy development with the support of PIEPSAP. The Cook Islands and

Palau, the largest per-capita energy user in the Pacific, does not have a national energy plan to define the role of government in the areas of energy efficiency, private energy development or renewable energy.

Nauru, Niue, Vanuatu, PNG, and Tonga have no national energy policy.

Tuvalu and Kiribati need to update and fit their unimplemeted energy policies to fit national needs and develop a strategy for their application.

The PIEPSAP project under SOPAC is addressing gaps by providing targeted assistance to each country.

Develop enforceable National Energy Policies that are accepted and endorsed at cabinet level. Prepare practical strategies and plans for their application.

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Tokelau have adopted national energy policies and strategic plans for their application. FSM is unlikely to develop a national energy policy since energy decisions are the province of the state governments. RMI has a draft policy under consideration.

Rural Electrification Policy Only Fiji has a specific rural electrification policy (established by Cabinet in 1993 and under review). PIEPSAP is assisting several countries in the formulation of rural energy policies but none have yet been adopted.

Those countries with more than 20% unelectrified households and no formal rural energy policy are PNG, Solomons, Vanuatu, RMI and FSM.

PIEPSAP to provide the support needed to develop the appropriate policies and strategies.

Develop and apply policies to rationally develop rural electricity delivery systems that promote rural development and reduce rural poverty. SOPAC to monitor the application of the policies and assist where this is not happening.

Regulatory frameworks No PIC has an effective regulatory structure for electric power external to the national utility. Fiji has a Commerce Commission to regulate tariffs but it is not fully independent with Cabinet still maintaining implicit control of tariff changes.

The lack of an external regulator for utility operations is not a problem for the small countries. PNG, Fiji, the Solomon Islands and Vanuatu utilities do lack sufficient external regulation to ensure efficient operations and minimum cost delivery of electrical power to all sectors.

PIEPSAP has prepared an analysis of the regulatory needs for Fiji and there may be follow-up from the ADB. PIEPSAP has commented on regulatory issues in the Solomon Islands. A similar study may need to be initiated for PNG and Vanuatu, depending on the extent and practicality of earlier World Bank advice to these countries.

Periodic independent review of tariff structures, regulatory structures and operations of PIC utilities, especially those of Fiji, PNG, SI and Vanuatu to be carried out.

Capacity DevelopmentEnergy Office Capacity for energy planning, policy development and project implementation

Energy office capacity varies widely among the PICs. Fiji and PNG have the largest and most professional offices with over 15

There is weakness in all energy offices in economic and financial analysis, project design and proposal

Regional energy agencies provide continuing capacity development support for project management, policy

SOPAC or other regional energy organisation maintain a training and capacity development log for all energy officers in the PICs

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full and part time employees. There is no full time energy officer in FSM, Nauru, or Niue. Most energy offices range from one or two persons (RMI, Tokelau, Samoa, Tuvalu, Palau) to a mid-group with less than 10 but more than two persons (Tonga, Solomon Islands, Vanuatu).

There tends to be relatively rapid turnover of energy officers due to the assignment mobility of the Civil Services and to emigration or shifting to better positions in regional organisations. Therefore training and human resource development is a continuing requirement.

None of the energy offices presently have significant regulatory functions and none have any oversight responsibility relating to the national utility. Their primary role is policy development, data collection and analysis, renewable energy implementation, rural energy development and to a lesser extent demand side energy efficiency programme development.

development, resource management and national energy data collection.

Energy activities in Palau and to some extent in Tonga and Tuvalu are fragmented with energy offices often not consulted when decisions are made regarding major energy projects and decisions are made by government that affect national energy policy or its application.

development, policy application, project development, funding proposal preparation, energy data gathering, data maintenance and data publication.

A regional renewable energy training project proposal, PRETI has been developed with funding from ESCAP. If funded, this would include some technical and management training programmes suitable for energy officers.

and offer training and capacity development as appropriate to the tasks assigned to those officers.

Capacities related to public There are limited capacities and In the public sector As is done with petroleum France is funding a feasibility

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private partnership (PPP) opportunities both in the public and private sectors to engage in PPP activities. The only significant opportunity is as a grid-connected IPP selling power to a utility or operating an independent grid selling to customers who cannot connect to the national grid.

An exception to the capacity limitations is cogeneration from industrial and agricultural processing facilities such as from sugar mills in PNG and Fiji. In the case of co-generation, the sale of electricity to the grid is typically considered a benefit to the company no matter what terms are proposed by the utility and profitability is not an issue. Large, well developed companies are generally involved and the capacity of management is adequate.

In Fiji, the RESCO PPP concept is being tried and appears to be sufficiently promising to warrant a larger “proof of concept” project of 2000+ installations.

throughout the Pacific, there is little experience or understanding of the requirements or capabilities of the private sector to engage in energy related PPPs. In particular the public sector tends to approach PPPs not as a partnership but assuming the senior role and refusing to negotiate terms but demanding that the private “partner” either agree to the non-negotiable terms or disengage.

On the private side, there is generally little experience with grid quality energy delivery and a lack of experience in realistically forecasting the energy production capability of projects, particularly those with renewable energy sources. There is a tendency to underestimate costs and overestimate energy to be produced. Business skills are generally limited particularly as regards cost accounting and project management.

contract negotiations, a regional agency can provide assistance with negotiations between a private party wishing to develop a grid connected IPP and the recipient utility to ensure that both parties are receiving the benefits that are necessary for a successful partnership.

Similar support can be provided to PICs that wish to develop PPPs to take over some or all generation and distribution in small government power stations, now typically operated by PWDs or provincial authorities.

The capital investment component of a proof of concept project for the Fiji developed RESCO PPP concept needs to be funded, implemented and carefully monitored. Training in business management and PV technology is needed for the private partners, the RESCOs.

study for a 2500 PV system project to prove the RESCO concept in Fiji. If the feasibility study is favourable, a project will be developed for funding.The PRETI project proposed by ESCAP will include training for small energy business development and for PV system installation and maintenance.

A regional agency, probably SOPAC, can establish an IPP development centre that includes assistance in developing the business and technical aspects of an IPP and provides assistance in negotiating with government (for a stand alone grid system) or a recipient utility (for a grid connected IPP) for the IPP contract terms.

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For the RESCO PPP concept the primary problem is development of capital finance by Government and the development of a suitable regulation mechanism for the RESCOs to ensure proper service is provided at an acceptable cost. In addition there is a need to train RESCOs in small business management and in the technical processes necessary for proper installation and maintenance of the PV systems under their control.

Knowledge management/ repositoriesModalities for knowledge sharing and transfer

Most knowledge sharing among and between PICs that relates to energy development is through regional meetings, email and websites.

Websites typically provide only a summary of the information available, not complete reports and supporting documents. Most PIC energy offices have slow dial-up Internet connections that cannot handle the large download volumes needed for the full set of documents for a project. Even some regional and international

SOPAC as lead energy agency for the region should collect and distribute full reports from regional and national energy projects in hard copy or on CD format on a regular basis (as they have recently done for gender and biofuel workshops) thereby allowing the PICs to develop an up to date, comprehensive library of

A process can be developed whereby project documents are collected from other regional agencies and PICs and made available for hard copy or CD distribution to PICs and other regional agencies. A summary of all available documents could be made available on the Internet and collections provided on demand as well as there being regular distributions of collected information to the PICs.

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organisations have rather small limits on the size of documents that can be sent or received electronically such as the headquarters office at UNESCO in Paris set the maximum email attachment size at 500kb.

Regional meetings usually have country reports as part of the agenda but the reports are typically very abbreviated and rarely provide sufficient details, lessons learned or problems encountered in projects to assist other countries in their project development.

Major projects funded by donors often do not provide for distribution of project information outside the target country (e.g. the Fiji GEF funded RESCO development project and the large solar rural electrification project by the EU in Kiribati had no process for regional distribution of information about the projects, their successes, problems and lessons learned).

energy project information and experience.

Additionally, relevant reports and information from sources outside the region should be collected and distributed in hard copy and electronic form.

Projects carried out by multilateral and regional donors should be required to provide reports and/or workshops for distribution to all PICs. (e.g. the ADB REEP project includes an end of project regional workshop specifically to disseminate information developed during the course of the programme).

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IX. ASSESSMENT AND GAPS IN PROGRAM FRAMEWORK

Program Framework with respect to poverty

and energy linkageAssessment/ Evaluation Gap analysis

Way forward


MappingPast regional programmes (1980-2000) with specific poverty and energy linkages

Programmatic linkages between poverty and energy were not specifically considered until after 2000 in the Pacific. Though the concept was implicit in most rural electrification programmes these have had negative effects on poverty in some instances.

Programmes were not explicitly focused on rural energy and poverty linkages so the results were sometimes to reduce poverty and sometimes they increased it.

There has been little or no monitoring of the effects on the recipients of regional energy programmes on the recipients as regards poverty and energy links.

Review past regional energy programmes and focus on the effect on poverty that they have had. Develop an understanding of the programmatic factors that determine whether poverty conditions are improved, unaffected or worsened by regional energy programmes.

Sponsor a review of regional programmes from 1980 to 2005 to examine their effects on poverty. Use the results to prepare a compendium best and worst practices for regional energy programmes regarding their impact on poverty reduction.

Recently completed (2000-2005) regional programmes with specific poverty and energy linkages.

The PREFACE programme (France-Australia 2000-2004) developed renewable energy rural electrification projects in Vanuatu, Tonga, RMI and the Cook Islands. The projects all included components of poverty reduction, particularly in Vanuatu where community facility electrification was a major component. All the PREFACE projects included consultations with recipients to ensure that the projects would

Despite extensive consultations with recipients in the PREFACE project, project effects have not followed expected paths in all instances. In RMI the recipient’s expectations (and actual access to cash) turned out to be far higher than anticipated in the project design and the energy available from the solar PV systems has been insufficient to run the video

Review past regional energy programmes and focus on the effect on poverty that they have had. Develop an understanding of the programmatic factors that determine whether poverty conditions are improved, unaffected or worsened by regional energy programmes.

Sponsor a review of regional programmes from 1980 to 2005 to examine their effects on poverty. Use the results to prepare a compendium best and worst practices for regional energy programmes regarding their impact on poverty reduction.

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have a positive impact on the recipients lives.

The GEF funded Fiji Renewable Hybrid Energy project (ongoing) originally was intended to develop the concept of rural electrification through private operation of hybrid mini-grids but that concept was determined early in the project to be uneconomic (due largely to the requirement for a national tariff for government/utility operated power systems) and the focus shifted to development of independent power systems through a Public Private Partnership (PPP) concept for Renewable Energy Service Companies (RESCOS). The concept was fully developed regarding institutional and technical design with a pilot project using solar PV implemented in Vanua Levu.

An EU project (1999-2005) to increase the scope of the Kiribati SEC solar rural electrification programme from three islands (325 households) to 18 islands (2000+ households and 160+ public meeting houses) is intended to improve the quality

systems and other appliances purchased. This has clearly been frustrating to the recipients and has resulted in non-payment of fees and appears likely to result in a lack of sustainability.

The Fiji RESCO pilot project has had extensive technical monitoring by the contracted RESCO operator but to date there has been no monitoring of the linkages between the project and poverty. The ongoing rural electrification survey funded by UNESCO and ESCAP that includes an examination of the uses of energy in DoE sponsored rural electrification projects will include the initial RESCO pilot project operating in Vanua Levu and conclusions regarding income generation and rural energy can be reached for Fiji.

Though in 1998 there was an EU review of the 1994 EU project that funded the expansion of the Kiribati

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of rural life in Kiribati for affected households.

The EPC/UNDP CocoGen project for Samoa includes coconut resource assessment and concept development for power generation using coconut oil on the rural island of Savai’i.

Various small, national projects (FSM, Palau, Tonga,, RMI, Cook Islands, Tuvalu, Fiji) for rural electrification have included poverty alleviation as stated goals but the projects are too new to know their actual effects.

SEC PV electrification programme to three islands (325 households) the review focused on technical quality and sustainability, not on poverty links. There have been no specific surveys of project recipients focusing on the effect of the project on poverty.

Major regional energy programmes in progress or in the pipeline intended to result in improved energy access or poverty reduction

The GEF and UNDP funded Pacific Island Renewable Energy Project (PIREP) is in the final stages of completion. PIREP is intended to prepare for GEF Full Size Project to increase penetration of renewable energy in the Pacific for greenhouse gas reduction. The PIREP project prepared baseline reports on PIC energy emphasizing renewables and determined barriers to the rapid deployment and large scale use of renewable energy in the PICs. The project was important to poverty-energy linkages mainly through its baseline

No pipeline projects specifically include poverty energy link monitoring and evaluation.

Include poverty and energy linkage monitoring and evaluation in new projects.

The REEP and EU projects can include specific components for monitoring of project effects on poverty. These will need to include a baseline survey as well as ongoing monitoring of project effects on poverty.

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studies of the energy economies of the PICs, but there was no direct focus on poverty.

The ADB Renewable Energy and Energy Efficiency Programme for the Pacific (REEP – 2004-2006) focuses on enabling the private sector with poverty reduction through improved energy access and energy efficiency a stated goal. Projects being developed under REEP include an 11 MW community owned hydro IPP in Fiji, electrification of a remote Fiji island (Rotuma) using locally produced coconut oil as a fuel, coconut oil as a fuel for a 3 MW grid system in Samoa which will help to rehabilitate the failing coconut industry and preparing an enabling environment for the private sector delivery of energy efficiency services through Energy Efficiency Service Companies (EESCOs) both in Fiji and in Samoa.

An €11 Million EU funded project for developing renewable energy and energy efficiency in Palau, FSM, RMI, Nauru and Niue will commence in late

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2005. This project has poverty alleviation as a stated overall objective.

Various small national projects are ongoing for rural energy access using renewable energy that are expected to improve rural quality of life (Samoa, Fiji, RMI, Palau, Tonga, Tokelau, Cook Islands)

Public-private partnerships PPP type energy projects are new to the Pacific. The Fiji RESCO project and the REEP community hydro IPP have PPP components.

There is little experience with PPPs. In particular the private partner in IPPs remains the minor partner with the public sector setting the terms of purchase of energy unilaterally without negotiation and with no consideration of the socio-economic effects of the PPP on either party.

Develop guidelines for power purchases from IPPs that considers marginal cost of power to the public utility, poverty alleviation effects, power reliability effects, capacity offset for the public utility, cash flows for both partners and national development effects.

PIEPSAP and ADB both are well positioned to provide assistance to governments in the preparation of IPP policies and guidelines.

Role of multilateral and bilateral organizations

The majority of rural energy development projects in the Pacific have been funded through multilateral and bilateral agencies. Major donors have been UNDP, GEF, UNESCO, France, Canada, USA, Japan, Australia, New Zealand, China, Taiwan, ADB, World Bank, ESCAP. In addition, Denmark, the Netherlands and Finland have contributed funds that have been used by ADB, UNDP and

Though programme implementations are usually reasonably well coordinated, their creation is not and there has been a recent proliferation of “soft” programmes for barrier reduction, capacity building, poverty reduction, etc. that have not included or resulted in “hard” on-the-ground projects that actually provide development

Pacific regional energy organisations (SOPAC, FS, SPREP, PPA) should work together through the Energy Working Group (EWG) to develop a long-range donor assistance programme plan that includes planned development and coordination of major Pacific donor programmes so that “hard” and “soft”

The usual planning process coordinated by NEDA, through the respective donor arrangements, can use the identified needs, priorities, targets and timetable of the component program on access to energy for poverty reduction.

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UNESCO for energy development in the Pacific.

results. In the past the opposite has occurred (e.g. the Lome II Pacific Regional Energy Programme) where hardware implementation was carried out with little or no long term capacity building or analysis. There needs to be a balance between “hard” and “soft” programmes and they need to be developed in a planned sequence for best effect.

components are implemented in a manner than is synergistic rather than in isolation.

PoliciesRole of policies in energy programme development and implementation

Existing energy policies have an effect on the design of energy programmes but do not provide specific programme guidelines or coordination.

Most PICs governments include an aid coordinating function, usually in the form of a committee or office in Finance or Foreign Affairs. The aid coordination effort is intended to ensure that aid is directed along he lines of government priority which is to some extent determined by energy policy

There are no PICs with specific energy programme policies other than those implicit in overall energy policy.

Consideration can be given to developing policy structures that prioritise, structure and coordinate energy programmes with the intent of avoiding duplication, of addressing national priorities and avoiding cross sectoral conflicts in energy development.

PIEPSAP is well positioned to examine the need and, if there is determined to be a need, to assist in the development of energy programme policies by the PICs tailored to the specific needs of each country.

Capacity DevelopmentCapacities for designing programmes related to energy service delivery for

The capacity within energy offices and utilities to design programmes related to energy

There is a general lack of programme design capacity in the PICs for developing

Continue and expand the programmes for capacity building in PIC energy

SOPAC has a small programme to assist PICs in energy project development. Capacity

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meeting poverty and gender concerns.

service delivery for meeting poverty and gender concerns varies widely among PICs but in general is not high. The quality of energy project documents provided to donor agencies by PICs is often poor and do not include proper economic analysis, realistic budgets for time and money, background study, etc.

energy service delivery for meeting poverty and gender concerns.

offices for programme design but add specific training relating to energy poverty and energy gender linkages.

development components of the proposed PIGGAREP project include capacity development for programme design. These should be coordinated and developed to include capacity building for programme development relating to poverty and gender linkages to energy.

Knowledge management/repositoriesExisting documentation of programs at national and local levels.

Regional projects in the Pacific have generally been well documented regarding project parameters, project implementation and post-project reviews. Regional agencies retain those reports in their repositories and often provide links to them on the Internet.

There has been almost no documentation of the actual effects of regional energy projects in the areas of poverty and gender.

Distribution of regional programme documentation is typically limited to access on request for PICs that were not recipients under the programme.

Post project surveys extending well beyond formal project conclusion that focus on poverty and gender links to energy.

Distribute all regional energy project documents to all PICs through CDROM or hard copy.

SOPAC can develop a comprehensive energy programme documentation dissemination programme that in essence duplicates the SOPAC energy resource in all PICs through CD or DVD ROM in order for all PICs to have immediate and full access to programme documents and analyses.

Develop surveys in each PIC to determine the linkages between energy programmes in the PICs on poverty and gender.

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X. ASSESSMENT AND GAPS IN ACCESS TO ENERGY

Access to Energy Services with respect to poverty

and energy linkageAssessment/ Evaluation Gap analysis

Way forward


MappingAccess to energy services Electricity:

The PICs can be divided into three groups relative to rural access to electrical energy:

Over 90% electrified:Niue, Cook Islands, Nauru, Palau, Tonga, Samoa, Tuvalu, Tokelau

50% to 80% electrified:Fiji, RMI, FSM

Less than 50% electrified:

PNG, Solomon Islands, Vanuatu

In all PICs urban and peri-urban areas are fully electrified. Urban grids usually extend some distance into rural areas but utilities are reluctant to extend into rural areas since the return on investment is usually negative.

Petroleum:All PICs have open market access to fossil fuels in rural areas. There may be shortages from time to time as storage

For PNG and Solomon Islands and to a lesser extent for Vanuatu, access to energy has been slow to develop due to a fragmented social structure, land tenure issues, unstable politics, and often a low priority for energy access development relative to other services, such as education, health, water and sanitation.

Fiji has an active rural electrification policy but the annual budget is insufficient to meet the demand by villages for electrification. In an attempt to accelerate rural electrification, the RESCO concept was developed to engage the private sector in the process of energy delivery for rural areas (in a RESCO programme, government purchases and owns energy equipment and leases it to private companies for

Develop financing processes for Fiji RESCO development.

Develop programmes to electrify rural health and education facilities in Melanesia and in those relatively few sites in the other PICs where health and education facilities are not already electrified by solar, diesel or grid connection.

Develop financing mechanisms that allow rural households with money income (plantation workers, government employees, shop owners, etc.) to obtain solar PV or personal generators.

The proposed World Bank program for Melanesia includes the development of financial mechanisms for rural energy access though the form it will take is not yet decided.

SOPAC should develop a project and seek donor financing for the electrification of all rural schools and health facilities that do not yet have services and to work with the PICs to develop the support and maintenance structures needed in each PIC for their sustainability. The EU is proposed as a possible donor e.g. via the coming ACP-EU Energy Facility. Electrification should extend to the homes of the health and education staff.

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reserves are usually small and deliveries not always on time.

In the Solomon Islands and PNG, little petroleum fuel is available in the most remote islands or interior areas or is extraordinarily expensive as it is flown in.

installation and maintenance. The companies make their profit from user fees that are of the same order as the cost of replaced kerosene for lighting and dry batteries for radios and other devices.). The RESCO programme is also stalled due to a lack of finance.

PoliciesExisting policies for energy service provision

All PICs claim that rural energy services are an important part of their development activities though in the case of Melanesia, the energy services are generally considered less important than the significant health, education, water supply and sanitation work that remains to be completed.

Only Fiji has a specific policy promoting access to electrical services for rural villages but budgetary support has been inadequate to keep up with the demand for new electrification.

RMI has an effective policy that is generally adhered to but it is not formally accepted as policy. The same is the case in Samoa expressed through the government’s rural

The FSM States, PNG, the Solomon Islands and Vanuatu do not have well defined access to energy policies.

Provide assistance in energy access policy development, strategy and planning for the FSM States, PNG, Solomon Islands and Vanuatu.

PIEPSAP is currently working with those countries/states on energy policy development and should ensure that access policy is considered for inclusion.

Policy development is expected to be a component of the World Bank projects proposed for Melanesia and energy access policy development should be a component.

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electrification program (that has been in force since 1989).

Kiribati has a stated policy that rural electrification will be by solar energy but requires donor funding to increase the penetration of electrification (it is now about 20% of rural households)

Capacity DevelopmentCapacities related to provision of energy services

Rural energy delivery is usually managed and maintained by local residents (except for larger government station power systems that are typically operated by government agency technicians).

The technical and business management capacity of rural residents is usually very limited and improvement in operation and maintenance skills, accounting and record keeping skills and general management skills can greatly benefit the quality of rural energy delivery.

Rural power development often is subject to the same licensing and standards as urban power though simplified standards and licensing can be adequate for small scale grids with a single generation source.

Periodically provide rural energy suppliers with training in maintenance and system business management.

Examine the rural electrification standards and licensing systems and simplify where safety is not affected. High reliability is less important than simplicity of design for rural village electrification.

The Fiji DoE under the 1993 Rural Electrification Policy provides periodic training, usually on site, for the rural power systems DoE has installed (village scale diesel grids, small hydro or solar PV). This programme should be considered for replication by other PICs that have large numbers of independent village power systems but no capacity building process that considers the need for repetitive training for new personnel and upgrading of the skills of existing rural energy technicians and managers.

SOPAC should work with the PICs and utilities to develop simplified standards and licensing procedures for small scale, independent grids for rural electrification referring to similar

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and energy linkage


work carried out in developing countries around the world.

Knowledge management/repositoriesModalities for knowledge sharing and transfer

There has been almost no information compiled in the Pacific with respect to poverty and energy linkages. Information on the subject is spread thinly among many documents, authors and locations.

The Fiji DoE rural electrification survey funded by UNESCO and ESCAP now in progress is expected to yield some of the first field data on the subject.

There is no program framework for integrating documentation of successful energy services and poverty reduction activities.

There are many NGOs, government agencies and international agencies working in the PICs in the area of poverty reduction. Their work, as it relates to energy linkages, needs to be compiled and shared among the PICs.

SOPAC, with the support of the Pacific UNDP offices, should collect and publish (CDROM and hard copy) all the available information regarding Pacific energy-poverty linkages.

Funding made available for the development of PIC rural energy surveys to ascertain the actual uses of energy in rural areas focusing on those that could reduce poverty.

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XI. ASSESSMENT AND GAPS IN TECHNOLOGY EFFICIENCY AND FUEL OPTIONS

Technology Efficiency and Fuel Options with respect to poverty and

energy linkageAssessment/ Evaluation Gap analysis Way forward

Mechanisms ModalitiesMappingInstitutions for the dissemination of modern technologies/fuels

Petroleum. In all the PICs, the international oil companies operate in a market based environment. The PIC markets are too small to have significant leverage with the oil companies. Samoa, Tuvalu, Kiribati and Niue contract for the supply of fuel from a single international supplier. Niue and Kiribati distribute fuel through a local structure not directly affiliated with any oil company. The other PICs allow the oil companies to maintain their own wholesale distribution system within the country and usually retail distribution as well. FSM, PNG & the Solomon Islands have locally-owned distributors that supply a small part of the market.

PNG is the only PIC with an oil refinery but it is controlled by the major oil companies. No PIC owns tankers to transport oil

Electrification. PNG, the Solomon Islands and Vanuatu have major social, financial, political and institutional constraints that have prevented the rapid development of rural electrification services.

In most PICs infrastructure for rural energy development is greatly dependent on the availability of donor funds for the small countries and soft loans for the larger PICs.

In the larger PICs (Fiji, Vanuatu, SI & PNG), many rural electrification projects have been implemented (diesel, microhydro, solar PV) but the governments have limited knowledge regarding their performance, real costs of operation,

General. The EU will be providing FSM and RMI with more than US$1.5 million each for the development of rural energy supplies. The existing utility structure will be used for the delivery of rural energy services though renewable energy will be the energy source.

The World Bank has a large new project in PNG that is expanding to the Solomon Islands, Vanuatu and Fiji to support the finance of rural energy development and poverty alleviation through energy access.

Rural electrification.

In order to effectively expand sustainable and

It is assumed that the EU and World Bank programmes will include the development of sustainable approaches to rural energy provision and a process for the monitoring and evaluation of the progress of improved access for rural households in FSM, RMI, PNG, Solomon Islands and Vanuatu.

SOPAC should further develop its outreach programme for the development of coconut oil as a diesel fuel replacement bringing in external expertise from France, the Philippines and India to assist in the development of a comprehensive regional programme.

SOPAC has undertaken a coconut resource assessment for Samoa (and possibly Rotuma) that can be expanded to include PNG, Solomon Islands, Vanuatu, FSM, RMI, Fiji, Tokelau, Tuvalu, and

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Mechanisms Modalitiesfrom overseas though Kosrae (FSM) did for some years.

LPG is generally imported and distributed privately on a free market basis.

Electricity. Except in Tuvalu, Niue, Tokelau and Nauru, the electricity supply institutional structure is split between urban and rural service delivery. Except for Kiribati (government-owned SEC) and Fiji (DOE), no PIC has a specific agency devoted to rural electrification development. In most PICs rural electrification is carried out by many public and private agencies, often in an uncoordinated manner.

The PICs can be divided into three groups relative to rural access to electrical energy:

Over 90% electrified:Niue, Cook Islands, Nauru, Palau, Tonga, Samoa, Tokelau, Tuvalu

50% to 80% electrified:

extent of maintenance, and even if they are operational. This makes it difficult to effectively plan and implement rural electrification programmes that are cost-effective, sustainable and provide a quality service to low-income people.

Biofuels.

In general, there has been little analysis of the technical, financial, economic, social, or environmental costs and benefits of a large-scale biofuel programme in any PIC except to some extent Samoa via technical assistance and preparatory work in these areas supported by ADB and UNDP.

There has been no study of mechanisms to establish biofuel industries in a manner that is likely to benefit the low-income rural

affordable rural electrification (whether diesel, microhydro, solar or other) a rigorous study should be carried out throughout the PICs on the actual costs of electrification from diesel systems to establish a baseline cost against which others can be compared. This is being done currently in Fiji via the study funded by UNESCO and ESCAP but costs and experiences in other PICs may differ.

Biofuels.

For Fiji, RMI, FSM, Tuvalu, Samoa, Tokelau, Vanuatu, Solomon Islands PNG and Tonga (with relatively low rural cash incomes) the development of coconut oil or palm oil as a diesel fuel replacement has great potential for rural income generation and a lower rate of greenhouse emission growth. A major

Tonga if finance can be made available.

Fiji’s DOE is developing its regulatory, monitoring and technical capacity to support PV based rural electrification through RESCO based PPP structures. Draft legislation has been prepared to provide a strong legal basis for RESCO development in Fiji.

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Mechanisms ModalitiesFiji, RMI, FSM

Less than 25% electrified:

PNG, Solomon Islands, Vanuatu

Biofuels. In Fiji a high level committee has been formed to examine the feasibility of large scale development of biofuels, both ethanol for blending with petrol and coconut oil (or palm oil) as a diesel fuel replacement with the intent of revitalising the weakened coconut industry and saving the long-established and economically important sugar industry from possible collapse.

Vanuatu has taken steps to legitimise and encourage the development and use of coconut oil base biofuel and a small biofuel industry is in place. In the Solomon Islands, the electricity authority is seriously studying (with World Bank assistance) the use of coconut oil for power generation.

Samoa is further advanced than other PICs in assessing coconut

people who will produce the feedstock.

Solar energy.

Except for Fiji, Tonga, Kiribati and possibly RMI solar PV-based rural electrification management and maintenance mechanisms are inadequate.

regional programme to support the development of biofuels, particularly those based on coconut oil, needs to be undertaken that would support information dissemination, provide technical advice, provide project development advice, assist in locating project finance and coordinate biofuel activities among PICs.

In Fiji, a successful biofuel industry might retain current levels of rural employment – or reduce the loss of rural jobs in the sugar industry – and help stem the apparently widening wealth gap between urban and rural people.

In some other PICs, there is immediate technical potential to reduce diesel fuel use by 20% or more (e.g. FSM, Samoa. Tokelau, Tuvalu) by utilising uncollected

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Mechanisms Modalitiesoil for use in for large-scale power generation.

Solar energy. Solar energy is the primary rural electricity supply source for Kiribati through the SEC and plans are in place to replicate that process in RMI through the MEC. Fiji has identified a need for major solar based rural electrification that could potentially reach 12,000 or more presently unelectrified households under their RESCO PPP concept. Tonga has nearly 1000 rural homes electrified by solar energy using a regional committee based management structure.

Small scale solar powered rural electrification is present in FSM, Palau, Vanuatu, Solomon Islands, and PNG but development has been ad hoc and generally donor driven.

Private solar PV installations are present in some rural areas of the Cook Islands where pearl farms provide substantial local income and remote parts of PNG where

coconuts but this assumes that petroleum prices remain at (or reach) high enough levels, relative to diesel fuel, to encourage nut collection.

France is preparing a feasibility study as a prelude for possible finance of a “proof of concept” project for the Fiji DOE sponsored RESCO PPP structure.

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Mechanisms Modalitiesdiesel fuel is extremely expensive, often flown in.

Samoa and Tokelau have grid based solar electrification projects in the pipeline and under implementation respectively (15,000 Wp and 10,000 Wp respectively)

Rural diesel gensets. Diesel based rural electrification is common in all PICs with a large number of diesel based village systems installed in Fiji under their 1993 Rural Electrification Policy. Diesel powered rural electrification in PNG, Solomons and Vanuatu has focused on government developed diesel mini-grids for provincial centres, private systems associated with religious missions and rural industry such as sugar mills, plantations, mines and forest product mills.

Energy Efficiency improvement progress

Supply side. Supply side energy efficiency has generally improved over the past decade though most PIC utilities still

End use energy efficiency can be improved by approximately 10% (e.g. Tonga) to 50% (Nauru)

Supply side.

The PPA offers supply side advisory assistance to its

ADB, World Bank and SOPAC will work together to provide financial guarantees, capacity building for private technical

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Mechanisms Modalitieshave technical and non-technical losses totalling more than 10%. Programmes focusing on supply side improvements have been delivered by the ADB, PPA and internally in the larger utilities (notably Fiji and PNG).

Demand side. Progress in improving demand side energy efficiency has been poor with no PIC making more than token DSM effort . SOPAC has carried out a UN-funded small energy audit programme in Fiji and Samoa and to a lesser extent the Cook Islands, but the programme has been too small to have provided national benefits and there is no indication that it will be replicated locally.

The ADB Renewable Energy and Energy Efficiency Programme for the Pacific (REEP) is developing a comprehensive programme in Samoa and Fiji for industrial and commercial energy efficiency improvement through the support of private EESCO operators. If the programme

cost-effectively. There are no current programmes underway in any PIC that can be expected to provide even 1% savings in overall fuel or electricity use through efficiency improvement.

Consumer information regarding energy efficiency for household energy use is available but distribution has been very poor and the impacts are unlikely to be more than temporary unless information dissemination efforts are repeated periodically.

The PIC utilities typically make token efforts to improve demand side management as it is usually stated government policy. Except in times of energy shortages (recent drought in Fiji for example) there is little but lip service given to DSM information delivery or in financing efficiency improvement programmes.

members.

The World Bank is proposing a GEF-supported energy financing mechanism for Fiji, the Solomon Islands, PNG and possibly other PICs that includes a supply side component for the power utilities.

Demand Side.

For Fiji, PNG, Cook Islands, Samoa and Tonga, there is a sufficiently developed technical private sector to support ESCO type of energy efficiency activity if externally supported capacity building and risk abatement measures can be developed.

The proposed REEP EESCO programme has focused only on Fiji and Samoa and includes capacity development programmes for technical companies and finance

businesses, capacity building for local finance institutions and market development in both the industrial and commercial sectors.

SOPAC assist PIC energy offices in the preparation of radio, TV and printed information packages on household DSM. Assist in the location of finance for the continued distribution of the information through local media.

Provide workshops and programmatic development for the PICs for appliance labelling, the development of import controls relating to energy efficiency of vehicles, air conditioners and major appliances (e.g. added import taxes on lower efficiency equipment)

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Mechanisms Modalitieseventuates, it will provide turnkey energy efficiency improvement services with payment based on the level of savings achieved.

The Fiji DOE has been working with the Australian Greenhouse Office to develop and implement refrigerator, freezer and air conditioner energy labelling and efficiency standards but none have yet been implemented.

Samoa supported via REEP is establishing an energy efficiency working group intended to restructure government activities to promote end-use energy efficiency.

Interviews with large commercial electricity consumers in Fiji suggest some willingness to invest in DSM if cash outlays are low and the advice provided is believed to be neutral and the analysts competent. They feel that currently neither is often the case.

institutions, a risk abatement fund to guarantee energy efficiency implementation loans and other support for EESCO development. The programme, if successful, should be extended to PNG, Cook Islands and Tonga. The market is too small in the other countries to sustain private EESCOs for energy efficiency improvements.

PoliciesPolicy trends that facilitate leapfrogging the energy ladder from low efficiency and environmentally unfriendly technologies/fuels to highly efficient and environmentally friendly technologies/fuels

National energy policies in place and those under development with the assistance of PIEPSAP all include preferential use of renewable energy and the reduction of the environmental impact of energy production and use. The actual commitment to these policies varies widely.

Even where appropriate policies

The main gap is not so much in the development of policies that provide preference to renewable energy development, improved efficiency and environmental suitability, the gap is in the commitment by governments to carry out the policies. This is partly due

The PIEPSAP project is committed to assisting PICs develop their own energy policies and to help decision makers develop the necessary practical strategies and plans for policy implementation.

However, without genuine understanding of

Through external technical assistance by PIEPSAP and other policy development programmes, PIC governments will develop and commit to energy policies that fit the country’s situation and needs.

A regional organisation collects energy information and provides an annual report that ranks the

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Mechanisms Modalitieshave been endorsed at Cabinet level, there are generally no legislative tools or regulations to implement them.

There is generally no incentive, either supportive or punitive, for the power utility or a private sector developer to choose efficient and environmentally appropriate solutions.

to generic policies having been developed by regional agencies rather than by the countries themselves and partly due to a lack of understanding by decision makers of the relative benefits of non-conventional energy development.

There is a lack of understanding in the rural areas of the relative advantages and disadvantages of the competing forms of rural energy supply. Presently the rural market in most countries (Kiribati excepted) is focused on grid based, diesel powered energy supply and other forms such as solar PV are not understood.

For many PICs, there is unfortunately a large gap between the forceful statements made at international forums regarding renewable energy, energy efficiency and

opportunities and costs at Cabinet level, policies will remain unimplemented. Some mechanism is needed to reach the PIC leaders, perhaps through the Forum. For many years, there has been no serious consideration of energy issues at Prime Ministerial level at the Forum (e.g. this was also the case at this years meeting in PNG despite the all time high oil prices) or other venues (such as EWC’s leader’s forums).

PICs according to their demonstrated commitment to their national energy policy during the previous year emphasising areas where actions have conflicted with policies.

Energy issues, opportunities and the costs to the PICs of inaction on policies are discussed at the annual Forum or other meeting of the region’s heads of government.

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Mechanisms Modalitiesenvironmental sustainability and the actual actions taken domestically (e.g. Tuvalu).

Capacity DevelopmentPublic sector capacity for improving energy access.

Energy access, both electricity and liquid fuels, is nearly 100% available in Niue, Nauru, Tonga, Samoa, Tokelau and Tuvalu.

The capacity (both in terms of human and financial resources) is limited in the rest of the countries. Fiji and Kiribati have well developed rural electrification programmes that are mainly capital limited though some human resource capacity development would be of benefit particularly as regards management of projects. RMI and FSM have little capacity in place for rural energy development.

The public sector capacity for arranging regular deliveries of fuels to remote areas is limited as the ocean transport systems run by governments in the region are often unreliable particularly with fuel deliveries since there

PNG, Solomon Islands, Vanuatu, RMI and FSM have insufficient human and capital capacity to develop rural energy access at a rapid rate. [

In these countries, an effective mechanism for planning, financing, maintaining and otherwise supporting rural electrification systems has not been put into place.

The upcoming EU projects for FSM and RMI should help in improving the public sector capacity for rural energy access provision. The current World Bank programme for the Solomon Islands SIEA includes components that address capacity development for rural energy electrification improvement. The WB may have interventions in PNG that do the same.

The GEF pipeline project PIGGAREP includes capacity development for renewable energy development in both public and private sectors for most PICs that are eligible for UNDP assistance. Similar interventions have been proposed for Palau and RMI, that have opted out of

The EU and World Bank projects focusing on FSM, RMI, PNG, Solomon Islands and Vanuatu should include capacity development for the public as well as private sectors in electricity access improvement.

In PNG, the government needs to decide whether the energy office or a rural electrification authority (as proposed by several agencies) is appropriate for improving electrification at C centres and beyond, and support the agency appropriately.

PIGGAREP should specifically address capacity gaps in PICs relating to renewable energy development for rural electrification

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Mechanisms Modalitiesare safety issues regarding type of cargo, passengers, and volume of fuel transported.

In PNG, with about 90 small power systems (called C centres) at rural government stations, the ability of national and provincial government authorities to maintain the provision of electricity has generally been very poor.

PIGGAREP in favour of national programmes.

Private sector capacity for rural energy entrepreneurship

There is significant opportunity in Fiji and PNG and Vanuatu (though to a lesser extent) for rural energy access development through private sector involvement though the involvement would not be by rural entrepreneurs. The market has been poorly developed to date but shows promise based on a few small rural energy development projects implemented through the private sector in PNG.

In Fiji, success of the RESCO PPP concept depends on the private sector having the capacity to install, maintain and

The rural market for energy services in PNG, Solomons and Vanuatu remains poorly developed and the private sector does not see a major opportunity.

In Fiji, there is only one company with RESCO experience. More will be needed if large scale RESCO operated rural electrification takes place.

Develop the rural energy market in PNG, Solomons, Vanuatu and Fiji through micro-finance mechanisms, information and marketing programmes and development of local maintenance capacity. The marketing focus should be on shop owners, plantation labourers, government employees and others in the local workforce. NGOs should be engaged in the process.

In Fiji, workshops for RESCO capacity development will need to

The World Bank programme for PNG, Solomons, Vanuatu and Fiji can provide the necessary support for the development of micro-finance and rural marketing of energy systems through NGOs and private sector businesses.

The Fiji DOE can follow the business development workshop pattern that was used in the 2003 Fiji GEF funded project for RESCO development. Local trainers in business management and PV technology are available to deliver the training.

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Mechanisms Modalitiesprovide customer support for individual solar home systems in rural areas. Some capacity has been developed but for large scale implementation, much more capacity will be needed.

be provided for capacity building prior to large scale RESCO managed project implementation.

In Fiji, PNG, SI, Vanuatu and possibly other PICs, it may be appropriate to develop legislation and regulations which allow IPPs to provide energy to remote locations and government stations with mini-grids to local communities. An effective regulatory mechanism is important.

Private sector capacity for energy efficiency improvements.

There is some technical capacity present in the larger urban centres of Fiji and PNG for the implementation of industrial and commercial demand-side energy efficiency improvement interventions.

The proposed ADB REEP “Energy Efficiency Service Company” (EESCO) development project includes capacity development for businesses in Fiji and Samoa to

There is little capacity present in the PICs for the development of private sector businesses focused on energy efficiency improvements.

Financial institutions have little experience with energy efficiency improvement finance and do not understand the risks involved and therefore are unlikely to provide finance

Focused, high level training to be provided to technical businesses (e.g. engineering consulting companies) for the auditing, intervention design, component specification, installation and maintenance of energy efficiency improvements.

Education provided for financial institutions regarding the finance of

The EESCO project proposed under the REEP for ADB and/or GEF funding will include capacity building for EESCOs themselves, for government and utility staff, for financial institutions and for the industrial/commercial market.

The Fiji DOE should provide training workshops for potential RESCOs to develop the technical and business skills needed to install, manage and maintain the

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Mechanisms Modalitiesdevelop the technical capacity for industrial and commercial energy efficiency interventions.

A limiting factor for the improvement of demand-side energy efficiency in the PICs is a lack of capacity at financial institutions to finance efficiency improvements. The lack of capacity is primarily the result of a lack of understanding of the risks for efficiency improvement finance.

The awareness is low in the industrial and commercial sector regarding the options for energy efficiency improvements and of their potential cash flow benefits. There is probably somewhat more awareness in the hotel industry as energy costs are a greater percentage of operating costs than in most other PIC industries.

on acceptable terms.

The market for energy efficiency improvements in industry and commerce is poorly developed.

energy efficiency interventions.

Training to be provided to RESCO candidates for Fiji rural electrification expansion.

Information delivery programmes directed toward the industrial and commercial markets to raise the awareness of options, costs and benefits available through energy efficiency improvements.

rural PV installations under their control.

The World Bank proposed GEF energy financing project for PNG, Solomon Islands, Fiji and possibly other PICs should consider energy efficiency capacity development and risk reduction funds as part of their programme.


In general, there is very limited availability of up-to-date,

There is no programme for integrating documentation

CD distribution of information regarding

SOPAC should develop a monthly CD based information

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Mechanisms Modalitiesrelevant and honest/neutral information on appropriate energy sector technologies and approaches which might help the PICs develop sustainable energy delivery systems for the bulk of the poor population. There are no effective mechanisms for widely sharing information that is available.

Some case studies on energy and poverty linkage and gender equity have been documented and shared in some conferences in specific PICs and the region and in the areas where the projects were implemented.

on technology and fuel options in support of energy services and poverty reduction activities.

Where information does exist in government institutions or utilities, it is not widely available to the public or even other decision-makers.

Where information is available in websites, only a small percentage of Pacific Islanders, and in some countries officials, have reliable and affordable Internet services and can access it

technology choice and energy efficiency is preferred over web based services because of the limited Internet access often available to individuals and government offices in the PICs.

dissemination service with staff collecting information relative to energy in the PICs from all available sources and putting them onto CDROMs for mailing to Energy Offices.

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XII. ASSESSMENT AND GAPS IN ENERGY-BASED ENTREPRENEURSHIP

Energy-Based Entrepreneurship

with respect to poverty and energy linkage

Assessment/ Evaluation Gap analysis Way forward

Mechanisms ModalitiesMappingSmall and medium sized enterprises (SMEs) and micro-enterprises in relation to energy service provision and use

Fiji and PNG have a number of small businesses that sell and install solar PV, small hydro equipment and other rural energy technologies. A few also exist in RMI, Solomon Islands, Tonga and the Cook Islands though there is a high turnover in the smaller countries with rural energy businesses typically lasting five years or less. These are not rural businesses, they are based in urban areas through their target market is usually rural.

Tonga, Fiji and PNG have solar water heater assemblers or manufacturers that are small renewable energy businesses with primarily urban sales.

A number of owners of private generators provide electricity for a fee to neighbouring homes or businesses in rural areas of

Knowledge about rural energy based SMEs is largely through word of mouth or personal observation. There is no structure in place that gathers such information outside of Fiji where an energy use survey funded by UNESCO and ESCAP of around 60 communities is presently under way with one of the goals a determination of the uses of rural energy for income production.

Rural energy surveys like the one being carried out in Fiji should be carried out for all countries to determine what PIC rural SMEs do to generate income that depends on the availability of modern forms of energy.

A regional agency should locate or provide funding support for rural energy use surveys in all PICs. Surveys should include the collection of gender differentiated energy use information.

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Mechanisms ModalitiesMelanesia.

In most rural areas of PICs, a common small rural business that requires an energy supply is showing videos for a fee (either cash or in some cases coconuts). The business may be powered by a portable generator or batteries charged from solar PV.

The pilot RESCO in Fiji is a small business but it is not yet a truly commercial entity. The pilot project is too small for profitability and operations are subsidised by the Department of Energy in Fiji.

In countries with a demand for biomass in urban areas (e.g. in Tonga, Fiji, Samoa and the Cook Islands where the traditional underground oven style of cooking is used for special occasions even in urban settings and in PNG, Vanuatu, the Solomon Islands and Fiji where there is significant wood use for day-to-day urban cooking) a small energy business is the harvesting, bundling and sale of

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Mechanisms Modalitiesfirewood to urban customers.

Institutional mechanisms related to incorporation of entrepreneurial and business concerns in rural energy service delivery

No PICs have special programmes for the finance, advisory services or other active support of rural SMEs for the provision of energy access or rural energy entrepreneurship in rural areas. Most PICs have “development banks” but there have been few loans for rural energy development or for financing productive uses of energy. A major problem for rural SME finance is the need for collateral. Typically land is the only significant asset held by rural residents and in most PICs there is no clear title for the individual ownership of land that can be transferred to a bank in the case of default on a land secured loan.

Fiji has a micro-finance NGO and a rural commercial banking facility. RMI has a floating bank facility on government freighters. But these and other rural banking facilities in the PICs are more oriented toward savings than loans with loans

There are no programmes or finance available in the PICs that provide for the support of new rural energy entrepreneurs who have insufficient suitable collateral for loans or long term business experience.

An analysis of the opportunities for rural energy based SMEs needs to be carried out. For those opportunities that have a good chance of success, a programme should be considered for supporting commercial banks to provide development finance through loan guarantee funds or other risk mitigation arrangements.

A regional organisation should undertake an analysis of rural SME development opportunities and seek risk mitigation funding from GEF, WB, ADB or another funding organisation.

A programme should be developed to educate finance institutions in the PICs to better understand the risks and opportunities of finance for rural energy entrepreneurship and to help them develop financial modalities that have an acceptable risk.

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Mechanisms Modalitiesmade mainly for the purchase of items that themselves form suitable collateral such as major appliances, vehicles and boats.

UNDP is supporting rural banking services through ANZ in remote parts of Fiji and Guadalcanal (Solomon Islands) and is interested in energy-based entrepreneurship but has not yet provided any specific support.

PoliciesPolicies promoting decentralised energy based entrepreneurship

The Fiji Cabinet has approved the concept of RESCO use for rural electrification but the concept remains in a pilot project stage.

No other PIC has specific policies promoting decentralised energy based entrepreneurship.

Energy policies being developed and already in place in the PICs do not have any focus on promoting decentralised energy based entrepreneurship.

PIC governments, particularly the Melanesian countries and FSM, need to understand the benefits, opportunities and modalities available for decentralised energy based entrepreneurship.

Assistance needs to be made available to the Melanesian governments and FSM state governments to develop policies that promote decentralised energy based entrepreneurship.

A regional agency should survey the opportunities for decentralised energy based entrepreneurship, particularly in Melanesia, and work with governments to develop policies for their promotion.

The Fiji RESCO concept should be disseminated throughout the Pacific region as a thus far successful approach to decentralised energy based entrepreneurship.

Capacity DevelopmentCapacities related to There is little capacity in the The small and dispersed NGOs and government Workshops and regional energy

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Mechanisms Modalitiespromoting energy entrepreneurship

PICs for the development of poverty alleviation through energy entrepreneurship. Some regional NGOs, notably the Foundation for the People of the South Pacific, International (FSPI) have attempted rural business development but without great success and without a focus on energy entrepreneurship.

The Women in Business NGO in Samoa is developing a project proposal to develop cottage industries for making biofuel as a cooking fuel to replace kerosene but the concept is still in the planning stage. There is reportedly a similar women’s NGO initiative in the Solomon Islands.

markets in most of the PICs limits the development of capacity in energy entrepreneurship. Rural owned businesses, other than retail shops, have a generally poor record of success in the PICs.

agencies that are promoting rural business development need to understand the opportunities for energy entrepreneurship and, where applicable, include their promotion in their outreach programmes.

agency outreach programmes to help governments and NGOs working to develop rural businesses understand the opportunities and risks of rural energy entrepreneurship and provide assistance in the development of support programmes where appropriate.


There has been almost no organised sharing of information regarding energy entrepreneurship among and between PICs and often within the larger PICs themselves.

There is no programme for integrating documentation on energy-based entrepreneurship in support of energy services and poverty reduction activities.

Information needs to be gathered from NGOs and the government in each PIC regarding attempts at energy entrepreneurship for poverty alleviation documenting and

SOPAC as part of its energy sector data gathering and information programme should develop a knowledge repository regarding the experiences in PICs of energy entrepreneurship for poverty alleviation. As part of

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Mechanisms ModalitiesNo systems of sharing information on experiences in energy-based entrepreneurship applicable for poverty reduction and for rural area dissemination.

disseminating information about best practices, problem areas and case studies of both successful and unsuccessful efforts.

SOPAC’s energy information dissemination effort, distribute case studies, best practices and information about problems faced in the development of energy entrepreneurships for poverty alleviation.

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XIII.ASSESSMENT AND GAPS IN ACCESS TO FINANCE

Access to Finance with respect to poverty and

energy linkage Assessment/ Evaluation Gap analysis Way forward

Mechanisms ModalitiesMappingExisting financial mechanisms for the finance of energy services at the regional, national, and local levels

International finance agencies:The main international finance agencies operating in the Pacific region are the ADB and the World Bank. The European Investment Bank, the French Development Bank (Caisse Francaise de Développement), the US Import/Export Bank and the Japan Bank International Cooperation all have had operations in the region. These banks provide “soft” loans and loans on relatively high risk capital investments generally to Governments but also in some cases to private entities. Most also provide grant based technical assistance to develop projects to the stage where a loan can be made.

Energy Development Grants:JICA, EU, France, Australia, USA, China, Taiwan and New Zealand have provided bilateral grants for energy related projects in the PICs. The EU, USA and

There are no financial institutions that are known to include energy access finance at the local level on other than a fully secured basis.

There are no financial institutions that are known to include energy efficiency measures finance in the PICs on other than a fully secured basis.

Demonstrate financial mechanisms that will improve the acceptance of finance for energy projects by banking institutions to make energy services part of their investment portfolio.

Various projects in the region including REEP (ADB), proposed World Bank project for Melanesia, the EU rural energy project in FSM, Palau, Nauru, RMI and Niue, the RESCO UNDP/GEF project in Fiji and FEA’s wind farm project in Fiji all have a component that can be used to help financiers gain confidence in the finance of energy access and energy efficiency programmes.

Through risk mitigation incentives and training programmes, develop energy finance centres in existing commercial banks and, where appropriate, national development banks. These would focus on energy access loans, energy entrepreneurship loans and loans to finance energy efficiency measures.

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Mechanisms ModalitiesJapan are the largest donors overall.

UNDP, UNESCO and GEF have provided grant support for energy related projects to the region supporting mainly studies (including energy resource assessments), capacity building, enabling activities in the context of international environment conventions and project concept development though small hardware grants have been provided for energy hardware, mostly solar PV.

National Development Banks:Nearly all the PICs have incorporated a national development bank intended to provide loans that support national economic development. Usually the interest rate is not low but the bank is willing to loan with lower collateral and for higher risk activities. Unfortunately the region’s development banks have mostly failed to maintain their focus on development oriented investments. In general they have not been active in

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Mechanisms Modalitiessupporting energy related investment though the Kiribati Development Bank has provided key working capital loans to the Solar Energy Company and the Fiji Development Bank has shown a strong interest in supporting the proposed Namosi hydro electric development.

Commercial Banks:All PICs have full commercial banking facilities except Tokelau where government provides basic banking services. Services on Nauru are limited by the financial state of the Bank of Nauru that has recently been so bad as to be unable to provide even basic services such as money exchange and check cashing. The smaller countries (Niue, Tuvalu, Kiribati) have a single full service bank that is partly owned by government and part by an international commercial bank, based in Australia or New Zealand. The larger countries typically have one or more locally owned banks and one or more international commercial banks (based in the USA, Australia, New Zealand,

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Mechanisms ModalitiesIndia or the Philippines). None of these banks have any finance for energy activities that is based on loan terms that are different from ordinary commercial loans. That typically is a requirement of at least 75% collateral and good credit background.

A few countries (Fiji, PNG) have commercial credit agencies that specialize in the finance of a limited commercial sector (in Fiji one such agency finances most of the busses owned by the many private transport companies). None specialize in energy related loans.

Credit unions based on employment or on association membership are uncommon but exist in several countries. They are savings institutions that provide small loans for members for consumer purchases and to get over short term cash shortfalls.

Time payment finance is offered by larger retailers for furniture, large appliances and high cost items in the more economically

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Mechanisms Modalitiesdeveloped PICs. Interest rates are high and loan terms short. Solar water heaters can sometimes be purchased under these plans but in general no energy related finance is available.

Micro-finance for consumer and entrepreneurs at the local level

Kiribati and Fiji are known to have well developed micro-finance NGOs (both supported by government) and it is likely that they also exist in most PICs on a small scale but no data is available as to their location or extent.

Agricultural cooperatives, (e.g. copra cooperative in RMI) are not micro-finance institutions in the formal sense since usually they do not actually loan money but they generally do allow rural produce sellers to take advances on payments and to establish accounts for the payment of bills and credit accounts in urban areas of the country.

By far the most effective micro-finance scheme is friend and family finance. Loan and gift financing for the purchase of appliances, even PV systems is

None of the micro-finance schemes known in the region specifically include finance for energy systems or energy entrepreneurs and there is little experience with such finance.

Assist micro-finance NGOs and agencies better understand the need for finance for rural energy entrepreneurs and for consumers to purchase energy delivery systems and appliances.

Provide loan funds and risk mitigation programmes directed at micro-finance institutions lending for energy related activities.

Should be integrated into other finance and risk mitigation processes under GEF, ADB and WB programmes for the region.

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Mechanisms Modalitiescommon in most rural villages. It is not unusual for an urban family member to obtain credit on behalf of a rural family member or simply to pay the cost of the needed service or product directly. The importance of this finance mechanism is often overlooked as some projects that were designed for supposedly low income households have been quickly overloaded by the use of costly video systems and refrigerators that were purchased by supposedly low income households (e.g. in RMI).

Energy pricing and analysis price impacts on poverty

No PIC has a fully independent electricity tariff regulating agency. Except for Fiji where is a quasi-independent Commerce Commission that acts on tariff changes, tariff changes are sought by the utilities and approved at a high level, usually Cabinet, of Government.

Electricity tariff structures vary widely among the PICs ranging from complicated tariffs that include a continually varying charge related to changes in fuel prices (Palau), through varying

Unless required by an international lending agency (ADB, WB), there is no analysis carried out that relates pricing of energy to economic development or poverty and such analyses that are made tend to be simplistic and unrealistic.

Many utilities in the smaller countries do not calculate the real cost of electricity production and tariffs therefore have no relationship to cost.

Develop economic models for each of the PICs with sufficient detail to show the relationship between energy (both electricity and petroleum) pricing and development/poverty.

Develop simplified corporate models for PIC utilities that allows utilities to determine supply costs under different conditions of loading, fuel pricing and collection rates.

PPA or other regional agency assist PIC utilities in developing and using a standard method for determining the cost of electricity production.

A regional agency should provide PIC governments with assistance in analysing the effect of electricity and petroleum pricing on national economic development and poverty.

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Mechanisms Modalitiesrates according to usage (Cook Islands) to a flat charge for all customers in each use sector (domestic, government, industry, commercial) as in Tokelau. Although most PICs still provide some subsidy for electricity provided by the national utility, the percentage of subsidy has generally declined over the past two decades and in some utilities the subsidy is effectively only for part of capital investment (Kiribati, Palau). Some PICs (Nauru, Tokelau, Tuvalu) still heavily subsidise electricity through a tariff far lower than production costs.

Petroleum prices are often capped by a price regulatory agency in the PICs but generally the caps are shifted as the oil company prices change and they have little actual effect on prices. In some outer island and remote interior situations, the caps are ignored and fuel prices are well above the regulated levels. (If that were not the case, no fuel would be brought to the remote location since the shipping cost added to the basic cost of the

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Mechanisms Modalitiesfuel exceeds the price cap).

PoliciesFinancier policies relating to energy finance for poverty alleviation

All finance institutions have policies for finance that relates to perceived risk. The ADB, World Bank and bilateral development banks tend to accept much higher risks for finance than do commercial banks. Poverty alleviation and energy access development are both components of the international development banks but none have clear policies that cover the two concepts into a single policy.

Commercial banks have clear loan policies that apply no matter what the purpose of the loan. Credit experience and collateral are the main defining factors for commercial finance. In general, the less secured the finance is, the higher the risk and the higher the interest rate that is charged. At some level of risk, the finance will not be provided.

Risk management is the key issue for all financing schemes and there is little knowledge about the risks encountered when financing rural energy access programmes or energy efficiency improvements. Where the knowledge of risk is poor, banks either avoid finance all together, require increased levels of collateral or charge substantially higher interest rates as a hedge.

Assist PIC financing institutions (commercial banks and development banks) develop methodologies to evaluate the risks for rural finance for energy access and for energy efficiency measures at all levels.

Provide loan officials with training in the technology, application and financial aspects of energy investments.

Establish risk mitigation programmes including partial loan guarantees (essentially increasing collateral), interest rebates (allowing banks to charge higher rates to offset risk) and soft loans to development banks (lowering the cost of money for loans and allowing a lower interest rate).

WB, ADB and GEF provide programmes for reducing perceived risks and interest rates for energy finance relating to poverty reduction.

Subsidy policies Electricity is to some extent There is almost no Develop simplified but ADB or WB technical assistance

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Mechanisms Modalitiessubsidized in all the PICs though in general the level of subsidy has fallen since the 1980s. Subsidies may be in the form of grant capital (most PICs), duty and tax free fuel (Tonga), exemption from corporate taxes (Kiribati), or simply payments from the government treasury to cover losses (Tuvalu).

Cross subsidies within a utility (high use customers typically subsidise low use customers) are always present in the PICs though the level of cross subsidy varies greatly from PIC to PIC.

Petroleum products are rarely subsidized though in some countries (e.g. Kiribati) the cost of delivery to remote areas is subsidized so fuel costs are essentially the same everywhere.

understanding of the effect energy subsidies have on overall development or poverty. There is almost no understanding of how cross subsidies that appear to penalize industry, commerce and urban dwellers to apparently benefit rural customers may affect economic development or poverty.

useable models that show the relationship between energy subsidies, economic development and poverty for each PIC. Provide training in the use of the model to analyse different subsidy strategies to develop subsidy policies.

could be well used for developing PIC models to show the relationship between energy pricing, energy subsidies, economic development and poverty. SOPAC could provide the PIC training component.

Capacity DevelopmentDevelopment of capacity for financial analysis and finance

There is no lack of capacity for finance in the PICs. At all levels, there is finance available for activities that meet the criteria for funding. Financial professionals are available in all sectors of finance except at the lowest micro-finance level

There is insufficient capacity at most PIC energy offices for the proper financial and economic analysis of projects.

Although the capacity to do proper analysis of energy

Develop text materials and provide training in economic and financial analysis of energy projects of various types to energy officers.

Survey rural energy

Developing energy officer training programmes in financial and economic analysis may be included in the proposed PRETI regional renewable energy training programme or the capacity building component of the PIGGAREP project proposed

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Mechanisms Modalitiesinvolving agricultural cooperatives or informal financiers at the village or family level.

project finance exists at financial institutions, there is a lack of reliable cost data, particularly as regards maintenance and management for rural energy systems.

suppliers to gather data on operating and management costs.

for GEF funding.

Replicate the rural energy use survey currently under way in Fiji across the region.


Although the finance industry has a well developed system for information sharing, it is generally focused on risk reduction.

There are no formal modes of information sharing in the region related to finance mechanisms for energy measures that address poverty.

Through end of project workshops and reports, disseminate information regarding successful financing models and what caused failures in other models that were used in the World Bank project for PNG and Melanesia that will concentrate on innovative financing for energy.

A regional agency establish a process for collecting region wide information from cooperating financial institutions concerning energy financing; summarise the information and annually provide the data to the cooperating financial institutions to help them track the development of the market and manage their loan portfolios.

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XIV. ASSESSMENT AND GAPS IN MONITORING AND EVALUATION

Monitoring and Evaluation with respect to poverty and energy

linkageAssessment/ Evaluation Gap analysis Way forward

Mechanisms ModalitiesMappingExisting monitoring and evaluation framework and tools

On going projects typically have project level M&E systems to serve individual project requirements. Those M&E activities rarely go beyond the conclusion of the project.

The ongoing rural electrification survey being carried out by the Fiji DoE is one of the few monitoring attempts for rural electrification that surveys older installations (all have been installed at least 5 years) and includes information abut income generation related to energy access.

The Forum Secretariat monitors petroleum wholesale price (excluding taxes and import charges) for the PICs. An evaluation of the appropriateness of the price can be provided.

The periodic census

There is no monitoring and evaluation system for the poverty and energy linkage since there is no program to monitor and evaluate.

General poverty indicators that are used are mainly based on MDG guidelines and are not well aligned with poverty issues of the Pacific.

The design of poverty and energy linkage monitoring and evaluation procedures and tools needs to be developed.

With the emphasis of UNDP focused on poverty, the development of tools and procedures to monitor and evaluate programs attempting to reduce poverty through energy supply should be developed by that agency though preferably with the assistance of SOPAC where the region’s energy development information and expertise is concentrated. Since the Pacific region has a quite different perception of poverty than that of most developing regions, a special set of tools and procedures will be needed by the Pacific region.

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Mechanisms Modalities(unfortunately carried out on different schedules among the PICS) is the most comprehensive tool available regarding type of energy used, type of energy use appliances owned and about the make up of the household using the energy.

In addition, at irregular intervals, most PICs carry out household income surveys that can provide important information about the affordability of energy and the sources of income for households. These surveys usually are based on a sample of households, not on all households as is the case with the census.

PoliciesPolicies related to incorporation of decentralized M&E tools for assessing impact of energy services

There are no policies related to energy M&E in the PICs.

No existing policy or even guidelines

Develop a policy framework on the incorporation of decentralized M&E system and tools for assessing impact of energy services on poverty.

Project developed in association with PIEPSAP.

Capacity DevelopmentCapacities related to undertaking M&E

There is no capacity in place specifically for undertaking

M&E capacities are typically project related and

Since the impact to be measured is regarding

Incorporated where possible with existing processes for poverty

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Mechanisms Modalitiespoverty energy linkage M&E. the tools and procedures for

poverty energy linkage M&E need to be integrated into all energy project frameworks.

Tools, procedures and guidelines do not exist in the PICs for energy poverty linkage M&E

poverty reduction and energy access, there is a need for establishing a base line for the project target group for both poverty (using the Pacific concept of poverty) and energy access.

monitoring.


There is no information on the existing knowledge sharing and transfer mechanisms regarding M&E systems relating to energy poverty linkages.

n.a. n.a. n.a.

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XV. ASSESSMENT AND GAPS IN ACCESS TO INFORMATION

Access to Information with respect to poverty

and energy linkage Assessment/ Evaluation Gap analysis Way forward

Mechanisms ModalitiesInstitutionsMany institutions in the Pacific are energy knowledge repositories in the approximate order of their importance as energy information repositories they are:

1. Regional organisations, particularly SOPAC, SPREP and the Forum Secretariat. The PPA maintains a utility database and library but it is only accessible by members.

2. PIC energy office libraries and report collections

3. Oil company sales and import records (almost impossible to access externally)

4.PIC utility and other power producer records (often difficult to access

The regional offices in the Pacific have done a generally good job of acquiring and storing energy statistics, project reports, survey information, overviews of technologies, etc. However, the detailed information for most energy activities remains with the agencies that carried out the activities.

With regards to energy and poverty linkages, such information as exists is buried in the mass of information kept by the knowledge repositories

None of the information has been indexed or compiled with reference to poverty and energy linkages.

There are many NGOs, government agencies and international agencies working in the PICs in the area of poverty reduction. Their work, as it relates to energy linkages, needs to be compiled and shared among the PICs. No new repositories appear to be needed.

Funding is needed for the development of PIC rural energy surveys to ascertain the actual uses of energy in rural areas focusing on those that could reduce poverty.

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Mechanisms Modalitiesexternally)

5.International agencies (e.g. UNDP, ADB)

6. Universities (USP and UNITECH mainly)

6. Technical training centres (in all PICs except Tokelau and Niue).

7. PIC statistical and census offices (mostly on energy access and appliance ownership)

8. PIC customs offices (mainly petroleum import information)

9. NGOs

PoliciesPolicies and frameworks for information dissemination/dialogues

There are no policies or legislative acts specifically focused on energy information collection or distribution.

There is no specific policy and framework on information access for energy-poverty agenda.

Develop within National Energy Policies the collection of data relating to energy and poverty linkages.

PIEPSAP propose to countries that information collection on energy be an integral part of the national energy policy

Capacity DevelopmentCapacities for data collection, management and dissemination

There is reasonable capacity for energy data collection.

Energy data is spread over many organisations and sectors making it hard to

Capacity development for information management on poverty and energy

SOPAC include capacity development activities for PICs in the collection and management

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Mechanisms ModalitiesThe capacity for energy data management and dissemination is not adequate.

consolidate.

Data management such as consolidation, indexing and distribution remains weak

linkages and distribution of that information to PICs.

of data relating to poverty and energy linkages.

Capacities related to improving awareness on energy issues

There has been little capacity developed in any of the PICs for energy awareness programmes to the public, to government agencies or to business

Specific capacity for awareness improvement on the energy-poverty agenda is not-present in the PICs..

Knowledge management/repositoriesKnowledge sharing and transfer

Since there are essentially no organized knowledge bases with respect to poverty and energy linkages, there is no sharing and transfer

Information about energy and poverty linkages is not specifically kept as separate information in any of the knowledge repositories so access to information means looking through all sources for references to the energy poverty linkages.

Dissemination of energy information remains relatively weak. There are no indexes or lists of documents for most of the information. There is no programme for the automatic collection and distribution of energy information.

Research existing energy information resources, index and compile the relevant information, distribute it by hard copy or CDROM to the PICs and make access possible through the Internet.

SOPAC, with the support of the Pacific UNDP offices, should collect and publish (CDROM and hard copy) all the available information regarding Pacific energy-poverty linkages and make them available on the SOPAC website.

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SECTION 3: COUNTRY OVERVIEWS

XVI. COOK ISLANDS

A. Background

1. Physical conditionsFifteen islands with a total land area of only 240 km2 make up the Cook Islands. They are about halfway between Hawaii and New Zealand located between latitudes 9º-22º South and longitudes 157º-166º West. There are two distinct groups of populated islands. The six raised coral or volcanic islands of the Southern group (Rarotonga, Aitutaki, Mangaia, Atiu, Mauke, and Mitiaro) contain over 88% of the land and 90% of the population. This group includes Rarotonga, the largest and highest island that itself includes Avarua, the capital. Rarotonga contains nearly 70% of the country’s population and has the only international airport, though upgrading the Aitutaki airport to international status is under consideration. The seven northern Cook Islands (Pukapuka, Penrhyn, Manihiki, Rakahanga, Nassau, Palmerston and Suwarrow) are coral atoll islands that are low-lying and sparsely populated. Arable land is mostly in the southern group and comprises 17% of the total, with 13% of the land under permanent crops. The Cook Islands claims an Exclusive Economic Zone (EEZ) of 1.8 million km2.

2. Population and demographicsThe total population in December 2001 was 18,027 including 3,010 visitors, a net 5.6% decline since 1996 mainly due to migration to New Zealand. This process does not involve qualifying for immigration since Cook Islanders are holders of New Zealand passports. On Rarotonga, there were 12,188 people, an increase of 8.6% since 1996 due to heavy migration from the outer islands, where the total population declined by over 25%. The census found that only Rarotonga and Aitutaki had populations exceeding 1,000. All islands are inhabited except Manuae and Takutea although Suwarrow has only a resident caretaker. Palmerston had 48 residents and Nassau 72.

Avarua on Rarotonga is the closest to an urban area in the Cook Islands, al though by world standards it is a large village. Since Rarotonga has only 67 km2 of land area with most of the interior in steep mountains, there are no true rural areas: the entire populated perimeter of the island is considered urban or peri-urban. All the outer islands are considered to be rural.

The Secretariat of the Pacific Communities (SPC) estimated the population as 14,000 in mid 2004 and projects a drop to only 12,100 in 2015, with an AAGR of -1.3%. This is a matter of some concern to the Government of the Cook Islands (GoCI), which would prefer not to bring in many more foreign workers.

3. Socio-Economic structureThe Cook Islands became a British protectorate in 1888, with administrative control transferred to New Zealand in 1900. In 1965 Cook Islanders chose self-government in free association with New Zealand, with a unilateral right to full independence. The GoCI retains responsibility for internal affairs but New Zealand handles external affairs and defence. The government is a Westminster-style parliamentary democracy with a

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unicameral Parliament of 25 members elected by popular vote to five-year terms. The voting system gives considerable power to the small sparsely populated outer islands. A House of Ariki (chiefs) advises on traditional matters but has no legislative powers. Each outer island has an elected Island Council presided over by a mayor. There was devolution of political and economic responsibility to local governments, followed by a reversal of this policy. There are frequent changes in political alliances that reduce continuity in policies.

Tourism is the primary base for the economy. Most agricultural products are locally consumed. Manufacturing is limited with some clothing and handicrafts manufacture. Fruit juice is a significant export. In 2002 pearls represented 60% of exports followed by fish and fruit.

New Zealand aid and remittances from Cook Islanders in New Zealand are major sources of income for the islanders. In the 1990s growth was slowed by the cost of a bloated civil service and fiscal excesses. In the late 1990s, public service was cut dramatically and fiscal management greatly improved leading to renewed investment, particularly in tourist facilities. In the 2000s, GDP growth has been high, driven by the rapid development of the tourist industry. However the small size of the country and the emigration of skilled workers are limiting factors.

For the Southern Group, tourism is significant and growing but except for Aitutaki it is not well developed. Agriculture, with much produce shipped to Rarotonga, is important in the southern group and overall in the Cook Islands provided about 15% of GDP in 2000. For the northern group where the atoll environment is not agriculturally productive, the sea is the main income source with pearl farming, fishing and sea weed farming the principal economic activities.

All the Southern Group and most of the Northern Group have airports but several of the northern islands are only accessible by boat. Pukapuka has an airport but no scheduled flights.

The GDP in 2000 was about NZ$190 million providing a per-capita GDP of over NZ$10,000 (~US$6,400), very high for the Pacific.

The economy has important subsistence components, particularly on the outer islands, but is very much a monetized economy. Agricultural workers are paid from about NZ$6 to NZ$10 an hour making market prices for food high by PIC standards and limiting the production of low value, high labour agricultural products such as copra.

4. Poverty issuesPoverty exists but is not a serious issue in the Cook Islands. The ADB has estimated poverty incidence from calculations of “national basic needs poverty lines” derived from Household Income and Expenditure Surveys (HIES). The 1998 Cook Islands HIES suggested that 12% of Cook Islanders fell beneath the basic needs poverty line, which was significantly lower than estimates for six other PICs for which there was equivalent data. While the infrastructure on the outer islands, particularly the Northern Group, is not as good as on Rarotonga, there are few households without access to improved water supplies and proper sanitation. Outer island health care and education facilities and standards are well above PIC averages. Nearly 100% of Cook Islanders have access to

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electricity and fossil fuels usually from a diesel powered grid operating providing 24 hour power though in the most isolated areas power may come from solar energy or part time diesel generation.

The Cook Islands, like a number of other smaller PICs, is not included in UNDP’s annual global Human Development Report (HDR). In 1999, however, UNDP published a Pacific HDR in which the Cook Islands was rated 2nd among 14 PICs in the Human Development Index (HDI), only Palau being higher. This was equivalent to a global HDI ranking of 62 among 177 countries. In the Human Poverty Index (HPI), the Cook Islands ranked 3rd of fifteen PICs in 1999. It is likely that in 2005, the Cook Islands would again rank near the top of all PICs in both HDI and HPI.

5. MDG progressThe Cook Islands have achieved many of the MDG goals, particularly as relates to health and education, and is considered likely to achieve all goals.

B. Institutional Arrangements for Energy Management

1. OverviewThe Ministry of Works houses an Energy Division with five staff. The Director is a member of the Board of the Te Aponga Uira O Tumu-Te-Varovaro (TAU – the Rarotonga Electricity Utility) though the Energy Division does not regulate the utility. The Division is responsible to the Minister of Works for developing policy and, through electrical inspectors, ensuring that electrical standards are met. The Division provides technical assistance and advice to other Government agencies relating to energy.

Although technically under the Ministry of Works, the Energy Division also has responsibility to the Minister of Energy relating to renewable energy and community energy issues such as street lighting.

The responsibilities for energy in the Cook Islands are unusually dispersed even for the PICs where energy development is often spread over several agencies, and this has made it difficult to develop and implement energy policy and to administer energy activities in a consistent manner.

a. Fossil Fuels

The Ministry for Internal Affairs manages petroleum pricing, quality, storage and safety issues. The Prime Minister’s office is concerned about the environmental issues relating to petroleum such as spills and emissions.

Mobil and BP products are delivered to the Cook Islands via Fiji. Triad, a subsidiary of Broken Hill Proprietary (BHP) of Australia purchases fuel from BP for distribution within the country. Except for ADO used by the Aitutaki Power Supply that purchases in bulk containers directly from New Zealand suppliers, all fuel is delivered first to Rarotonga and stored in bulk tanks for further distribution. Outer island distribution of petrol and kerosene is in 200 L drums and ADO for power systems is delivered either in 200 L drums or in the fuel tanks of the delivery ship for pumping ashore.

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b. Electricity Supply

The Te Aponga Uira (TAU) is the Rarotonga power utility. It is a commercially operated, government owned corporation charged with delivering minimum cost, maximum reliability power to all households on Rarotonga. As of 2004, TAU had no responsibility for power systems on outer islands though it often provides technical assistance when there occur problems beyond the technical capabilities of outer island power systems.

The Ministry for Outer Island Administration (OMIA) is the primary financial and technical support for outer island electrification though each island council is ultimately responsible for its own power system, a system that often has not worked well. In 2004, the Aitutaki Power Supply (APS – the largest of the outer island power utilities) and TAU began talks about merging operations and other island utilities, notably Atiu, are also considering relinquishing their independent operations and asking to join TAU. The proposed arrangement will keep APS independent commercially but TAU will provide technical support and, where appropriate, management assistance. TAU would not become financially responsible for APS operations.

c. Renewable Energy

Responsibility for the development of renewable energy is legally on the Energy Division. There is no legal responsibility for TAU to use renewable energy though management appears open to cost effective renewable energy applications.

d. Regulation

Both the petroleum suppliers and the electricity suppliers (both on Rarotonga and the outer islands) are in effect self-regulating. With two full time electrical inspectors, the Energy Division is responsible for ensuring that proper standards are met by installers of electrical equipment.

Maximum petroleum product prices are regulated by a formula administered by the Ministry of Internal Affairs but price control has been ineffective and allows varying prices for different suppliers depending on their landed costs. A new price control system will be in effect from December 2005.

2. Policies and legislationA National Energy Policy was adopted in 2003 patterned after the 2002 Pacific Islands Energy Policy and Plan promoted by the regional organisations. A strategic plan has been prepared that is clear and consistent though whether sufficient commitment exists to pay for its implementation remains to be seen.

Legislation includes the Energy Act of 1998 that places energy efficiency – both supply side and demand side – responsibility onto the Energy Division and generally spells out the powers and responsibilities of the Division, of which most had already been assumed by the Division but had not been legally required.

The Te Aponga Uira (TAU) O Tumu-Te-Varovaro Act of 1991 effectively converted the old Energy Power System under the Government into a stand alone commercial company, though still owned by the Government. It also removed the TAU from being

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responsible for outer island electrical systems and placed that responsibility on the Island Councils.

The Environment Act of 2004 only covers Rarotonga, Aitutaki and Atiu (the most developed outer islands) and affects the placement of power plants, grid components, fuel storage and general environmental effects associated with energy delivery. It also effectively limits the use of biomass for energy production.

Petroleum safety is covered under the Dangerous Goods Act of 1984 though standards for handling and storage are not included and the petroleum companies and storage owners typically follow New Zealand standards.

3. Capacity issuesIn effect, the Energy Division has 2½ full time equivalent staff dealing with energy issues (not including electrical inspections). The institutional capacity and budget resources of the Energy Division is not adequate if energy efficiency is to be properly addressed. Another person with specific training in the development of energy efficiency measures will be required.

TAU has the capacity to adequately manage the Rarotonga system but if it accepts technical responsibility for APS and other outer island power systems, it may need increased technical and administrative capacity.

4. Knowledge repositories and information deliveryThe Petroleum Companies, the TAU, each of the rural utilities, the New Zealand High Commission and the Energy Division maintain individual repositories of information relating to their individual scope of work. The Energy Division has the responsibility of maintaining the national energy database but must rely on the primary data sources to provide the data for the Energy Division to enter into the database and often the data provided is late, of poor quality or simply not provided at all.

C. Programme Framework

1. Overviewa. Programme history

Although renewable energy has been considered for over 20 years, with the exception of the full electrification of Pukapuka in 1992 by solar PV (about 120 solar home systems were funded by grants and a loan from France and designed and installed by the Tahiti based South Pacific Institute for Renewable Energy), only trials and pilot projects have been carried out. None of the pilot projects (biogas, solar PV, wind) installed prior to 2000 have led to large scale implementation (again excluding the Pukapuka project).

b. Current programmes

In Mangaia, two 20 kWr wind turbines were installed in 2003 under the PREFACE projects with connection to the island grid. This was intended both to test the viability of the resource and to provide a trial for grid connected wind in the Pacific. The systems have had several problems and are not yet considered fully operational.

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PIEPSAP has been assisting the GoCI study options for the rehabilitation of the electricity system of Pukapuka, which was damaged by a hurricane.

The APS is in the process of establishing a close working relationship with TAU with a TAU member sitting on the Board of the APS and with TAU providing the operational oversight and guidance that was previously supposed to be provided by the Island Council. APS will, however, not be owned by TAU nor will TAU be accepting any fiscal responsibility for APS.

The Mangaia grid connected wind system installed by PREFACE has not yet been fully integrated into the island grid. Negotiations are underway for making the changes to the wind power management system to allow the 40 kWr of turbines to interface properly with the existing grid.

c. Pipeline programmes

NZAid has contracted the Vergnet office in New Caledonia to assess the wind energy regime of Aitutaki.

d. Programmes under consideration

It is understood that proposals for wind power on Rarotonga, a topic that was studied several years ago and rejected as uneconomic, are to be reconsidered with PIEPSAP assistance in light of current high petroleum prices. Furthermore it is understood that under PIEPSAP an energy conservation and awareness program and investigation into the viability of coconut oil as a diesel substitute also are considered.

It is also understood that hybrid diesel/renewable energy (i.e. wind and solar) concept proposals identified as part of a UNDP/UNESCO technical assistance consultancy undertaken in the period 2004-2005 are under consideration for Atiu, Mauke and Mitiaro.

2. InstitutionalThe Energy Division and TAU are responsible for programme development for the energy sector overall and electricity respectively but in practice responsibility is scattered among a number of ministries. In 2004, there were separate ministers for public works and energy. Programme responsibilities include including the Minister for Works (energy policy), Minister for Energy (renewable energy), Minister for Outer Island Affairs (implicit subsidies for outer island electrification), Minister for Internal Affairs (petroleum pricing), and the Prime Minister (oil spills and management; environmental aspects of energy development including EIAs).

3. Policy and legislationThere is no legislation regarding responsibility for developing energy programmes or an overall framework for them.

4. Capacity issuesThe capacities of the Energy Division and TAU to develop a consistent national programme framework for the energy sector overall and electricity respectively are limited.

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5. Knowledge repositories and information deliveryAgencies responsible for energy programmes are the repositories for knowledge about those programmes. There is no agency with the responsibility for information delivery though the Energy Division is generally looked to when energy information is needed.

D. Access to Energy Services

1. Overviewa. Cost of fossil fuels

Fossil fuels provide about 90% of the national energy supply with almost all the rest as biomass for cooking, mainly on the outer islands. The Forum Petroleum Price Monitor in 2003 indicated that the Cook Island wholesale price (excluding import duties and taxes) was one of the highest in the Pacific (along with Tuvalu and Niue) with the price nearly double that of nearby French Polynesia.

The most recent version of the Pacific Island Forum Secretariat regional petroleum fuel price monitor in July 2005 includes no coverage of The Cook Islands but it is expected to include Rarotonga in the future. In October 2005, the former PIFS petroleum adviser prepared an ADB-funded assessment of petroleum supply and pricing issues. The report has been widely covered in the Cook Islands’ and regional media. Reportedly, it concludes that Rarotonga prices have been significantly higher than they should be considering the market size, shipping arrangements and location, and prices can be reduced substantially through price control. Compared to similar markets such as Tuvalu and Tonga, Rarotonga prices (excluding tax and import duties) are significantly higher. According to the Cook Island News, new price control regulations have been adopted by the GoCI and prices are expected to drop “sharply” in December 2005 when they come into effect.

As of 2003, petroleum had never exceed about 18% of total imports and the 20 year average is on the order of 12%.

b. Cost of electricity

In early 2005, the cost of electricity generation and distribution in Rarotonga was stated by TAU to be about NZ$0.35 per kWh (US$0.23). Household consumers on Rarotonga paid NZ$0.23/kWh for the initial 60 kWh per month, NZ$0.41/kWh for 61-240 kWh/m, and NZ$0.49/kWh for consumption over 240 kWh/m. Commercial users paid NZ$0.49/kWh. A domestic consumer using 100 kWh/m would pay about US$0.21/kWh.

The charge to consumers on other islands varies, in early 2004 from NZ$0.36-0.44/kWh for households and NZ$0.40-0.60/kWh for commercial users, excluding a 12.5% value added tax. In 2004/2005 he cost of electricity delivery was found to range from NZ$0.77 on Aitutaki to NZ$1.72 on Mitiaro with higher costs probable on the smaller Northern Islands.

c. Electricity coverage

About 99% of all households had electricity in 2001, of whom 94% were connected to an island grid, 8% had solar photovoltaic (PV) systems and 3% used small diesel generators,

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with some households having access to more than one source. In the northern islands, 60% of households were connected to an island grid and 43% had PV systems.

Rarotonga accounts for the bulk of electricity generation with all areas having access.d. Access to fossil fuels

Except for ADO used by the Aitutaki Power Supply that purchases in bulk containers directly from New Zealand suppliers, all fuel is delivered first to Rarotonga and stored in bulk tanks for further distribution. Outer island distribution of petrol and kerosene is in 200 L drums and ADO for power systems is delivered either in 200 L drums or in the fuel tanks of the delivery ship for pumping ashore. The lower frequency and more unreliable schedule of shipping to the Northern Islands has often caused fuel supplies to have to be rationed or to have run out completely.

e. Access to renewable energy

Fuelwood for cooking was once common but has largely been replaced by kerosene and liquid petroleum gas (LPG). According to the 2001 census, wood is still used as the principal cooking fuel by about 11% of all households (Rarotonga 0.6%, Southern Group 29% and Northern Group 34%). Increased use of biomass for energy is unlikely due to environmental considerations.

Solar PV provides electrification on several islands of the northern group. Wind power is being integrated into the grid in Mangaia and is seriously being considered for Rarotonga and Aitutaki and possibly will be considered for Atiu, Mitiaro and Mauke as well. Biogas generation has been demonstrated on small Rarotonga piggeries but most have not been kept in service. Solar water heating is common on Rarotonga. OTEC has been strongly promoted by a University in association with a private Japanese company but is unlikely to actually be installed in the Cook Islands since it remains experimental with a 1 MW trial unit being constructed by that Japanese company in India still not operational after several years of development.

Solar water heating is widely used on Rarotonga, partly due to tax incentives that used to be provided by the government and partly because of the high standard of living on Rarotonga that often includes piped hot water in homes.

The outer island coconut resource is greatly underutilized and in theory could provide a feed stock for biofuels. However the high cost of agricultural labour would make the cost much too high to compete with imported fuels unless the price of imported diesel fuel were to more than double.

2. InstitutionalAccess to energy is provided by the petroleum importers and distributors, the Island Councils, and TAU. All are supported and monitored by the Energy Division.

3. Policy and legislationThere is no specific energy access policy or energy access legislation though this is implicit in the Government’s policy as evidenced by the nearly 99% access to electricity.

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4. Capacity issuesThe capacity in human and financial resources for the operation of the smaller outer island electricity supplies is weak. Maintenance is often poor, power outages frequent, capital investment has not kept up with needs and management is weak.

5. Knowledge repositories and information deliveryIndividual energy agencies maintain their own records and knowledge repositories. There is no programme for information delivery or sharing other than the data collected by the Energy Division for its energy database.

E. Technology Efficiency and Fuel Options

1. Overviewa. Uses of energy

The Cook Islands are overwhelmingly dependent on imported refined petroleum fuels, which account for about 90% of gross energy supply, biomass providing the remaining 10%, mainly for cooking. Petroleum import and use data available to researchers outside the oil companies is unreliable but oil companies fail to provide import and sales information even when formally requested by Government. Based on customs data known to be unreliable, around 12 ML of petroleum products (excluding LPG) are imported for non aviation use. That makes the per-capita use around 670 litres/person/year. LPG is used for cooking in most Rarotonga households and in an increasing percentage of outer island households. Boral Gas of Australia provides the Rarotonga and outer island market except for Aitutaki that imports from New Zealand.

In 2001, domestic consumers of TAU were 85% of the total and accounted for 44% of sales. Commercial consumers were 15% but consumed 66% of GWh sold. Energy demand has been growing rapidly with TAU estimating a continuing growth of from 6%-10% annually. In 2003, TAU had 6.8 MW of diesel generation. In 2002, maximum demand was 4.4 MW and generation was 25 GWh (growing 9.4% per year since 1997). The per-capita electricity use in 2003 was therefore about 115 kWh/person/month, well above the PIC average.

Energy efficiency of use issuesIn the mid 1990s, a PIFS initiative, funded by UNDP and working closely with the Pacific Power Association (PPA), assessed the demand side management (DSM) potential within ten PIC power utilities. Typical practical overall demand savings (MW peak) were 17%, with a range of 8-28% and typical energy savings (MWh) were also 17%, with a range of 6-27%, even though not all options were investigated. The assumed benefits were confined to reduced energy consumption and deferred capital expenditure. The Cook Islands was about the middle of the ten, with 19% savings potential for maximum demand and 16% for energy sales, respectively.

A few energy audits were carried out with donor support in the 1980s -1990s, particularly at hotels but there are few records of results. In 2002, the Rarotongan Hotel, then the largest in the country, audited electricity use and implemented some changes to reduce

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consumption. A tourism company, Island Hoppers, built a new office in 2003 with some energy efficiency features including some solar PV, insulation, high thermal mass, and low-energy lighting and computers. The design appears to be optimised more for New Zealand than a tropical island but is energy efficient compared to typical offices in Rarotonga.

There is substantial room for improvement in energy efficiency. The PIREP report estimated that around 20% of current energy use for transport and power generation could be saved by relatively easy energy efficiency improvements.

b. Developable renewable energy resources

There is sufficient experience with solar PV and solar water heating to ensure that the resource is adequate and the available equipment is suitable for use in the Cook Islands. The wind resource appears to be reasonable for development though the experience is too limited to estimate its development potential properly. Significant development of biomass for energy production beyond the small usage for cooking is unlikely to be possible under the new environmental laws. Biofuel from coconut oil appears possible for development but there are economic constraints that make its large scale development unlikely in the Cook Islands unless there is a dramatic increase in fuel prices. The wave energy and ocean thermal energy resource is good but there is no commercially available technology for their development.

2. InstitutionalEnergy efficiency development is the responsibility of the Energy Division with TAU and the smaller island power systems focusing on supply side efficiency improvement.

3. Policy and legislationThe 1998 Energy Act specifies that the Energy Division will promote conservation. The National Energy Policy includes improving the efficiency of energy use.

4. Capacity issuesAdditional capacity at the Energy Division will be needed if a national energy efficiency improvement programme is to be carried out. The capacity in outer island power systems has little capacity for supply side energy improvement.

5. Knowledge repositories and information deliveryThere is no central knowledge repository for energy efficiency and fuel options. Each agency carrying out programmes maintains its own repository. There is little sharing of information regarding energy efficiency or fuel options.

F. Energy-Based Entrepreneurship

1. OverviewOther than the sale and installation of solar water heaters there is little business activity in the Cook Islands that can be considered energy entrepreneurship.

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2. InstitutionalThere are no institutional structures that either promote or specifically discourage energy entrepreneurship.

3. Policy and legislationThere are no policies or legislative acts that relate specifically to energy entrepreneurship.

4. Capacity issuesThere is no known capacity for entrepreneurship other that for the sale and installation of solar water heaters.

5. Knowledge repositories and information deliveryThere are no repositories of knowledge or information delivery systems for energy entrepreneurship.

G. Access to Finance

1. OverviewThere is a Cook Islands Development Bank, a locally owned bank (The Bank of the Cook Islands) and two international commercial banks (ANZ and Westpac). In general, at least 50% collateral is required by commercial banks for customers with good credit experience. The CIDB requires a minimum of 30% collateral.

2. InstitutionalThere are no special finance arrangements available for energy entrepreneurship or investment in access or efficiency measures.

3. Policy and legislationThere is no policy or legislation focusing on energy access, energy-poverty linkages, energy-gender linkages or energy efficiency measures.

4. Capacity issuesThere is no experience with finance for energy access, energy-poverty linkages, energy-gender linkages or energy efficiency measures

5. Knowledge repositories and information deliveryThere are no knowledge repositories or information delivery mechanisms for finance relating to energy access, energy-poverty linkages, energy-gender linkages or energy efficiency measures.

H. Monitoring and Evaluation

1. OverviewMonitoring and evaluation of the Rarotonga power system appears good at TAU and reasonably good at the larger outer island power stations. Monitoring and evaluation of

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renewable energy programmes is relatively weak and there is essentially no monitoring and evaluation of energy efficiency interventions.

2. InstitutionalTAU and each outer island power system is expected to monitor and evaluate their respective operations. The Energy Division has the designated responsibility to collect energy data and maintain a national energy database. The Energy Division is expected to monitor and evaluate renewable energy installations not associated with a power utility.

3. Policy and legislationThe Energy Act of 1998 and the Te Aponga Uira (TAU) O Tumu-Te-Varovaro Act of 1991 implicitly assign monitoring and evaluation responsibilities to the Energy Division and TAU.

4. Capacity issuesThe monitoring and evaluation capacity of TAU appears adequate. That of the outer island power systems appears weak. The Energy Division is unable to develop a good quality energy database because the primary data sources have either not cooperated or have provided poor quality data. The monitoring and evaluation of renewable energy projects has been adequate though the number of projects has been very small. Additional capacity may be needed if more projects are to be implemented.

5. Knowledge repositories and information delivery.Each agency maintains its own monitoring and evaluation records for projects and operations. The Energy Division maintains a national energy database though the quality of data available for entry is poor.

I. Access to Information

1. OverviewTAU, the Energy Division, the petroleum companies and the larger of the outer islands power systems are the primary repositories of energy information in the Cook Islands. The Statistics Department also has energy related data from census, household surveys and other sources. The quality of the data that is available varies from apparently good to obviously wrong, making all energy data suspect. The petroleum companies failed to respond to data requests by the Government during the PIREP survey period.

2. InstitutionalThere is no specific institutional information access requirement other than the national energy database maintained by the Energy Division and the statistical database maintained by the Statistics Department.

3. Policy and legislationThere is no explicit policy or legislation relating to access to information relating to energy access, poverty and energy linkages or gender and energy linkages.

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4. Capacity issuesThere is need for increased capacity in the maintenance of accurate and timely energy records. There is need for capacity for the improvement of access to energy records.

5. Knowledge repositories and information deliveryThere are no significant knowledge repositories or information delivery systems in the Cook Islands that relate to energy information access.

J. Conclusions

1. OverviewThe Cook Islands is not a good candidate for poverty reduction programmes through energy access.

2. InstitutionalEnergy responsibility is dispersed among many organisations but in general the institutions are responsive and reasonable effectively cover the national needs in energy supply. However, the institutional structure for energy efficiency is weak.

3. Policy and legislationPIEPSAP is working with the Energy Division to further refine the energy policy. The energy policy is somewhat generic but the strategy that has been developed focuses strongly on the specific requirements of the Cook Islands.

4. Capacity issuesThe capacity to develop, manage and maintain outer islands power system is often too limited to allow efficient power delivery. On the outer islands, the capacity for accurate record keeping and provision of data to the Energy Division is weak.

5. Knowledge repositories and information deliveryEach organisation involved with energy programmes has its own knowledge repository and there are no formal data sharing processes outside of provision of data to the Energy Division for inclusion in the national database.

K. Recommendations

1. OverviewAnti-poverty programmes emphasizing poverty alleviation through energy access provision are not recommended for the Cook Islands.

2. InstitutionalInstitutional strengthening is needed with regards to energy efficiency improvement.

3. Policy and legislationLegislation or enforceable regulations should be prepared that requires petroleum importers and distributors who are operating in the Cook Islands to maintain auditable

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records of imports and sales in litres and to provide that information to government on at least an annual basis.

4. Capacity issuesImprove capacity in outer island power systems in technical and management areas. Increase capacity in the Energy Division to handle a national energy efficiency improvement programme.

5. Knowledge repositories and information deliveryImprove the collection of information from petroleum companies and electricity supply companies to improve the quality of the national energy database.

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XVII. FEDERATED STATES OF MICRONESIA

A. BackgroundThe Federated States of Micronesia (FSM) is a federation of three island groups (Yap, Chuuk and Pohnpei) and a single island (Kosrae), each with their own language and culture. Although formally a single nation, FSM should be considered as four distinct and separate entities when considering energy sector development: there is no national energy agency and the Constitution specifically relegates energy to the four states for development and regulation.

1. Physical conditionsFSM is one of the largest of the Pacific Island Countries (PICs) in terms of its boundaries, which extend from Guam to the Marshall Islands. The 607 islands stretch over 2,500 kilometres from east to west and over 1,000 km from north to south, creating an Exclusive Economic Zone (EEZ) exceeding 2.6 million km2. Yet the total land area is only about 700 km2. The islands vary geologically from the relatively large high mountainous islands of Kosrae, Pohnpei and Chuuk to numerous low lying coral atolls in Chuuk and Pohnpei and most of the outer islands of Yap. Northeast trade winds heavily influence the tropical climate, with strong trade winds prevailing from December through April and periods of weaker winds and doldrums occurring from May to November. Annual rainfall is high on the volcanic islands (Kosrae, Pohnpei and Chuuk) and can exceed 10,000 mm on Pohnpei. Storms and typhoons are infrequent and are generally more severe in the western islands of Yap. The El Niño southern oscillation brings alternating periods of drought and heavy rainfall. A 1997-1998 drought was especially severe.

The physical characteristics of the four states can be summarised as follows:

Pohnpei has six main island groups, 342 km2 of land, and a lagoon of 769 km2. There are extensive tropical rain forests but about two thirds of the native forest has been lost in the past 20 years due to logging.

Chuuk is spread over seven main island groups with 127 km2 of land and a large lagoon enclosing 2,130 km2. There are mixed broadleaf high island forests. Lowland vegetation is dominated by mangrove and swamp, with large portions disturbed by human activity.

Yap has 119 km2 of land, 12 inhabited islands and a lagoon of 1,050 km2. There are topical forests on the low-lying islands. Dominant vegetation is mixed broadleaf forest, swamp, mangrove, savannah and agro-forests.

Kosrae is a single volcanic island of 111 km2 and thus has no lagoon. Vegetation is similar to that of Chuuk. Montane cloud forests thrive in higher parts of the island.

2. Population and demographicsThe last national census, in 2000, counted a population of 107,008 with an annual average growth rate (AAGR) since the 1994 census of only 0.2%. In 2000, 50% of the population resided in Chuuk (53,595), 32% in Pohnpei (34,486), 11% in Yap (11,241) and 7% in Kosrae (7,686). FSM’s median age of 18.9 years is among the youngest in the

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Pacific. The census does not distinguish between urban and rural areas although Chuuk and Kosrae are probably the most urbanised states.

FSM’s crude birth rate, 29.1 per thousand of population, is high. From 1970-1994, FSM had one of the fastest growing populations in the Pacific, averaging 2.6% per annum but from 1994 the AAGR dropped due to migration to the United States. The ADB estimates that between 16% and 21% of the entire population reside overseas. As FSM citizens have the right of free access to the USA, emigration may remain high and the average age remain low. The Secretariat of the Pacific Communities (SPC) estimated the mid-2004 population as 112,700 and expects a 1.2% AAGR until 2015 (due to lower anticipated rates of migration to the USA), when the projected population will reach 129,000.

3. Socio-Economic structureGovernment structure. The FSM was part of the Trust Territory of the Pacific Islands (TTPI) until independence within a “Compact of Free Association” with the USA in 1986. An American-style constitution was adopted in 1979 with a legal system based on TTPI laws, acts of the legislature, and municipal, common, and customary law. Each of the four states has an elected governor and a single-house legislature. The National Congress is also unicameral with ten members elected for two-year terms apportioned by population plus one member from each state elected for a four year-term. The President and Vice-President also serve four-year terms. There were elections for two-year seats in March 2005 and elections are due for the four-year seats in March 2007.

Some weaknesses of FSM are rooted in the nature of its federalism. The national government has very limited powers over the states, which are responsible for their own management and financial accounting. The states broad jurisdiction includes all residual powers not specifically granted under the constitution to the national government. As the states enjoy considerable financial autonomy, it is difficult for the national government to intervene, even in cases where a state system is not functioning. Hence, transparency and the extent of corruption vary from state to state, tending to be best in Yap and worst in Chuuk. Several congressmen and some state officials have been indicted for misuse of public funds; they authorised expenditures for use by development authorities, controlling disbursement by the same authorities. However, the judicial system is well organised and generally highly respected.

The president and vice president are elected by the 14 members of Congress, not directly by the people, and the president is dependent on the continuing good will of the Congress. As noted in a recent analysis (Hezel, 2005) a weak president can be a creature of the Congress in a way that is not conceivable in the nearby Micronesian countries of Palau or the Marshall Islands. Thus it can be difficult for FSM to develop and implement consistent policies.

The Faichuk group of islands west of Chuuk lagoon have been lobbying to be separated from Chuuk and be established as a separate fifth state, a move which is supported by Chuuk. Faichuk consists of 8 islands and 20,000 people, more than Yap or Kosrae states, and about 30% of Chuuk’s population.

The economy. Economic development since Independence has been highly variable and extremely dependent on the financial transfers from the Compact, which has accounted

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for most of FSM’s Gross Domestic Product (GDP). A large reduction in Compact funding in 1997 resulted in an Asian Development Bank (ADB) public sector reform programme that reduced public service staffing by 23% and wages by 29%, with real GDP declining 3.9% per year from 1995-1999. From Independence in 1986 through 2003, GDP grew only 1.6% per year. Pohnpei with 32% of population accounts for 45% of GDP whereas Chuuk, with 50% of population has only 30% of GDP. The Pohnpei and Yap economies grew at an AAGR of 2% from 1987-2003 whereas Kosrae and Chuuk each grew at only 0.6% per year. The ADB has calculated a decline in national GDP of 3.3% in 2004 and projects growth of 2.3% in 2005 and 1.8% in 2006.

The GoFSM has calculated GDP per capita as US$ 1,829 in 1987 growing to $1,966 in 2003 (both in constant dollars of 1998 value), a very modest increase. In 2003, per capita GDP ranged from a low of $1,182 in Chuuk to a high of $3,133 in Yap, with Kosrae at $2,307 and Pohnpei at $2,718. Yap’s GDP/capita was nearly 2½ times that of Chuuk.

Compact funding will continue to dominate the FSM economy for many years. There is little industry or tourism and exports are minimal. An amended Compact signed in 2003 provided grants plus contributions to a trust fund totalling US$92 million per year for twenty years, about $850 per capita (compared with per capita aid flows of $175-$200 in Kiribati, Samoa and Tonga). In July 2005, the US Government Accounting Office (GAO) warned that agreed conditions regarding accountability, planning and oversight were not being adhered to by the FSM government. In Chuuk state, Compact funds earmarked for education have been suspended because of alleged misuse of funds.

4. Poverty issuesIn late 2003 to early 2004, the ADB undertook a ‘participatory assessment of hardship’ involving nine communities, three each in the three states which took part. Kosrae declined participation due to the perceived lack of poverty on the island. When asked if hardship has gotten better or worse over the five years from 1999-2004, people in Yap and Pohnpei said their situation had worsened. They cited the increasing need for cash for basic services and goods and declining incomes due to the lack of jobs or markets in which to sell produce. Growing drug and alcohol abuse among youth was mentioned as an alarming trend. Weakening traditions and adoption of an individualist “Western” lifestyle (especially in Chuuk and Yap), overcrowding of households (Yap and Pohnpei), and increasing incidence of stealing (Yap) were said to contribute to worsening hardship. In Chuuk, the people consulted said their situation had improved in some ways and worsened in others over the previous five years. They cited improvements in basic services – particularly primary and secondary education – and more church programs in the communities, highlighting the important role of churches in delivering basic services.

The ADB concluded that there is a significant incidence of poverty (according to a basic needs poverty line, i.e. insufficient incomes to meet the level of expenditures required to provide basic needs), which in the FSM is defined by a lack of access to basic services, lack of opportunities or adequate resources (including cash) to meet basic household needs and customary obligations. Kosrae appears to have both a higher standard of living and a more equal distribution of income than in Yap and particularly than Chuuk and Pohnpei, where disparities of wealth are glaring in particular areas.

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Based on a 1998 Household Income and Expenditure Survey (HIES), about 28% of all households nationally were below the basic needs poverty line. 33% percent of Chuuk households, 12% of Kosrae, 30% percent of Pohnpei and 14% of Yap households fell below the poverty line. A new HIES carried out in 2005 should provide information to revise these estimates but the REP-PoR consultants have not seen any report of results.

5. MDG progressIn 2003, the ADB concluded that FSM shows little progress towards meeting the MDGs by 2015. There are signs of increasing inequalities within and between states. Key issues were poor delivery of basic social services, poor health indicators, and limited access to clean water and sanitation. Social services often fail to reach the poorer strata of society overall, the outer islands and rural areas. FSM not only faces the challenge of increasing school enrolment rates at all levels but also of improving the quality of education, retention rates and access in the outer islands. Although maternal mortality rates have fallen significantly, FSM still has a relatively high maternal mortality rate and a rapidly increasing incidence of non-communicable diseases. Child mortality rates have decreased slightly. Available data suggest that only 41% of the population has access to an improved water source and about 45% to improved sanitation.


1. OverviewThere is no national energy office in the FSM as energy matters are constitutionally the responsibility of each state. Staff of the federal Department of Economic Affairs (DEA) have occasionally dealt with energy issues on an ad hoc, part-time basis since 1999 and DEA is the contact point internationally for energy issues. However, there are no formal links between DEA and the four states on energy matters. From the early to mid-1990s there was also a petroleum advisor who advised the national and state governments on fuel contracting and pricing matters.

Some years ago, there was a national energy planner and each state also had an energy planner, all funded by the US Department of Energy (USDOE). By 1992, USDOE funding had been discontinued. The state energy planning position was left vacant in Chuuk, abolished in Yap, and continued for a time in Kosrae. By 2004, only Pohnpei retained its state energy office, with a chief of energy and an energy technician. The office has no overall energy planning responsibility beyond implementation of small-scale renewable energy projects. In all states, the main energy sector responsibility is through the state planning agency and the electric power utility.

a. Fossil Fuels

Refined petroleum products are supplied to Chuuk, Yap and Pohnpei by Mobil Oil Micronesian Islands (MOMI) from Guam. Kosrae is supplied by the state-owned Micronesia Petroleum Corporation (MPC) which operates a bulk terminal. MPC had a 1500 tonne tanker, which was sold in 2004 after several years when it could not meet international standards. It currently obtains fuel from MOMI or South Korea. MPC also has small bulk storage facilities in Yap.

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According to a draft 1999 national energy plan prepared by DEA, there was limited competition for the supply of petroleum fuels and products into FSM; the fuel supply companies assumed no responsibility for collection, removal and disposal of used and waste petroleum products; and the oil companies did not ensure that adequate fire fighting capability was available in terminals and the general community to cope with a worst-case disaster scenario. There was, and in 2005 is, no national Government of the Federated States of Micronesia (GoFSM) institution to address these issues.


Each state has a state-owned and controlled power utility. Compact funds have traditionally been the main source of funding for capital replacement and expansion. There is no national utility and no national standards, utility laws or regulation. The Kosrae, Pohnpei and Yap utilities operate semi-autonomously but still rely on state governments to cover deficits. In Chuuk, the utility is more heavily subsidised than in the other three states and revenue collection is lower. All utilities have state-wide mandates but provide services primarily to the main island or islands.

c. Renewable Energy

There is no national FSM institution responsible for renewable energy. The draft 1999 energy plan says that the development of renewable energy suffers from: i) solar electrification programs that are unsustainable; ii) the absence of any long-term experience with renewable energy; and iii) the lack of monitoring of FSM’s renewable energy potential.

d. Regulation

There is no national regulation of the electric power sector or of petroleum fuel standards, storage or transport. State regulations tend to be weak and sometimes poorly enforced.

2. Policies and legislationAs noted, in 1999, the DEA prepared a draft National Energy Policy, but there has apparently been no further development since 2000 and it has no formal status. Nonetheless, the objectives and issues are relevant. The overall objective is to promote sustainable social and economic development through cost effective, safe, reliable and sustainable energy services. In 2002, the GoFSM prepared a “National Assessment Report for the World Summit on Sustainable Development” that indicated five areas where energy policies and related strategies were needed: i) an effective and coordinated energy sector; ii) safe, reliable, cost effective and sustainable energy; iii) restructuring the power utilities and petroleum industry and promotion of energy service companies; iv) diversification of FSM’s energy resource base away from petroleum; and v) the environmentally appropriate and efficient use of energy. The earlier draft energy plan identified four constraints and deficiencies which needed to be addressed: 1) institutional issues (small fragmented energy sector; environment not conducive to private sector participation; no oversight or regulation; and insufficient capacity to coordinate, plan and manage); 2) the power sector (highly subsidised, no standards; 3) petroleum supply and pricing (limited competition, no responsibility for waste disposal); and 4) renewable energy (solar electrification unsustainable, little local experience, no monitoring of

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potential). These issues remain unaddressed. There are statements in the state plans regarding energy but apparently no budgets, priorities or even specific activities.

It is understood that the DEA may prepare a “bottom up” national energy plan based on state policies and plans. SOPAC / PIEPSAP may assist with technical input only as policy development is considered a sovereign matter. At the state level, PIEPSAP has been asked to assist Yap and Chuuk develop energy policy frameworks.

As noted, there is no national electricity or petroleum legislation or regulation. In addition to state laws establishing the four power utilities and Kosrae’s MPC, there are state and national environmental laws that could affect energy development although there are no specific requirements (e.g. environmental impact statements or assessments) for energy except those related to pollution control and waste management.

3. Capacity issuesThe draft 1999 energy plan specifically noted the lack of capacity at all government levels to coordinate, plan and manage energy sector activities. Essentially, there is no capacity at the national level and almost none at state level outside the power utilities except for small renewable energy projects in Pohnpei state.

4. Knowledge repositories and information deliveryThere is no GoFSM institution responsible for establishing or maintaining a repository of energy sector knowledge or its dissemination. There is a limited collection of energy materials at DEA, the state utilities, the state planning and environment offices and possibly the College of Micronesia in Pohnpei.



Prior to Independence in 1986, the states of what is now FSM had an active programme of energy assistance through the USDOE. Renewable energy initiatives included a few biogas, biomass, biofuel, small hydro, wind and solar energy demonstrations but none had survived to the early 2000s. Under TTPI funding, and the Compact after Independence, millions of dollars were provided for power sector development. The initial Compact included an energy grant of $3 million per year from 1988-2002 for energy development including renewable energy and efficiency improvements. Except in Pohnpei, the funds were used primarily to subsidise electricity prices for consumers. The grant typically provided between 25% and 50% of electricity revenues (varying by state). The FSM has had access to US federal assistance programmes, several of which included energy or rural electrification assistance, but no details are available.

In the early 1980s, about 200 solar photovoltaic (PV) pumps were installed in Chuuk, a few surviving until at least 2000 when some were renovated. About the same time 46 solar home systems (SHS), and a municipal PV system, were installed in at Mwoakilloa atoll in Pohnpei, all of which had failed by 1995. In 1988 a 2.06 MW run-of-river

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hydropower system with maximum output of 1.8 MW was commissioned at Nanpil on Pohnpei. The penstocks were damaged in 2001 and the system is not currently operating.

In 1992, a joint World Bank (WB), United Nations Development Programme (UNDP), ADB, Forum energy sector assessment estimated the extent of renewable energy development in FSM. It found 90 small PV systems operating (50 in Chuuk, 22 in Pohnpei and 18 in Yap) with a total of 7.1 kWpeak. There were two hydro systems (Nanpil in Pohnpei and 35 kW in Kosrae), although the Kosrae system operated only briefly, if at all. There were no biomass / biofuel energy systems.

Pohnpei state has had considerable experience with SHS for PV-based rural electrification in the outer islands through the Energy Office. About 1997, 129 solar SHS were installed on Pingelap through the Pohnpei Utilities Corporation (PUC). They were operating satisfactorily in mid 2004. In 1998, about 42 SHS and public building PV systems were installed on Mwoakilloai with French funding. Numerous problems of fee collection and poor maintenance have plagued the project ever since. In 1999, 105 SHS were installed on Sapwuhafik by the PUC. Most systems were operational in mid 2004 although over use has been common. In 2000, Paren and Lenger Islands received 47 and 21 SHS respectively with Italian funding. Perhaps 25% remain operational, fees are not being paid and many systems have been badly abused. In Pakin, 21 SHS were installed in 2001 and are understood to be operating.

In Chuuk state, about 56 high-quality household PV lighting systems funded by the state were installed in 1995 on Unanu, Makur, and Onou Islands in Namonweito Atoll. No user fees were charged nor were arrangements made for operation and maintenance, with individual households fully responsible. Despite abuses and poor maintenance, many systems continued to function providing a basic lighting service in 2004.

In Yap, there has been at least one French-funded PV project in the outer island of Satawal. In 2001, 50 SHS were installed. In 2004, they remained operational but power outages were frequent due to relatively small panel capacity.


In mid 2004, the Pohnpei state Energy Office on Pohnpei sought funding for 350 SHSs for electrification of outer island communities. The status in unknown but this could be in the upcoming EU project mentioned below.PIEPSAP (SOPAC/UNDP/Government of Denmark) – cooperation defined in the area of utility tariff policy in Pohnpei, rural electrification in Yap and Kosrae and state energy policy Chuuk. Co-financing of tariff study agreed upon for Pohnpei in cooperation with US Department of Island Affairs and the Pohnpei Power Utility.PIREP (SPREP/UNDP/GEF) – have undertaken assessment of key energy issues in FSM, barriers to the development of renewable energy to mitigate climate change, and capacity development needs for removing the barriers.

The European Union has allocated about 4 million euros (over US$4 million) to the FSM under the 9th European Development Fund (EDF9) for renewable energy or energy efficiency development for rural areas or remote islands of the four states. SOPAC/PIEPSAP have advised the states on the use of the funds.

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According to PIEPSAP, the PUC has negotiated a contract with an American company, Parsons, to rehabilitate the Nanpil hydro system at a reported cost of about $1.5 million.


PIEPSAP reports that the PUC hopes to develop a 10MW hydro project, which could cost as much as $50 million, quite high per MW. As far as the REP-PoR consultants are aware, no finance has been found.


Chuuk states CPUC hopes to install a 7 MW diesel generator, with funding from the Compact and an ADB loan. This is conditional on landowner agreement, which has stymied at least on previous ADB project.

2. InstitutionalAlthough externally funded programmes liaise through the DEA, in practice, all programmes work through the individual states, normally the office of the governor and the state power utility.

3. Policy and legislationAll energy legislation is at the state level. There is no legislation specific to energy programming.

4. Capacity issuesFor programme implementation, most capacity is within the state power utilities. Except for the Pohnpei PUC, capacity is largely limited to diesel power generation and distribution.

5. Knowledge repositories and information deliveryThe REP-PoR consultants have no information (beyond that already covered) on state-level knowledge repositories or information delivery regarding energy programmes. In general, the DEA provides the states with information on the availability of programme funds and much information delivery is by personal visits to the states. Internet access is available in the main parts of all states and this is a key, if expensive, source of information. The state utilities are members of the Fiji-based Pacific Power Association (PPA), which provides a range of services and has held several workshops on renewable energy development through utilities.



The only state of FSM for which fuel prices are regularly available is Kosrae, as the other three states do not provide information to the PIFS. According to the PIFS Pacific Fuel Price Monitor of July 2005, in June 2005 the wholesale price of petrol (gasoline) was about US$0.64/litre and automotive diesel oil (ADO) was US$0.61, excluding all taxes

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and duties. Gasoline was $0.11/litre above the average FIC price at the time, and ADO was $0.06 higher. The wholesale price of ADO (US$0.65/l) was about midway in the FIC price range, mainly because Kosrae has the lowest rates of tax and duty of any country listed.

There is no control of fuel prices except for the state government’s use in Kosrae. In mid June 2004 the DEA was directed to look into the contractual terms of supply of MOMI but the outcome is not known.


In April 2005, the cost of electricity for household consumers as reported by a PIEPSAP mission was as follows:

Chuuk. The tariff was a flat rate of 21¢/kWh (but 23¢ for commercial /kWh and 23¢ for the state government).

Kosrae. The charge was 18¢/kWh for the initial 100 kWh/month and 24¢/kWh for all consumption above this level. This included a fuel surcharge of 8¢/kWh, which covered perhaps half of actual fuel costs, the rest subsidised by the state government. The cost of supply in early 2005 was about 34¢/kWh.

Pohnpei. Households paid 25¢/kWh, but this has reportedly since been raised by 10% or more due to continued fuel price increases.

Yap. Households paid 13¢/kWh for the initial 100 kWh/month but the average cost was reportedly 18¢/kWh.


There are electric power systems on the principal islands of all four FSM states, and very small systems on some outer islands of Chuuk and Yap. In 2000, about 54% of all FSM households were electrified from some source ranging from 33% in Chuuk, to 59% in Yap, 68% in Pohnpei and 100% in Kosrae. Overall, 46% of all households were electrified through a state utility, varying from a low of 19% in Chuuk to a high of 98% in Kosrae. More recent data are not available to the REP-PoR consultants.

The Pohnpei Utilities Corporation’s distribution system reaches nearly all inhabited areas of the main island. The Yap State Public Service Corporation network reaches 98% of the state’s population and in 2000 served 57% of the state’s households. The Chuuk Public Utilities Corporation system has long experienced frequent outages and there are many commercial and private users with their own gensets. In 2000 19% of the state’s households were electrified through the utility. The Kosrae Utilities Authority provided electricity to 98% of Kosrae’s households through the grid in 2000.

d. Access to fossil fuels

Petroleum fuels are available in the main islands of all four states and are distributed to all inhabited islands. According to the last census, in 2000, 34% of all households cooked primarily with kerosene and less than 2% with liquid petroleum gas (LPG). By state, kerosene use for most cooking ranged from 22% of households in Chuuk, to 38% in Yap, 39% in Pohnpei and a high of 74% in Kosrae.

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As noted under “programmes” above, a significant number of Pohnpei’s households have solar PV systems for lighting and basic needs. In other states, PV is quite limited. The 2000 national census reported that over 50% of all households in FSM used wood as their main fuel, ranging from a low of 8% in Kosrae, 38% in Pohnpei, 47% in Yap and a high of 71% in Chuuk. Biomass is the most common renewable energy resource used in FSM.

2. InstitutionalThere are no institutions, except for the power utilities, which promote improved access to energy services.

3. Policy and legislationThere are no agreed formal policies, and no legislation, promoting improved access to energy services.

4. Capacity issuesOutside of grid-based electric power, and to some extent household PV in Pohnpei, there is little capacity to improve the access of FSM’s people to modern energy services. There is little capacity to establish sustainable operational and management systems for energy services for low-income households.

5. Knowledge repositories and information deliveryThere are no GoFSM institutions that serve as repositories for knowledge on improving access to energy services. Several NGOs have some limited experience and knowledge.



The GoFSM keeps records of petroleum imports by value but not volume so estimates of petroleum imports are only approximate. In 2002, about 53.3 ML were imported, of which about 20 ML was gasoline, 7.1 ML was jet fuel (including all kerosene products), 25.5 ML was diesel fuel and 1 ML was LPG.

FSM is overwhelmingly dependent on petroleum for all modern, commercial energy use. Roughly 86% of gross energy supply is from petroleum and 14% from biomass for cooking. Nanpil hydro provided several percent of electrical energy but is not now operating. Solar energy provides far less than 1% of the total.

b. Energy efficiency of use issues

There were some initiatives to improve the efficiency of energy use, mainly electricity end-use, by the USDOE and Department of Interior (UDDOI) in the pre-Independence TTPI during the 1980s. Several regional energy efforts of UNDP and the Forum Secretariat provided advisory services until about 1992 but with no discernible impact.

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In the mid 1990s, a UNDP-funded PIFS initiative, working closely with the PPA, assessed the potential for cost-effective demand side management (DSM) within ten PIC power utilities. Results suggested typical potential overall demand savings (MW peak) of 17% with a range of 8-28% and typical energy savings (MWh) of 17% with a range of 6-27%, although not all practical options were investigated. Although FSM was not included in the study, it is likely that savings would have been in the middle to upper ranges of those investigated. There is no doubt significant potential for savings.

In 2001, the PPA studied the potential for improved power utility energy efficiency in Kosrae and Pohnpei through supply side management (SSM), i.e. reducing technical and non-technical generation and distribution losses. Results are not publicly available.

c. Developable renewable energy resources

A biomass resource assessment was carried out in 2004 but the REP-PoR consultants have not seen results. Environmental issues make the use of indigenous forests for energy unlikely. The main developable resource is coconut. Potentially, FSM could probably produce around 6,500 tonnes per year of copra, roughly sufficient for about 4.8 ML of coconut oil or 4.5ML of diesel-fuel equivalent. This is less than 20% of estimated diesel fuel imports. However, even this would require improved production and higher payments to producers.

Typically, FSM receives about 5.5 kW/m2/day of solar radiation (horizontal surface), which is sufficient for cost effective photovoltaic and solar water heating use. No wind resource assessment has been carried out but in general the resource appears poor. Pohnpei and Kosrae have an estimated 7 MW or more of developable hydro potential (mostly on Pohnpei) but construction costs would be quite high.

There is a moderate seawave resource but this is not developable with current commercially available technologies. FSM has a large ocean thermal energy resource but this too is not currently developable. There is no known geothermal resource.

2. InstitutionalThere are no institutions with responsibility for improved technical efficiency of energy use or promotion of practical alternatives to diesel fuel, although the state power utilities are interested in means of reducing fuel costs through new fuels or better efficiency.

3. Policy and legislationThere is no legislation pertaining to energy efficiency or fuel options.

4. Capacity issuesCapacity to develop and implement energy efficiency programmes is very low. There is no GoFSM or private sector capacity. There is some small-scale production of coconut oil but no experience with biofuels, except very small-scale trials.

5. Knowledge repositories and information deliveryAs above.

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1. OverviewThe REP-PoR consultants have no information on any private sector entrepreneurial energy sector initiatives in the FSM.

2. InstitutionalThere are no institutions specifically to encourage energy-based entrepreneurship in the FSM.

3. Policy and legislationThere is no GoFSM policy or legal tools to encourage energy-based entrepreneurship in the FSM.

4. Capacity issuesThere is little if, any, GoFSM capacity for developing energy-based entrepreneurship in the FSM.

5. Knowledge repositories and information deliveryThere are no known knowledge repositories or information delivery mechanisms to encourage energy-based entrepreneurship in the FSM.


1. OverviewOnly two commercial banks operate in the FSM. According to the International Monetary Fund (IMF) in 2003, the banking system is well regulated and supervised. The Development Bank of the FSM has branches in the capitals of each state. It offers loan finance at 9% per annum interest and has provided loans to the state power utilities of Chuuk and Pohnpei. In 2005, the bank’s management has expressed interest in financing future hydro development on Pohnpei, renewable energy development in all states and initiatives that improve energy efficiency. As far as the REP-PoR consultants are aware, there has been no financial support for any individual or shop-based solar PV systems in FSM.

2. InstitutionalSee overview above.

3. Policy and legislationThere are no policies, legislation or regulations that encourage finance for energy sector initiatives in the FSM.

4. Capacity issuesOutside the Development Bank of the FSM and the private banks, there is no capacity to improve access to finance for energy-based development.

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5. Knowledge repositories and information deliveryOutside the Development Bank of the FSM, there is no known capacity to provide or improve access to finance for energy-based development.


1. OverviewThere has been some monitoring of PV projects by the Pohnpei energy office, and limited monitoring of Compact or other external energy sector assistance by DEA and the Finance Ministry. There is no monitoring by the GoFSM of power utility performance, financial situation or tariffs. In 2004, DEA planned to monitor and evaluate petroleum fuel pricing, probably with PIFS assistance, but the results are not known.

2. InstitutionalOther than GoFSM responsibilities under capital expenditures for the energy sector within the Compact, almost entirely for the power sector, there is no institutional responsibility for energy sector monitoring and evaluation (M&E).

3. Policy and legislationAs far as we are aware, there are no polices or laws regarding energy sector M&E, except for environmental legislation, varying state by state, regarding pollutants from power or petroleum facilities.

4. Capacity issuesCapacity for energy sector M&E is very limited at all levels.

5. Knowledge repositories and information deliveryWe are aware of no knowledge repositories or information delivery mechanisms regarding energy sector M&E.


1. OverviewThe main newspapers generally available in the FSM are published in Guam or elsewhere in Micronesia. They are not controlled but have limited coverage of FSM issues. There is free access to information on the Internet in all states for those with access and the funds to afford it. Each state has at least one Telecom-run Internet facility available to the public.

2. InstitutionalThe GoFSM and all four states have public information offices. There has been, and may still be, a biweekly national newspaper, the Kaselehlie Press. Yap also had a privately published weekly newspaper, the Yap Networker. Both have published politically sensitive stories.

Each state government has a local radio station that broadcasts primarily in the local language. The Chuuk State government has censored politically sensitive domestic news

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of its radio station. Religious groups also operate private radio stations. Pohnpei, Chuuk, and Kosrae have access to live satellite-broadcast from around the world and tape-delayed broadcasts of major U.S. television networks.

3. Policy and legislationAccording to the US government’s “FSM Country Report on Human Rights Practices for 2003” (published in 2004), the FSM Constitution provides for freedom of speech and of the press, and the GoFSM generally respected these rights in practice. There is no legislation restricting the media.

4. Capacity issuesWe have no information on the capacity of the FSM media to provide access to up-to-date and relevant energy-related information.

5. Knowledge repositories and information deliveryAs above but this is probably quite weak and limited.

J. Conclusions

1. OverviewThe FSM essentially operates as four quasi-independent states, possibly to expand to five, with very limited central government control in general. Under the Constitution, energy matters are the responsibility of each state.

2. InstitutionalThere is no central GoFSM institution dealing with energy matters, except to a limited extent the Department of Economic Affairs. DEA mainly functions as a contact point for external agencies dealing with energy and has no formal link with the individual states regarding energy. Only Pohnpei state has a state energy office, and it deals primarily with small-scale rural renewable energy project planning and implementation. In general energy matters are dealt with by the state utilities and the state planning authorities.

3. Policy and legislationA draft national energy policy was prepared in 1999 but has no formal status and has not been further developed since 2000. The DEA may develop a “bottom up” national energy policy based on the individual state energy policies and plans, some of which are now being considered and possibly developed.

There is no national legislation or regulatory framework for the electric power sector. There are no national standards for the supply, storage or distribution of petroleum products or LPG. There is state legislation establishing the power utilities, most of which also deal with water (which is cross-subsidised by power consumers). There are state laws which deal prohibit certain types of pollution from petroleum or power facilities.

4. Capacity issuesThere is some capacity for power sector planning within each state. There is no national capacity and no one within the federal GoFSM dealing full-time with energy.

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5. Knowledge repositories and information deliveryThe GoFSM does not have a national system or database for energy sector information. Even the import and consumption of petroleum fuels by volume by state can only be estimated, although the statistics office has been trying to rectify this. In general, there is no central knowledge repository for energy sector information, whether conventional energy, renewables, policies or plans, etc. Much of the information is with the state power utilities. Access to up-to-date information generally necessitates Internet access.

K. Recommendations

1. OverviewBecause energy is dealt with at a state level, and the federal government discourages assistance initiatives from working directly on policy matters, there are limited opportunities for external assistance without discussions with the officials of the individual states. Opportunities to provide practical assistance through energy initiatives which help lower-income people are probably easiest in Yap and most difficult in Chuuk (due to relative state governance) but Yap has the highest per capita GDP, 2½ times that of the poorest state, Chuuk, where such assistance is presumably most needed.

In all states, there are opportunities for substantial funding for the power sector from both grants (Compact) and loans (ADB) assuming land access is not an issue. For renewable energy development and energy efficiency improvements, there are some funds available from the EU from late 2005 or early 2006.

2. InstitutionalIt is difficult to recommend immediate practical assistance at the national level when the individual states fiercely retain all responsibility for energy sector matters.

At the state level, Pohnpei is likely to expand its use of solar PV for electrifying the relatively low-income outer islands. Advisory services may be useful to assist Pohnpei state develop sustainable mechanisms for the long term financial viability, operation and maintenance of rural SHS and this is recommended if Pohnpei state so requests. (This would also be useful for Yap and Chuuk but not Kosrae, which is fully electrified except for one small community.)

At least several states are reportedly considering the use of coconut oil based biofuel projects through EU assistance. As coconut oil in principle could replace nearly 20% of diesel fuel use for transport and/or power production, a technical study is recommended to assess the practicability of relatively small-scale coconut oil biofuel production, mechanisms to assure that the low-income people benefit from such a programme, the impact of coconut oil on the warranties of the state utility gensets (and the maximum acceptable distillate displacement by manufacturers), and the capacity of the Coconut Development Authority to play a role in biofuel development. This should be done in cooperation with the EU’s EDF9 project if it includes any biofuel component in FSM.

3. Policy and legislationAlthough the FSM lacks any policies and energy sector legislation at the national level, currently assistance is not recommended in these areas since PIEPSAP is advising on

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energy policy matters and power sector tariffs (mostly at state level). The PIFS has already prepared draft standards for the PICs for petroleum storage and distribution, and these are applicable to the FSM.

It may be appropriate to provide assistance at state level to develop legal tools for RESCOs (Renewable Energy Service Companies) to allow private companies or utilities (or their subsidiaries) to improve the reach, performance and sustainability of rural electrification systems through renewable energy. Essentially the same legislation should be suitable for each state.

4. Capacity issuesAt the national level, it is recommended that assistance be provided to the DEA, assuming they so wish, to develop its capacity to analyse energy sector issues, develop an energy sector database, and provide advisory services requested by the states. As Congress has apparently asked DEA to look into the high prices of petroleum products and their supply arrangements, it may be appropriate to build up petroleum contracting capacity, in cooperation with existing services offered by the PIFS.

5. Knowledge repositories and information deliveryThere should be some up-to-date and relevant knowledge repository on energy sector issues, technologies, policies, etc. readily available to GoFSM and state officials and the public. Some of this exists on the SOPAC and SPREP websites. A mechanism is not specifically recommended for FSM but there should be a PIC-wide system, perhaps with a Micronesian subsystem, available for FSM’s use. It is recommended that ways in which this could be established, whether through Internet services or other mechanisms, is considered.

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XVIII. FIJI

A. Background

1. Physical conditionsWith a land area of 18,333 km2 the Republic of the Fiji Islands consists of more than 320 islands of which about 120 are inhabited. Fiji lies between 177 E and 178 W Longitude and 12 and 22 S Latitude, about 3,200 km NE of Sydney and 2,100 km north of Auckland and claims an Exclusive Economic Zone (EEZ) of 1.6 million km². There are some low lying and raised coral islands but over 95% of the land is on continental-like volcanic islands that rise to well over 1,000 metres in elevation, with 87% of the land concentrated in the two main islands of Viti Levu and Vanua Levu.

The larger volcanic islands are characterised by steep, mountainous country, deeply cut by rivers and streams with large areas of natural forest and grassland. The islands are bordered by an extensive system of fringing or barrier reefs. Coastal areas include significant mangrove forests and coral. The climate is tropical with an average annual temperature of 26oC. Average annual rainfall on the windward sides of the larger islands typically ranges from 1,800 to 2,600 mm. As elsewhere in Melanesia, Fiji is rich in natural resources, particularly minerals, agricultural land and extensive forests; much richer than its Polynesian and Micronesian neighbours to the east and north.

2. Population and demographicsFiji has two main ethnic groups, roughly equal in number. Ethnic Fijians, about 53% of the total, are largely Melanesian in appearance, descended from the original settlers of several thousand years ago. Indo-Fijians, about 41% of the total, are descendents of indentured labourers brought from India by the British to provide agricultural labour in the 19th and early 20th centuries. The most recent population census, in August 1996, counted 775,077 people, representing an annual average growth rate (AAGR) of only 0.8% since 1986. Population data, which include some important energy use indicators, are quite out of date and the next census is not scheduled until May 2007 (a year late due to national elections in 2006). The Bureau of Statistics (BOS) estimated the 2004 population as 844,000 with the rapidly-growing urban population to be over 48% of the total. The main urban concentration, the Suva-Nausori-Lami corridor, has well over a quarter of a million people.

In 1996, 77% of the population was concentrated on Viti Levu (with 57% of Fiji’s land area) and 95% lived on the three largest islands. With over 90% of Fiji’s urban population living in Viti Levu in 1996, and the urban population increasing at an AAGR of 4%, the proportion of the population on the main island is no doubt higher today.

Political instability following coups in 1987 and 2000 has been a major factor in the net emigration of about 12% of Fiji’s 1986 total labour force (33,000 of 274,000) mostly people with upper levels of education and training. The emigration of about 53% of the 1986 stock of managers, professionals, technicians, associate professionals and clerical workers has required years of education and training to partly replace, and the cycle was repeated in 2000.

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3. Socio-Economic structureFiji is a republic within the Commonwealth. The 1997 Constitution has been widely praised internationally for its balance and protection of human rights but has also been criticised by some traditional leaders and nationalists. Cabinet is appointed by a Prime Minister from among members of Parliament and is responsible to Parliament. The Bose Levu Vakaturaga (BLV or Great Council of Chiefs), consisting of high-ranking members of the traditional chiefly system, elects a President for a five-year term, with the PM appointed by the President. Parliament is bicameral, with a Senate (34 seats; 24 appointed by the BLV, 9 appointed by the President, and one appointed by the council of Rotuma), and a House of Representatives (71 seats; 23 for ethnic Fijians, 19 for Indo-Fijian, 3 for other ethnic groups, one for Rotumans & 25 open seats). Members serve 5-year terms. Elections were last held in Aug./Sept 2001, and will be next held by September 2006. All citizens aged 21 and over are eligible to vote. There is full freedom of religion in Fiji and the court system has remained independent despite periods of political unrest.

Fiji has been highly dependent for several decades on tourism, sugar and other agricultural exports, garments and other manufactured goods, gold, timber and fish. From 1995 to 2002, Gross Domestic Product (GDP) grew in real terms at 2.4% per year to F$2.8 billion in 1995 dollars. In current dollar terms, GDP in 2002 was F$3.44 billion (about US$2 billion) or F$4,165 (~US$2,400) per capita. In 2002, Fiji’s exports were F$1.2 billion (~US$700 m) led by garments (32%), sugar and molasses (29%) and gold and fish (9% each). Imports were F$2.0 billion, a visible trade deficit of F$760 million (~US$440 m). Although economic growth in 2003 and 2004 averaged 3.4%, the Pacific Islands Forum Secretariat (PIFS) June 2005 Economic Outlook projected a drop to 1.7% in 2005 and 0.6% in 2006. Investment in Fiji has steadily declined from 35% of GDP in 1983 to about 12.5% since 1997. A low investment rate over a long period, particularly a sharp decline in private investment, has caused observers to question whether the country can sustain growth in the future.

The sugar industry has been in decline since 1994 and requires considerable restructuring to survive, and this is underway with Indian government assistance. The need to effectively address land lease arrangements, poor cane supply, deteriorating transportation, and mill inefficiencies have added to the serious problems faced by Fiji due to loss of subsidised access to the EU sugar market. According to the International Monetary Fund, the 68% government-owned Fiji Sugar Corporation (FSC) could face increasingly heavy losses reaching F$33 million (~US$19 million) by 2008 if no action is taken soon. Uncertainty over the future of the sugar industry has implications for national energy use and development since the FSC produces a significant amount of electricity, some of which is sold to, and distributed by, the Fiji Electricity Authority (FEA) and is potentially a significant source of biofuels. FSC is directly and indirectly a significant employer and the future of the sugar industry has strong links with rural hardship, particularly in cane growing areas where Indo-Fijians are the main ethnic group.

4. Poverty issuesThe UNDPs 1999 Pacific Human Development Report (HDR) ranked Fiji 4th highest among 14 Pacific Island Countries (PICs) in its 1998 Human Development Index (HDI), Fiji ranking 101st globally in HDI. Although Fiji has improved to 92nd in the 2005

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report, it has been passed by Tonga (54th) and Samoa (74th) of the 177 countries covered. In the 1999 Pacific regional report, Fiji ranked 6th among 15 PICs in UNDP's human poverty index (HDI).

There has been considerable debate within Fiji for some years on the extent of poverty. Fiji’s Strategic Development Plan 2003 estimated that the percentage of households living in poverty (which was not clearly defined) grew from 15% in 1983 to nearly 26% in 1996. The ADB in 2003 estimated that the “incidence of poverty has increased to possibly 33 to 50%” with urban slum dwellers becoming a problem. In 2003, the ADB also surveyed twenty urban and rural communities to determine people’s perceptions of poverty. In general, people described their situation as one of “hardship” rather than poverty. Both rural and urban communities defined hardship as: i) low income, which limits the ability to provide for family needs and traditional and church obligations; ii) lack or limited access to basic services, particularly education beyond class 8, safe water supply, roads, transport, and electricity; and iii) landlessness, particularly for ethnic Fijians who have moved to urban areas and all those who must lease land for shelter, subsistence gardens and cash income.

The communities’ views on whether hardship had increased or decreased from 1998-2003 were evenly split between those who saw an improvement and those who said their situations had worsened. 10% claimed no change in their standard of living. The key improvements cited were basic services such as community halls, paved footpaths, community water supplies, and rural electrification. The communities experiencing greater hardship cited higher prices of basic goods (e.g. flour, rice, and fuel), more joblessness particularly those in urban settlements, and higher school drop-out rates for both rural and urban children. Women are more vulnerable to hardship in Fiji than men.

The secretary of Fiji’s MDG national steering Committee, Josefa Sania (Fiji Times 13 October 2005) has told parliamentarians that Fiji cannot achieve the MDG’s poverty goal “because of the lack of data and statistics to quantify the extent of poverty in the country and also because of changes in the social and economic environment.”

The Ministry of Women, Social Welfare & Poverty Alleviation (MoWSW&PA) may produce a poverty and gender report during late 2005. Although it has the responsibility for developing gender and poverty reduction polices and programmes, capacity and financial resources are minimal.

5. MDG progressFiji has adopted the MDGs. Fiji has very high literacy rates for both men and women, with universal primary education for boys and girls. Quality of education and retention are problems, particularly on outer islands. Rural areas and outer islands compare unfavourably with urban areas regarding access to, and quality of, basic social services. Available data suggest that only half the population has access to a good quality water source. Access to good sanitation is 75% in urban areas but only 12% in rural areas.

A Pacific Islands Regional MDG Report (PIFS, 2004) has very little energy sector coverage in its section on MDG Goal 7 that ensures environmental sustainability. It reports, for Fiji, as for all PICs, no data on energy use (kg of oil equivalent) per US$ of GDP in purchasing power parity (PPP) as no accurate PPP conversions are available for

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the subregion. The report shows Fiji’s CO2 emissions in tonnes per capita declining from 1.52 in 1990 to 1.02 in 2000 (compared to a PIC median of 0.94 and 1.02 respectively). The reported 2000 emissions are consistent with those calculated independently by the GEF SPREP Pacific Island Renewable Energy (PIREP) Project Fiji report of 2005.


1. OverviewFor energy development, an important institution in Fiji is the Native Land Trust Board (NLTB), which administers all customary (native) land for the benefit of indigenous landowners. Native land includes a “non-reserve” classification, which can be leased or licensed for up to 99 years for use by owners or others. There are nearly 32,000 outstanding NLTB leases, about 14,000 each for agricultural and residential purposes, and the rest for commercial, industrial, government and miscellaneous developments. Because about 90% of all land is native, and land lease issues have been contentious in recent years, the success of most large-scale (and many small-scale) renewable energy developments in Fiji will be dependent on the policies of NLTB, the attitudes of traditional landowners and land-access policies of the government.

a. Fossil Fuels

Mobil, Shell and BP import refined petroleum products into Fiji and re-export to other nearby PICs. There is no petroleum refinery; supply is by medium-range tankers from refineries in Australia and Singapore. Liquid petroleum gas (LPG) is imported by Fiji Gas and Bluegas. All storage, distribution, wholesale and retail facilities are owned by private industry. In the case of petroleum, these are the international oil companies; for LPG, storage is owned by local companies. The Ministry of Finance and Planning (MoF) establishes maximum petroleum prices for motor spirit, kerosene and automotive diesel oil through its Prices and Incomes Board (PIB). LPG is not under price control. In the past, coal was used for cement manufacturing and the FSC reportedly plans to import coal to supplement bagasse (cane waste) for process steam and electricity production during periods when bagasse is unavailable.


A state -owned utility, the Fiji Electricity Authority (FEA) is to operate grid systems nationally according to the Electricity Act but only “where financially and economically viable” which in effect is for the two main islands of Viti Levu and Vanua Levu. For historical, not economic reasons, the old capital of Ovalau is also provided electricity by FEA. In addition to grid extensions to rural areas through FEA, there is a highly-subsidised (90% of capital investment and 3 years of free repair and maintenance services) rural electrification programme managed by the Department of Energy (DoE), which provides stand-alone community systems throughout the country by working in cooperation with the Public Works Department (PWD). The PWD itself operates small power systems at five remote government stations and these provide electricity to nearby households and businesses.

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c. Renewable Energy

A number of government agencies are involved in renewable energy planning, production, policy, or training. The majority of FEA’s capacity is hydro and major hydro systems are planned in the next several years. FEA has signed a contract for a wind energy farm and is testing coconut-oil/diesel biofuel blends. The FSC produces process heat and electricity (for internal use and for sale to the FEA grid) from bagasse. Several companies produce electricity from wood waste and one has signed a power purchase agreement with FEA for provision of electricity to the grid. In 2005 the Government of Fiji (GoF) established a Biofuel Industry Development Steering Committee within the Prime Minister’s Office to investigate commercial opportunities for investments in several types of biofuel including palm oil, coconut oil and ethanol blends for both power and transport use. There have been consultations with FEA, FSC, the Coconut Industry Advisory Board (CIDA), the Ministry of Agriculture, Sugar and Land Resettlement (MoA), the Land Transport Authority (LTA), the oil industry and SOPAC. The Department of Energy is not a member.

At the rural community scale, there are around five hundred solar photovoltaic powered electrification systems that have been installed under various programmes by the DoE. The most successful have been managed through a Renewable Energy Service Company (RESCO). There have been a few small mini/micro hydro systems installed for and managed by rural communities, church groups, etc. Several small private companies provide renewable energy sales and maintenance services but their market has been mostly limited to the sale of components to DoE and solar system sales to shopkeepers, eco-tourism establishments and wealthy owners of off-grid homes.

The Centre for Appropriate Technology and Development (CATD) and more recently the Fiji Institute of Technology (FIT) provide training in renewable energy systems at the technician or field operation and maintenance (O&M) level. There is some tertiary level training in renewable energy technology available at the University of the South Pacific (USP), sometimes in cooperation with regional organisations such as SOPAC.

d. Regulation

Currently, the FEA regulates all technical standards for grid based, public electrical power supply but this has been under review by the GoF during 2005 and may change. The driving force behind regulatory change has been the Ministry of Public Enterprises and Public Sector Reform (MoPE&PSR). The Commerce Commission, in effect with the MoF, establishes FEA electricity tariffs. In 2003 legislation was drafted to provide DoE the legal authority to regulate RESCOs but has yet to be presented to Parliament.

As all petroleum fuels are imported, Fiji in effect adopts the standards of the Australian and Singapore refineries. Although the GoF regulates petroleum storage and transport standards, the Fiji standards are out of date and the industry in fact adopts Australian standards. The PIFS has developed, and advocates the adoption of, a regional Pacific standard for petroleum storage and distribution.

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2. Policies and legislationThe Department of Energy (DoE) within the Ministry of Works and Energy (MWE) is responsible for overall national energy policy and policies for off-grid rural electrification. FEA does not have a formal policy statement but has a Corporate Plan for 2004-2006 with a publicised goal of 100% renewable electricity supply by 2011 while simultaneously restructuring and downsizing staffing levels. Though it is probably correct that 100% renewable generation (mostly hydro) can be achieved by FEA itself, this is likely to only be possible through shifting any increasing generation requirement to IPP suppliers who operate diesel generators – a process that actually began several years ago. FEA’s own generation forecast from year 2004 (available in PIREP Fiji Report Figure 3-8, p. 26) indicates a levelling off of renewable generation after 2008 and an ever increasing use of diesel for electricity well past 2011. The MoF is responsible for a national strategic plan that establishes a framework for energy and the national budget that allocates funds for implementing energy policies. The Land Transport Authority (LTA) deals with motor vehicle regulation, licensing and inspections and has a role in improving energy efficiency and reducing greenhouse gas emissions, a stated GoF objective. The Environment Department is responsible for climate change activities including greenhouse gases.

Within the GoF’s Strategic Development Plan for 2003-2005, the key energy sector goal is “to facilitate the development of a resource efficient, cost effective and environmentally sustainable energy sector.” Specific objectives include: a) formulation of “a comprehensive national energy policy to address renewable energy, efficiency and affordability, and environmental sustainability”, b) reform of the power sector “through internal restructuring of FEA and the encouragement of private sector participation through Independent Power Producers and Renewable Energy Service Companies (RESCOs) in electricity generation”, and c) increased funding … for the DoE’s rural electrification programme. DoE is developing the new national energy policy with the assistance of the UNDP/Government of Denmark funded Pacific Islands Energy Policy and Strategic Action Planning project (PIEPSAP), a regional programme managed by SOPAC.

Under the Rural Electrification Policy, approved by Cabinet in 1993, rural communities can request government assistance for electrification with several options: 1) extension of the FEA grid or a government station mini-grid; 2) a diesel genset with a mini-grid, operated by a village committee; 3) solar photovoltaic systems (PV) for lighting and basic appliances, operated by a village committee; and 4) small hydro with a mini-grid, again operated by a village committee. Applicants initially pay 10% of the estimated capital cost, with the remaining 90% provided by the government. Free maintenance and repair services are provided for three years to programme recipients. Those connected to the FEA grid pay the national FEA tariff. All other fees are established by a community committee that becomes responsible for O&M costs three years after commissioning. The programme has resulted in many installations but many suffer from poor maintenance and frequent power outages. There is a waiting list of roughly 900 or so communities.

Key legislation affecting the energy sector follows:

Electricity Act (Cap. 180 of 1966) established the FEA as a corporate body responsible for electricity supply in Fiji, and specified FEA’s duty to promote and encourage the generation of electricity for Fiji’s economic development and to secure electricity supply

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at reasonable cost. There is no requirement for FEA to assess or develop indigenous energy resources, consider environmental impacts, or promote the efficient use of electrical energy.

Petroleum Act (Cap. 190) regulates standards for storage and transportation of petroleum fuels into and within Fiji; the Fuel and Power Emergency Act (Cap. 191) regulates supply, distribution and use of fuel and electric power during fuel and power emergencies but has not been used sine the early 1980s; and Petroleum (Exploration and Exploitation) Act (Cap. 148) regulates exploration and exploitation of petroleum in Fiji (no economically developable sources have been yet located).

Public Enterprise Act (1996) or PEA, provides for the reform and restructuring of government entities, to be reorganised initially as government commercial companies (and subsequently commercialised, corporatised, or privatised) and regulated in the public interest.

Commerce Act (1998) established a Commerce Commission with powers to promote effective competition, and facilitate negotiations for access to infrastructure facilities or services and arbitrate in disputes about such access. An explicit objective is to “facilitate an approximate balance between efficiency and environmental and social considerations.” FEA pricing is considered by the Commission although effectively Cabinet has a strong role in tariff changes.

Environment Management Act (2005)). All development proposals that require government approval must undergo screening to determine whether they will be subjected to an Environmental Impact Assessment (EIA) process. There is a system of approvals, inspections, permits and fines for generating or discharging waste, pollutants or hazardous substances. Among developments requiring approval by an EIA Administrator are dams, artificial lakes or hydroelectric schemes and developments that could alter tidal or wave action. EIA requirements are vague and weak by recent international standards and have yet to be implemented.

Renewable Energy Service Company (RESCO) Bill (draft). Cabinet has approved a charter for the establishment of RESCOs and draft legislation has been prepared to develop a public-private partnership for rural electrification. The mechanism is through DOE purchase of solar home systems and leasing them at a subsidised rate to private companies, RESCOs, who will install and maintain them in return for user fees adequate to cover all their O&M costs and an acceptable return on their investment.

3. Capacity issuesOut migration of skilled people has been a serious issue for small island states globally for decades. As noted, in Fiji, the 1987 and 2000 coups have increased the historically high migration rates further, reducing dramatically the numbers and quality of technicians, engineers, economists and managers necessary for a well-run energy sector. The loss of these skilled people has necessitated the use of expensive expatriate staff in some key positions and requires extensive ongoing training. Nonetheless, Fiji still has the best capacity within the PICs for planning, developing, and managing its energy resources.

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The FEA has “downsized” its staffing from about 740 in 2002 to about 580 in 2005 through restructuring. It lost a large number of experienced technical staff in 2000 (including almost all of its system planning capacity) and relies on a relatively small, inexperienced group of professionals as it shifts its responsibilities toward new renewable energy technologies (e.g. wind), new supply arrangements (e.g. independent power producers) and possibly new relationships with government and regulators. This raises a range of additional capacity development issues during a period of rapid institutional change.

The DoE has approximately 13 professional / technical staff entitlements and 15 support staff, making it the largest energy office in the Pacific subregion with the exception of PNG. However, this includes some rural electrification responsibilities which are normally the responsibility of the Public Works Department (PWD) elsewhere and there are a number of key vacancies at both levels. In effect, all key decisions and analyses are concentrated within the activities of only a few individuals. One staff member is undertaking postgraduate training and several have recently resigned and migrated overseas. The capacity to influence national decisions on key energy issues (e.g. national biofuels policy, large scale renewable energy development, national energy efficiency policies and who provides energy services to the rural poor) and their effective implementation is weak.

4. Knowledge repositories and information deliveryAs Fiji is a key southern Pacific hub for interregional travel, fuel transhipments, industry, training, diplomatic offices, international organisations and regional organisations. As a result, Fiji has a larger number of energy-related knowledge centres than other PICs. In general, these are of relevance to the wider subregion, not just Fiji.

Within the electric power sector, FEA has long had a reasonably well-equipped training centre for technician-level services. The Pacific Power Association (PPA) also located in Fiji has, for over 10 years, offered a range of services to member utilities and private sector members throughout the region in an attempt to improve technical and financial operations. These programmes tap the skills of members, the E7 group of utilities and others. The PPA services and information sources are not available to non-members.

At the tertiary level, the University of the South Pacific (USP) offers technically-oriented MSc level courses in energy technologies and has in the past offered occasional courses and workshops covering a range of energy management issues at undergraduate level. There is a small Renewable Energy Centre for demonstrating renewable energy technologies at the Laucala campus and staff are involved in applied research on some aspects of solar thermal, solar PV, biofuels and energy efficiency. The USP offers a number of courses at undergraduate level that can be useful for energy management but no energy studies degree per se. A range of materials on energy policy and technologies are available at the USP’s main library. A campus of Central Queeensland University (CQU) in Suva and the new University of Fiji (UoF) in Lautoka offer general degrees but have no research facilities, no energy programme, and modest library facilities.

A number of technical institutions provide a broad range of short and long-term, part-time and full-time, training for the private sector and others (Training & Productivity Authority of Fiji; FIT, CATD) and can offer tailored specialised courses. However, their

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capacity would have to be improved to offer more than fairly basic courses in (for example) energy auditing or solar energy technologies.

At various times in the past there have been Fiji-based regional assistance programmes offering a wide range of services to PIC governments in energy policy formulation and implementation, petroleum policy and contractual advice, renewable energy systems planning and development, national electric power planning, policy and tariff reviews, rural electrification policies, environmental aspects of energy, etc. Except for some remaining petroleum pricing and related advisory services at the PIFS, these types of advisory services have shifted to SOPAC giving it the largest single repository of skilled people and information (printed and electronic) on energy issues in the Pacific subregion. This includes a wealth of historical information at both national and project levels, as well as up-to-date knowledge of current energy matters. Although some information cannot be released without the approval of the governments concerned, there is nonetheless a great deal of publicly available knowledge and data. SOPAC maintains an energy sector database, though it has numerous gaps and depends upon the national energy offices, not the PIC government agencies primarily responsible for data collection and analysis.

There is some information regarding the energy projects and activities of specific donors and regional organisations within their Fiji offices. These could include the embassies of France, Japan and the USA, the High Commissions of Australia and New Zealand, the EU and UNDP. Although these projects are often hardware-oriented, they often include policy and management components. In general, information tends to be available for only several years after a project’s conclusion and is often not readily available to outside parties except sometimes through the DoE.

The Fiji DoE has an extensive, well-organised library and a helpful librarian, although it can require some diligence to locate old reference materials. The GoF National Archives maintains old files and reports from the DoE (and the previous Ministry of Energy) and can retrieve these given written notice of about 6-8 weeks.


1. OverviewSince Independence for Fiji in 1970, here has been a wide range of programmes to develop energy policies and plans, assist Fiji to implement them, and develop the energy sector. The Ministry of Energy was established in 1982 and has since been downgraded to a Department of Energy. Since its inception, DoE has had formal responsibility for developing the overall framework for national energy policy and management. The Director of Energy is a member of the Board of the FEA but effectively the key government influence on FEA and its programmes is through the MoPE&PSR (through deregulation including FEA’s relationship with private producers of electricity) and the MoF (through tariffs and financial guarantees). The DoE has a strong influence on rural energy programme development, renewable energy development for off-grid use and energy efficiency activities, both in terms of programme design and in obtaining local and overseas finance.

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a. Programme history

In the post Independence early 1970s, Fiji’s main energy sector priority was to develop a true national power utility from several independent entities. Although the FEA existed, it served primarily a small urban market in the west of the main island. Following the consolidation of FEA, the priority was the development of Fiji’s hydroelectric resources by FEA to reduce diesel fuel use and expand electrification. The Monasavu hydro scheme, supplying the bulk of national needs at the time, was commissioned in 1983.

With the establishment of the Ministry (later Department) of Energy in 1982, following the oil price “crisis” of 1979, the policy framework, though vague, was to develop indigenous energy resources, improve energy efficiency and expand rural electrification. This has remained unchanged since then although the interpretation may have differed over time and the funds available for activities has waxed and waned.

In the 1970s, there was a long a series of assistance programmes to FEA to study its hydro potential (UK, AusAID, NZAID, ADB, WB) followed by commercial and development bank loans to develop the resource. There were a number of assistance programmes to the government (Japanese, Norwegian, UK, French, UN, EU) for preliminary assessments of small hydro, geothermal, solar, ocean thermal and seawave energy resources. Through the (then) Forum Secretariat, EU, UNDP/ESCAP, and currently SOPAC, there has been assistance available to DoE to develop energy policy frameworks since the early 1980s.

Fiji has installed about 1,000 kW of micro/mini hydro and is monitoring at least four additional sites with a potential for at least additional 220 kW. About 500 solar home systems have been installed producing about 40 MWh/year. Roughly 500 community diesel gensets have been installed in rural Fiji through PWD programmes since the 1970s, of which perhaps 270 have been installed in the past decade, serving (when they work) over 7,500 households for roughly 4 hours daily. An unknown but considerable number, however, do not provide reliable electricity service due to poor management, poor O&M, and/or the high cost of fuel.


The main programme for further development of an energy policy framework in Fiji is the Danish-funded UNDP/SOPAC PIEPSAP, which is advising DoE on its broad policy framework and MoPE&PSR on power sector regulatory issues.

SOPAC, with support from the United Nations Department of Social and Economic Affairs (UNDESA) has been undertaking a programme of energy audits and training with the governments and power utilities of Fiji and Samoa.

FEA continues its diesel and hydro expansion programme and has signed an agreement for the construction of a wind farm of about 10 MW rated capacity on Viti Levu based on Vergnet systems and has begun trials of coconut oil-diesel fuel blends. The DoE/PWD rural electrification programme continues much as it has for some years.

The UNDP/GEF preparatory phase grant for SOPAC to design a GEF Medium Size Project (MSP) on the “Promotion of Environmentally Sustainable Transportation in the Pacific Islands” (PESTRAN) initially covering Fiji, Samoa and Vanuatu.

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PIREP (SPREP/UNDP/GEF) – have undertaken assessment of key energy issues in Fiji, barriers to the development of renewable energy to mitigate climate change, and capacity development needs for removing the barriers.


With French government support, a survey of suitable sites for an expanded solar home PV system is scheduled to begin in 2006. It is anticipated that several thousand rural solar home systems (SHS) may be installed during 2006-2008.

The FEA is finalising arrangements for registration of several new hydro projects (Vaturu and Wainikasou) for ‘certified emission credits’ under the Kyoto Protocol’s Clean Development Mechanism for carbon emissions trading. This is expected to provide nearly US$0.6 m to FEA over a 7 year period, expected to be backdated to July 2005.

The Pacific Islands Greenhouse Gas Abatement through Renewable Energy Project (PIGGAREP) where Fiji is participating. This is a planned joint SPREP/UNDP/GEF barrier removal project building on the preparatory work undertaken as part of PIREP.


The ADB has discussed the possibility of assisting FEA with power sector planning and is assisting DoE and FEA develop both renewable energy and energy efficiency projects for possible financing through the Technical Assistance for the Renewable Energy and Energy Efficiency Program for the Pacific (REEP) funded through a trust fund provided by the Government of Denmark, a programme that also covers Samoa. The projects under consideration for development include hydro development (joint landowner/privately owned), biofuel for power generation on a remote island (Rotuma), training support for renewable energy and energy efficiency and others.The ADB has also designed a SHS component of a larger electrification programme for Fiji, which would tentatively provide about 2,500 SHSs. However, this has been on hold since about late 2004 pending agreement with FEA on overall power sector development.

There is a 2005 World Bank draft concept proposal for a possible GEF funded ‘Sustainable Energy Finance’ Project to improve supply-side energy efficiency within the power utilities, demand-side energy efficiency and renewable energy use in Fiji, Papua New Guinea, the Solomon Islands (and possibly other PICs) with possible support through the EU Energy Initiative and others.

2. InstitutionalThe key institutions for developing energy programme frameworks in Fiji are those whose roles and responsibilities have already been discussed above: the government agencies (DoE, MoF, MoPE&PSR) and the FEA. The regional institution with a key energy role (SOPAC) has no mandate to develop national programme frameworks but it, and donors and lending institutions such as the ADB, do have a strong influence; an example is the PIEPSAP programme under SOPAC that is assisting DoE in the preparation of a national energy policy framework.

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3. Policy and legislationPolicy and legislation issues have been covered in Section B ‘Institutional Arrangements for Energy Management’. It is worth emphasising here, in a section emphasising development and delivery of energy programmes, that Fiji’s current rural electrification policy, dating from 1993, has been reviewed several times in part as it has not been particularly effective in providing a consistent, high-quality, reliable and affordable service to a large percentage of Fiji’s remote rural people. Recall from the Background section that the 2003 hardship and poverty survey identified the lack of electricity as a basic need perceived by rural communities as a key issue contributing to hardship in Fiji.

The Fiji government’s formal policy is to involve the private sector to a greater extent in energy provision. In rural areas, experiences elsewhere suggest that locally-owned RESCOs can be an effective means of providing better energy services. As noted, RESCO legislation has been drafted in Fiji. In principle it has been approved by Cabinet and has been independently reviewed but not yet sent to Parliament for its consideration.

If the government genuinely wishes to encourage private power production for feeding the national grid, there is a need for legislation or regulations to assure transparency in the establishment of power sales to FEA on terms that are reasonable to the producer, FEA and the consumer.

4. Capacity issuesThe issues are the same as those raised above: high levels of migration from Fiji have resulted in the loss of a very high percentage of skilled and experienced people in general, requiring continuous training and incentives to retain good staff.

5. Knowledge repositories and information deliveryThis has been covered in earlier sections.



In June 2005, the retail price of gasoline in Suva was US$0.92 per litre, kerosene was $0.73 and the wholesale price of distillate (most of which is sold at wholesale prices for electricity generation and sea transport) was $0.65. Excluding import duties and taxes, the wholesale prices of gasoline and distillate were US$0.46 and $0.48 respectively, about 70% higher than at the beginning of 2004. Gasoline, distillate and kerosene are price-controlled with allowable prices higher in rural areas depending on transport costs. Kerosene is considered a basic need and attracts a low rate of duty (3%) compared to other fuels (about US$0.11-$0.26/l), plus 12.5% value added tax (VAT).

A recent analysis (B Rao, Fijian Studies, USP, May 2005) suggests that historically the Fiji pricing formula allows oil companies to increase prices during periods of crude oil price rises twice as fast as the decreases during times of declining crude oil price, and the companies have done so. In October 2005, the PIB was considering changes to the pricing formula to allow more frequent consumer price adjustments.

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FEA has a national tariff for domestic (i.e. household) consumers of F$0.2059/kWh plus 12.5% VAT or F$0.2316/kWh (about US$0.14). However, the cost of generation and distribution vary by about a factor of ten between their main urban centre (largely hydro supplied) and the smallest FEA diesel grid system. In late 2005, with high demand growth, very high fuel prices and limited hydro capacity, FEA is selling electricity at well below its marginal cost. FEA’s charges have declined slightly in current dollar terms over the past decade, which is a substantial decrease in real terms during a period of price increases.

Under the government’s rural electrification programme, rural communities must contribute 10% of the capital cost as estimated by PWD. If grid extension by FEA is impractical, communities tend to prefer stand-alone gensets, for which the government assumes all maintenance for three years, after which the community is responsible. There are very limited data available on the cost of providing diesel village electrification in Fiji. A 2002 DoE study based on 15 village records of fuel costs, government records for capital costs, and an assumed 8 year loan at 9% annual interest indicates an average cost of supply of F$2.70/kWh (~US$1.50) including transmission losses (but excluding operating costs). The implied subsidy through the government capital grants averaged about 60% of the cost of the service. With assistance from ESCAP and UNESCO, the DoE is currently surveying a number of remote communities that have had power for five years or more in order to determine true costs of supply, reliability of supply and the manner of use of the electricity.


At the time of the most recent national census (1996), 87% of Fiji’s urban households, 49% of rural households and 67% of national households were electrified. 57% of households had FEA power. On the main island of Viti Levu, 73% had some form of electricity. It is surprising that 35 years after Independence, Taveuni, Fiji’s third largest and third most populated island still lacks a reticulated power supply. The average household consumption of electricity is not clear from FEA statistics but in 2003, 63% of residential consumers used 108 kWh/m or less.

During the 1996 census, less than 4% of households reported that their power was from village systems, whereas nearly 5% reported that they had their own power plant. The census included no data on solar systems. There are no accurate data on how many diesel systems installed under the DoE programme remain operational.

Nearly all the standalone rural electrical systems provide electricity only in the evening hours and the electricity is used almost exclusively for lighting and entertainment appliances. Electrical power is usually not available for use in daytime economic activities in most off-grid communities.


Although petroleum fuels are shipped throughout Fiji, for remote islands there are sometimes periods of unavailability due to inadequate shipping capacity. The northernmost island of Rotuma reported periods in the past year when there was no fuel

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(or electricity in villages) for several weeks and long periods of restricted hours of power supply due to fuel shortages. In 2004, retained imports of petroleum fuels were about 440 litres per person per year.


Most of the population of the main island of Viti Levu (with 77% of Fiji’s people) has access to renewable energy in the sense that in 2003, hydropower provided 53% of FEA’s total generation. Of five rural community micro systems been built with government support in the 1980s-1990s; it is understood that none are currently functioning, in part due to high costs of repairs and the lack of a consistent institutional support structure.

There has been production of electricity from bagasse at Fiji’s sugar mills for decades, with excess power supplied to the grid during the crushing season and nearby FSC staff homes receiving subsidised power. The timber industry uses wood waste for power production for internal purposes and sells surplus to the FEA grid. None of this appreciably affects low-income families.

As noted earlier, there are about 500 rural households in western Viti Levu, Vanua Levu and outer islands with access to small amounts of electricity from solar PV systems. At these small numbers, access can generally be maintained – particularly in Vanua Levu where trained support is available – but an expanded programme would require better training for O&M and formalising RESCO arrangements.

There have been trials of biogas at piggeries, coconut oil as a fuel at several villages and small-scale production of electricity from biomass steam systems, one of which has operated successfully for several decades. Solar thermal energy is widely used for water heating. However, these have not resulted in any appreciable access of the rural population to modern forms of renewable energy. One of PWD’s rural government stations and nearby communities was served by a hybrid wind/solar PV/diesel power system but over several years it gradually reverted to diesel operation as the renewable component failed and was not repaired.

The main use of renewable energy in Fiji is biomass for cooking. In 1996, about half of Fiji’s households reported that wood or biomass was their main cooking fuel. Of these only 5% reported that they used a wood stove, the rest relying on open fires. During the 1980s, there were DoE household and institutional woodstove programmes but they were only widely accepted in schools and rural institutions. It is unlikely that more than a few of the institutional stoves remain in occasional use at remote boarding schools.

2. InstitutionalThe key institutions dealing with access to energy services, particularly for rural and lower-income people have already been discussed: FEA for electricity grid extensions, DoE for stand-alone community systems, and PWD for a few small communities served by a small grid from a remote government station. There are no private institutions whose full-time activities relate to assuring access to energy services.

There are several private suppliers of renewable energy systems and one RESCO on Vanua Levu. Twelve companies in Fiji include renewable energy systems as a significant

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component of their business. The MoWSW&PA has no activities directly related to energy.

3. Policy and legislationLegislation and pending legislation related to energy services has already been described. As noted in the 2005 Fiji PIREP report, it is likely that a significantly higher percentage of people in remote communities could have access to modern energy forms (i.e. high quality well maintained electricity systems) if appropriate policies, legislation, regulations, and tariff structures were developed to encourage local companies to provide such services. There is currently no legal or financial incentive for such services.

4. Capacity issuesThe DoE does not presently have the funds or human capacity to develop or implement a programme that would provide high quality and sustainable energy services to a significant percentage of those who currently lack such services. Although the GoF is corporatising or reducing staffing in major elements of the public service, the government (possibly DoE with MoF and MoPE&PS) does not seem to have the immediate capacity to develop or monitor a programme in which such services could be effectively provided outside of government with DoE in a monitoring role. This needs to be developed if the large numbers of rural areas without electricity are to be electrified over a reasonable period of time.

If Fiji were to expand its government rural electrification programme significantly, it would require significant expansion in the capacity for planning, management and O&M in both the public and private sectors. If the solar home PV programme expands, the capacity to train RESCO operators and technicians will also need to be expanded. Regardless of the types of systems used, any programme to provide reliable off-grid rural electrification services will require significant new institutional capacity for sustainable management.

5. Knowledge repositories and information deliveryThis has already been covered.



Petroleum fuel accounts for nearly 100% of commercial energy use in Fiji, excluding hydroelectricity. For reasons that are not entirely clear, there are serious anomalies in the data for petroleum fuel imports for recent years. In 2000, approximately 350 ML of petroleum fuels were imported and retained (i.e. re-exports excluded) of which about 55% was used for land and sea transport, 26% for electricity production (public and private), 8% each by households and industry and 3% in the commercial sector. Refined imported petroleum fuels will continue to dominate the energy economy for some years to come.

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A number of energy audits have been carried out within GoF and private facilities, and these often indicate opportunities for rapid and cost effective savings. Some of these have been implemented but there are no monitoring results available. There have been no comprehensive studies on practical opportunities for improving the supply side or end-use efficiency of energy use in transport, power, industry, households, commerce, etc.

There have been internal studies by FEA indicating opportunities for savings (money, demand and energy) by the utility and major commercial customers through a short-term energy efficiency programme but this was related to temporary drought conditions and the need to increase use of costly diesel fuel, not part of a FEA planning effort. There is a study underway with ADB REEP support on the practicality of supporting an energy efficiency service company (EESCO) concept in Fiji to improve energy end-use efficiency in the commercial and industrial sectors.

Much of FEA’s diesel generating plant is operated under contract by a private company. It is understood that the contractual terms provide incentives for improving supply-side efficiency, and that this is happening. FEA has recently begun testing blends of coconut oil and diesel fuel within tight parameters established by the cooperating engine manufacturer (Caterpillar) so the warranty is not voided.


Fiji has large-scale hydro resources (which are developable and being developed by FEA), geothermal (for which there are scant data), and ocean energy resources (which are not currently developable). FEA is developing a wind farm and a private developer is investigating a wind farm of roughly similar capacity. If viable, wind farms could in principle provide a good rental income to relatively low-income rural land-owners.

A proposed hydro development scheme in Naitasiri on Viti Levu, if successful, would be the first such venture in Fiji for IPP supply to FEA that would have majority ownership by indigenous rural land-owners. In addition to providing 24-hour electricity at FEA standards to a number of remote villages, the project would provide considerable long-term income to one of Fiji’s poorest areas and could be a model for similar developments elsewhere in the Pacific. Preliminary technical studies are encouraging and further development is under consideration through the ADB’s REEP.

For transport fuel use based on current biomass production, in the short term Fiji could in principle produce about 2 ML of diesel-fuel equivalent from only 20% of its current copra production. Fiji could also displace about 11 ML of retained petrol imports with ethanol from sugar cane in a 15% ethanol/petrol blend (commonly referred to as E15). A recent report on Fiji’s sugar industry (Oxfam, Sept. 2005) quotes an Australian expert who estimates that Fiji would require about 32 ML of ethanol for a 10% ethanol/petrol blend (E10) and that most of this (22 ML) could be produced from Fiji’s molasses with the 10 ML difference from 17,000 tonnes of sugar (only about 6% of sugar production). Although the analysis appears to grossly overestimate Fiji’s petrol consumption, it does indicate a local capacity to produce a good deal of fuel ethanol without reducing sugar exports substantially. It notes that a 60 ML/year ethanol facility is generally considered small so the economics of production need to be carefully assessed. Ethanol can

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reportedly also be blended with diesel fuel but typically only up to about 3% by volume, not enough to greatly increase Fiji’s potential ethanol fuel demand.

As the Fiji sugar industry has been in crisis for some time, in principle production of ethanol (or any fuel produced at a large scale from biomass produced on farms) could have a significant impact on rural employment and thus on hardship and poverty. The Fiji government is said to be considering the development of a palm oil industry with Malaysian technical assistance. Although palm oil is not as good a fuel as coconut oil, it is far more productive per hectare and could be very competitive (alone or as a biofuel blend) with imported diesel fuel. The key issue for Fiji in developing biomass resources for fuel is likely to be long-term, secure agricultural land access on acceptable terms to land owners and tenants as well as the government and political forces.

In the mid 1980s there were several proposals from development NGOs for producing ethanol in Fiji as a fuel on a village scale for cooking and lighting. In addition to the non-commercial nature of the technologies and the uncertain economics, a key concern of the GoF was the potential for abuse of the product in villages as an alcoholic drink. In North America decades ago, and possibly now, ethanol or methanol was widely available in gel form as a cooking fuel in special disposable “Sterno” stoves’ for campers. Today a similar gelfuel – ethanol combined with a small amount of cellulose and water – is reportedly (UNDP, The Sustainable Difference: Energy & Environment to Achieve the MDGs, Aug. 2005) being tried in Africa as a safer alternative to kerosene and other liquid fuels. In Fiji low income homes have burned down and lives lost due to fires started by kerosene lamps or stoves. If Fiji pursues ethanol as fuel on a commercial scale, it should also investigate the potential for gelfuel (and gelfuel stoves and lamps) for both fossil fuel replacement and safety reasons.

For small-scale rural energy provision, Fiji has reasonable information on its solar resource. There are about 50,000 rural households in areas of high solar insolation. The DoE estimates 12,000 households as reasonable candidates for home PV systems. Although there is a significant microhydro resource, only four undeveloped sites have been studied in any detail.

2. InstitutionalIn addition to organisations that have already been discussed, there are at least ten private companies in Fiji that have been involved at some extent in energy auditing or energy efficiency studies (and their implementation), several others with an expressed interest, and several investment and financial institutions with some interest in energy efficiency investments. FEA, USP and FIT have all carried out energy audits (FEA for some of its largest commercial customers) with UN and SOPAC assistance.

3. Policy and legislationThe new National Energy Policy nearing completion includes overall national energy policy, energy efficiency, rural electrification, renewable energy, environmental aspects of energy, etc. It is understood that no radical changes are expected from the existing policy draft. In 2005, the GoF gazetted (published) a long-awaited new building code that did not include any consideration of energy efficiency.

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4. Capacity issuesThe issues are as described already. If Fiji does embark on the large-scale development of biofuels for transport and/or electric power, the government will require a wider range of skills than it presently has for planning and O&M.

High level training, initially from external sources, will be needed if the wide range of possible energy efficiency improvements are to be addressed using local firms. Initial training is proposed as a part of the REEP EESCO project but local training capacity needs to be developed for the long term.

5. Knowledge repositories and information deliveryIn addition to earlier coverage above, it is noted that there is very limited knowledge in Fiji on effective and practical energy efficiency programme design and implementation.


1. OverviewA small core of energy-based entrepreneurial companies exists in Fiji and this could be further developed with appropriate policies and incentives.

The development of large scale RESCO operated solar powered rural electrification as proposed by DoE will require the development of several rural based companies along the lines of Labasa based RES, the company presently contracted by DoE to manage the approximately 300 rural solar PV installations on Vanua Levu.

2. InstitutionalThere are a number of certificate and diploma courses offered in Fiji by private schools and FIT in business studies, management and accounting as well as BA and MBA degrees at USP and CQU. The GoF sponsors “Start Your Own Business” workshops and some organisations offer mentoring programmes for young people staring businesses.

The ADB’s REEP is developing a programme to encourage companies in Fiji to improve their capacity for energy auditing and related energy efficiency work. The Energy Efficiency Service Company (EESCO) concept would provide intensive, focused training to interested companies and a loan and risk mitigation fund would support energy efficiency investment. A number of companies and individuals have expressed an interest in becoming an EESCO, although the programme could not be implemented before late 2006.

3. Policy and legislationThere is no policy or legislation specifically for energy-based entrepreneurship. In 1998, FEA was briefly re-organised into three government-owned commercial companies for generation, transmission and sales of electricity. The GoF then drafted an Electricity Reform Bill to provide a related framework for competition. Under that system, there would no longer be a national electricity tariff but rather electricity prices would vary by location and consumer class. There were provisions to encourage the private supply of electricity throughout Fiji. The bill was never passed by Parliament.

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4. Capacity issuesThere are a few small companies in Fiji whose primary business, or a significant portion of it, is renewable energy or energy efficiency. There are others with a strong interest in one or more of these areas. Most effectively rely on one or two key people and must bring expatriate staff into Fiji for any sizeable project and cannot expand services quickly. Those that offer energy management services routinely rely on staff from overseas associates for technical expertise. In general, capacity is very limited.

Rural entrepreneurship is limited largely by a lack of business skills and knowledge of management techniques. For the RESCO approach to work for DoE subsidised rural electrification, a training programme will need to be developed specifically covering the technical and management skills required to operate and maintain rural solar home systems. Also training for DoE staff in the management of and support to the RESCO operators will be required.

5. Knowledge repositories and information deliveryExisting energy entrepreneurs in Fiji represent an important knowledge base not found in most PICs where energy entrepreneurship is typically not yet present. This resource could be tapped to develop energy entrepreneurship programmes for the region.


1. OverviewFiji has a number of full service, international commercial banks, one locally based commercial bank and the Fiji Development Bank. Also present are commercial finance companies (specialising in business loans) and other specialty finance agencies.

No institutions in Fiji specialise in energy sector finance, either for major projects or small-scale systems such as solar water heaters or rural solar photovoltaic systems.

2. InstitutionalFor rural areas and the urban poor, UNDP has supported microfinance activities in Fiji for some years and recently began working with the ANZ Bank to introduce a travelling banking facility that includes a specially-equipped van to visit rural areas and provide banking services to remote areas on a regular schedule. There has been no attempt to market renewable energy to rural households though if loan requirements can be met by the purchasers, there is no reason they cannot be financed.

The National Centre for Small and Microenterprise Development (NCSMED) has a nation-wide micro-finance programme, the National Micro Finance Unit (NMFU). The goal of the programme is to create an enabling environment for a micro-finance industry, which will focus on providing financial services especially for the poor and disadvantaged households. The NMFU does not provide micro-finance services. It creates and works with NGOs that have as their specialty the delivery of micro-finance services to rural Fiji.

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3. Policy and legislationThere is no specific policy in Fiji regarding access to finance for energy related investment.

4. Capacity issuesFiji has a well-developed urban financial infrastructure but services to remote areas remain basic though improving.

5. Knowledge repositories and information deliveryBoth UNDP and the NCSMED have information repositories on microfinance.


1. OverviewAny programme of activities which hopes to reduce poverty in Fiji through energy sector interventions faces several immediate problems. First there is no real agreement in Fiji on what constitutes hardship or poverty or how to measure it. Thus there is no baseline from which to measure progress. Second, there is little accurate information on household patterns of energy use related to income, consumption or (however estimated) poverty. Third, even if data did exist on current levels of poverty in Fiji plus some correlation between poverty and energy use, this would not suggest a causal relationship between the two so a programme to increase energy use among the poor in Fiji would not necessarily reduce poverty and, as some analysts have suggested, could even make it worse by requiring more cash outlay from already poor households.

2. InstitutionalThe Population Studies Programme at USP has an ongoing programme on poverty and gender in Fiji. A number of NGOs are addressing the same issue. Several NGOs (WWF; Greenpeace Pacific) have limited involvement in monitoring national involvement in international treaties and conventions with energy components (i.e. Kyoto) but this is minor.

The DoE, concerned about the poor quality of petroleum import and end-use data, has been working closely with the oil companies, the BoS, the LPG importers and the Fiji Customs & Revenue Service in an attempt to reconcile differences and develop a system to improve future reporting. No report on findings or results is yet available. The PIB regularly monitors the price of price-controlled fuels at markets throughout Fiji to assure they are within the maximum established wholesale and retail prices. The Commerce Commission has recently (about 2004-2005) begun seriously evaluating FEA submissions for tariff changes to assess the justification and the impacts on businesses and other consumers.

3. Policy and legislationThe GoF’s Strategic Development Plan: 2003-2005 has a formal policy of reducing poverty by 50% between 2000 and 2005. By 2005, 95 % of the urban population were to have access to electricity, 300 additional villages and settlements were to be electrified, and a RESCO charter was to be in effect. The extent to which targets are being met is not known.

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The extent of urban and rural electrification will be known after the analysis of the 2006 census.

4. Capacity issuesThe BoS has been unable to provide an accurate time series (for unknown reasons) of even basic energy data such as retained fuel imports. However it has some good staff capable of good analysis if provided with financial resources and reliable data from original sources.

5. Knowledge repositories and information deliveryThese have already been discussed. USP and others offer courses in monitoring and evaluation methodologies. A wide range of GoF reports of use for monitoring and evaluation are available on the government’s overall website and individual department websites (such as the DoE, the BoS and the national planning office) though many are out of date.


1. OverviewUnder the 1997 Constitution, the GoF is obliged to introduce a freedom of Information Act but this has yet to occur, despite pressure from the NGO community. Reports produced by the BoS are generally available to the public, many on-line. The MoWSW&PA (with the BoS) has been working on a national poverty report for some time. According to recent press reports (Fiji Times, 9 October 2005) this has yet to be completed.

For many years urban Fiji has had access to a vibrant and uncensored print media with three English daily newspapers and less frequent Hindi and Fijian publications and several business-oriented periodicals. Dial-up Internet access is available in towns. In 2005 an expensive land line and wireless ‘broadband’ service has been introduced in the capital. The Internet is a key resource in Fiji for access to technical information for a small but growing group of professionals. Despite recent decreases in charges, it remains very expensive, even relative to other PICs.

Traditionally, the rural population has relied on Fijian language radio, which has tended to be somewhat self-censoring. Recently Fiji TV has become available nationwide through satellite broadcast but few people away from the main islands have bought (or can afford) the satellite dishes or have the power to receive broadcast.

The DoE and FEA have at times prepared information on renewable energy and energy efficiency for radio, television and print media in English, Hindi and Fijian. FEA has acknowledged, at least in private, that their efficiency information campaigns have not been effective.

2. InstitutionalThere is a national library in Lautoka and a city library in Suva but no effective national library system. There is little or no technical information or access to it through this system. The school system in Fiji is well developed with universal primary education.

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There is no gender disparity with respect to education with almost equal numbers of males and females in primary and secondary schools.

3. Policy and legislationA Freedom of Information Act has yet to be drafted but the press has largely operated in Fiji with minimum restrictions.

4. Capacity issuesPublic libraries in Fiji are very under resourced and have no technical capacity. By far the best library in Fiji accessible to the public is that of USP but the public does not have access to borrowing or research facilities. The best information access is through the Internet for those who can afford it.

5. Knowledge repositories and information deliveryThis has been covered already.

J. Conclusions

1. OverviewPoverty. There are opportunities within the energy sector for programmes and activities with the potential for reducing poverty in Fiji. However, without agreement on what constitutes poverty in Fiji, its extent, how to quantify it, and its relationship to energy use, it would be foolhardy to estimate the likely impact of such programmes on the degree of poverty reduction.

Biofuels. Fiji has rich agricultural lands and a long history as a sugar and copra producer. Considering the current level of oil prices and the likelihood of high prices for the foreseeable future, Fiji has genuine opportunities to competitively produce biofuels from sugarcane, coconuts or a range of other agricultural crops to replace or reduce fuel imports. The impact on poverty would be through employment in agriculture and processing, possibly in part through ethanol (reducing the level of reduction of Fiji’s sugar industry otherwise expected) and partly through new employment through coconut-oil, palm oil and/or other distillate replacements. In several remote islands, there may be biofuel options based on raw refined coconut oil as a diesel fuel replacement but this would not have a significant poverty impact.

Rural energy services. A considerable portion of Fiji’s rural population does not have access to reliable, affordable energy services. Except for FEA grid extensions, the mechanisms for providing reliable stand alone community electricity services in Fiji (whether gensets, microhydro, or PV) are generally not functioning adequately, although (e.g. RESCOs) there are exceptions. Twenty-four hour service is rare and O&M is often poor.

In remote areas, basic petroleum fuels are sometimes unavailable, key problems being high prices and inadequate, irregular transport to the site. It may be technically possible to replace kerosene with locally produced ethanol-based “gelfuels” or other biofuels but this would not have an impact on poverty except to the extent that the fuel/stove

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combination might be safer. It would not improve access to fuels without a corresponding improvement in the reliability of fuel shipments.

Urban energy services. Although the majority of urban households do have access to electricity, there are no recent, reliable data on the percentage of urban people with access to adequate energy services or their cost related to income. There are no readily available data through which to link urban poverty and energy

2. InstitutionalDoE. At the national level, the Fiji public service is going through a period of downsizing and reform in which services previously considered to be public service functions are increasingly going to be commercialised or “outsourced”. Within the MWE for example water supply and possibly road construction are under consideration for outsourcing. In this downsizing environment, the DoE’s current emphasis on the design and implementation of a wide range of small scale pilot type projects needs to be seriously reconsidered, especially as their impact at a national level has been minor. The time for pilot projects probably has passed and Fiji’s need today is for large scale implementation using the lessons learned in the pilots. DoE should be focusing on planning and managing so that sustainable energy services (e.g. biofuels, rural electrification, renewable energy, energy efficiency) are effectively delivered and monitored by contractors, not by DoE itself. There has been a shift in this direction, for example with the RESCO concept, but DoE personnel still are spending most of their time micro-managing small projects that have little national significance. Such a change requires a major reorientation of existing resources rather than a major increase in resources. Without such a change in its institutional mindset, DoE risks becoming redundant within the new public service.

3. Policy and legislationNational electricity tariff policy. The GoF policy of a single national electricity tariff has held back the development of reliable rural electrification in areas away from the two main grids on Viti Levu and Vanua Levu. There is no financial or legal incentive for FEA or any private developer to provide a high quality 24-hour power supply in areas away from these grids, as the supplier will lose money. This is known to be one of the main reasons a reliable grid supply has not been provided on Taveuni despite interest in its development by several private investors.

IPPs. Under current electricity legislation, in which FEA arbitrarily decides the amount per kWh to be paid to independent power producers (which is currently substantially less than FEA’s marginal cost of supply and less than its cost of diesel-generated power), there is little incentive for IPPs to invest in renewable (or other) energy systems even if they may be able to supply electricity at costs below those of FEA diesel generation.

Energy efficiency. Although Fiji has numerous opportunities for improved energy end-use efficiency, there is no legislation to require or encourage cost-effective energy use (e.g. minimum energy standards for new vehicles, for new buildings and for major renovations, or for industrial/commercial investments – especially those that receive GoF tax incentives). Although such legislation is ineffective on its own, it can establish an environment for effective action. Under current conditions in Fiji, some specific policies (such as highly subsidised or even free highly efficient compact fluorescent lights for

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urban households) could save money for both FEA and low-income households. If the GoF approves, it is expected that ADB will assist Fiji establish an energy efficient service company (EESCO) for which such legislation would provide a framework.

4. Capacity issuesIn general, despite coups and waves of emigration, Fiji has a better capacity to manage its energy sector than other PICs. However, it can be concluded that for effective planning, management and implementation of opportunities within the energy sector which are likely to have positive impacts on those suffering most from hardship will require continuing efforts at capacity building at all levels – from rural community O&M through to negotiating large wind system contracts and monitoring contracts – for the foreseeable future. Even assuming a stable political and economic future in Fiji, there is little reason to expect that the emigration of highly skilled people from Fiji (and other PICs) will decline markedly without major policy changes in Australia, Canada, New Zealand and the USA. A major long term investment in well-designed training and education is important if capacity is to be better developed and maintained. As much of the Pacific subregion relies on Fiji for both training and technical services, this conclusion has impacts for neighbouring PICs as well.

5. Knowledge repositories and information deliveryIn general, outside USP and SOPAC, there is limited energy sector knowledge available to the public in Fiji. There is a need to develop repositories of up-to-date, practical and accessible information on energy technologies of a scale appropriate for their application in Fiji in a manner which will benefit the bulk of Fiji’s population.

K. Recommendations

1. OverviewThe recommendations below are implicit from the above conclusions and some will require technical assistance or funding from external sources.

Poverty and energy. These refer to links, not clearly understood in Fiji, presumed to exist between poverty and energy:

Fiji needs to develop in association with the regional organisations and donor community a mutually agreeable and measurable definition of poverty or hardship as it applies to urban, rural and remote island communities of different ethnic groups. It is understood that Fiji, with UNDP assistance, is developing a national poverty assessment at present.

Based on existing information through Household Income & Expenditure Surveys (or other suitable surveys or the forthcoming poverty study), the BoS should determine whether there is in fact any clear relationship in Fiji between poverty and energy or between income or expenditure and energy. This should include a gender component. The analysis needs to further determine if this is merely a correlation or if there is a true cause-effect relationship. If there are clear links, there should be an analysis of implications for the energy policies and plans of the GoF as to how they are likely to affect the poor and gender equality.

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Biofuels. The GoF is likely to require some advisory services (technical, policy, institutional) regarding biofuels as some sort of large-scale development. It is premature to make specific recommendations. However, as the GoF and FSC seem to be serious about ethanol production as a fuel (to mix with gasoline), it would be appropriate to carry out a preliminary study of the practicality of gelled ethanol (gelfuel) as a kerosene replacement for cooking and lighting, including experience elsewhere, the costs of jellification, its safety compared to liquid fuels, and the types (and costs) of cooking appliances needed for their use.

It is recommended that there be undertaken an analysis of the feasibility and impacts of large scale use of coconut based and palm oil based biofuel as a diesel replacement on small and large scale producers, on the price structure of the local coconut and palm oil market, on the logistic requirements for moving raw materials to processing centres and on the locations and requirements for those processing centres. The end result should be a plan for the rational development of the industry in Fiji (with potential applicability to the Solomon Islands, PNG and other PICs).

2. InstitutionalDoE. Fiji will probably require assistance to re-align the operations of the DoE with the overall direction being taken by the Fiji civil service (i.e. a management and monitoring rather than implementation role), with the new operational requirements consistent with the existing staffing and budgetary constraints of the DoE.

3. Policy and legislationBiofuel. Fiji is likely to require assistance with policy and legislative tools for effective biofuel development and for analysis of approaches that are likely to have the maximum benefit for the bulk of Fiji’s population. If biofuel development is to benefit the poor, there should not be a monopoly producer or supplier.

Power sector reform. In 1998 Fiji considered an Electricity Reform Bill to provide a framework for competition with electricity prices varying by cost of supply at different locations. There were provisions to encourage the private supply of electricity throughout Fiji. If the GoF is serious about providing reliable and high-quality electricity services throughout the country, it is recommended that a similar approach be considered again and adopted. Other reforms to power sector legislations should include the inclusion of some end-use efficiency planning in FEA’s system planning criteria and an independent determination of the cost formula for electricity purchased by FEA from IPPs. Some form of legislation is needed to encourage IPPs.

RESCOs. Fiji should expedite the passage of its RESCO legislation through Parliament. It is not clear if assistance (e.g. further legal drafting) is needed.

Energy efficiency. Fiji should develop regulations that incorporate minimum energy standards in new commercial buildings and major renovations to new buildings. There should be minimum energy efficiency standards for commercial investments in which the investor receives a tax break or other incentives. Assistance will be needed to draft such legislation and associated regulations. The DoE is developing an appliance labelling system to encourage the import of energy efficient refrigerators and later air conditioning systems. DoE should be assisted to develop this into a practical system which assists the

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consumers choose, and have access to, the most suitable energy-efficient appliances available on the market.

4. Capacity issuesThere are several initiatives under development for enhancing the capacity of Fiji-based institutions (TPAF, FIT, CATD, USP) for energy sector training at various levels covering policies, renewable energy, energy efficiency, etc. Assistance will be needed to further develop these into fundable proposals. If ADB assistance is not forthcoming for EESCO development, this will be needed from other sources.

If Fiji shifts toward private provision of power in remote areas, there will be a need for entrepreneur/management training specifically for RESCOs. This is recommended.

5. Knowledge repositories and information deliveryTechnologies and mechanisms for effectively accessing, storing, and delivering knowledge widely, cheaply and effectively throughout the widespread islands of a small country like Fiji are changing rapidly. We are aware that other initiatives are underway through the ITU, UN system, SOPAC, PIFS, etc, regarding provision and delivery of appropriate knowledge and information to Fiji and the wider Pacific for technical decision-making. Initially we propose that knowledge systems for the energy sector be specifically included in such initiatives.

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XIX. KIRIBATI

A. Background

1. Physical conditionsThe Republic of Kiribati has 32 widely scattered atolls in three island groups (Gilbert, Line, and Phoenix) spread over a large ocean area measuring 4,200 km from East to West and 2,000 km from North to South and includes 85,000 people living on 811 km2 of land. About one third of the land area is in the Gilbert group with over 90% of the population. Most of the rest of the land is in sparsely populated Kiritimati (Christmas) Island, the largest (by land area) atoll in the world. Except for one raised coral island (Banaba), Kiribati’s islands are all low lying coral atolls in the Gilberts group. All islands are rural except the southern portion of the capital island of Tarawa where the government centre is located.

2. Population and demographicsThe last national census was held in 2000. At that time Kiribati had a population of 84,494 and an annual average growth rate (AAGR) of 1.7% for the period 1995-2000. Over that five year period there was an urban (Tarawa) growth of 5.2% per year and a rural decline of 0.6%. Urban South Tarawa reached 36,717 or 43.5% of the total national population,. over 2,300 persons per km2, whereas population density for the Gilberts group excluding Tarawa was only 145 persons per km2. If this trend continues, South Tarawa would reach 50,000 people by 2006, which will make it one of the most densely populated atolls in the world with serious problems of sanitation, waste control and water supply.

Not only is urban growth fed by migration from rural islands, Tarawa has a young population with a higher birth rate than that of rural islands. These two factors have combined to make the Tarawa population grow at three times the normalised rate of the rural population. The moderately high rate of national population growth and the rapid growth of the South Tarawa population are major problems facing development planners. Another alarming statistic is the large, and apparently growing, gap in the life expectancy of the male and female population. In 1973-78 the male life expectancy was 50.3 and female 54.5. In 1999/2000 the male life expectancy and increased only slightly to 58.2 relative to that of females who had gained nearly 13 years of expectancy at 67.3. This gender gap is primarily seen on South Tarawa where males are particularly subject to life style diseases including obesity, diabetes and alcoholism. The relatively high incomes available to South Tarawa workers has allowed a shift from traditional food and drink toward tinned meat, rice and sugar-laden soft drinks and has supported a high per-capita consumption of imported beer and spirits.

English is widely spoken on Tarawa and all schools include English studies though only the local language is generally used on the outer islands outside of Government offices.

3. Socio-Economic structureKiribati people, called i-Kiribati, are Micronesian though the southern islands have been influenced strongly by Polynesian culture. The Gilbert Islands became a British protectorate in 1892 and in 1916 the Line Islands were included with the Gilbert Islands

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as a British Crown Colony. In 1937, the Phoenix Islands were brought into the colony. The islands were taken over by Japan in WWII and Tarawa, by then the capital island of Kiribati, was the scene of an important battle between the US and Japan over control of the central Pacific. After the war, the islands returned to British administration until independence in 1979 and the official name changed from the Gilbert Islands to Kiribati (pronounced “Kiribass”).

Government is organised generally on the British model. The head of state is the President who is elected by popular vote every four years as is the 42 seat single house legislature. Traditional forms of governance remain strong, especially on outer islands, and operate in parallel with the official government.

On outer islands, local government power is vested in an Island Council that is typically composed of elder men representing the villages on the island. In effect the Island Council is a combination of official government and traditional government.

The attention of the British during the colonial years was focused on the mining of the large phosphate resource on Banaba, a remote south-western island of the Gilbert group, the only raised coral island in Kiribati. The phosphate was mined out by 1979 when Independence was granted but money from a phosphate reserve fund established in 1956 is still available (2001 value about A$636 million) and is an important source of funds for government operations.

The gross domestic product (GDP) in 2004 was about A$70 million, a per-capita GDP of around US$700. Data sources are not consistent with estimates ranging from a low of $500 to nearly $1,000. Whatever the actual value, it is clear that Kiribati does still belong in the Least Developed Country (LDC) category of the UN that provides for special support from UN sources.

Copra remains an important source of income on outer islands and the establishment of a new oil mill on Tarawa confirms its continued importance despite the fall of oil prices on the export market.

Income from the sale of foreign fishing licences (around A$46 million in 2001) is an important source of cash income for Kiribati since the island republic has an enormous EEZ of around 3,550,000 km2, about 1/3 the land ? area of the USA.

Another important source of income for Kiribati families is the many graduates of the Maritime Institute in Tarawa who become seamen on foreign, usually German, vessels. Most extended families on the outer islands include at least one active seaman who sends money home from his seaman’s wages helping cover the modest cash needs of the outer island family.

4. Poverty issuesThe ADB’s recent series of reports on hardship in the Pacific does not include Kiribati. Like other very small (in population) PICs, Kiribati is also not included in the annual UNDP Human Development Report (HDR) so there are no recent estimates of its Human Development Index (HDI). However in 1999, UNDP’s Pacific HDR calculated the Kiribati HDI as equivalent to a global ranking of 129th among 177 countries and 11th of 14 PICs.

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Although per-capita GDP is low, conventional poverty indicators do not provide a proper picture of outer island conditions. The outer island economy, largely due to the remote nature and small size of each island, is almost wholly subsistence oriented with the economy relying on barter, non-monetary trade and family fishing and farming for subsistence. In general, outer island residents enjoy better nutrition and longer lives – especially men – than their counterparts on relatively money rich Tarawa where the very high population density, the stress of salaried work and the easy access to alcohol and “junk” food has caused serious social and health problems not found on the “poor” outer islands.

The primary concern on outer islands is drought. There are no creeks or lakes and the ground water is brackish and limited in quantity so most potable water is obtained by rainwater catchments and stored in large tanks at each house. Large reserve tanks are also sometimes installed at public facilities for emergencies. A few villages have water piped from ground water sources using solar powered pumps but most households even in those villages prefer the purer rain water for cooking and drinking. Also during drought conditions, production of coconuts, a staple food, goes down and if the drought is severe some economic trees, particularly breadfruit, die. Several of the islands in the Phoenix group are not inhabited largely due to the prevalence of cyclic drought.

Access to water sealed sanitation facilities has increased greatly in recent years but still is far from universal.

Outer island residents do not consider themselves as members of an impoverished class but do express concern regarding the limited opportunities available for education and personal advancement for outer island children. The relatively poor access to good health care facilities for citizens of the outer islands is also a major concern though a general program for outer island facilities improvement, including the construction of a major hospital complex on Tabituea Island, is under way by Government.

There is no malaria though mosquito borne dengue fever is sometimes a problem. There was a large increase in the reported cases of HIV/AIDS infection in the early 2000s causing considerable concern among health officials. HIV is potentially a serious problem due to the large number of seamen employed overseas.

5. MDG progressInfant mortality remains high at nearly 50 deaths per 1000 births with some slow improvement. The average life expectancy in 2003 was 61.7 years at birth with the gap between males and females over 8 years and widening – largely due to the increased prevalence of life style diseases in Tarawa males.

Indicators of nutrition and health, notably the percentage of underweight children, have become worse in recent years. Access to primary education indicators have not improved significantly on the outer islands though gender parity goals have been achieved in education. Goals to improve retention rates in secondary schools have not been achieved though progress has been made.

In 1996, roughly half the population was considered below the US$1 per day income level defined as poverty under the MDG. This is based on unreliable data but there is no doubt that money income on the outer islands is low, however in Kiribati that does not

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translate to hunger, malnutrition or a degraded life style as is the case in many parts of the world. With the fall in copra prices, the expectation is that the monetary income for outer island families probably has fallen somewhat since 1996 though there is no solid data available.


1. OverviewEnergy policy and planning, Tarawa electrification, Kiritimati (Christmas Island) electrification, rural electrification and fossil fuel supply all come under different institutional structures with little coordination among them.

a. Fossil Fuels

The Kiribati Oil (KOIL) was formed in 1992 and is state owned. The company imports and distributes all petroleum products in Kiribati. In 2003 it sold around 16 million litres of petroleum products within Kiribati. That represents about 190 litres per person per year, one of the lowest in the Pacific. Mobil Oil has been the contracted supplier since 1992.

Oil storage is owned by Mobil and leased by KOIL though KOIL is constructing some storage of its own and is negotiating to purchase the Mobil tank farm.


The Public Utilities Board (PUB) is the primary grid based electricity supplier in Kiribati. The PUB serves all of South Tarawa with an extension into part of rural North Tarawa. All generation is by diesel power.

The Public Works Department (PWD) operates a small power system on Kiritimati Island that covers only a small part of the island, mostly tourist and government facilities.

Most of the local governments of the outer islands operate a small generator for a few hours per day to provide electricity for office use and to providing lighting for nearby employee housing.

A new hospital facility on Tabituea has its own power system that also provides power to some housing associated with the hospital.

A number of small private generators are used intermittently, some for business use such as powering a video system used to show films for a small fee for village entertainment.

c. Renewable Energy

The Solar Energy Company (SEC) handles nearly all solar based electrification. It currently manages around 2000 installations on homes, public meeting houses (maneabas), health centres and schools. Though the great majority of the PV installations are rented to users by the SEC, some are sold and the SEC provides maintenance when needed.

The SEC has installations on all the islands of the Gilbert group (representing 90% of the population) and has resident technicians and agents on each island. The last expansion

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project, funded by the EU, was only recently commissioned. The SEC is currently looking for capital funds to further expand their rural electrification scheme.

d. Regulation

The prices of petroleum products are in theory regulated by the Ministry of Commerce, Industry and Tourism but are usually adjusted in line with the prices quoted by KOIL.

There is no external regulation of the PUB, PWD or the SEC in the provision of electricity services.

2. Policies and legislationThe Ministry of Works and Utilities is responsible for energy policy and the development and possibly implementation of renewable energy and energy efficiency programmes. The six person Energy Planning Unit (EPU) is the main policy, monitoring and advisory group, the Public Utilities Board is a statutory authority responsible for the provision of electric power, water and public sanitation on Tarawa, The SEC provides for outer island electrification using solar photovoltaics, the KOIL imports and distributes petroleum products, and the PWD operates the power plant on Kiritimati and provides for piped water (usually with solar powered pumps) and sanitation on outer islands. Aviation fuel is provided by BP directly under contract to airlines serving Tarawa.

Fuel pricing is the responsibility of the Ministry of Commerce, Industry and Tourism (though in fact KOIL typically sets prices) and the Ministry of Finance and Economic Development oversees aid coordination and capital investment programmes.

Relevant legislation includes the Public Utilities Act that formed the PUB as the exclusive generator of electricity within its supply area (as defined by the relevant Minister). The legislation also excuses the PUB from customs duty, import levies, sales tax or income tax.

The Prices Ordinance allows for price regulation of energy services though only petrol and kerosene are actually controlled in price.

The 1999 Environment Act is intended to help control the serious environmental problems that are the result of the extraordinarily high population density on South Tarawa. Major projects require an environmental impact assessment (EIA) and environmental impact statement (EIS) but the extent to which these requirements are enforced is apparently low..

3. Capacity issuesCapacity building at the PUB and the SEC has been the focus of ADB, the EU and Japanese aid (JICA) over the years. The energy delivery institutions appear to be functioning adequately though management capacity does not extend to good forward planning, the preparation of high quality project proposals or proper economic analysis of projects.

The EPU has fairly regular turnover of staff and capacity development is usually needed for policy and planning.

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4. Knowledge repositories and information deliveryThe EPU maintains a well organised and extensive library of materials and reports relating to past energy projects, policy work and general references. The SEC also has a small library of reference materials, reports and project records that is easy to access.

The PUB and KOIL maintain their knowledge base primarily for internal reference though both have been willing to share information if a clear request is provided.



The PUB was formed in 1977 to take over the public utility requirements (electricity and water supply and more recently sewage) of South Tarawa from the PWD. A number of expansion and upgrade programmes have been carried out and today the utility extends throughout South Tarawa and has a short extension into North Tarawa.

The SEC has been in operation since 1984 though it was solely a PV sales organisation until 1989 when, facing bankruptcy, it reorganised into a service provider rather than a hardware seller. Since 1992 the operations have gradually expanded with donor inputs from Japan and the EU through three projects.

Both the rural electrification through the SEC and the PUB Tarawa electrification have benefited greatly from recent donor projects. JICA has paid for the complete rehabilitation of both generation and distribution on South Tarawa and the EU has funded the expansion of the SEC rural solar programme from 325 to 2000 homes. Both projects were completed within the last year.


The final installations of solar equipment for public meeting houses has yet to be completed under the now technically closed EU outer islands electrification project. Negotiations are underway between KOIL and Mobil to purchase the Mobil owned storage on Betio. Additional storage is also being constructed by KOIL.

PIEPSAP (SOPAC/UNDP/Government of Denmark) – cooperation in general defined in the area of fuel supply and bio fuels. More specifically it is planned to consider wind power for Kiritimati, coconut oil as a diesel substitute, study of petroleum delivery and storage and to review the energy policy

PIREP (SPREP/UNDP/GEF) – have undertaken assessment of key energy issues in Kiribati, barriers to the development of renewable energy to mitigate climate change, and capacity development needs for removing the barriers.


The PIEPSAP project has been asked to examine the prospects for wind power for Kiritimati, coconut oil as a diesel substitute, study petroleum delivery and storage and review the energy policy.

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The SEC is preparing project documents for further expansion of solar based rural electrification both in the Gilbert group and in the Line and Phoenix group. Rehabilitation of the health centre solar electrification systems is also being considered.

2. InstitutionalThe Ministry of Finance and Economic Development oversees aid coordination and capital investment programmes to ensure that they fit into the national development plan and are not duplicating other programmes.

Each energy delivery institution develops its own programmes and seeks funding on its own though the EPU may assist in making contact with donors and with development of project documents.

3. Policy and legislationThe Environment Act is the only legislation that directly affects energy development programmes. There is no legislation to control petroleum fuel standards, storage or distribution and thus any programmes regarding petroleum storage or its ownership.

4. Capacity issuesThere is limited capacity for the preparation of good quality project proposals and the analysis of projects and programmes.

Management of programmes is an area where capacity development is needed.

Programme and project record keeping and record retrieval is not generally adequate and assistance is needed in developing proper monitoring and documentation processes for programmes and projects.

5. Knowledge repositories and information deliveryProject records are kept by the agency implementing the project and often copies are kept at the EPU library.



The price of fuel on outer islands of the Gilberts group is the same as Tarawa. Shipping costs are subsidised. Kiritimati fuel prices may differ from Tarawa prices since it is also supplied from Fiji making shipping costs much higher.

The Forum Secretariat Petroleum Price Monitor of July 2005 placed Kiribati above average for the PIC wholesale price of petrol and distillate (excluding import taxes and duties,) and similar to that of Kosrae (FSM), Tonga and Tuvalu but cheaper than Vanuatu. Retail prices were about average for the PICs, mainly because the import taxes and duties are somewhat less than average.

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The PUB tariffs in 2003 were A$0.37 (~US$0.27) per kWh for domestic customers and A$0.47 (~US$0.35) per kWh for government and commercial customers. This is one of the highest electricity tariffs in the PICs and probably covered actual O&M costs for generation at that time if there were not a substantial cross subsidy to the water and sanitation component of the PUB business from electricity fee collections. As crude oil prices have roughly doubled since then, costs have since increased.

On the outer islands, the SEC solar systems that provide lighting and radio power cost users around A$10 per month (~US$7.50). That covers SEC O&M cost (including battery replacements) but does not include capital investment recovery.


South Tarawa with around 45% of the national population is fully electrified by the PUB. An additional 5% of the population receives electricity on Kiritimati Island or from local government generators. Of the remaining 50% of the population without electricity, roughly 20% of that has been electrified by solar energy leaving about 40% of the population without access to electricity.

In 2003 the PUB generated about 15.9 GWh of electricity. This represents a very low 15 kWh/person/month electricity use.


Although all island councils maintain a small store of diesel, petrol and kerosene fuels in 200 litre drums, outer island use of fossil fuels is minimal.

Fuel shortages are not unusual as Island Councils cannot afford to purchase a reserve. Although fuel deliveries are expected monthly, they often are not on time.


Biomass remains the primary fuel for cooking and copra drying, probably representing around 25% of gross national energy use, the rest being imported petroleum products.

Kiribati has a higher percentage of solar energy generation in its energy balance than any other PIC but it is still less than 1% of the energy supply. Nonetheless, over 2000 rural homes (about 20% of rural households) now have solar electricity provided by the SEC that rents solar systems to outer island households. Fees charged are around A$10 per month with some variance according to the actual services desired. Typically the systems include about 110 Wp of solar panel, a high quality long life battery, high efficiency lights and a converter to allow radios to be powered from the solar system. The programme has been in effect since 1992 and has been very well received by rural dwellers. The government is preparing project documents for another 2000 systems since the demand remains high on the outer islands.

Copra production is down from earlier levels but remains the primary product from the outer islands for local income generation. The coconut oil mill on Tarawa (the government owned Kiribati Copra Milling Company or KCMC) has an oil production capacity of around 700 tonnes/month (full 24 hour operation) but actual production has

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been more like 300 tonnes/month due to inadequate copra available for milling. The oil produced is almost all exported but could be developed locally as biofuel to offset the import of diesel fuel since production costs are now less than the local cost of diesel fuel. PIREP estimated that as much as 85% of diesel fuel used for power generation could be provided by local coconut oil production though considerable effort to rehabilitate the resource and to develop a more efficient copra production process would be needed.

2. InstitutionalAccess to rural electricity is largely provided by the SEC. Access to electrical energy on Tarawa is by the PUB and on Kiritimati by the PWD. KOIL provides access to petroleum products on all islands. The EPU does not designate where access will be provided though it is government policy to develop universal access to both electricity and fossil fuels.

3. Policy and legislationIt is long established policy that energy development on the outer islands will use renewable energy where possible. To date all outer island energy development at the household level has used solar PV except for some government facilities, such as the large new hospital complex on Tabituea that has diesel generation. All other outer island power including that for schools, communications, public meeting houses and health clinics, is from solar photovoltaics.

4. Capacity issuesAlthough some capacity development, particularly in the area of management and monitoring, would be useful, in general the SEC, the PUB and KOIL appear to have adequate capacity to carry out their respective tasks in the supply of energy for Kiribati. The EPU would benefit from further capacity development in the areas of analysis, policy and planning and energy database management.

5. Knowledge repositories and information deliveryThe Statistics Office periodically surveys households regarding their ownership of electrical appliances, status of electrification, lighting and cooking fuels, etc. Those statistics are published in Statistical Yearbooks, though the publication is often two years or more after data collection.

The EPU has performed household energy surveys of several islands but is too limited in resources to do the national survey that is needed to fully understand the rural energy situation and the processes needed for its development.

Each energy supply agency maintains records of connections and fuel deliveries.



Of the electricity used on South Tarawa in 2003, about 55% was for government (a major component being air conditioning of offices), 30% for households (mostly refrigeration

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and lights) and 15% for commerce (also mostly refrigerators and freezers in shops and lights and office machines for offices though air conditioning use is increasing).

Small generators on outer islands are used to power local government offices, some schools and some (maneabas. Solar electric units on outer islands mainly provide lighting and entertainment services. The 21 outer island health clinics have solar power for lighting, communications and vaccine refrigeration though about half the systems are not fully operational due to lack of maintenance. Some schools are also electrified by solar energy.

On South Tarawa, petrol is mainly used for automobiles and outboard motors. Diesel fuel is used for power generation, sea transport and some land transport. Kerosene is used for cooking.

On outer islands there is no private transport other than a very few outboard powered boats and a few motorcycles, most personal transport involves bicycles or traditional sailing canoes. Island councils typically operate a diesel tractor or truck and most operate a small generator for office power and evening lighting of employee homes. A few churches and village committees have portable generators used for special events and a few are owned privately, often to power videos that are used for village entertainment.

Rural households without solar electricity use kerosene for lighting with wick lamps for ordinary lighting and pressure lamps for meetings and special occasions where brighter light is desired.

On the rural islands (including North Tarawa) biomass, typically coconut husks and shells, palm fronds or firewood is used for cooking and copra drying. There is no shortage of biomass for household use.


The high cost of energy coupled with the low incomes of most households has resulted in generally high efficiency of household energy use. Only around 10% of household energy can be expected to be saved through practical efficiency measures. Commercial usage also appears reasonably efficient. However, government use of energy offers probable savings of 25% or more if action is taken to improve the efficiency of air conditioner use, computer use and lighting .

In relation to most other PICs, transport efficiency appears to be good with a high percentage of small vehicles and a relatively efficient, privately owned public transport system

In the mid 1990s, a Forum Secretariat programme, funded by UNDP, working with utility data and working closely with PPA, assessed the demand side management (DSM) potential within ten PICs. Results suggested typical overall practical demand savings (MW peak) of 17% with a range of 8-28% and typical energy savings (MWh) of 17% with a range of 6-27%, even though not all options were investigated. For Kiribati, the PUB could reduce peak demand by 25% and energy sales by 18%, one of the highest among the ten studied.

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Besides increasing the use of solar PV for rural electrification, the development of coconut oil as a diesel substitute offers promise as a renewable energy source. The low cost of rural labour coupled with the high cost of fuel, the low value of coconut oil on the world market and the presence of a new and under utilised oil mill all appear to be favourable to using coconut oil as a diesel replacement.

2. InstitutionalThe EPU is primarily responsible for the development of energy efficiency programmes.

3. Policy and legislationEnergy policy for Kiribati includes energy efficiency improvement though there has not been any strategy or plan development under the policy. There is no legislation relating to energy efficiency.

4. Capacity issuesThere is no experience in Kiribati with energy efficiency programmes on any useful scale. External support and capacity building will be needed.

5. Knowledge repositories and information deliveryThere are no knowledge repositories or information delivery processes now present in Kiribati relating to demand side energy efficiency improvements other than general concept materials at the EPU as provided by SOPAC and other international agencies. None have been developed specifically for Kiribati.


1. OverviewOn South Tarawa there are no energy entrepreneurs beyond a few people selling firewood. On the outer islands a few entrepreneurs have an income by using portable generators to power video systems for village entertainment and to provide music and lights for special occasions.

There is no opportunity for IPPs for stand alone grids or for connection to the PUB grid. Neither is there an opportunity for the sale of solar PV to outer island households except by the SEC.

There appears to be significant opportunity for the development of the biofuel resource, an activity that could be by the private sector if Government does not take the initiative.

2. InstitutionalThere are no institutions that favour energy entrepreneurship or rural businesses.

3. Policy and legislationThere are no policies or legislation that work either for or against energy entrepreneurship.

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4. Capacity issuesSmall businesses (and some large ones) in Kiribati typically suffer from poor management. Capacity building for small business accounting, management and record keeping is needed.

5. Knowledge repositories and information deliveryThe Tarawa Technical Institute and the USP Centre are the main repositories of information regarding business development and management.


1. OverviewPrivate sector investment is encouraged by Government but no special programmes are available for finance in either rural areas or the energy sector.

2. InstitutionalThe Bank of Kiribati is a joint venture between the Government of Kiribati (25%) and the Australia-New Zealand Banking Corporation (ANZ Bank; 75%). Some business loans are made based on credit experience as well as the availability of collateral.

The Development Bank of Kiribati provides enterprise development loans to Kiribati citizens and has loaned money to the Solar Energy Company to provide working capital in 1994 and 1999.

There are no formal institutions that provide rural finance programmes, what little outer island borrowing there is typically occurs within the extended family or of an informal nature with shops or the more wealthy members of the island community or with local cooperatives.

3. Policy and legislationThere are no policies or legislation that work either for or against finance for rural dwellers or energy investment.

4. Capacity issuesThere is no capacity in Kiribati specifically for rural credit development or rural business finance.

5. Knowledge repositories and information deliveryCommercial banks, the USP Centre and the Development Bank of Kiribati can be considered finance knowledge repositories.


1. OverviewThe monitoring that occurs is typically just basic financial accounting with generally no performance based or technical monitoring taking place. Some specialty projects, such as

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village water supply projects, are regularly monitored and their performance evaluated by the implementing agency.

2. InstitutionalEach of the energy agencies is essentially self-monitored except in terms of financial accounting where the Government auditor is involved. The long range development plan for Kiribati includes the implementation of a performance monitoring and evaluation process for all public enterprises though in 2004 it had not yet been addressed.

3. Policy and legislationOther than for financial accounting, there are no monitoring or evaluation policies or legislation relative to the energy sector.

4. Capacity issuesAll of the energy agencies are weak in monitoring, non-financial record keeping and performance evaluation. This makes planning difficult and leads to a form of crisis based management since problems are not recognised until they are serious.

5. Knowledge repositories and information deliveryEach energy agency maintains its own monitoring records. They often are not in a form useful for analysis or even understandable by external evaluators.


1. OverviewFreedom of speech and the media is generally respected. State owned broadcast radio reaches all of Kiribati. The new broadcast television service only reaches households on Tarawa. Telephone service off of Tarawa is very limited, often only a single telephone per island. On Tarawa there is both wireless and land line phone service though most households do not have a private phone. The telecommunications company TSKL, operates an ISP for Internet access. Access is slow and expensive but generally available where there is telephone service.

The printed media consists of an independent weekly, The Kiribati Newstar (published by group that includes a former President), and a government newsletter Te Uekera. The protestant and catholic churches also publish widely read newsletters.

2. InstitutionalAll rural primary schools (79) and Junior Secondary Schools (21) are operated by the Government. Primary schools are not generally electrified (though a few have received solar electricity) but Junior Secondary Schools were provided with diesel generators by China in 2002. Unfortunately the generators have generally failed due to poor design and improper component selection.

There are 10 government boarding schools at the secondary level plus 10 church schools. All have local power from diesel generators though some also have solar power installed. Five secondary schools have solar water pumps and four include a conventional AC pump operated from the diesel powered electrical supply.

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The Tarawa Technical Institute offers technical trades programmes and commercial skills development programmes. None are directed specifically toward energy development.

The USP Centre supports extension education that includes business management, accounting and other enterprise development skills. Programmes ranging from short term specialty courses to four year degree study are offered.

The SEC has its own training programme for developing the technical skills and management skills of outer island PV technicians and SEC agents.

3. Policy and legislationThere are no policies or legislative acts that prevent free exchange of information, freedom of speech or of the media.

National energy policy includes the development of a national energy database, a task assigned to the EPU. However cooperation by the energy data sources has not always been good and as a result the database is not up to date nor does it include all the information needed to provide a full picture of the national energy situation.

4. Capacity issuesIf energy efficiency development is to become an active programme at the EPU, there will need to be some capacity development in both the technical aspects of such a programme and in the information delivery aspects.

5. Knowledge repositories and information deliveryThe primary knowledge repositories for information access regarding energy remain the individual energy supply agencies and the EPC plus the USP Centre and the TTI.

J. Conclusions

1. OverviewThe primary area for the improvement of outer island development is through development of coconut oil as a diesel replacement on Tarawa. This has the potential to increase urban to rural money flows and to make rural areas an important asset for the country rather than what is often considered a drain on development resources.

There is an opportunity to assist in the further development of solar PV for schools and for the rehabilitation and upgrading of the PV systems at rural health centres.

2. InstitutionalThe EPU needs to have its responsibility for energy efficiency clearly confirmed by Cabinet through formally accepted policy with adequate resources provided to the EPU to carry out that mandate. The EPU has been unable to develop a fully functional database of energy information largely because access to energy statistics from KOIL, PUB, PWD and PUB is not provided in a timely and useful manner.

3. Policy and legislationThere is need for further support in the development of strategic plans relating to national energy policy.

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Development of a clear policy, strategy and planning regarding the development of coconut oil based biofuel is needed if that development is to go forward rapidly and effectively.

4. Capacity issuesThere is limited capacity in the area of biofuels at the EPU, PUB and KCMC and in end use energy efficiency programming at EPU and PUB.

The capacity of the SEC to manage development of PV based rural electrification on the distant Line and Phoenix islands is limited.

5. Knowledge repositories and information deliveryTechnical knowledge regarding energy development and supply for Kiribati is held at each energy delivery agency (PUB, SEC, PWD and KOIL) and not always easily accessed or kept in a format that provides for easy consolidation and analysis.

Small business skills development information is available at the USP Centre and the Tarawa Technical Institute.

Financial knowledge for energy entrepreneurship is held mainly at the Development Bank of Kiribati and the Bank of Kiribati.

The only national information delivery medium is radio and outer island communications are often difficult and expensive through HF radio and TSKL.

K. Recommendations

1. OverviewThe primary energy related poverty reduction activity proposed for Kiribati is the development of coconut oil as a fuel to replace PUB purchases of imported diesel fuel.

Expansion of the PV rural electrification programme to include schools and to upgrade the power systems at health centres is also considered a useful poverty reduction programme.

2. InstitutionalAssistance to the EPU should be provided to develop a Tarawa energy efficiency improvement plan and to obtain official endorsement by Cabinet and budgetary support for improving energy efficiency.

3. Policy and legislationAssistance would be useful in the further development of policy and strategy relating to energy efficiency and the development of coconut oil as a diesel replacement.

Development of legislation to codify the responsibility of the SEC for rural electrification and to put the SEC on the same tax footing as the PUB should be considered (duty free entry for components, no income tax, no sales tax). Kiribati should adopt the petroleum storage & distribution standards developed by the PIFS or other suitable standards but no advisory support is needed.

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4. Capacity issuesThere needs to be support for the development of capacity at EPU, KCMC, KOIL and Agriculture relating to coconut oil for the replacement of diesel fuel.

The SEC needs assistance in developing the capacity to deal with further expansion of the solar PV rural electrification programme, particularly to the distant Line Islands.

5. Knowledge repositories and information deliveryAccess to energy information from energy supply agencies needs to be improved through clear directives from the Minister to those organisations to make their data available in an acceptable format and in a timely manner so that the responsibility of the EPU to collect, analyse and distribute energy related statistics can be properly carried out.

Knowledge regarding the condition of the coconut resource needs to be urgently developed if coconut oil is to become a replacement for imported diesel fuel.

Assistance to the EPU in developing and carrying out a rural energy survey of national scope would be of value to support the preparation of plans for the rational development of energy in rural Kiribati.

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XX. MARSHALL ISLANDS

A. Background

1. Physical conditionsThe Republic of the Marshall Islands (RMI) consists of 29 atolls (22 inhabited) and 5 raised coral islands (4 inhabited) divided into the western or Ralik (sunset) group and the eastern or Ratak (sunrise) group. The total land area of the RMI is about 181 km2

commanding an Exclusive Economic Zone (EEZ) of 1.2 million km2. RMI is contained within a rectangle extending north and south some 1,150 km and east to west about 1,300 km located between about 4° to 15º North Latitude and 160º to 172º E. Longitude. Kiribati lies to the immediate south and the Federated States of Micronesia (FSM) to the west. The entire country is low lying with almost no land more than 5 meters above sea level. Kwajalein vies with Kiritimati Island in Kiribati as the largest atoll in the world with Kwajalein having the bigger lagoon and Kiritimati the larger land area. The capital island is Majuro near the southern end of the western island chain.

The atolls of Bikini and Enewetak were the sites of US nuclear tests after WWII and Kwajalein remains under the control of the US as a missile test and tracking station.

2. Population and demographicsIn 1999, there were 50,840 people in the RMI with 46.6% of the population living on Majuro and 21.4% on Kwajalein – mostly on the very densely populated small islet of Ebeye, where the families of local workers at the US facility live.

The RMI’s population grew at an average annual growth rate (AAGR) of 1.45% from 1988-1999, a dramatic decrease from the high 1980-1988 AAGR of more than 4.3%. The drop in growth rate is largely due to emigration to the USA, not to a reduction in the fertility rate.

From 1980-1988, the urban and peri-urban population on Majuro and Kwajalein grew at 5.8% annually compared to 1.8% for the rest of the country. In the 1988-1999, these growth rates slowed to 1.6% for urban areas and 1.1% for rural areas. It is postulated that though the rural to urban drift has continued, a number of educated and well trained persons emigrated from the urban areas to the USA reducing the rate of actual urban growth.

3. Socio-Economic structureThe Marshall Islands have been administered by Spain (1494-1886), Germany (1886-1914), Japan (1914-194 and most recently the USA as a UN Trust Territory. In 1979 the Republic of the Marshall Islands came into being as a self-governing nation. In 1983, the Compact of Free Association (COFA) was signed with the US, which provided for $336.5 million in grants though the actual amount given by the US to the Marshalls from 1987-2003 was about US$750 million.

A parliament (Nitijela) of 33 members is elected to a four year term by popular vote of all citizens 18 and older. The President is elected from the Nitijela by its members and a Cabinet is appointed by the President from the members of the Nitijela. The traditional

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leadership structure is represented by a twelve member Council of Chiefs (the Iroij), which advises Government regarding issues of tradition including land tenure.

Because GDP is heavily dependent on grants from the USA under the Compact, as the Compact money flow declined, GDP also dropped with significant downward effect on the real per-capita GDP.

A new twenty year compact agreement is now in effect that includes input to a Compact Trust Fund which is intended to provide funding for the operation of the government after 2023. The new Compact provides for about US$66 million per year, a sum that is about 60% of the $110 million GDP (about $2170 per-capita income).

Japan has provided donor assistance as has France and Australia. In 2003, the Marshall Islands became one of the ACP (Africa-Caribbean-Pacific) states eligible for EU assistance and will soon participate in an EU funded regional energy programme.

4. Poverty issuesThe 1999 Pacific Human Development Report ranked the RMI 8th out of 12 PICs listed, a downgrading from 5th in 1994. As one of the most urbanised PICs (70% of the population live on either Majuro or Ebeye), the rural islands receive less development attention than in most of the Pacific countries. The very difficult public services and environmental problems of Majuro and Ebeye have absorbed most of the development funds that have been available to date. As those problems are being solved, it is expected that in the future more funds will be directed toward improving the quality of life of rural dwellers.

Ebeye is the most populous island of Kwajalein Atoll, as well as the center for Marshallese culture in the Ralik Chain of the archipelago. The residents of Ebeye are concentrated on the island to allow employment on the US Missile range facility on Kwajalein and for those families relocated off the military area of Kwajalein. It is one of the most densely populated islands in the world with more than 12,000 people on just 0.32 km2 of land (37,500 persons per km2) making the problems of sanitation, environmental protection, water supply, electricity supply and general quality of life formidable. Reportedly, the power plant, which also produces potable water through distillation of sea water from diesel engine waste heat, has been shut down frequently during 2005.

The primary issues for rural dwellers relate to the relatively poor quality of schools and health services available on outer islands. In the past, the government copra purchasing scheme provided an income opportunity to most rural households through cutting copra if money was really needed. Unfortunately that source of income has declined in recent years as the market price of copra has fallen. Pension payments for the elderly and retired persons plus remittances from family members employed on Majuro or Ebeye represent a significant cash income source for outer island households.

Most rural households in 2000 did not have piped water or water sealed sanitation systems. Piped water is not so much an issue as proper sanitation since potable water is typically obtained through rainwater collection with a large tank at each household. That type of household water supply is unlikely to be contaminated or to be the source of a health hazard. Drought can be a serious problem, however. Large rainfall collection tanks are sometimes constructed in association with public buildings to provide an emergency

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water supply in low rainfall periods. The somewhat brackish ground water usually can be used for washing and general household purposes. Though monetary income is low, there is no hunger, the diet is adequate and is based on fresh food obtained from the sea and household gardens.

Most rural islands have no public electricity supply though private generators are relatively common.

Hardship and poverty are also found on urban islands and in many ways the problems are more socially damaging than those of the rural areas. Child and spouse abuse, alcoholism, child neglect and malnutrition are problems mostly found in urban areas. The need for money in urban life makes the high rate of youth unemployment a major problem for families and society in general. The primary to secondary pass rate on Ebeye was only 1 in 97 who took the high school entrance test. Serious communicable diseases are more likely to be a problem in the densely populated urban islands of Ebeye (where there was a cholera outbreak in 2000) and on Majuro. Maintaining a safe piped water supply on a densely populated island where there are no streams nor is there potable ground water is a difficult problem as are proper sanitation and environmental management.

5. MDG progressMost of the MDG data is based on 2000 census information or very limited surveys, some is seriously out of date and much of the data that is available is conflicting and of poor quality. There has been a concerted effort by government to increase the rate of development of the rural islands and the published MDG figures are expected to indicate worse conditions than actually exist. There is a tendency to report conditions as worse than they actually are since anti-poverty funding from donors can be expected to decrease when government data indicates improved conditions.

In 2000, around 20% of the population – almost all on rural islands – claimed to be living below the US$1 per day MDG poverty line. Access to improved water and improved sanitation facilities remains relatively low in the rural islands though the situation is improving rapidly. Despite these discouraging indicators, there is no evidence of hunger and the average health indicators for rural dwellers is improving while those of urban dwellers are decreasing due to life style diseases (notably diabetes and diseases related to poor nutrition and obesity) that are increasingly common among the more affluent urban citizens. The average health and life expectancy of rural citizens has improved in recent years while the life expectancy of urban dwellers, especially males, has fallen. Infant mortality has fallen dramatically in the past 15 years though the rate is still higher than most PICs. In 1999 around one fourth of children under 5 were considered underweight though there was no indication that development was retarded.

Over 85% of primary school age children are enrolled in school. Literacy is high and the number of children going on to high school is low but in most parts of the country it is increasing rapidly. However, there are indications that in recent years the percentage of enrolment of rural children has been falling while those in urban areas have been rising.

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1. OverviewThe responsibility for energy policy and programme management is distributed over many agencies and organizations. Within the Ministry of Resources and Development there is an Energy Planning Division, typically with one or two active staff, with responsibility for general energy policy, energy planning, a national energy database and the management and maintenance of existing renewable energy projects on outer islands.

The Marshalls Energy Company provides for some of the petroleum purchase, storage and re-export, the generation and delivery of electricity on Majuro, Jaluit and Wotje, and has recently agreed to install, operate and maintain the large number of new household solar electric installations on outer islands that are expected to be funded through local budgets, the EU and other donors.

The Kwajalein Atoll Joint Utility Resource (KAJUR) is a second RMI utility that provides electrical power and a water desalination plant for only Ebeye.

The Office of Environmental Planning and Policy Coordination is concerned with the environmental aspects of energy development and greenhouse gas control.

The Economic Policy, Planning and Statistics Office is responsible for overall development policy, energy sector finance and donor liaison.

Additionally, individual government departments, notably Health and Education, have their own independent programmes for renewable energy use in remote clinics and schools.

a. Fossil Fuels

The MEC imports and distributes petroleum products, mostly ADO, on Majuro as does Mobil Oil Micronesia, Inc. who also has bunkering tanks on Ebeye, Jaluit and sells products on Kwajalein. Mobil is the primary retail distributor, selling a full range of products (except LPG which is privately imported). The international air carriers negotiate their own fuel supply and currently Mobil is the dominant aviation fuel supplier.

Fuel supplies for outer islands are typically delivered using 200 litre steel drums though a small government fuel tanker is sometimes available for fuel delivery.


The MEC provides grid based electricity supply on Majuro, Jaluit and Wotje. The KAJUR provides grid based electricity supply on Ebeye. The atoll of Kwajalein is leased to the U.S.A. as part of a missile test range and has its own independent grid system.

c. Renewable Energy

Individual government departments continue to develop the renewable energy implementations for health, education and telecommunications. The quality of the installations has ranged from quite poorly designed and doomed to early failure for some schools and health centres to excellent in the case of most telecommunications solar

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installations. In 2003, the MEC agreed to manage household solar electric installations on outer islands with any financial shortfall that results guaranteed by Government. It is expected that this will dramatically improve the sustainability of outer island PV implementations and bring the RMI in line with the practices of Kiribati that have worked well for PV based outer island electrification.

d. Regulation

There is no formal regulation of energy supply systems. MEC must, however, have Cabinet approval before electricity tariffs and fuel prices can be changed. In 2005, the RMI Cabinet approved a pricing template which allows for MEC to increase the electricity tariff as the price of fuel increases.

2. Policies and legislationTwo formal energy policies have been endorsed by Cabinet: (1) The 1994 Outer Islands Energy Policy (that had as its objective outer island development, the use of renewable energy where practical, full cost recovery from consumers and the use of commercially proven technologies); and (2) the broad based 2003 Marshall Islands National Energy Policy is vague and is based on the generic “Pacific Energy Policy” developed by regional organizations. The strategy for implementing the 2003 policy has yet to be developed and specific budgetary support for its activities has not yet been provided.

Though not formally recognised as policy, the 1995 ADB “Outer Islands Electrification Feasibility Study for the Republic of the Marshall Islands” has effectively been the primary guiding document for rural electrification development.

Relevant legislation is minimal. There is no legislation regulating the electric power sector. There is a Retail Price Monitoring Act that can be used to regulate petroleum products but so far there have been no formal price controls applied. The Environmental Protection Act was intended to foster the sustainable use of the RMI’s natural resources and has powers relating to land use, pollution control and emissions. Its application has not received strong budgetary support from government.

3. Capacity issuesThe fragmented responsibility for energy, particularly implementation of unconventional energy has prevented the development of local expertise. As a result, renewable energy projects often use dated technology and techniques and many of the implementation errors that occurred in other projects are repeated. In particular, designs and specifications often are provided by manufacturers or dealers who may have a rather different development agenda than the government agency being served.

4. Knowledge repositories and information deliveryThe EPD, MEC, oil companies, health, education, telecommunications and fisheries agencies each have independent repositories of energy information relating to their separate operational domains. Although the EPD is designated as the energy data collection focal point, there is little data provided directly by other agencies to the EPD.

Some energy data is available from census information and the bureau of statistics.

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The MEC concentrated solely on developing the Majuro grid until the early 1990s when the small Jaluit grid was taken over by MEC for operation. Recently, the small Wotje network has also been shifted to the MEC. The KAJUR has developed only the grid on Ebeye.

Around 400 solar PV installations on outer islands have been installed, the majority for individual households under several donor projects. The performance of the installations have ranged from poor to acceptable with most of the older installations suffering from a combination of technical and institutional problems and the newer projects better technically but institutions still are not able to provide sustainable operation.

In 2002-2003, UN funding and German contractors installed large (almost 800 Wp at each of ten sites and 2200 Wp for one site) solar installations on eleven health centres. Unfortunately the designs were not up to modern Pacific island standards in that the components that were selected were not suitable for the atoll environment (there were no consultations with local PV experts, no apparent consideration of prior experience in the Pacific nor was the EPD – the government agency with the most outer island PV experience – consulted) and are unlikely to provide reliable service for the long term. The projects repeated earlier mistakes in that there was insufficient capacity building included in the project and maintenance can be expected to decline in quality in a relatively short time.


An 80 household solar rural electrification project funded by France for Mejit was completed in October 2005. Additional funding from the RMI government was appropriated in FY 2005 in order to complete this project. A US$1 million allocation was included in the 2002 budget for 500 rural household PV systems and 250 of the systems were tendered but the equipment was never purchased.

The MEC is developing its capacity to handle the greatly expanded solar rural electrification programmes coming over the next few years under GEF, EU and other sources of funding.

Biofuel from coconut oil is currently being examined by the Tobolar Copra Processing Authority to provide a local market for the coconut oil being locally produced. Tobolar has been experimenting with coconut oil for its vehicles for several years and has used the biofuel in small diesel generators and diesel outboard engines with apparent success. The Tobolar has reportedly been considering the possibility of using coconut oil as fuel (probably blended with diesel fuel) for powering the oil mill with generators maintained by neighbouring MEC staff.

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A GEF project (ADMIRE) and a €2 million EU project both focussing on renewable energy, are in the pipeline with work expected to start in early 2006. The projects are expected to focus on solar home systems for rural electrification but the details of the project concept are not yet firm.


Extensions of the solar PV rural electrification programme and further development of coconut oil as a substitute for imported diesel fuel are the main areas expected for future development in the energy sector.

2. InstitutionalThe bulk of the programmatic effort for the foreseeable future will be handled by the MEC. The role of the EPD will no longer include actual project management but is shifting to a policy development and planning function.

The departments responsible for rural clinics, rural schools, rural fisheries and telecommunications continue to have their own energy development programmes that are not coordinated with the general rural electrification effort.

3. Policy and legislationThere is no clear policy or legislation relating to energy programming. Programmatic efforts are done ad hoc and without coordination or consultation with other agencies administering energy programmes.

4. Capacity issuesWith renewable energy projects being done independently by health, education, fisheries, telecommunications and the MEC, the limited capacity that can be mustered independently by each agency is insufficient to provide for proper design, installation and, most importantly, maintenance of the installed systems. Concentrating the skills needed into one organization was attempted briefly in the mid-1990s through the creation of a renewable energy implementing agency (MAEC) but the necessary funding and support was never provided. The MEC is, by default, becoming the focal agency for renewable energy implementation but its capacity is still quite limited as regards renewable energy design and component selection for atoll use and its personnel are relatively inexperienced.

5. Knowledge repositories and information deliveryThe EPD has records of some past rural energy projects as do the agencies responsible for rural health, education, telecommunications and fisheries. The records are not well organised and are incomplete, however.

Although the EPD has as one of its stated responsibilities the maintenance of national energy data, the primary sources of the data have been either uncooperative (as is clearly the case with the oil companies) or the energy organisations have not maintained good records themselves. The MEC and KAJUR claim to maintain detailed records of electricity supply and sales though when requested, neither appeared to be able to provide

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records disaggregated into household, commercial and government sales by island. Petroleum product import and sales records are fragmented with records in the customs department, MEC, Mobil Oil Micronesia and Shell Oil. Since Mobil and Shell refuse to provide import and sales data and there is no legislation or regulation requiring release of that data to government, it is impossible to prepare a national energy balance.


1. OverviewThe exact percentage of households that do not have access to electricity in 2005 is not available but since about 75% of the population lives on Majuro and Ebeye – both of which have 100% electricity coverage – somewhat less than 25% of the population can be expected to be without electrical energy access. That represents around 2,400 households.

a. Cost of fossil fuels

According to the July 2005 Forum Secretariat petroleum price monitor, the RMI fossil fuel wholesale price (excluding taxes and duty) was at about the median price for the PICs for gasoline and slightly above the median for diesel fuel.

Petroleum products represent over 40% of imports though some of that is re-exported by MEC to foreign fishing fleets.

The fuel price is not regulated. In October 2005, the Cabinet changed the government imposed tax on fuel from 20% of the landed cost to US$0.25 per gallon, which lowers the costs of petrol on Majuro. However, fuel cost in the outer islands is substantially higher than on Majuro because of shipping and handling costs.


In 2003, electricity from MEC cost US$0.12 per kWh for residential use and $0.16 per kWh for commercial and government use. KAJUR charged $0.155 and $0.185 respectively. In 2005, due to higher costs of fuel, MEC raised the electricity rates to US$0.17 per kWh for residential use and 22.5 per kWh for commercial and government use.

The approximately 120 household solar power systems (76 Wp of panels suitable for lights and radio mainly) on Namdrik cost users US$100 for the initial installation and a continuing US$12 per month, an amount that is expected to be sufficient to cover operation and maintenance costs but not capital replacement costs for panels. The systems remain the property of the Government, the payment is essentially a rental and does not imply transfer of ownership to the households. This rental approach (as has been successfully used in Kiribati since 1992) is expected to be used for the large number of solar PV installations to be installed under the EU and other funding in the near future.


MEC provides electricity on Majuro, Jaluit and Wotje. The KAJUR provides electricity on Ebeye. The islands of Kili and Bikini have local government operated generators that provide power part of the day to households on the same islet as the government offices.

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Solar photovoltaics are used for household electrification on the small islands of Namdrik and Jabat. Numerous health facilities and schools have been equipped with solar PV for lights and vaccine refrigeration but at any given time only a fraction appear to be actually working. Solar powered HF radios are also typically powered by solar PV and they have a relatively high operational percentage.

With MEC generating about 81.3 GWh in 2003 and KAJUR generating about 19.2 GWh, the total generation was about 165 kWh/mo/person. Data made available by the electric companies was aggregated so average household use could not be calculated. The PIREP report estimated a rather high 720 kWh per household per month but that could not be confirmed.

Breakdowns at the KAJUR Ebeye power plant have been common in recent years causing water shortages and sewage spills. Tariffs do not reflect the actual cost of power and the funds shortfall has resulted in poor maintenance. The utility’s financial condition has become made untenable dur recent fuel price increases. In September 2005, management stated that they simply could no longer purchase fuel and informed the Government that it would cease supplying power as of midnight September 18. Since Ebeye represents nearly ¼ of the RMI population, the loss of electricity services – that power vital water and sanitation systems as well as businesses and households – could not be allowed and emergency funding support had to be provided. Thus access to electricity on Ebeye is still available but tenuous and a major overhaul of the tariff structure, capacity building in management and initial financial support will be needed to rehabilitate the KAJUR if access to electricity is to continue.


The Mobil tank farm is in a densely populated area of Majuro and cannot be enlarged in capacity. As a result, the increased demand for petroleum products over the past decade has left Mobil with little reserve capacity so gasoline shortages have occurred on Majuro due to delayed tanker arrivals. Diesel shortages are unlikely since MEC has a large reserve capacity.

Outer islands receive their fuel (mostly gasoline for outboard engines though some kerosene and diesel is also provided) in 200 litre steel drums. Deliveries are often late and fuel shortages occur.

Accurate data for petroleum imports and sales could not be obtained. Customs information is in dollar value, not volume of product. Using customs data and information from MEC, a total import volume of about 94 million litres is estimated. That indicates a per-capital petroleum fuel use of about 1,850 litres per year. Some of the imported fuel is re-exported but that data was not made available by MEC.


Biomass for traditional uses remains the largest use of renewable energy in the RMI. In 1999 use was estimated to be about 19,500 tonnes, of which 62% was for household cooking and 38% for copra drying. This is equivalent to about 6,650 tonnes of oil equivalent (toe). There are no biomass shortages on any of the islands of the RMI and

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there is no reason to expect any future problem with access to biomass for cooking or copra drying.

By 2002, nearly 400 solar PV systems have been installed. About 265 of those were for individual homes though the largest capacity units (totalling around 25,000Wp of panels) were solar powered fish freezers provided by Japan on Ailinglaplap, Likiep and Namu atolls.

2. InstitutionalThe institutional structures have shifted in recent years from government to the MEC as the primary provider of electric energy access to both urban and outer island citizens. Petroleum energy access remains the responsibility of the oil supply companies, primarily Mobil Oil.

3. Policy and legislationPolicy is to provide access to reliable and minimum cost energy supply to all of the RMI. There is no legislation that is related to energy access.

4. Capacity issuesThere do not seem to be capacity issues within MEC regarding conventional electricity supply. MEC is a well managed small utility and provides a reasonably efficient, reliable power supply for Majuro, Jaluit and Wotje. The KAJUR has had serious capacity problems in recent years and has had to rely on external contractors to operate its facility on Ebeye.

There remain capacity issues regarding renewable energy access. These issues are partly due to the fragmented implementation of projects with many agencies attempting to independently provide renewable energy services to its rural facilities and partly due to the very rapid increase in the number of installations that are to be installed over the next several years mostly by the MEC.

5. Knowledge repositories and information deliveryThe EPD, MEC, oil companies, health, education, telecommunications and fisheries agencies each have independent repositories of information relating to energy access under their operational domain. Local governments also have information regarding local access to energy. Although the EPD is designated as the energy data collection focal point, there is little data provided directly by other agencies to the EPD.

Some energy access data is available from census information and the bureau of statistics.



Though accurate quantitative data is not available, the primary uses of fossil fuels are diesel for power generation and sea transport and gasoline for automobile and outboard motor use. Kerosene is the primary cooking fuel on Majuro and Ebeye though LPG is

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increasing in use. Biomass is the primary cooking fuel on other islands, often in the form of coconut shells and husks as well as firewood. Copra production requires biomass for the drying process. When burned, the husks and shells that are discarded during copra production are more than sufficient to provide the heat for drying the copra.

There are no large industries in the RMI that are major electricity users. Government buildings are the largest electricity users due mainly to air conditioning loads. Domestic use is dominated by refrigeration and lighting. There is increasing use of air conditioning for homes, a factor in the load growth for Majuro that is growing at a rate significantly higher than the population.


The demand side efficiency of electricity use is not as bad as some PICs though lighting remains relatively inefficient and the increasing use of air conditioning may provide an option for significant energy efficiency improvements. There is no control over appliance imports or standards for their performance. Labelling of appliances for their energy efficiency is not required nor are labels that are present on imported appliances consistent in their presentation of appliance efficiency.


Solar energy and coconut based biofuel appears developable for the near term. Possibly OTEC and sea wave could be of interest for development in the distant future but the lack of commercially available equipment for those technologies makes them impractical for near term use.

2. InstitutionalThe two utility companies are the only institutions with any energy efficiency activities and those are mostly supply side. The EPD is designated under the national energy policy as an implementing agency for the development of energy efficiency improvement programmes.

3. Policy and legislationThe National Energy Policy includes energy efficiency as an issue for government to consider. Strategies for improving the efficiency of energy use have not yet been developed, however. There is no legislation specifically relating to energy efficiency.

4. Capacity issuesThere is little experience or capacity at EPD, MEC or KAJUR in developing and implementing national energy efficiency programmes.

5. Knowledge repositories and information deliveryThe MEC, EPD and the College of the Marshall Islands are the main repositories of information on energy efficiency. The MEC has primarily knowledge on supply side efficiency measures and the EPD and the College have mainly demand side information. The information that is available has been externally generated, there is little local experience that has been documented.

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1. OverviewAn ADB private sector assessment in 2003 concluded that

“…doing business in the Marshall Islands is difficult. Problems with property rights and the laws related to business transactions make arms length contracting almost impossible and finance very difficult to obtain. The prominent role of the state in the economy raises costs for business and crowds out employment and entrepreneurship. The impact of state intervention augments the negative effects of isolation, size, and vulnerability of the country, which are further compounded by a trade regime that is characterized by variable tariff rates and taxes on imports on which there are many exemptions. This situation has resulted in an atmosphere of tension and mistrust between government and the formal private sector. At the same time, the institutions and incentives inherent in the current system put native-born Marshallese at substantial disadvantage in doing business. The problem is not the result of discrimination or exclusion, but rather because the interaction between property rights on the one hand and the financial system on the other disbars most of the local population from even the possibility of mobilizing their wealth to finance business ventures. Furthermore, the incentives faced by Marshallese in the outer atolls, especially the government-sponsored copra purchasing scheme, do not encourage entrepreneurial activity….. Property rights in land are uncertain because of communal ownership and movable property rights, the basis for pledging assets as collateral against lending, are very weak. The result is that lending for business support occurs only to those who have substantial assets. Other important financial market issues include possible regulatory concerns with the largest commercial bank on the island and the poor state of the development bank.”

2. InstitutionalThere are no institutions specifically oriented toward energy entrepreneurship.

3. Policy and legislationThere are no policies or legislation that relates specifically to energy entrepreneurship. The MEC and KAJUR have no established policies for IPPs and there are no policies or legislations in place relating to biofuels as a replacement for imported diesel though issues of taxation, quality control and pricing will need to be addressed ultimately.

4. Capacity issuesThere is limited capacity in RMI for business development. Skills in management are poorly developed and the small business support mechanisms (finance, accounting support, legal support, marketing support, etc.) are weak.

5. Knowledge repositories and information deliveryThere are no known knowledge repositories or information delivery mechanisms focusing on energy entrepreneurship in the RMI.

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1. OverviewDue to the inability to show clear title to most outer island land, land cannot usually be used as collateral for loans. Since most rural households or businesses have few assets of significant value other than land, this severely limits access to finance.

2. InstitutionalThe Marshall Islands Development Bank is theoretically able to provide finance for local entrepreneurs where there is some expectation of future economic development. In fact, the Development Bank is essentially insolvent and has provided few entrepreneurial loans. It is not a realistic source of finance for energy entrepreneurs.

The Bank of the Marshall Islands is the largest bank and is mostly locally owned. With a mobile bank on the government ships that periodically travel to outer islands, it provides banking services to most of the rural areas. Most lending is for housing, automobiles, boats and other large purchases where the item being purchased can be the loan collateral. Business loans are possible but the usual requirement for 75% or higher collateral security limits their availability to well established businesses or those with definable wealth.

The Bank of Guam is an international bank that does little local lending and is not likely to be providing energy entrepreneurs finance.

Agricultural cooperatives, particularly for copra purchasing, provide financial services to rural islands. The cooperatives establish an account for persons producing copra and that account can be used to act as the collateral for credit purchases on Majuro or at local shops.

The U.S. Department of Agriculture (USDA) Rural Economic Community Development programme provides finance to low-income families. The programme is primarily used for home construction and improvement though in theory loans could be made for home energy systems such as solar photovoltaics.

3. Policy and legislationThere are no policies, incentives or legislative acts intended to specifically provide access to finance for energy.

4. Capacity issuesCapacity of the financial institutions is not a limiting issue.

5. Knowledge repositories and information deliveryCommercial banks, the Ministry of Finance, the copra cooperative and the USDA office are the main repositories of financial knowledge relating to energy and rural finance.

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1. OverviewIn general, the fragmentation found in rural energy implementation is present in monitoring and evaluation.

2. InstitutionalThough the MRD is given responsibility for maintaining a comprehensive energy database, there are almost no resources provided for its maintenance. Such minimal monitoring and evaluation as takes place is done by the agencies implementing projects or providing services and the resulting information is rarely available outside that agency.

3. Policy and legislationThe National Energy Policy designates the EPD as the focal point for energy data, monitoring and evaluation but no resources are allocated for that purpose. There is no specific legislation relating to energy monitoring and evaluation.

4. Capacity issuesNone of the agencies delivering energy services, except perhaps the oil companies, have sufficient capacity to properly monitor and evaluate their own energy programmes, particularly those targeted at rural areas.

5. Knowledge repositories and information deliveryThe agencies and businesses delivering energy projects and services are the main – but very limited – repositories of information for energy monitoring and evaluation. The MRD maintains an energy database but it is incomplete and generally out of date as there are no resources available for its proper maintenance.


1. InstitutionalThe Marshall Islands Journal (a private weekly newspaper) and the Marshall Islands Gazette (a government monthly publication) are the main printed media sources. Radio broadcasts by the government station reach nearly all households and government TV broadcasts reach about 75% of households with most of those in urban areas. Most programming time is foreign sourced, mostly from the USA. Satellite TV is available but relatively rare.

Telephone service is accessible to most urban households but rural households typically must go to a central location for telephone use and the rural telephone service is relatively expensive.

The College of the Marshall Islands is classed as a “Community College” and offers two year programmes in technical trades, commerce and business.

The University of the South Pacific maintains an extension centre on Majuro and offers courses of study ranging from short courses to four year degree programmes. The

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programme emphasis is on non-technical subjects since there is no laboratory based study possible at the Majuro facility.

2. Policy and legislationThere is no overt censorship of information delivery in the RMI and freedom of the press and freedom of access to information is embodied in RMI law.

There is no enforced policy or legislation relating to energy information sharing. As a result, there is almost no formal information exchange between agencies relating to the development of rural energy even though the technical and institutional requirements are essentially the same whether health, education, fisheries or telecommunications agencies are involved.

3. Capacity issuesThe capacity needed for the preparation and delivery of energy information is quite limited. Additional support is needed if a public information programme relating to demand side energy efficiency improvement is to be developed and delivered.

The agencies responsible for energy implementation in rural areas have little capacity for the organization and delivery of information about their projects.

4. Knowledge repositories and information deliveryThe College of the Marshall Islands and the University of the South Pacific Centre are major knowledge repositories of technical and business information. The utilities and the EPD also have significant knowledge repositories that can be important for information access relative to energy issues. There is limited or no access possible for the knowledge repositories at the oil companies and other agencies involved with energy development and services.

J. Conclusions

1. OverviewPoverty is an issue in urban areas as well as rural areas. Though monetary income in rural areas is low, the living conditions, social climate, diet and overall health have been generally better in rural areas than those found in the poorer urban households, especially on Ebeye. However, the education and health services in rural areas are not good, few houses have electricity and many households still do not have access to water sealed sanitation facilities or a reliable water supply. Rural poverty is seen as increasing due to the fall in copra prices and reduced shipping frequency brought on by the reduction in copra volume to ship.

The Marshall Islands is planning for the delivery of energy services to the approximately 25% of the population currently without electricity (virtually all the outer islands excluding Jaluit and Wotje). Solar photovoltaics is expected to be the primary mode of electrification through individual installations on each home.

Copra production has long been the primary means for local income generation on the outer islands. With the industry in decline, there has been a decline in rural income and some indicators imply that rural hardship is increasing as a result. Since much of the

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credit finance on outer islands is linked to copra sales, the ability of rural households to borrow money is also decreasing just when there is a need to finance a shift to other forms of income production.

2. InstitutionalIn theory the Energy Planning Division (EPD) under the Ministry of Resources and Development (MRD) is the focal point for energy programmes. In fact, the institutional arrangements for energy, particularly rural energy, are fragmented and uncoordinated. The MRD, telecommunications agency, health department, education department, MEC and fisheries all have implemented energy projects in rural areas generally without any form of coordination or even information being provided to other rural energy delivery agencies.

3. Policy and legislationCabinet has endorsed a rural energy and a national energy policy. The policies have been endorsed without simultaneously allocating resources for their application and as a result neither has been effectively enforced nor have there been strategies and plans prepared for their application.

4. Capacity issuesThe one full time and one part-time staff at the EPD are insufficient to carry out the assigned responsibilities. The capacity of the MEC to design, install, operate and maintain the more than a thousand solar home systems expected to be soon installed on outer islands urgently needs development. The capacity of the health and education departments to implement and sustain renewable energy projects in rural areas also needs development.

5. Knowledge repositories and information deliveryKnowledge relative to energy and in particular rural energy is dispersed among many agencies and in most cases is poorly organised and difficult to access. Though the electric utilities and the oil companies appear to have good records of their activities, accessing the information and obtaining it in a form useful for energy planning ranges from difficult to impossible.

The College of the Marshall Islands and USP are the primary tertiary educational institutions and are the best organised and easiest to access repositories for technical information and business development information relating to energy technology.

The census data and data collected by the Economic Planning, Policy and Statistics Office provide some insight into energy use patterns but is often out of date and of suspect accuracy.

K. Recommendations

1. OverviewSupport of the GEF ADMIRE and EU rural electrification projects is recommended through capacity building programmes. Support is recommended for the development of coconut oil as a diesel fuel replacement.

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2. InstitutionalThere is a strong need to provide a central support mechanism for development, implementation and maintenance of rural renewable energy installations. The separate renewable energy projects of health, education, telecommunications, fisheries and MEC should be developed through a common process, not completely independent of each other so that lessons learned and technical competence can be shared.

3. Policy and legislationSupport is needed to provide resources to develop strategies for the existing energy policies and to mobilise resources for their implementation.

Legislation or regulations should be developed requiring oil companies, utilities and local governments to provide energy delivery statistics in an accurate and timely fashion.

4. Capacity issuesCapacity development is needed at MEC for solar PV rural electrification and at EPD for planning and policy development.

5. Knowledge repositories and information deliveryAssist the MEC to create a knowledge repository for solar PV design, component selection, installation and maintenance specific to the RMI. Assist the EPD in developing energy data sources and in the maintenance of the RMI energy database. Assist the College of the Marshall Islands to integrate solar PV into their electrical trades programme. Assist the EPD and MEC in developing a public information programme for demand side management.

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XXI. NAURU

A. BackgroundNauru is at a development crossroads. After decades of having the highest per-capita income in the Pacific (in the 1980s, possibly the highest in the world) due to export of high quality phosphate from huge deposits that covered most of the island, the phosphate has essentially run out and so has the money. The government is deeply in debt and cannot pay the civil service more than a fraction of the salaries due, the Bank of Nauru is insolvent and the primary services of water and electricity are being supported through large financial inputs from Australia. Except for the narrow populated fringe of the island, Nauru is a mined out desert often likened by visitors to the surface of the moon. With essentially no natural resources other than the sea, the economic future of Nauru is not looking good.

No updated information was provided by Nauru with most data dating from 1999-2002. Given the rapidly changing situation in Nauru, some of the information provided, notably statistics on electricity and fossil fuel use, is likely to be seriously in error but the conclusions and recommendations appear to be appropriate despite what are probably large errors in the numerical data.

1. Physical conditionsNauru is a single island state located only 41 km south of the Equator at longitude 166º 56´ East which is due east of Abemama in Kiribati and about half way between Sydney and Honolulu. The 21 km2 of uplifted coral land area rises steeply from the ocean bottom some 4000 metres below to a rocky fringing reef. There are two levels of land: “bottomside” – a 100-300 metre wide plateau 1-15 metres above sea level where over 90% of the population resides, and “topside” which is a plateau some 30 metres higher that extends across the rest of the island. The phosphate mining has stripped almost all of “topside” and what is left are thousands of limestone pinnacles several metres high with a few metres of separation. “Bottomside” traditionally had coconut trees and “topside” pandanus trees but today there are relatively few of either tree present. Though the land now has little to offer economically, isolated Nauru commands an Exclusive Economic Zone (EEZ) of 320,000 km2 which does have economic potential.

There are no natural harbours but because the reef falls off at a steep angle, large ships can anchor less than 100 metres off shore. Goods are moved from ships by lighter to an artificial harbour where it is safe to move the goods to shore. Fuel is transferred through a flexible pipeline. A second small artificial harbour has been constructed by Japan to facilitate the unloading of fishing boats up to about 10 metres long.

Potable water is a major concern. Though there is a freshwater lens in the porous coral rock, the water is brackish and barely suitable for washing and sanitation. Nearly all houses and commercial buildings have rainwater catchments but the volume of storage is insufficient for the drought conditions that occur cyclically. Two reverse osmosis desalination plants provide around 250 tonnes of fresh water per day to supplement the rain water catchments. A 1,500 tonne per day distillation facility, intended to use waste heat from electrical generation, provided sufficient fresh water in the past but the engines whose exhausts are connected to the facility are broken down and generation has been

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shifted from those fixed engines to many portable containerised generators that exhaust their heat to the air instead to the distillation apparatus.

2. Population and demographicsThe 1992 census counted 9,919 persons on Nauru with about 68.87% ethnic Nauruan. The 2002 census counted 10,065 persons of whom 75.25% were ethnic Nauruan. This represents an annual growth of 0.15%. That figure is deceiving because there was an exodus of expatriate workers due to reduced phosphate production during that period. The ethnic Nauruan population rose at a rate closer to 1% per year.

The population is distributed in small villages along the narrow “bottomside” plateau around the perimeter of the island and there are no urban areas.

Health problems, particularly life style diseases such as diabetes, obesity and conditions brought on by smoking and the excessive use of alcohol are a major problem. Nauru maintains five kidney dialysis machines, more than any other Pacific Island country, as they are needed to handle the unusually high number of persons with renal failure caused by diabetes. In the late 1980s, around one-third of the adult population were diabetics. Nauru has consistently been low in Pacific rankings regarding life span and high in frequency of lifestyle related diseases. Health officials attribute these problems to a diet consisting almost entirely of imported processed foods, heavy use of soft drinks and alcohol, all combined with low levels of exercise, conditions allowed by the high per-capita income of the past three decades.

3. Socio-Economic structureNauru is an isolated island and the people appear to have been influenced by both Micronesian and Polynesian groups. The language of Nauru is unique and not clearly related to any other Pacific language. Nauru has had a varied colonial background. From 1888 to 1914, Germany administered the island. In 1914 Australia took possession and after the First World War the island became a trust territory of Australia, New Zealand and Britain. In 1942, the Japanese took over the island, then after the war it reverted to Australia, New Zealand and Britain trusteeship with Australia as the administrator. Finally on January 31, 1968, Nauru once again became independent politically. Nauru now has a Westminster parliamentary system with a single chamber parliament of 18 members elected for three year terms. The parliament selects a President who is both Head of State and Head of Government. The politics of Nauru have been volatile in recent years with frequent changes in government probably associated with the many economic problems since the mid-1990s.

Since the beginning of the 20th Century, Nauru has been dependent almost completely on phosphate exports for its income. Exports peaked at about A$120 million a year in the 1980s but have been in decline since with the decline accelerating after the mid 1990s. Though a Nauru Phosphate Royalties Trust was established to provide income after the phosphate was mined out, extraordinarily poor management of the trust has resulted in its serious depletion making Nauru essentially bankrupt today.

Now that the phosphate resource is essentially gone and over 70% of the island destroyed by strip mining, only the narrow “bottomland” fringe can be of any economic use for the foreseeable future. Bottomland is where the population is concentrated and while there

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appears to be enough land available for subsistence agriculture, there is not enough to develop agriculture for significant export income even if the fragmented land ownership problems could be overcome to allow coordinated, export oriented agricultural production. Adding to the problem is the isolation of Nauru and the long distances to any significant markets.

Most of the Government’s operating funds in recent years have come from Australia as payment for damages to the Nauru environment during its years of mining (an A$107 million Compact of Settlement was agreed upon by Australia and Nauru in 1993 with the money intended for rehabilitation of the areas of the island damaged by mining), through payment to Nauru for hosting refugees that Australia is unwilling to host on its own soil (now down to around 80 persons and expected to be soon phased out) and through outright grants. Substantial income also comes from licensing foreign fishing boats to operate within the EEZ. The economic outlook for the near-term is bleak and Nauru is almost completely dependent on Australia for the continuance of most public services.

The GDP has been dropping rapidly as phosphate reserves have dwindled and available data for 2002 is known to be inaccurate in 2005. Therefore no per-capita GDP figure can be provided with any degree of accuracy. The Pacific Islands Forum Secretariat’s Economic Outlook of 2005 was unable to provide GDP data for Nauru from 2003 to the present or to project GDP for the coming years.

4. Poverty issuesWith the exception of a few privately owned shops and businesses, all employment is by government or government owned agencies such as the Nauru Phosphate Corporation. With the collapse of the economy, the Government has not been able to pay full wages since 2003. So far that has not resulted in exceptional hardship since essential public services continue to be provided through Australian funding with no expectation of payment for electricity or water by anyone except for private businesses which are mostly owned by ethnic Chinese or Europeans. Thus, poverty is not an immediate issue but there is certainly the potential for serious poverty in the future if the heavy input of funds from Australia and the donor community should cease or be drastically reduced.

The ADB and other international agencies have been working to help bring government spending under control and to rationalise the economy but progress has been slow and difficult.

5. MDG progressNo data are available for Nauru


1. OverviewAll energy supply has been managed by the Nauru Phosphate Corporation. With the collapse of the phosphate exports, a restructuring is likely, though how that will be done is not clear at this time.

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a. Fossil Fuels

The data quality is poor but it appears that the average annual petrol imported by NPC in 2003 was around 3.5 ML, ADO was around 9.5 ML and jet fuel was around 1.6 ML. In 2005 it is likely that ADO purchases have been reduced since the phosphate industry no longer is a large electricity user. Petroleum and Jet Fuel probably have remained about the same. Petroleum products must be purchased in cash by NPC since credit is no longer extended by oil suppliers. Ships can tie up to a buoy off shore and deliver petroleum products through a pipeline to topside storage that is extended from the phosphate delivery structure. Pricing for resale is based on CIF cost plus a mark up sufficient to cover handling and storage. There is no price regulation. Shortages have occurred due to a lack of cash at NPC to make a timely purchase and there have been times where voluntary rationing of petrol and rolling blackouts of electricity were the result.

Based on inaccurate 2003 data, the annual per-capita use of petroleum fuels (excluding jet fuel) was about 1,400 l/person/year. In 2005 that is likely to have fallen to around 1,000 l/person/year.


NPC acts as the electricity utility. The Australian Government also operates generators at the Government Hotel and at refugee centres. Most of the power in 2004 came from containerised diesel generators with only one of the eight stationary engines still in service. The distribution system is in a ring main configuration and includes 11kV, 3.3kV and 415V sections. Maximum demand was in excess of 7 MW in the early 2000’s but is dropping due to the loss of phosphate processing demand with the remaining demand around 4 to 5 MW. The last year with apparently accurate electricity generation data was 2002 when about 44 GWh was generated. That makes the generation about 400 kWh/month/per person. That is expected to be substantially less in 2005, since the electricity requirement for phosphate processing is much less, probably on the order of a still rather high 300 kWh/month/person.

c. Renewable Energy

There is no use of renewable energy on Nauru beyond the few household solar water heaters that still work and very limited use of biomass for cooking. There is no renewable resource that is known to be economically potential other than solar energy and biomass for household use.

d. Regulation

There is no formal regulation of energy supplies and no energy office in government.

2. Policies and legislationThere are neither policies nor regulations relating to energy other than the legislation that created NPC and its scope of operations.

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3. Capacity issuesThere are serious issues with the capacity of government to manage its finances and to rationally shift from the phosphate based economy to one based on ocean resources, subsistence and donor inputs.

Technical capacity is limited though the main problem with maintaining technical systems appears to be inadequate access to funds rather than human resource limitations.

4. Knowledge repositories and information deliveryNPC staff and records represent the entire repository of information regarding energy in Nauru. Records are poor, and such data as is available is not in a format that lends itself to analysis for forward planning purposes.



There have been no energy development programmes in Nauru other than adding generation capacity to meet increasing loads and to replace generation capacity that has been lost due to equipment failure. In recent years, as the eight stationary engines installed at NPC for power generation have, except for one, each failed, generation requirements have been increasingly covered through the rental of five containerised generation packages at NPC and transportable generators at three other locations around the island.


Current programmes are strictly based on crisis management to keep the energy system from collapsing.PIEPSAP (SOPAC/UNDP/Government of Denmark) – cooperation will focus on energy sector framework development. PIREP (SPREP/UNDP/GEF) – have undertaken assessment of key energy issues in Nauru, barriers to the development of renewable energy to mitigate climate change, and capacity development needs for removing the barriers.


A €1.5 million EU project is expected to begin early 2006. The overall objective will be to improve the overall efficiency of the energy sector and, where justified, to increase power production through renewable energy.


Reorganisation of the energy sector, replacement of old stationary engines not worth the repair cost.

2. InstitutionalCurrently, all energy comes under the NPC.

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3. Policy and legislationGovernment policy remains to provide all Nauruans with electric power and potable water and thus far has been a policy that can be implemented.

The PIEPSAP project has received a request from the Nauru government for assistance in developing a national energy policy and strategy. Also, PIEPSAP has agreed to assist in the restructuring of the electricity utility.

4. Capacity issuesThere is little capacity in either Government or NPC for long range planning or for the development of energy programmes and policies that will be viable for the post-phosphate economic era.

5. Knowledge repositories and information deliveryA small group of persons in Government has addressed some of the programmatic issues relating to environment and renewable energy but in a practical sense NPC remains the repository of all energy programme information. The information is not well organised and is not readily available. Increasingly, the AusAID office in Nauru is replacing NPC as the most accessible repository of information about existing and proposed energy programmes in Nauru since that office now increasingly manages energy program development for Nauru.


1. OverviewAll households and businesses in Nauru have access to grid power and fossil fuels. Power outages and fuel rationing do occur, however, and the energy system seems continually on the verge of collapse.


The Forum Secretariat’s quarterly Pacific fuel price monitoring reports do not include Nauru. The fact that Nauru has no credit with the major fuel suppliers and must purchase in relatively small quantities for cash suggests that a high price must be paid. The retail price is not as high in some PICs however, since there are no import duties or taxes on petroleum imports or sales and the NPC sells at only a small mark up over the purchase price.


The price of electricity is set by NPC with government approval. In the past, domestic pricing was cross subsidised by the phosphate industry. Today the price has remained artificially low (A$0.09 per kWh – about US$0.064 – for domestic users and A$0.13 – about US$0.093 – for commercial and government users) but government must provide the difference between what is collected from customers and the cost of supply as a subsidy to the NPC. For the past year or more, there have been collections only from commercial customers and the huge resulting losses have been made up by Australian payments for fuel and operations.

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Nauru has 100% grid coverage.d. Access to fossil fuels

Except for periods when there has been insufficient cash to purchase fuels on time, all of Nauru has easy access to fossil fuels including petrol, diesel, and kerosene through NPC distribution. LPG is privately imported and distributed. Most LPG is used in the several Chinese restaurants. Households typically use electricity for cooking though as power outages have become more common, households are switching to LPG at least as a standby fuel for cooking.


The only economically developable renewable energy source is solar. The wind resource is not known but as Nauru is on the equator, it is not likely to be a developable resource. Arable land is limited to the populated “bottomland” fringe of the island and is not sufficient to provide biomass for energy development. Other technologies, including wave energy and OTEC have an available resource but at this time there are no commercially available systems for converting the resource into useable energy.

2. InstitutionalNPC is the sole provider of fossil fuels and of electrical energy.

3. Policy and legislationIt is government policy that electricity access be available to all of Nauru citizens. No legislation is in place regarding energy access.

4. Capacity issuesSufficient technical capacity appears to be available on Nauru for maintaining energy access. The limiting factor is the availability of funds.

5. Knowledge repositories and information deliveryNPC only.


1. OverviewNauru has historically been a very inefficient user of both petroleum and electrical energy. Households usually use electricity for cooking, have one or more air conditioners and generally make little effort to use energy efficiently. This has been the result of low electricity prices (and bills that often go unpaid for years), the very high per-capita income of the past decades and a general lack of understanding of energy efficiency matters.

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a. Uses of energy

Nearly all petrol is used for land transport and nearly all diesel is used for electricity generation. LPG is used for cooking in some houses and most restaurants. With the fall in phosphate processing, domestic electricity is expected to soon become the largest use sector if that is not already the case in 2005. The domestic use in 2002 was about 18.4 GWh. The average household use in 2002 was 915 kWh/month/household due to the use of electricity for cooking and the general use of inefficient window-type air conditioners. Commercial use in 2002 was 5.8 GWh with the load including ice making for fish storage, two hotels, two large stores and a number of smaller shops and restaurants. Government use was included with NPC usage at 20 GWh, a figure that is much smaller in 2005 due to the drop in phosphate processing.


Household energy is very inefficiently used. PIREP estimated that a reduction of 50% could be achieved without significantly changing services received. It is likely that the use of electrical energy could be reduced by a factor of 10 as that would be in line with household users in Fiji and other PICs, though cooking and air conditioning would then have to be dropped as electricity uses.


2. InstitutionalThere is some interest in the government departments that do environmental planning but there is no focused institutional interest in renewable energy.

3. Policy and legislationNone specifically affecting renewable energy.

4. Capacity issuesThere is almost no capacity for the development of renewable energy on Nauru.

5. Knowledge repositories and information deliveryA small repository exists within the Department of Island Development and Industry but is only a source of general information.


1. OverviewNone is present on Nauru and there is no history of energy entrepreneurship in the pat.

2. InstitutionalThere is no institutional development relating to energy entrepreneurship.

3. Policy and legislationThere are no policies or legislation that either promote or prohibit energy based entrepreneurship.

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4. Capacity issuesThere is little capacity on Nauru for energy based entrepreneurship.

5. Knowledge repositories and information deliveryNone are known to exist.


1. OverviewThe Bank of Nauru failed several years ago and is unable to provide even money exchange services. They have no money available for finance.

2. InstitutionalWith the collapse of the Bank of Nauru, there is no institution active on Nauru for the finance of energy activities.

3. Policy and legislationThere are no policies or legislation relating to the finance of energy related activities.

4. Capacity issuesThere is no capacity on Nauru for the development of energy related finance.

5. Knowledge repositories and information deliveryThere are none known.


1. OverviewData sources are unreliable, disorganised and often monitoring of activities both public and private simply is not done.

2. InstitutionalThe primary data gathering institution on Nauru is the Bureau of Statistics but except for census data, they are dependent on data from other sources that are often unreliable. The rapidly changing economic conditions, the inability of the Government to respond effectively and the almost continual state of crisis have made it almost impossible to obtain up to date and accurate data on any aspect of energy or the economy of Nauru.

3. Policy and legislationThere are no specific policies and legislation relating to monitoring and evaluation of energy related activities other than the legal requirement to prepare basic financial accounts.

4. Capacity issuesSuch capacity as is available in Nauru appears to be fully occupied with crisis management and no time is available to monitor and evaluation.

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5. Knowledge repositories and information deliveryPoor quality data from NPC and the Bureau of Statistics is all that is available.


1. OverviewThe island is small and all households have access to public information services through radio and television. There is a newsletter published by the Government on a weekly basis. The telephone service reaches into most homes and Internet access is available though in households only at dial-up speed through the telephone system.

2. InstitutionalEducation is available through high school and scholarships have been available for some students to attend secondary school in Fiji and other Pacific Islands. For example, the Hammer de Roburt Scholarship Scheme receives about A$250,000 annually from AusAID for five regional scholarships. Until recently, many teachers have been foreign contract workers but problems with housing and finance have reduced their numbers dramatically. The education system has had problems maintaining a good student/teacher ratio and in maintaining an acceptable standard of instruction.

USP has a centre in Nauru that can be used for short courses and focused technical training as well as USP credit studies. There is a vocational-technical school on Nauru although its facilities were greatly reduced by a major fire in 2003. Lost in the fire were all electrical trades teaching facilities. Most trades training in technical fields is through informal apprenticeships at NPC and through on-the-job training although some personnel receive overseas training, mostly in Fiji, Samoa, New Zealand and Australia.

3. Policy and legislationThere is no overt censorship of information. There is no legislation or policy relating specifically to information relating to energy.

4. Capacity issuesPrior to the collapse of the economy, the majority of teachers were well qualified expatriates. Most of those teachers have not had their contracts renewed and the quality of school instruction has declined significantly. There are few people qualified in the information services and there have been problems with access to maintenance of IT systems and other communications equipment.

5. Knowledge repositories and information deliveryPublic schools, the trade school, the USP Centre and Nauru Telecom represent nearly all the knowledge repositories relating to information access.

J. Conclusions

1. OverviewNauru has no energy access problems and thus far no overt poverty issues.

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2. InstitutionalEnergy institutions are in a state of continual crisis, both economic and technical, and are likely to change radically in structure in the future.

3. Policy and legislationThere is no energy policy nor is there legislation that relates to energy other than the creation of NPC as the supplier of energy in Nauru.

4. Capacity issuesCapacity for long range planning, renewable energy development, economic analysis of energy development and management of energy systems is in need of improvement.

5. Knowledge repositories and information deliveryNPC holds most of the knowledge regarding energy on Nauru but the information is based on records with numerous gaps and is in a form difficult to access and use for analytical purposes. Information delivery is limited to public schools, a small trades school, the USP extension services, radio and TV. Internet access is possible but few households access the service.

K. Recommendations

1. OverviewThe once very wealthy economy has collapsed and in effect basic public services cannot be provided without external support. Access to energy is not currently an issue, poverty is not (at this time) an issue and the existing pipeline programme in energy (the EU renewable energy and energy efficiency programme) appears greater in size than can be absorbed by the available capacity on Nauru.

2. InstitutionalA reorganisation of the energy sector appears likely but without access to financial resources for repairs and reconstruction little improvement is possible. The size of the country and the fact that the priority for Government must be on survival with energy issues well down the priority list, makes it impractical to propose developing any new institutional structures for energy.

3. Policy and legislationEnergy efficiency improvements are vital to reduce the cost of imported diesel fuel. With as much as 50% of all energy used in Nauru effectively wasted, policies, legislation and regulations directed toward improving the efficiency of the end use of both electrical and petroleum energy are important to consider. It is hoped that the EU project that will soon commence will focus on energy efficiency improvements and thereby help cut the cost of fossil fuel imports dramatically.

General energy policy and restructuring of the energy delivery sector are being addressed by the PIEPSAP project.

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4. Capacity issuesMany of the issues in Nauru relate to inadequate management capacity. That cannot be developed in a short time, therefore the provision of external expertise to support and train local managers appears appropriate. The technical capacity to operate and maintain the existing energy systems appears generally adequate, the technical failures have been attributable to a lack of resources more than inadequate technical capacity.

5. Knowledge repositories and information deliveryThe development of information delivery systems and knowledge repositories relating to end use electrical energy efficiency are recommended.

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XXII. NIUE

A. Background

1. Physical conditionsNiue is a single island country. It is a large raised coral island with a land area of 259 km2

and located at 20°S and 175°W. Niue has about ten times the land area of Tuvalu but has a population of only about 1,200 people. Niue has a fringing reef and no lagoon with the limestone mass rising nearly vertically to a perimeter elevation of around 25-40 metres. There are no beaches and with almost vertical cliffs all the way around the island, access to the sea is difficult and is typically by way of steep foot paths and stairways cut into the cliff. From the perimeter cliffs the land rises slowly to a central plateau having a maximum elevation of about 68 metres. Ships must anchor off shore and goods are brought to shore by small boats and lighters. The EEZ of Niue encompases 390,000 km2.

Though there are no lakes or streams due to the porous coral rock, there is an annual average of 2050 mm of rainfall that accumulates in a fresh water lens within the rock. The lens water is of good quality and is pumped from 15 boreholes and distributed to households.

About 20% of the island is arable land though little of that is actually in crops. Forests cover over 60% of the island and as they are protected through a system of traditional and legal sanctions they have remained close to their natural state.

2. Population and demographicsThere is no urban area. The population resides in small villages distributed around the perimeter of the island. The village of Alofi has the government facilities and the greatest concentration of homes and businesses but cannot be considered an urban area.

Politically, Niue is in free association with New Zealand and there has been free travel between the countries for decades. Due to emigration to New Zealand, the population of Niue has fallen steadily and Niueans in New Zealand outnumber those remaining on Niue by over 20 to 1. In 2004, there was a sudden drop in resident population from around 1,800 to the present approximately 1,200 following a devastating cyclone that caused major damage to homes, businesses and government facilities. There is a growing concern that any further reduction in population will endanger the ability of government to properly provide essential services.

3. Socio-Economic structureEducation is compulsory from age 5-14. The Niue high school covers Form 1-6. The population is bilingual (English and Niuean) and almost 100% literate. Almost all the population is Christian with about 75% belonging to the Ekalesia Niue (a faith that was developed from the London Missionary teachings), 10% belong to the Latter Day Saints church and the rest are mostly Catholic, Jehovah’s Witnesses and Seventh Day Adventists.

Niue was annexed by New Zealand in 1901 and attained independent status in free association with New Zealand in 1974. The government has a 20 member assembly with

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the Prime Minister elected by the assembly. Three other assembly members are selected by the PM for his Cabinet.

GDP in 2000 was about NZ$14.2 million (about US$9.9 million which represents about US$5,500 per capita) with NZ$3 million coming from New Zealand, NZ$7.7 million from other donors and NZ$3 million from agriculture (taro, coconuts, bananas, honey and vanilla, mostly exported to New Zealand). Tourism amounted to NZ$0.3 million and manufacturing NZ$0.2 million. Cyclone Heta in 2004 greatly damaged crops and agricultural exports are expected to be much lower until at least 2006 or 2007. Tourism is expected to have the most rapid sectoral growth but facilities for tourists and access to the country remain limiting factors. Remittances from relatives in New Zealand are a significant source of cash for Niue residents. A large fish freezer is being installed and the export of frozen fish is expected to be substantial in the future since foreign vessels fishing within the EEZ of Niue will be required to deliver their catch for freezing in Niue.

More than half of the workforce is employed by government. Small shops and the service industry provide most of the remaining employment.

Most households maintain a “bush garden” along with poultry and a few pigs. Thus much of the food for the household need not be purchased, at least during periods of normal weather.

4. Poverty issuesThere are no known poverty issues in Niue. All the population have access to fossil fuels, electricity, education and health services, there is little unemployment and housing is of a high standard. UNDP’s 1999 Pacific Human Development Report (HDR) calculated Niue’s human poverty index (HPI) as 4.8, by far the best among 15 PICs, others ranging from 5.9 (Tonga) to 52.2 (PNG). At the time, this placed Niue roughly in the same HPI category as Costa Rica, Singapore or Uruguay.

5. MDG progressNo MDG statistics are available. The 1999 Pacific HDR calculated Niue’s Human Development Index (HDI) as 0.774, the third highest at the time among 14 Pacific Island Countries, which ranged from a high of 0.861 (Palau) to a low of 0.314 (PNG).


1. OverviewThere is no energy office though one of the three Cabinet Ministers has energy as part of his portfolio.

a. Fossil Fuels

The Bulk Fuel Corporation has the exclusive import rights for petroleum (except LPG). The corporation owns the storage and distribution system and uses New Zealand standards in its operations. The fuel supplier has been Shell Fiji, Ltd., for many years. The retail price is set by government and a NZ$0.10 per litre tax is imposed.

LPG is imported privately in containerised bulk tanks.

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The Niue Power Corporation (NPC) is a government owned corporation under the Secretary for Government. It has 1.6 MW derated capacity and provides 24 hour power to 960 active customers through an 11 kV underground distribution system. The government uses about half the energy produced, though when the fish freezer comes on line it will dwarf all other loads.

c. Renewable Energy

There is no institutional structure specifically for renewable energy. A small solar pump (no longer operating) was installed under the Public Works Department (PWD) and a community building was electrified by solar PV (no longer working) under a village committee. Solar water heaters are often used, purchased through local importers or directly from suppliers in New Zealand. The use of wind power by NPC has been proposed but no installations have yet been made.

d. Regulation

Petroleum prices are regulated and electricity tariffs must be approved by Cabinet.

2. Policies and legislationNiue does not have a national energy policy though PIEPSAP has been requested to assist in its development. There is no specific energy legislation other than those establishing the Bulk Fuel Corporation and the Niue Power Corporation.

3. Capacity issuesThe NPC appears to be well managed, producing reliable power with reasonable efficiency of supply. The BFC has no known capacity issues.

4. Knowledge repositories and information deliveryRecords and employees at NPC and BFC are the primary knowledge repositories in energy matters. Some information is available from the PWD regarding solar pumping and the meteorology office has sunshine hour and wind data, though neither are very useful for solar or wind resource assessment. SOPAC has two years of wind and solar resource data for Niue from a mid-90’s Forum Secretariat resource assessment project.



The NPC has long been a good example of a well run small power utility. Due to the falling population, load growth has been slow and the system has not suffered from many of the growth related problems of other island utilities.

A few solar PV panels have been imported privately and there have been two significant donor projects for solar photovoltaics. The first was a community building installation funded by the SPC in the late 1980s that. The 658 Wp of panels powered a refrigerator

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and lights. The system did not fit the needs of the village (a freezer, not a refrigerator was needed) and though PWD was supposed to keep the batteries maintained, the system soon failed. A village water system (AusAID funded about 1996) was constructed using a complicated 1.365 kWp solar PV system that was supposed to track the sun powering a bore hole pump feeding water into storage for village use. The system never provided the design flow of water and failed completely within a few years.

Government housing built in the 1980s and 1990s included solar water heating. There have been no programmes for private solar water heater installation though a number have been purchased and installed by households and businesses.


Repairs to fuel storage and the Niue electrical system due to cyclone Heta have been undertaken and are underway. The development of the Reef Shipping/Government of Niue fish freezer will have a significant impact on NPC with about a 100kW continuous demand. PIEPSAP (SOPAC/UNDP/Government of Denmark) – priorities for PIEPSAP co-operation defined in the area of National Energy Policy development and assist in preparing for the upcoming EU project. PIREP (SPREP/UNDP/GEF) – have undertaken assessment of key energy issues in Niue, barriers to the development of renewable energy to mitigate climate change, and capacity development needs for removing the barriers.


The EU has allocated €1.8 million (about US$2.2 million) for renewable energy and energy efficiency improvements on Niue. The programme will commence late in 2005 with the determination of the types of measures to be employed scheduled for early 2006. Wind power development has been requested by the Niue Government and is expected to be a major component of the programme.

The Pacific Islands Greenhouse Gas Abatement through Renewable Energy Project (PIGGAREP) where Niue is participating. This is a planned joint SPREP/UNDP/GEF barrier removal project building on the preparatory work undertaken as part of PIREP.


No programmes relating to energy are known to be under serious consideration in Niue.

2. InstitutionalThe NPC is expected to continue to be the institutional focus of future energy programmes relating to electrical energy and the BFC the focus for petroleum development.

3. Policy and legislationPIEPSAP has been asked to assist in developing energy policy. There are no legislative programmes relating to energy.

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4. Capacity issuesIf wind power is to be added to the NPC generation mix, there will need to be associated capacity development both for the hardware and the software components of grid integrated wind power development.

5. Knowledge repositories and information deliveryKnowledge repositories relating to current and pipelined energy programmes in Niue are almost all external to Niue, including UNDP Samoa (wind utilisation consultancies) and SOPAC (wind utilisation consultancies and resource – solar and wind – assessment and PIEPSAP.).


1. OverviewAll Niue residents have access to both fossil fuel and electricity energy.


All diesel, petrol and aviation fuel is imported and distributed by BFC. The corporation adds a mark-up to the landed price to cover storage, handling and administration. A NZ$ 0.10 per litre tax is added to the wholesale price. The retail price is regulated by Government and fluctuates with the wholesale price.

According to the PIFS Pacific Fuel Price Monitor of July 2005, in June 2005, the wholesale price of petroleum fuels in Niue (excluding all taxes and duties) was about US$1.05/litre for petrol and US$1.00/l for automotive diesel oil (ADO) or distillate. Both were about double the average prices for Forum Island Countries and by far the highest levels in the subregion. also the highest in the Pacific.


The electricity tariff in 2004 was NZ$ 0.30 per kWh (US$0.20) for all sales. This tariff has been in effect for many years and does not cover the cost of generation and distribution.


Niue is fully electrified.d. Access to fossil fuels

All residents have easy access to fossil fuels.e. Access to renewable energy

For individual use, solar energy is the only renewable energy source likely to be developed. The most likely use of solar energy is for water heating though electricity from solar may be developable close to the current cost of diesel generation.

The wind resource is seasonal and moderate but appears to be economically reasonable for development.

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The wave energy resource is modest and would be difficult to develop even if commercial wave energy conversion devices were available. OTEC is theoretically possible but no commercial installations have yet to be made anywhere in the world.

2. InstitutionalNPC and BFC provide access to electricity and fossil fuels.

3. Policy and legislationEPC legislation includes the mandate to supply all Niue residents with affordable electrical power. The Niue Integrated Strategic Plan 2003-2008, in the Energy Sector under Infrastructure Development, states a goal is to provide a reliable energy supply to all residents and to complete the European Union energy project.

4. Capacity issuesNone relating to access to conventional energy. There is no capacity presently in Niue specifically for the development of renewable energy. Or energy efficiency?

5. Knowledge repositories and information deliveryEPC and BFC records are the primary knowledge repositories relating to energy access.


1. OverviewAlthough there have been programmes to improve supply side efficiency at NPC, improving the efficiency of use of energy has received almost no attention by government or NPC. No energy efficiency public information projects have been implemented. The Niue PIREP report indicates that a saving of 15% of ADO used for electricity generation and 5% of fuels used for ground transport would be achievable goals for relatively easily implemented energy efficiency programmes.

a. Uses of energy

About 2,620,000 litres of fuel were imported in 2003 for local use (not including jet fuel). This represents about 1,150 litres per capita for the 2003 population. Around 964,000 litres of diesel fuel went to NPC for power generation. Automotive use was about 600,000 litres (of which some no doubt was used for outboard motor use). Sales specifically for outboard motor use was 98,000 litres. Diesel for land transport was about 367,000 litres and 10,300 litres was recorded as sold for sea transport.

LPG use has grown rapidly in recent years with over half of households using LPG for cooking. The cost in 2003 was about NZ$4.50 per kg. No more recent costs are available. Some kerosene is used for cooking though the quantity is not large and is decreasing.

Almost no biomass is used for cooking.

Around 3.370 GWh of electricity was sold in 2003 of which about 1.4 GWH went to domestic customers and 1.3 GWh to government. For the 2003 population, the per-capita kWh per month usage was therefore about 156 kWh/person/month – high for the PICs.

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Government uses almost as much electrical energy as the entire domestic sector but end-use efficiency has not been addressed in a systematic way. In the 1980s, PWD (then operating the electricity supply) implemented some measures to control government use of air-conditioners including imposing a significantly higher tariff for electricity used for air-conditioning (a NZ$0.18 per kWh surcharge). Trials of timers and other devices to control electrical use in government facilities were not successful.

In particular, many government buildings were constructed with little attention paid to energy efficiency in their design. Hopefully, the redesign and reconstruction of many government facilities following their destruction by Cyclone Heta in 2004 will not repeat that error.


Solar energy is economically reasonable for water heating and for electricity supply where connection to the grid is too expensive (e.g. lighting for accessways down the cliff to the sea, water pumping). The high cost of fuel in Niue makes grid connected solar more interesting than in most PICs but it is still more expensive than diesel based generation. Wind power for supplementing diesel generation appears economically reasonable though it is unlikely that more than about 10% of the electrical energy sold over the year in Niue can be expected to come from wind generators.

Though there is a large biomass resource on Niue, much of it is protected under traditional customs or environmental law. Land issues also prevent major use of biomass for other than household use. The coconut resource is small relative to most PICs and high value export sales consumes most of the easily accessed production. The limited resource and the high per-capita income of Niueans make it unlikely that biofuels will be produced locally.

2. InstitutionalThere is no specific institution responsible for energy efficiency measures. In the past PWD and more recently NPC have addressed some energy efficiency issues but with little long term results.

3. Policy and legislationThere is no policy or legislation relating to energy efficiency.

4. Capacity issuesEnergy efficiency skills are basic. There is almost no capacity on island to prepare energy efficient building designs or to develop and implement large scale demand side efficiency programmes.

5. Knowledge repositories and information deliveryNo significant local knowledge repositories or information delivery systems for energy efficiency information are known to be present on Niue. New Zealand, however, has a wide range of information available and a number of companies specialising in energy efficiency interventions.

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1. OverviewBeyond the installation of standby generators at commercial and government facilities, LPG supply and solar water heaters are presently the only private sector entrepreneurship opportunities. No significant opportunity is seen for independent power producers (IPPs) or private sector energy entrepreneurship in overall power supply, biofuels or photovoltaics.

2. InstitutionalThere are no institutional structures relating to private sector energy development.

3. Policy and legislationThere are no policies or legislation that either act to encourage or discourage energy entrepreneurship.

4. Capacity issuesThe small Niue market makes it unlikely that energy entrepreneurship will develop much beyond the existing LPG and solar water heater market.

5. Knowledge repositories and information deliveryNone are known to exist outside the companies serving the LPG and solar water heater markets.


1. OverviewOne commercial bank operates in Niue.

2. InstitutionalThe commercial bank provides for secured loans (notably for housing, automobile and boat purchases) but is not known to provide finance for energy development. The Niue Development Bank in theory can arrange for loans where economic development will occur and commercial finance is not available. Niue is an associate member of the ADB but cannot negotiate loans until full member status is achieved.

3. Policy and legislationThere are no policies or legislation that appears to either encourage or discourage energy related finance.

4. Capacity issuesSince energy finance does not appear to be an issue in Niue, the development of capacity in this field does not appear to be needed.

5. Knowledge repositories and information deliveryNone focused on energy finance.

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1. OverviewA major part of the problem with past renewable energy and energy efficiency efforts has been a lack of any sort of formal monitoring or follow-up evaluation. NPC and BFC maintain good operational records and do perform basic analysis of their operational data. Private sector records seem less complete and any analysis of data likely to be informal and not truly analytical.

2. InstitutionalBFC and NPC have internal monitoring systems. Evaluation appears to be less institutionalised.

3. Policy and legislationAs government corporations, NPC and BFC are required to carefully monitor their operations and to maintain comprehensive records. There is no other monitoring and evaluation policy or legislation relating to energy.

4. Capacity issuesAs there is no government energy officer, the information available to NPC and BFC is not consistently used by government for policy or regulation. The value of establishing such a position for a country the size of Niue is relatively low since there are few interventions that can be made to affect either petroleum or electricity supply economics that cannot be carried out within NPC and BFC as easily and effectively.

The renewable energy and energy efficiency interventions that take place under the EU project (expected to be defined in 2006) should include long term monitoring and evaluation. It is unlikely that the EU project itself will include monitoring and evaluation beyond the conclusion of the project, so some capacity to continue that effort by NPC or Government should be developed.

5. Knowledge repositories and information deliveryNPC and BFC monitoring and evaluation procedures represent most of the local resource for energy monitoring and evaluation.


1. OverviewAs a dependency of New Zealand, access to energy information available in New Zealand can be arranged relatively easily either by Niueans going to New Zealand or by experts from New Zealand visiting Niue. The telephone system is well developed and reliable with costs typical of PICs. Internet access is generally available though the data speed is not often high and the number of customers that can be simultaneously served is not large.

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2. InstitutionalNiueans are typically bilingual, speaking both Niuean and English. Education is compulsory and free for ages 5-14. The National Primary School in Alofi provides classes 1-6. English is introduced at class 3 and its use in teaching gradually increased as the student progresses. The Niue High School, also near Alofi, covers form 1-6. Form 7 is taken in New Zealand by students selected under a Government scholarship scheme.

The University of the South Pacific has a facility at the Niue High School with resident and distance learning programmes. There is no vocational or trades school on Niue.

3. Capacity issuesThere are few persons in Niue with skills relating to energy. Those skills are concentrated in NPC and are also found in PWD. There are no technical schools or training facilities on Niue. Persons needing technical skills development mostly go to New Zealand. Scholarships are often available and there usually are family members resident in New Zealand who can help keep living costs low while studying. Given the small population of Niue and the small need for energy related skills, it is unlikely that developing a local capacity for training of energy specialists would be appropriate.

4. Knowledge repositories and information deliverySuch energy related knowledge as is to be found in Niue is concentrated in NPC and BFC with some available in PWD and telecom.

Niue has broadcast television and local radio broadcasts. Both extend into most households and have time available for public information delivery.

J. Conclusions

1. OverviewWith relation to poverty reduction and improved energy access, Niue has no significant programme opportunities.

2. InstitutionalThe main energy area that can be effectively addressed in Niue is that of energy efficiency improvement, particularly in the new government complex, and the integration of renewable energy sourced electricity into the NPC generation system. Establishing a position either within NPC or, preferably, in Government that focuses solely on developing and implementing energy efficiency measures should be cost effective for the country.

3. Policy and legislationPIEPSAP is assisting with policy development. No legislation appears to be needed for further energy development.

4. Capacity issuesThe ability of NPC to absorb significant renewable energy sourced power will depend largely on the staff capacity regarding operation, maintenance, repair and their ability to

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maximise the renewable energy component with changes in the renewable energy resource.

5. Knowledge repositories and information deliveryIn general, NPC and BFC are the main repositories of energy related information. Information delivery is done to some extent through the Bureau of Statistics website though most information is available only through direct enquiry to NPC and BFC. The store of knowledge and the delivery of information relating to the efficient use of energy is limited almost entirely to supply side efficiency improvement at EPC. Demand side efficiency improvement knowledge and information delivery is weak.

K. Recommendations

1. OverviewThe small population of Niue makes it impractical to manage more than a narrow range of energy programmes. Two appear reasonable: 1) to add wind generation to the NPC generation and to develop and implement a general demand side energy efficiency improvement programme that emphasises the replacement of existing inefficient lighting with new CFL or electronic ballast type fluorescent lighting and 2) a programme by NPC or government to improve energy efficiency in refrigerators, freezers and air conditioners through repair or replacement of door seals, cleaning of heat exchange surfaces and instruction to users on the efficiency use of the appliances. If the design of the new government complex has not been finalised, it should be reviewed to incorporate energy efficiency.

2. InstitutionalIt is recommended that a position be established in Government on NPC and resources allocated to develop and deliver programmes for end use energy efficiency improvements in government, households and commerce.

3. Policy and legislationPolicy should be developed and enforced requiring the incorporation of energy efficiency measures in new commercial and government facilities.

4. Capacity issuesCapacity development is needed to support both energy efficiency interventions and the integration of renewable energy into the NPC power system.

5. Knowledge repositories and information deliveryAn energy efficiency public information programme should be developed along with programmes supporting domestic energy efficiency measures particularly as regards lighting and refrigeration.

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XXIII. PALAU

A. Background

1. Physical conditionsPalau, often spelled Belau, is a group of small islands with a total land area of 458 km2 that lies along a north-east by south-west line between about 8º 10´ and 3º N Latitude and about 132º 45´ and 134º 25´ E Longitude. Palau and its 629,000 km2 EEZ lies 660 km north of Papua New Guinea, 1,300 km SW of Guam and SE of the Philippines. Palau includes over 200 islands but most are small and the population is found on just nine islands. Over 90% of the islands and of the population lie within a single large, complex reef structure that includes the three most populous islands of Babeldaob, Koror and Peleliu. Babeldaob is the location of the single international airport and the new national capitol complex. It comprises around 75% of the country’s land area and in Micronesia, only Guam is a larger island. Babeldaob is connected by a bridge with Koror, the most populous island and the urban centre of the country.

Outside the main reef, Kayangel (population of 130 in 2000) lies around 30 kilometers to the north-east and Angaur (population of 188 in 2000) around 20 kilometers to the south west. Sonsorol (population of 39 in 2000) is about 300 km further to the south west with Tobi and Helen’s Reef (population of 23 in 2000) yet another 300 km south west of Sonsorol.

The main islands of Babeldaob and Koror are mountainous and volcanic in origin. Palau also includes atolls, raised coral islands and the beautiful Rock Islands that are eroded limestone pinnacles covered with lush vegetation.

2. Population and demographicsThe national census of 2000 recorded 19,129 persons living in Palau. Around 95% of those lived on the connected islands of Koror and Babeldaob with Koror alone accounting for 13,303 persons. Peleliu was a distant third in population with 571 people. Kayangel to the north had 138 people and Angaur to the south had 188. Only 23 people lived on distant Tobi and 39 on even more distant Sonsorol. The population of Palau is neither particularly young nor old. In 2000 about 40% of the population was between 25 and 44, with 38% under 25 and 22% over 44.

Koror has a very high population density (739 persons per km2 in 2000) and it is national policy to encourage a shift in population from Koror to thinly populated Babeldaob. The Palau government centre has been moved to Babeldaob and the population around the new Capitol complex is expected to grow rapidly as government workers move from Koror to be near their work.

3. Socio-Economic structureAs a former colony of Spain (1885-1898), Germany (1898-1914), Japan (1914-1945) and finally the United States (1945-1994), Palau has had a complex relationship with the outside world. Japan was the only one of the colonisers that actually settled in Palau with as many as 20,000 Japanese living there by 1935. Though officially considered part of

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Micronesia, the first settlers in Palau were probably from the Philippines, Malaysia, Indonesia and Melanesia.

The government is organised into three separate and independent branches: executive, legislative and judicial. The Olbiil Era Kelulau (OEK) forms the two house legislative branch with a 9 member Senate elected at large and a 16 member House of Representatives with one member elected from each of the 16 States. The President is elected directly by popular vote. As a part of the transfer to independent status, a Compact of Free Association (CFA) was signed in 1994 between Palau and the USA providing for a total grant of US$500 million to be provided over a 15 year period as well as continuing support from the USA in defence, foreign affairs and other matters.

The traditional social structure remains strong and works independently of the Government system, mostly at the local and extended family level.

Health care is free to all citizens and the health related statistics are among the best in the Pacific. Nearly all households have access to a good water supply, good quality sanitation facilities and electricity.

The 2003 GDP of US$120 million represents about US$6,200 per person placing Palau at the top of the PICs in per-capita GDP. With most households now having more than one person employed and with a mean income for employed workers of over US$8,000 per year, household income often exceeds US$20,000 per year. Services, mainly related to the tourist industry and Government, represents around 80% of employment. Tourism, largely from Taiwan and Japan, accounted for 51% of GDP in 2001 and is rising in importance. Government represented around 25% of GDP. Large capital investment projects (a new capital complex, new roads on Babeldaob and a new bridge connecting Koror and Babeldaob) represented 10% of GDP. The next largest sector is fishing at only 3% of GDP. A large number of foreign workers, over 30% of the resident population and mostly from the Philippines, support the service sector.

Of the US$500 million from the CFA, $70 million was invested in a Compact Trust Fund (CTF) to help fund government operations after the CFA payments cease in 2009.

4. Poverty issuesPoverty is not an issue in Palau. Unemployment is low, the per-capita income is the highest in the Pacific and most households have more than one person in the workforce.

5. MDG progressPalau is one of the Pacific countries with a high probability of meeting the MDGs.


1. Overviewa. Fossil Fuels

Petroleum products represent around 12% of total imports (2001). Mobil Oil and Shell supply Palau from Guam for resale. The market is unregulated with oil companies establishing their own pricing based on import costs and other factors.

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Storage is owned by the oil companies with sufficient storage to make shortages due to altered shipping schedules unlikely. Private retailers distribute the products to individual customers except for government and the international airlines who purchase under tendered contract for their supplies.


With the exception of the approximately 75 solar electricity installations still operating in Palau, all electricity supply is provided by the Palau Public Utility Corporation. The PPUC operates four independent grids: Kayangel (~230 MWh/year), Angaur (~450 MWh/year), Peleliu (~1270 MWh/yr) and the combined Babeldaob-Koror grid (~103,000 MWh/yr). The PPUC is wholly owned by the Government but is operated as a commercial entity. Electricity demand has been growing at a rapid rate (over double the rate of population growth) during the past decade but is expected to fall to around the population growth rate as the rate of tourist facility development slows and as the rapid growth of household appliance use (notably refrigeration and air conditioning) slows due to market saturation.

c. Renewable Energy

The Ministry of Resources and Energy has an Energy Department that includes only one permanent position, that of Director. The Department is responsible for interfacing with the donor community for renewable energy and demand side energy efficiency projects, developing policy for renewable energy and energy efficiency and sometimes managing projects relating to demand side energy efficiency and renewable energy.

Most renewable energy projects have been undertaken by various ministries and departments with no coordination. As a result, errors in project design and implementation have been repeated over and over again and most projects have failed within a few years of implementation. The current renewable energy project, the rehabilitation of the failing Sonsorol and Tobi solar project, again repeats the earlier mistake of separating the design, purchasing and installation components into different contracts which are likely to be awarded to different companies. This makes it highly likely that no company will accept responsibility for any problems, each contractor claiming that the difficulties are due to poor performance by the other companies.

The Palau Public Utilities Corporation is legally required to consider renewable energy in its development of electrical power though there has been no use of renewable energy by the PPUC to date.

d. Regulation

The PPUC is “self-regulating” though in practice base level tariff changes are a politically charged issue and in fact have to have at least tacit approval by government. There is no regulation of fossil fuel imports or prices.

2. Policies and legislationPalau has no formal energy policy. The PIEPSAP project has agreed to assist Palau in the development of a renewable energy and energy efficiency policy and strategy and to assist in the preparation of the EU project for 2006.

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The legislation forming the PPUC (1994) gives the corporation the mandate to develop a national electrical supply. The legislation specifically requires the corporation to investigate, and where appropriate, to use renewable energy. To date, renewable energy has not been used by the PPUC.

3. Capacity issuesThe PPUC appears to be able to provide reliable and reasonably efficient electrical supply and can be considered to have adequate capacity for carrying out its core business. It does not have any capacity for developing renewable energy nor does it have significant capacity for improving the end use efficiency for electrical energy. Since the EU project will use the PPUC as its focal point for renewable energy and energy efficiency improvements, some capacity will need to be developed.

The Energy Department has only one person in a full time position and that is insufficient if issues of national energy policy, energy strategy and non-conventional energy development are all to be handled by that office.

4. Knowledge repositories and information deliveryThe Palau Community College has a trades programme in electricity and plumbing, though generally only focused on conventional energy systems. The College also provides training in management, accounting, information technology and other commercial skills. There are several companies specializing in training for business skills, mostly relating to computer use.

The Energy Department has a small library of information relating to renewable energy and energy development and the full time staff person in the Energy Department has participated in numerous training programmes relating to energy development. The PPUC and the oil companies represent the primary repositories of information relating to conventional energy supply.


1. OverviewEnergy programmes in Palau have been almost exclusively directed toward development of conventional energy and expansion of those services to cover all of Palau.


There were several small solar PV electrification projects in the 1980s and 1990s that provided household lighting to most of Kayangel and part of Babeldaob. By 2002 most of those installations had been abandoned due to extension of the grid on Babeldaob and the construction of a diesel powered grid system on Kayangel. All significant energy development programmes have been directed toward expanding and extending the grid, all of which is powered from diesel engines. Although energy efficiency has been a topic for discussion and several small programmes implemented, the effects have been small and there has been no attempt to monitor and evaluate the results.

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A programme to rehabilitate the approximately 75 solar PV installations on Sonsorol and Tobi households and public buildings is underway. Though the installations are less than five years old, they have suffered from a bad design and poor component specification and need to be restructured. The installations include around 800 Wp of panels, an inverter to provide AC power and sufficient capacity for operating a refrigerator, colour TV and most other household appliances found in grid connected homes.

PIEPSAP (SOPAC/UNDP/Government of Denmark) – priorities for PIEPSAP co-operation will be in the area of energy conservation policies and strategies with emphasis on the development of sustainable institutional structures and in the preparation of the European Union/EDF 9 renewable energy and energy conservation project.

PIREP (SPREP/UNDP/GEF) – have undertaken assessment of key energy issues in Palau, barriers to the development of renewable energy to mitigate climate change, and capacity development needs for removing the barriers.

Sustainable Economic Development through Renewable Energy Applications (SEDREA). An UNDP/GEF preparatory phase is underway to prepare for a GEF Medium Size Project (MSP) that will promote and develop solar energy-based power generation to support the country’s rural electrification program.


The EU has allocated € 2 million for development of energy efficiency and renewable energy in Palau. The programme will begin late in 2005 with specific interventions designed in 2006. Implementation of projects is not likely before 2007 or 2008. There are no pre-determined concepts for the programme, all project development will take place as part of a consultation process beginning in 2006.


OTEC was promoted by a Japanese company/university consortium in the early 2000s and the Government has agreed to work with the consortium to develop a pilot installation but no funding has been allocated. Energy efficiency improvement programmes, incentive programmes for solar water heater installation and grid connected solar PV installations have been proposed for Palau.

2. InstitutionalConventional energy programmes come under the oil companies or the PPUC. Non-conventional energy has no focal institution and programmes are developed ad hoc by whatever agency wishes to carry out the development. In theory, the Energy Department has a role in any non-conventional energy development since that is where almost all the available expertise can be found. In fact, that expertise is not often utilised and projects are often developed without reference to the Energy Department or to past experience with similar projects in Palau or other PICs.

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3. Policy and legislationThe PIEPSAP project intends to provide Palau with policy assistance relating to energy programmes and to advise in the development of programmes for funding under the EU project to commence in 2006.

4. Capacity issuesProgrammatic capacity at PPUC and the oil companies appears adequate for conventional energy development. There is no capacity in Palau for non-conventional energy development or energy efficiency improvement outside the Energy Department and that capacity is very limited.

5. Knowledge repositories and information deliveryHistorical information regarding prior energy programmes is held at the Energy Department (non-conventional energy) and the PPUC (conventional electricity supply). Although other agencies have implemented renewable energy projects, the records are typically poor, often are limited to financial accounts and are generally inadequate or even inaccurate as regards the actual implementation of the project.


1. OverviewPalau has full coverage for both electricity and fossil fuel supplies.


There is no regulation of fossil fuel prices, it is entirely market based. The Forum Secretariat fuel price monitoring programme indicates that Palau wholesale prices (excluding duty and taxes) is in the middle range of PICs but are generally cheaper than other countries of similar size. Pricing for markets distant from Koror and Babeldaob is generally somewhat higher as the market is small and shipping is in small quantities at higher cost.


The PPUC is required by law to charge a tariff that recovers all operating and maintenance costs (there is no requirement for capital cost recovery). There is a complicated tariff structure that includes an automatic tariff change each month to compensate for fuel price changes. The base price remains fixed for long periods and cannot be changed without public hearings (and unofficial but necessary political approval) but the actual price per kWh changes as the cost of fuel changes in accordance with a fixed formula. The tariff is staged with the base price (2003) of US$0.08/kWh for residential customers using up to 500 kWh/month, $0.10 per kWh for 501-2000 kWh/month and $0.12/kWh for over 2000. The fuel price adjustment is added to this base cost and can result in a price more than double the base tariff. In addition to the kWh price, household customers pay a fixed monthly access fee of $3.00 and have an $8.00 minimum bill even if there is no electricity used at all. Commercial customers pay US$0.10/kWh base rate for up to 2000 kWh/month and $0.12 per unit (base price) for use over 2000kWh per month. Government pays $0.01/kWh more than commercial rates.

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Both Government and commercial customers have an additional $10 per month fixed charge for the meter and service connection.

The pricing is the same for all PPUC customers even though the cost of supply is significantly higher on the outer islands.


Less than 2% of Palau residents do not have a connection to a permanent electricity supply.


Nearly all households have easy access to fossil fuel supplies. The stored fuel volume is large and fuel is supplied from several major companies. There is little likelihood of fuel shortages due to delayed shipping or poor purchase planning.


Biomass use for cooking is negligible with the 2000 census indicating about equal shares for electricity, LPG and kerosene. The only significant use of renewable energy is for water heating, mostly in tourist facilities though household installations of solar water heaters is increasing. The two remote islands (Sonsorol and Tobi) have their electricity supply from solar photovoltaics but this in total represents less than 75 households. The PV installations are large and provide full AC power sufficient for refrigeration, colour TV and other appliances common in other areas of Palau. A very few households have chosen not to connect to the grid but to continue to use the small solar PV systems that were provided in the 1980s and early 1990s before the grid was extended to all parts of Babeldaob.

2. InstitutionalThe PPUC is the only institution involved in the supply of electricity (except for the very small percentage of households using solar energy) and has provided access to all parts of Palau except the tiny, distant islands of Tobi and Sonsorol where household solar energy systems provide electrical power.

The oil companies provide universal access to fossil fuels in Palau.

3. Policy and legislationThe legislation that formed the PPUC requires the company to provide access to electricity to all of Palau. Its policy is to carry out that mandate and nation wide supply (except for Tobi and Sonsorol) was achieved in 2002 with the construction of the diesel powered grid for the 53 customers on Kayangel.

4. Capacity issuesThere are no known capacity issues relating to access to energy.

5. Knowledge repositories and information deliveryPPUC and the oil companies represent the knowledge repositories and information delivery institutions relating to energy access.

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Around 80% of households reported having a refrigerator in the 2000 census and over 85% reported having a TV, telephone and radio. Around 40% of households reported having an air conditioner. Electricity use for Palau was about 450 kWh/month/person. The domestic sector consumed around 550 kWh/month/household – one of the highest in the Pacific, second only to Nauru household use. The per-household use of electricity has fallen in recent years, probably due to sharp increases in fuel prices that are passed on to customers in the utility charges. There have been no explicit energy efficiency improvement programmes though the PPUC has a limited programme to provide public information regarding energy saving options.


The PIREP estimated that energy efficiency measures could reduce fuel use by about 20% in Palau by following readily available, low technology methods. The supply side efficiency at PPUC is not good and should be improved. The available data does not differentiate between technical and non-technical losses so the type of programme needed to improve supply side efficiency is not known.


Although OTEC has received considerable attention from the Government in Palau, it is unlikely to be developed since it is not yet a commercially viable technology. Solar energy, either to provide for water heating or for electricity, is the only renewable technology considered to be reasonable for development at this time.

2. InstitutionalThe Energy Department and the PPUC are the only institutions with structures that are aligned toward improving technology efficiency and different fuel options.

3. Policy and legislationThere presently are no policies or legislation relating to technology efficiency. The PPUC formative legislation does require it to examine renewable energy as a fuel option.

4. Capacity issuesThere is little experience or capacity in Palau for the development of national energy efficiency programmes or the development of alternatives to conventional fuels. Some local engineering firms do have limited experience with energy efficiency improvements for the tourist industry (notably air conditioning) but most energy efficiency and alternative energy expertise is brought in from outside Palau as needed.

5. Knowledge repositories and information deliveryLimited information available at the Energy Department and the PPUC. The PPUC provides some information delivery through its delivery of bills.

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1. OverviewThere is limited energy entrepreneurship as regards solar water heater sales, installation and maintenance. Also, some energy efficiency measures for tourist facilities are provided through local companies.

There is a major opportunity for the development of a business specialising in energy efficiency devices for the home (high efficiency lighting, devices to reduce refrigerator demand, etc.) and business. Also there is an opportunity for a technical business to assist commercial building owners develop energy management programmes and to design and implement energy efficiency interventions for government and commercial businesses.

There may be an opportunity for the development of businesses involved in the design, sale and installation of grid connected solar equipment if the EU project includes that technology in its development programme.

An expansion of the domestic market for solar water heating is expected and there is an opportunity for business to develop relating to the import, sale, installation and maintenance of these units.

2. InstitutionalThere is no institutional structure that promotes or discourages energy entrepreneurship in Palau.

3. Policy and legislationThere are no existing policies or legislation that promotes or discourages energy entrepreneurship in Palau.

4. Capacity issuesSome training and external support will be needed to further develop solar water heating businesses, notably training in marketing, installation and maintenance.

There is no existing capacity in Palau for the implementation of grid connected solar systems and that capacity will have to be developed if the technology is to be used in Palau on any scale.

5. Knowledge repositories and information deliveryThere are no knowledge repositories or systems for information delivery relating to energy entrepreneurship in Palau. General business knowledge support is available from the Community College and private training companies but there is no local knowledge base relating to the technical aspects of energy entrepreneurship or relating to the specifics of marketing the products and services that are appropriate for Palau.


1. OverviewIn general there is good access to conventional finance in Palau. There are international commercial banks and local finance institutions providing a full range of financial

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services. The economy is fully monetised and it is common for large appliances and other consumer goods to be purchased on credit.

2. InstitutionalThe Bank of Hawaii (USA), the Bank of Guam (USA) and the Rizal Commercial Banking Corp. (Philippines) represent the international banking community and provide full commercial services in Palau. Other banks include the Guam Savings Bank, the Pacific Savings Bank, Ltd., the Palau Construction Bank and the Malekeok Government Bank. The Palau Central Bank and the National Development Bank of Palau represent the government in the financial system.

In addition there are small credit unions and private lenders that specialise in small loans to consumers.

Palau joined the ADB in December of 2003 but thus far no loans or technical assistance has been provided to Palau. Palau also has a working relationship with the IMF.

3. Policy and legislationThere are no policies or legislation relating specifically to energy finance or to finance for low income households.

4. Capacity issuesThere do not appear to be any capacity issues relating to access to finance in Palau.

5. Knowledge repositories and information deliveryCommercial banks, the Ministry of Finance and the National Development Bank of Palau appear to be the main knowledge repositories within Palau.

The Bank of Hawaii, the Asian Development Bank and the IMF have available extensive information on the Palau financial situation and as regards future economic development. None of the information, however, is energy related.


1. OverviewMonitoring and evaluating energy is carried out by the oil companies and by PPUC, each for their own energy services and primarily for internal use only. The oil companies do not share their monitoring and evaluation information with government or researchers outside the company collecting the data.

2. InstitutionalThe PPUC monitors and evaluates its own provision of services. There is no institutional structure external to the PPUC that has any monitoring and evaluation responsibility for energy service provision though the Energy Department has sometimes attempted to monitor non-conventional energy projects by other agencies.

Every ten years, as part of the census, the Office of Planning and Statistics collects information about appliances in the household and the type of energy used for cooking.

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3. Policy and legislationThere is no policy or legislation relating to monitoring and evaluation of energy access or the relationship of energy to poverty.

4. Capacity issuesThere needs to be institutional capacity and human resource capacity developed to monitor and evaluate all energy delivery systems and to monitor and evaluate energy efficiency programmes.

5. Knowledge repositories and information deliveryAlthough the oil companies can be considered a repository of knowledge about the use of petroleum products in Palau, the information is not available outside the companies. The PPUC does provide information regarding their provision of electricity services and through its annual report delivers that information publicly.

The Energy Department has a limited knowledge base regarding non-conventional energy use in Palau.


1. OverviewPalau is an open society and information generally is freely distributed without censorship. Most households have telephone access. Broadcast radio and television reach into nearly all Palau homes and access to the Internet is readily available either through a telephone dial up connection or at kiosks in hotels and shops.

2. Knowledge repositories and information deliveryThere is free and compulsory education for all children aged 6-17 (or until graduation from high school). There are 21 elementary schools and six high schools. Tertiary education is provided by the Palau Community College with two year programmes in business, trades and commerce.

Broadcast radio and television reaches almost all Palau residents, satellite TV reception is common and the telephone system (both land line and wireless) reaches nearly every household.

The Tia Belau newspaper publishes biweekly and the Palau Horizon weekly.

J. Conclusions

1. OverviewPalau is a well developed island state with little poverty and universal energy access. It’s primary problems with energy are its relatively poor efficiency of use and the high cost that comes from having to generate electricity using diesel power.

There are few opportunities for the use of renewable energy, the only economically reasonable application being solar water heating though the use of solar photovoltaics for supplementing the diesel generation has potential for large scale development.

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2. InstitutionalThe institutional structures for energy in Palau are dominated by the organizations and agencies that produce and/or distribute the energy: the oil companies and the PPUC. There is no effective institution that does energy planning, collects and evaluates energy data or provides for non-conventional energy projects. The one person Energy Department has insufficient capacity to do much more than act as an interface between the Palau Government and donors and external agencies that have some energy component in their programmes.

3. Policy and legislationThere is no national energy policy and that has made it impossible to develop any long range energy development plan. The PIEPSAP project will assist Palau in further developing its renewable energy and energy efficiency policy but there is no policy development effort planned that would deal with either petroleum or electricity.

The only legislation that directly relates to energy provision is that which created the PPUC.

4. Capacity issuesThe capacity at the oil companies and the PPUC appears adequate to reliably provide their respective energy services. The capacity of the Energy Department is seriously limited by its lack of personnel and resources.

5. Knowledge repositories and information deliveryOutside the energy providers, there are no significant knowledge repositories regarding the energy delivery systems of Palau. The Palau Community College is a repository of technical knowledge with regards to conventional electrical technology but has little information regarding non-conventional energy.

Country wide information delivery systems in the form of broadcast radio, TV and the Internet are available.

K. Recommendations

1. OverviewThe primary recommendation is to address capacity building for entrepreneurs with regards to domestic and commercial solar water heating and for companies to provide energy efficiency improvement services to government and the tourist industry.

2. InstitutionalIt is recommended that an institutional structure responsible for energy efficiency activities be developed external to the PPUC.

3. Policy and legislationPolicies and legislation relating to energy efficiency measures are recommended for development. In particular, consideration for incentives of various types to encourage improved efficiency of energy use are recommended.

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4. Capacity issuesCapacity needs to be developed for the preparation and management of energy efficiency programmes. Capacity will need to be developed to support the large programmes envisioned under the upcoming EU project.

5. Knowledge repositories and information deliveryIt is recommended that public information programmes for domestic energy efficiency improvement be developed and delivered with emphasis on lighting, refrigeration and air-conditioning. Technical information resources for commercial energy efficiency improvements need to be developed and made available to government agencies and the tourist industry.

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XXIV. PAPUA NEW GUINEA

Introductory CommentOf the fifteen REP-PoR Pacific country reviews, this one for Papua New Guinea is the most incomplete. As described below, PNG accounts for nearly 90% of the land area and about three-fourths of the population of the entire group of Pacific countries covered. It is comparable in population, land area, diversity and the range of energy sector issues to a number of Asian countries for which there are stand-alone REP-PoR country reviews, and far larger than some. Regarding its location, PNG is arguably as much Southeast Asian as Pacific. Given the limited resources available for this country review, the lack of a country visit, and the necessity to spend time within PNG to accurately gather and ascertain recent information, the coverage is superficial and somewhat out-of-date. Serious consideration of PNG and opportunities for practical assistance to PNG require time to be spent within the country, resulting in a separate country study. Finally, the conclusions within a Pacific regional overview report which includes PNG risks being skewed statistically and practically by its’ shear dominance.

A. Background

1. Physical conditionsAlthough Papua new Guinea (PNG) is made up of over 600 islands, most of the land area is contained in the 396,452 km2 “mainland” that constitutes the eastern half of the island of New Guinea, the world’s second largest island. Some of the “outer islands” are quite large in relation to other Pacific Island Countries (PICs) with, for example, New Britain Island over double the total land area of Fiji. PNG, with 462,800 km2 of land, accounts for about 88% of the total land area of the 15 PICs included in the REP-PoR Pacific group. The country extends north-south 1,300 km from the equator to 12º south latitude and east-west around 1,200 km from the border with Indonesia at around 142º E longitude to 160º E. Australia lies to the south and the Solomon Islands to the southeast.

A number of PNG’s islands are atolls or raised coral but PNG was mostly formed by volcanism. The larger islands are characterised by steep mountains, high plateaus and deep valleys. Mountain ranges on New Guinea run from northwest to southeast with snow-capped Mount Wilhelm reaching 4,509 m. The country is geologically unstable and subject to active volcanism with frequent and sometimes severe earthquakes, mudslides and tsunamis. Of all PICs, PNG is the most affected by natural disasters, with nine serious disasters between 1990 and 1999. During the 20th Century, nearly a million people died in PNG from the effects of drought, earthquake, landslides, volcanoes, floods and other natural disasters. The climate is tropical, with northwest monsoons from December through March, and southeast monsoons from May to October. Rainfall exceeds 2,030 mm throughout the country, but in some areas averages over 5,080 mm. Temperatures average 27ºC in the coastal lowlands and as low as 16ºC on the high inhabited plateaus. Most of the country is covered with tropical rain forest, but drier areas are covered in savannah or reed grass.

PNG is very rich in forest, mineral, sea and energy resources. It is the only Pacific island country with known exploitable resources of petroleum and natural gas and has considerable undeveloped geothermal and hydropower potential.

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2. Population and demographicsThe 2000 census counted 4.4 million people with an Average Annual Growth Rate (AAGR) of 3.1% from 1990–2000 compared with only 2.3% during the previous decade. However, the accuracy of some data is in doubt and the UN Population Fund believes the real growth rate was considerably lower. The SPC estimated the mid 2004 population as 5.95 million. With an estimated future AAGR of 2.2%, population will reach 7.236 million by 2015. Of the total current population of approximately 6 million people, 80% live on the main island with 85% of total land area. Nearly half the population is below 17 years of age. About 13% of households are urban, with the largest concentration around the capital Port Moresby, where about a quarter of a million people reside. Population density averages 11/km2 overall, ranging from 2/km2 in the remote Western province to 52/km2 in the Western Highlands, and much higher in areas of urban concentration.

There are two major population groups, about 84% of the total being Papuan and 15% Melanesian. More than 800 languages are spoken, many by a single tribal group with Pidgin English (the lingua franca) and Motu being the most widespread languages. Much of the population is nominally Christian, with Roman Catholics the largest group. PNG’s life expectancy is the lowest among the PICs, lagging almost 20 years behind Fiji. About 22% of the population is not expected to survive to age 40, largely due to high infant mortality rates compounded by poor access to health care.

Just as PNG is by far the largest of the PICs in land area, it also dominates the region’s population with an estimated 73% of the total in 2004.

3. Socio-Economic structurePolitical and social development. The eastern half of New Guinea was administered by Australia as a United Nations trusteeship from the Second World War until 1975, when the Independent State of Papua New Guinea was established. PNG is a constitutional monarchy (with the UK’s Queen Elizabeth II as chief of state, represented by a Governor General) and a parliamentary democracy with generally free and fair elections. However, members of the House of Assembly (Parliament) are being elected by ever decreasing proportions of the electorate, in some cases as low as 10% of voters. The Prime Minister (PM) is the leader of the majority party or coalition and heads a National Executive Council (i.e. Cabinet) that is appointed by the Governor General on the recommendation of the PM. The House of Assembly is elected by popular vote to five-year terms. Of 109 seats, 89 are from open electorates and 20 from provincial electorates. Elections were last held in June 2002 but not completed until May 2003 as voting in one province was not completed for many months. The next election will be no later than June 2007. Since 1997, there have been three Prime Ministers and numerous changes in Cabinet portfolios.

A nine-year secessionist revolt on the copper-rich island of Bougainville formally ended in 1997, after claiming some 20,000 lives, with Bougainville now largely self-governing. A UN review of key development issues in PNG (the Common Country Assessment of 2000) concluded that development was fairly steady until the early 1990s when progress slowed significantly for complex reasons related to law and security, civil strife on Bougainville, growing inequality among provinces, and a macro-economic crisis in 1994-95 which continues. The policy responses of successive governments to these crises have

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led observers to conclude that poor governance remains a major impediment to development. Nonetheless, PNG’s rich cultures, democratic heritage, independent judiciary, free press, robust civil liberties and immense resource base provide strong potential for future development.

The economy. In PNG, two almost distinct economies exist side by side, a modern cash economy and a traditional economy comprising subsistence and semi-subsistence farming, with most self-sufficient villages producing little or no surplus for trading. The “modern” sector is dominated by resource extraction (minerals, oil, timber and seafood) mainly developed and controlled by overseas companies. Energy and minerals have accounted for over 20% of PNG’s GDP in recent years and over half of all exports. However, agricultural exports are also important, particularly coffee, cocoa, tea, oil palm and copra.

Economic growth averaged about 3% annually in real terms between 1984 and 2002 (ADB, 2002) but with wide year-to-year variation, due in part to PNG’s high dependence on mineral exports. The Gross Domestic Product (GDP) of US$580 per capita in 2002 (in current dollar terms) was lower in real terms than the level at Independence in 1975. The Pacific Islands Forum Secretariat’s Regional Economic Outlook (PIFS, June 2005), which draws on ADB and other analyses, indicates real GDP growth of 2.8% in 2003 and 2.6% in 2004. Projected growth is 2.4% in 2005 and 2006, barely above population growth. Over the next few years, PNG’s economic growth is likely to depend to a considerable degree on the continuation of China’s rapid growth and its increasing demand for PNG’s minerals and timber.

4. Poverty issuesUNDP’s 1999 Pacific Human Development Report (HDR) ranked PNG as the lowest of 14 PICs in its 1998 Human Development Index (HDI) PNG was ranked 164th globally of 177 countries. The same report ranked PNG lowest in its Human Poverty Index. However, the 2005 global Human Development Report shows PNG’s HDI improved to 137th, within the lower range of the medium human development category of countries.

In 2001, eighteen communities in PNG were surveyed regarding their own perceptions of poverty. Twelve were rural villages in four provinces and six were urban settlements in or near the National Capital District. ADB’s 2002 report Priorities of the Poor in Papua New Guinea reported that most of those consulted felt that conditions had worsened between 1996 and 2001. The reasons cited by urban dwellers for increased hardship were higher prices of “store” foods, higher school fees, worse rates of joblessness, increased population, and the presence of more elders without support. Rural communities cited the increased number of idle school leavers and the deterioration of services and roads, school facilities, and aid posts. Safe drinking water and useable roads were most cited as services that would most improve the quality of life. Respondents felt that poverty was caused by the lack of jobs, little or no land to cultivate, no access to education and other basic services, and the breakdown of the family. Those most affected by poverty were said to be children, youth and women, although poverty affects entire villages and districts.

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5. MDG progressIn 2003, the ADB reported on the progress of its Pacific Developing Member Countries toward meeting the Millennium Development Goals. The ADB reported that:

“Papua New Guinea is lagging far behind in achieving most of the [MDGs]. Poverty is reported to be increasing in both urban and rural areas. Some indicators, particularly those for health, show deterioration, while in other areas, such as education and promoting gender equality, there is little or no progress towards meeting the targets by 2015. For most indicators there is a significant disparity between urban and rural areas and among islands. One of the key issues is delivery of basic social services, which often fail to reach the poorer strata of society and rural areas. Enrolment ratios at all levels and literacy are low. PNG is also lagging behind in … eliminating gender disparity in primary and secondary education by 2005 and in all levels of education by 2015. The gender gap is also noticeable in literacy rates. Child mortality rates remain extremely high. … The maternal mortality rate (at least as reported) has more than doubled between 1995 and 1998. There are also indications that the country may soon face a serious HIV/AIDS epidemic. Access to safe drinking water is very low (42%) with huge discrepancies between urban (88%) and rural (32%) areas.”

A national MDG report has been prepared and is available at http://www.spc.int/prism/mdg/mdgs.html


1. OverviewThe Energy Division (ED) of the Department of Petroleum and Energy (DPE) has for some years been responsible for energy policies and plans, data collection and analysis, and advice to the Government of Papua New Guinea (GoPNG) on a wide range of energy sector issues. In practice, it has concentrated on electric power. However, the national electricity utility PNG Power undertakes most grid-based power sector planning whereas the ED has emphasised rural electrification. DPE itself reports that extremely limited resources have seriously hampered data collection and analysis. For renewable energy, data collection nearly ceased by the mid 1980s. Following several assessments in 2004, the ED has shifted its focus and is now concentrating on the development of overall energy policies and plans and, as before, rural electrification. The Petroleum Division of DPE is responsible for oil and natural gas exploration and development, with the industry largely controlled by foreign companies, whose interests are represented by the PNG Chamber of Mines and Petroleum.

In mid 2004, there were about twenty positions in the ED including four long-term casual professionals, and several positions were unfilled. An AusAID adviser proposed a new, enlarged divisional structure in 2004 but apparently this has not been accepted by the GoPNG.

a. Fossil Fuels

Shell, Exxon-Mobil and British Petroleum market most petroleum fuel although a local company, Niugini Oil Company, distributes products in PNG’s second city, Lae. The small InterOil petroleum refinery at Napanapa near Port Moresby began producing fuel

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from a local light, high-value crude oil, for the local market in 2004. Capacity in 2004 was about 36-40 thousand barrels per day (bbl/day). According to Pacific magazine (October 2005), PNG’s Minister of Trade and industry has offered to share surplus output of 17,000 bl/day among the other Melanesian Spearhead Countries (Fiji, Solomon Islands and Vanuatu), at least implicitly at prices below those prevailing on the market.

PNG exported about 100,000 bbl/day of crude oil on average from 1992-2002 from recoverable reserves of roughly 550 million barrels. In 2003 exports were 15 million barrels earning about US$520 million but production volume will steadily decline over the next decade as the resource is depleted. During 2005, production (not exports) has reportedly been about 33,000 bbl/day. The natural gas resource is equivalent to at least 2,700 million barrels of oil, over ten times remaining recoverable oil reserves. PNG is expected to invest about US$4.5 billion in a Gas to Queensland Project, which could earn over US$11 billion in exports (at today’s prices) over a thirty-year period.


GoPNG-owned PNG Power (PNGP) operates three distribution grid systems — Port Moresby, Ramu in the central and northern parts of the main island (Lae – Madang – Goroka – Mount Hagen), and the Gazelle Peninsula — plus nineteen smaller provincial systems. There are about 85-100 small rural electricity systems called “C-centres” at government administration stations, using diesel generation and some small hydro. Provincial authorities are supposedly responsible for planning, financing, and managing C-centres but ownership and actual responsibility are often unclear. Operations and maintenance are in principle handled at district or sub-district level. PNGP can provide maintenance for some larger C-centres but the provinces are seldom able to pay for the services. Many, if not most, of the systems are badly managed and are usually not operating. The GoPNG Departments of Health, Education, and Communications have also developed and managed various small electric power systems for health centres, schools, and telecom facilities in rural areas.

With its large isolated enclave mines and a very rugged terrain, PNG also has numerous large private electricity producers, some of which supply nearby communities. Their combined installed capacity is of the same order of magnitude as that of PNGP.

Electricity production can vary substantially from year to year. According to the Asia Pacific Economic Cooperation group (APEC, 2003), in 2001, the installed electric power capacity nationally (i.e. PNGP and private) was 451 MW with generation of 2,638 GWh. This was nearly double the reported 2000 output of 1,348 GWh, due to dramatic year-by-year variation of demand in the mining sector. In 2001, hydro provided 35% of generation and thermal 65%, of which natural gas accounted for about 26% and oil 39%. The GoPNG, however, reported 614 MW of installed capacity in 2001 of which 302 MW was PNGP, 280 MW was self-generation at mines, roughly 7 MW was through C-centres and the rest at church missions and various other locations.

c. Renewable Energy

There is apparently no GoPNG department with explicit responsibility for renewable energy development, except for rural electrification, which falls under the ambit of the ED, and large-scale electricity through renewable resources (e.g. hydro and geothermal),

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which comes under PNGP. Uncertainty over responsibility for renewable energy is exacerbated by the absence of a Cabinet-endorsed energy policy.

d. Regulation

Although DPE’s Petroleum Division is responsible for oil and natural gas exploration and development, key financial matters such as tax rates and incentives are the responsibility of the Department of Finance and Treasury. The Independent Consumer and Competition Commission (ICCC), which is attached to the Ministry of Trade and Industry (MTI), plays a major role in the regulation of the petroleum and electricity sectors, energy pricing, and electricity utility licensing. For the present, the ICCC has left technical aspects of power regulation (e.g. standards) with PNGP on a year-to-year basis. The ICCC has some regulatory power over independent power producers (IPPs) but formal GoPNG policies regarding IPPs, particularly for rural electrification, are unclear.

2. Policies and legislationIn 1993, policy guidelines were developed within the ED to address the low rate of rural electrification, the high costs and subsidies to C-centres, high costs of grid connections, and the relative effectiveness of mission station electrification compared to government initiatives. In early 2004, the most recent energy policy documents were a draft National Energy Policy Statement and accompanying National Energy Policy Guidelines of 2000, neither with any formal status. During 2004 there was an Australian Aid (AusAID) funded national energy policy review; World Bank (WB) assistance to develop a new rural electrification policy and strategy; and an ICCC review of petroleum product pricing. A draft ED strategic plan for 2004-2008 called for creation of a Rural Electrification Authority with enabling legislation. In August 2005, the ED held a workshop attended by public servants and others to discuss and further develop a national energy policy and a rural electrification policy for consideration by Cabinet. A SOPAC/PIEPSAP report of the workshop includes drafts of the proposed new policies that eventuated. Their subsequent development and status are not known. However, the workshop reportedly endorsed rural electrification as the core area of ED responsibility, with the intention of the eventual establishment of the Rural Electrification Authority.

Acts of Parliament that deal with energy issues include the Electricity Supply Act regarding powers of the minister for energy for generation, supply and extension of electricity from power facilities built with government funds; the Electricity Industry Act regarding the functions and powers of PNG Power; the Independent Consumer and Competition Act regulating electricity and petroleum and their pricing; the Independent Public Business Corporation Act under which the government holds all shares of PNG Power; the Organic Law on Provincial Government and Local Level Government which grants authority to 19 provincial and 299 local governments to regulate electricity; the Community Services Trust Act, which could require PNG Power to supply services at subsidised rates to rural and low-income populations; and the Environmental Act which can require environmental impact assessments for prescribed energy sector investments.

3. Capacity issuesThe ED of DPE has for some years been the largest and best-staffed energy office among the PICs. However, the PNG energy sector is far larger, more diverse and, certainly in

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terms of rural energy services, more difficult to manage than the others. Considering the range and complexity of issues it is supposed to deal with, the Energy Division is understaffed and lacks resources.

4. Knowledge repositories and information deliveryInstitutionally, there is no GoPNG department responsible for acting as the overall repository for energy sector information and its dissemination. There is a considerable repository of energy sector knowledge, particularly regarding oil and gas matters, spread within several GoPNG departments and the private sector but much is not available to outsiders. The University of Technology in Lae (Unitech) has had teaching, consultancy and R&D activities in a number of technical areas related to renewable energy for some years. Several independent or NGO-based organisations (e.g. the Australian-based APACE Village First Electrification Group, ATCDI at Unitech, VSA, Oxfam) have considerable knowledge regarding rural energy systems and this is often available in their reports or websites. Unitech and the University of Papua New Guinea (UPNG) have organised at least three national seminars on energy for rural development from the mid 1980s through the mid 1990s but there has been very little recent dissemination of knowledge through workshops, seminars or publications.

PNG has a vibrant press with some coverage of energy issues. There are three Internet Service Providers operating in urban areas. The Internet is an important source of information delivery for those who can access it and afford to do so.


1. OverviewDuring the early 1980s, PNG had an innovative national energy programme with considerable financial and human resources and a wide range of activities ranging from information collection, resource surveys, energy use surveys, energy demonstration projects, policy formulation, training and support for activities with the private sector and at Unitech and UPNG. Much of this had declined by the mid 1980s when budgets outside of petroleum and the power sector decreased and information collection away from Port Moresby and Lae lessened considerably. Although many interesting activities continued, most were through NGOs and local organisations, rather than through national government.


The 2005 PNG PIREP report (based on a mission to PNG in early 2004) describes a wide range of energy sector programmes since Independence. This section briefly summarises those programmes of relevance to poor and rural communities.

In 1985 the ED decided to replace its diesel C-centres power plants where feasible with small hydro systems, studied 45 potential sites, and by 1987 had carried out 14 feasibility studies. By 1992 three small (60-300 kW) hydro systems had been completed. Despite an ambitious programme and considerable training, apparently no subsequent systems were built. The ED developed new rural electrification guidelines in 1993 (modified in 2001) and has had a series of strategies to improve rural electrification within the C-centres but

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DPE itself acknowledges that despite considerable expenditure, rural electrification remains ad hoc and the C-centres perform poorly.

Including those built by church groups, NGOs, and private parties, about 200 household-size picohydro, microhydro and minihydro systems were installed in rural PNG between 1960 and 2004. Of these, perhaps 20-25% were functioning in 2004, about half in Bougainville and the others spread throughout the rest of the country.

A few wind energy systems have been installed in PNG, most recently 50 small wind/solar hybrids (500 Wp wind; 100 Wp PV) donated by the Chinese government in 2002. Some 3000 solar home systems were installed between 1998 and 2002. The largest GoPNG solar programme was probably a JICA funded initiative, which provided solar lighting and other amenities to 320 schools in all twenty provinces. Although completed in 1998, a survey showed that very few systems remained operating by 2002 due to poor installations, security and support services. A smaller GoPNG programme provided nearly 300 solar and kerosene refrigerators for vaccines and solar examination lamps to numerous rural health clinics. Many failed due to inappropriate panel design and panel thefts. Despite the loss of many systems through theft, PNG Telecom reportedly has over 170 sites with about 5,000 PV panels with a capacity of over 200 kWpeak. Several thousand solar home systems have reportedly been installed in the past decade through personal purchases, company provisions to workers, NGOs, etc.

There is a long history of biomass energy programmes in PNG dating back to the 1980s or earlier including crop drying, power generation, biomass gasification and the development and manufacture of household wood and charcoal stoves. For a time, some of the ethanol produced at Ramu sugar mill (about 4 ML/yr) was blended with petrol as a local transport fuel. In 1990, Waterwide heat gasifiers were introduced using biomass waste to dry copra, cocoa, coffee and tea, replacing diesel fuel burners. As many as a hundred systems may have still been in use in 2004. Esterified coconut oil was used as fuel on a small scale in PNG for about a year in the mid-1980s. During the Bougainville crisis, a number of vehicles routinely used coconut oil as a diesel fuel replacement for several years in the late 1990s, when ADO was unavailable.


In 2004, the Department of Health announced plans for solar powered HF radios at a large number of rural health facilities. It is not known if these eventuated. Otherwise, current programmes are unknown.

The World Bank, with GEF support, is implementing a five-year solar lantern project for teachers in rural schools. Details are unknown.

There has been considerable interest in PNG, as elsewhere in the region, on biofuels but it is not known if any new programmes are underway to develop this.


A World Bank (WB) project is planned to build the capacity of the Petroleum Division. Timing is unknown. Other pipeline projects are also unknown.

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We have no knowledge of other new programmes under consideration except a draft 2005 World Bank concept proposal for a GEF ‘Sustainable Energy Finance’ Project to improve supply-side energy efficiency within the power utilities, demand-side energy efficiency and renewable energy use in Fiji, Papua New Guinea and the Solomon Islands (and possibly other PICs) with possible support through the EU Energy Initiative and others.

2. InstitutionalSOPAC / PIEPSAP may assist the GoPNG with finalising its national energy and rural electrification policy frameworks. It is not known if the WB and AusAID have provided further assistance following their 2004 institutional strengthening assistance.

3. Policy and legislationThe consultants are unaware of any new policy or legislative changes that have been approved as a result of 2004 WB and AusAID assistance, or the August 2005 workshops, that would affect the framework for energy programmes. As noted above, it is understood that SOPAC/PIEPSAP has offered its assistance in the further development of national energy and rural electrification policies.

4. Capacity issuesThe current capacity of the ED to effectively develop and implement new energy sector programmes is unknown but it is understood to have recently improved. However, as elsewhere in the region, good staff tend to be very mobile and ongoing training is needed to develop and retain skills.

5. Knowledge repositories and information deliveryThis has been covered.


1. OverviewThere are no recent estimates of household energy use in PNG. A 1996 survey covered only 2% (22,156) of all households and results may not be statistically accurate for the entire country, particularly as the electrification rate seems too high. About 12% of the households surveyed had electricity and almost all of these had electric lighting. Fewer than 9% had either a refrigerator or television. Over half used non-pressurised inefficient kerosene lamps as their main source of light and a quarter relied on open fires for light. Over 87% cooked mainly with fuelwood, with 3% each using LPG or electricity. For the Port Moresby area, 77% of households were electrified, 67% had refrigerators and 61% had television. Over 75% in Moresby used electric lighting, 40% cooked with kerosene and nearly 30% reportedly cooked mainly with electricity. These data are nearly a decade old; more recent large-scale household and industrial/commercial energy use surveys were carried out in 1997 but apparently never completed or analysed due in part to insufficient staff and funds within the ED. There may also be some useful household energy-use data in the report of the 2000 census.

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A 2004 WB/UNDP Energy Sector Management Assistance Programme (ESMAP) report argues that most rural Papua New Guineans receive no benefit from the government except access to critical services including basic health care, inoculations for children, and maternity care at remote health centres or aid posts and primary school education at remote schools. These services require electricity. Yet 75% of the schools (mostly boarding schools) have no electricity. Although 62% of health centres in principle have access to electric power, a great many in fact do not.


The ICCC establishes the maximum wholesale price of all gasoline (petrol), automotive diesel fuel (ADO), aviation gasoline and kerosene imported into PNG, based on monthly submissions by the three major oil companies. Fuel prices are the same at the four main ports of Port Moresby, Lae, Madang and Rabaul, which is effectively a cross-subsidy from Port Moresby consumers to those of other ports. Prices are considerably higher, though still price controlled, in more remote areas. Maximum retail margins are also set by the ICCC. Revisions to the pricing mechanism were under consideration in 2004 as a result of the new refinery but the eventual changes, if any, are not known.

According to the PIFS Pacific Fuel Price Monitor of July 2005, in June 2005, the wholesale price of petroleum fuels in Port Moresby (excluding all taxes and duties) was about US$0.55/litre for petrol and US$0.60/l for automotive diesel oil (ADO). These prices were about US2¢/l and US6¢/l respectively above the average for Forum Island Countries (FICs) at the time. The retail and wholesale price of petrol was US$0.93/l and US$0.83/l respectively. For ADO, the prices were US$0.77/l and US$0.68/l respectively. The wholesale price of kerosene was US$0.67/l, roughly midway within the FIC price range but about US11¢/l higher than Fiji with a smaller market and about the same rates of tax and duty.


The ICCC also licenses electric power and establishes electricity tariffs. There is a single national power tariff (which varies by consumer class) for those parts of PNG served by PNG Power. The price of electricity for those served by C-centres or other remote systems varies widely but tends to be based on historical costs and is generally much less than the actual supply cost. The REP-PoR consultants are not aware of any recent studies of the actual costs of rural power supply but in late 2004, diesel fuel alone cost K4/l (US$1.32) or more and the total cost of supply must have exceeded US$2/kWh. Fuel prices have since increased substantially, of course.

The cost of electricity from the PNG Power system in 2005 is not known. PNGP has a complicated tariff structure. “Easipay”, a pay-in-advance metering system, accounted for about a third of household consumption in 2003. In mid 2004, domestic credit customers paid a minimum charge of Kina 7 per month (about US$2.30), domestic Easipay consumers a minimum of K9/m, and general credit (i.e. billed) consumers K10/m. The domestic or household tariff, including 12% value-added tax (VAT), was a flat rate of K0.2413/kWh for an initial lifeline consumption of 30 kWh/m and K0.3992 for the balance. Easypay consumers paid a flat K0.33/kWh. In mid to late 2004, a household

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consuming 100 kWh/m would pay the equivalent of US 10.9 ¢/kWh through Easypay or US 11.6 ¢/kWh under the normal billing system.


PNG Power has about 75,000 customers of which about 60,000 are households, accounting for only 11% of sales in 2002, consuming an average of 166 kWh/month overall or 123 kWh/m if the main urban centres of Port Moresby and Lae are excluded. It is likely that under 10% of the total PNG population, and perhaps only 6-7% of the rural population, are electrified by all means: grid, self-generation, nearby industry, small hydro or solar. Those in rural areas with electricity tend to be shopkeepers or relatively affluent individuals; few others have any access.


Although petroleum fuels are available in all provinces, the extremely high cost of supply to remote areas, often by airplane or helicopter, precludes the use of petroleum fuel in most of rural PNG. The 1996 survey of over 20,000 households – already discussed – indicated that only 6.5% of all households nationally used kerosene for cooking and fewer than 3% used LPG, with over 87% relying on fuelwood. Outside of urban areas, nearly all households relied on fuelwood.


As described already, perhaps 40-50 small hydro systems are operational in rural PNG. Several thousand solar PV systems have been installed in missions, health centres, schools, rural shops and a few homes, but there is no reliable information on the numbers that are functional, although the percentage is likely to be low. It is not known how many of the 50 small Chinese PV/wind hybrid systems were installed in government centres are still working. There are no known biofuel systems providing fuel to rural communities. In general, there is very limited access to modern forms of renewable energy.

2. InstitutionalAs described already, the GoPNG institutional mechanisms for the provision of energy services to rural and low-income people have not functioned well despite a number of policy deliberations and considerable funding during the past twenty years or more. The WB, Aus AID, the ED and others have made recommendations for changes to the institutions that provide rural energy services but none have been formally accepted or endorsed by the GoPNG.

3. Policy and legislationUnder the Community Services Trust Act of 2002, providers of essential community services are required to supply their services at subsidised rates to rural or low-income populations. Diesel fuel, for example, may be required to be subsidised for electricity generation in C-centres or for use in farm equipment. There is not yet a ‘community service obligation’ affecting electricity service, but under the legislation this could be imposed.

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4. Capacity issuesThe capacity of the small rural electrification section of the Energy Division does not have the capacity at present to deal effectively with the delivery of rural electrification services within PNG. It can barely have much impact nationally.

5. Knowledge repositories and information deliveryThere are no knowledge repositories or mechanisms specifically for delivery of energy services within PNG.



An energy balance prepared by APEC suggests that in 2001, the end-use consumption of commercial energy in PNG was 364 ktoe, a decrease of 58% from 2000(as the mining sector fluctuates considerably). Industry accounted for 60%, transport 17% and agriculture/residential /commercial, 24%. Petroleum provided 40% of energy consumption and other energy forms (mainly electricity) 60%.


No information is available on the efficiency of energy use in PNG or any plans to improve energy efficiency. There are no doubt substantial opportunities to reduce the consumption of electricity in commercial buildings (typically through improved lighting and air conditioning), industry (more efficient processes) and transport (through more efficient vehicles, better traffic management, better maintenance, etc.).

In the mid 1990s, a UNDP/PIFS programme, working closely with the Pacific Power Association (PPA), assessed the potential within Elcom (the national power utility at the time) for practical and cost-effective demand-side energy savings. The study indicated that between 1994-2013, PNG could easily reduce both maximum demand (MW) and energy generation (MWh) by 13% compared to a ‘business-as-usual’ approach. It is not known if PNGP has carried out similar analyses since then or been active in encouraging its large consumers to reduce demand or consumption.


The technical potential for energy production from renewable energy in PNG is enormous. However, much of this is very expensive to develop or is far from locations with significant energy demand and cannot be readily exploited. There are areas of PNG with geothermal potential but only one geothermal power system is operating (initially 6 MW but recently increased to about 25 MW), at a mine on the island of Lihir off the north coast of New Ireland. A World Bank-funded Hydropower Resources Inventory Study (1994) estimated the gross theoretical hydropower potential as roughly 175,000 GWh per year (20,000 MW), with a technically feasible potential of 122,640 GWh/year (14,000 MW). This excludes many megawatts of small-scale or mini hydro potential.

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PNG is two-thirds forested but much is inaccessible or unsuitable for energy use with 58% of land subject to strong or severe erosion and 18% permanently inundated or regularly flooded. The main practical biomass energy potential is in areas of logging or agricultural production, using crop output or residues. There are about 2 million m3 of log exports annually but very little local processing, leaving only small amounts of biomass for energy production. Almost any vegetable oil can in principle be used as a liquid fuel although they vary in suitability, palm oil for example being a less desirable fuel than coconut oil. PNG produces about 330 ML of crude palm oil per year and about 33 ML of coconut oil. Ethanol can be produced from sugar cane, molasses, sago palm, nipa palm and other crops and blended with petrol (up to about 15%) as a vehicle fuel. About 200–1,100 ML of fuel alcohol per year could reportedly be produced from sago palm in the Gulf Province alone. Over 250 ML could be produced from nipa palm from the Purari Basin. In principle, PNG could manufacture a huge volume of fuel for transport or power generation (or export) from its agricultural resources.

There is very limited knowledge of PNG’s potential for ocean thermal energy conversion (OTEC), tidal energy or wave energy. The REP-PoR consultants investigations uncovered no information on any measurements of deep sea versus surface ocean temperature differentials. However, none are suitable for commercial energy production in the short term. There has been no systematic study of wind energy since the 1970s when the best potential was believed to be in portions of Central, Western, Milne Bay and New Ireland provinces and the Port Moresby area. Solar energy is among the largest potential sources of energy in PNG. Average insolation in much of the country is 400-800 W/m2. Port Moresby is apparently PNG’s sunniest location with 2,478 sunshine hours per year and the worst is Tambul, Western Highlands, with only 1,292 hours. The most suitable locations for solar PV are the off-shore islands and the southern regions.

2. InstitutionalAs far as the REP-PoR consultants are aware, there is no GoPNG institution that deals specifically with the technical efficiency of fuel use or fuel switching options. Unitech in Lae has had small-scale activities looking into alternative fuels. It is understood that Unitech has also carried out some energy audits. There are no doubt PNG-based companies that offer energy auditing and management services but no information is available on the extent of these services.

3. Policy and legislationThere is no legislation requiring energy services to be provided in the most efficient manner or for preference to be given to indigenous forms of energy.

4. Capacity issuesThere is little or no capacity within the GoPNG to develop more efficient energy use or develop (or advise on) fuel options.

5. Knowledge repositories and information deliveryThere is no information available on knowledge repositories and information delivery related to efficiency and fuel options. Unitech probably has the most accessible information base.

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1. OverviewThere are a few private companies based in PNG that concentrate on the provision of renewable energy equipment and services and no doubt on energy management. There is no GoPNG department or institution that encourages the development of energy-based entrepreneurship.

2. InstitutionalThe GoPNG has established PNG Sustainable Development Limited (PNG SDL) as an investment company to manage the government’s 52% shareholding in the huge Ok Tedi mine. Although PNG SDL is not primarily involved in energy matters, it does have an interest in investments in rural electrification. It is reportedly reluctant to pursue this until GoPNG policies and regulations regarding private participation in rural electrification are clarified. Nonetheless, the CEO of PNGP has been appointed to the board, in part to advise on rural electrification matters.

3. Policy and legislationThere are no apparently GoPNG policies regarding energy-based entrepreneurship. As noted, there appears to be a lack of clarity regarding the legal right of IPPs to provide electric power to rural government stations and rural communities.

4. Capacity issuesThe GoPNG has little capacity to effectively encourage or promote energy-based entrepreneurship.

5. Knowledge repositories and information deliveryThe REP-PoR consultants have no information.


1. InstitutionalThe commercial sector of PNG is well serviced by banks, leasing companies, accountancy and law firms and other service providers. There are a dozen banks and financial institutions that offer a full range of financial products. The larger accountancy and law firms are predominately subsidiaries of overseas companies. The investment regime is described by the ADB as liberal, encouraging and welcoming foreign investment. The GoPNG’s National Investment Policy aims to provide the transparency, equal treatment and consistency required by foreign companies to enable them to make medium-term strategic decisions to invest in PNG. The government has also established an Investment Promotion Authority as, in principle, a one-stop-shop investment facility. There are no financial institutions that concentrate on energy sector finance, at least outside of large-scale commercial energy.

For rural PNG, banking and credit services are limited. There are apparently no financial institutions that provide rural consumers with loans specifically meant to provide improved energy.

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2. Policy and legislationNo information

3. Capacity issuesNo information

4. Knowledge repositories and information deliveryNo information


1. OverviewThe monitoring and evaluation capacity of the ED has been weak for twenty or more years. There is little monitoring of rural energy projects and apparently no up-to-date database on the operations of C centre power stations (e.g. their current status, true costs of operation, reliability of power provided, maintenance, financial status, etc.) beyond some cases studies carried out under the WB/UNDP ESMAP rural electrification study of 2004. PMGP monitors and evaluates its own system with financial monitoring through the Finance Ministry and ICCC.

2. InstitutionalOutside of the Finance Ministry and ICCC, there is little capacity to monitor and evaluate energy sector programmes and their work is confined to financial matters.

3. Policy and legislationThere is no policy or legislation requiring energy sector monitoring and evaluation.

4. Capacity issuesAs with other aspects of energy, the capacity of the ED to monitor and evaluate programmes and activities is quite limited. It is understood that they wish to improve this capacity regarding rural electrification in particular.

5. Knowledge repositories and information deliveryOutside of courses offered at UPNG and Unitech, and some limited public sector training material, none of which is energy-specific, there is little accessible information regarding energy sector monitoring and evaluation.


1. OverviewAs noted, there is not a great deal of up-to-date and relevant information available within PNG on the energy sector and approaches that might help reduce poverty. UPNG and Unitech have reasonable library facilities but these are only in Port Moresby and Lae and are not easily accessible by the public. The Internet remains a key source of information but is expensive and unavailable in much of rural PNG.

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2. InstitutionalThere is nothing to add here.

3. Policy and legislationIt is not known whether the constitution of PNG includes a section on the right of access to government information by the public or the extent of protection of press freedom.

4. Capacity issuesThe capacity of GoPNG officials to access relevant information is hindered by poor telephone (and thus Internet) facilities within many departments, with lines often disconnected or few in number. In addition, financial constraints severely limit the journals, papers, etc. that can be purchased or downloaded.

5. Knowledge repositories and information deliveryThere is nothing to add which has not been covered already.

J. Conclusions

1. OverviewPNG, the largest by far of the Forum Island Countries and a nation of great diversity, faces bigger challenges in providing energy services to its widely-scattered rural and low-income people than other PICs. It faces serious issues of stability, governance and inequality but also has considerable human and physical resources that can be exploited to better address these issues. Although PNG has a refinery that processes indigenous crude oil into a range of fuels, the known oil resource is rapidly diminishing. It seems likely that the development of local biofuels to replace a large percentage of petroleum-based fuels could provide substantial employment for rural Papua New Guineans and help reduce poverty and regional disparities through job creation.

PNG can be assisted to develop energy resources in a manner that can help reduce poverty, but it needs to focus clearly on a limited number of specific high-priority areas selected by Papua New Guineans. Such assistance should work closely with other current or potential key players in the energy sector (such as the World Bank, AusAID, JICA ADB) and not attempt to work in isolation. Because it was not possible to visit PNG while preparing this assessment, conclusions and recommendations are tentative.

2. InstitutionalThe main GoPNG institution responsible for energy policies, planning and rural electrification, the Energy Division of the Department of Petroleum and Energy, appears to be emerging from a period of relative quiescence (when there was little political or financial support) and is attempting to develop national energy policies and plans for endorsement at Cabinet level. The ED’s renewed focus on rural electrification, whether directly or through a new entity such as the proposed Rural Electrification Authority, presents enormous challenges and also opportunities to assist PNG significantly expand services to low income rural populations. It is not clear whether institutional changes within ED might result in lower priority for small-scale renewable energy development, other than minihydro.

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Although institutional responsibility for the C centres has been decentralised to provincial and district level, confusion remains about ownership, control, operations, financial management, etc.

3. Policy and legislationWith the assistance of AusAID, the World Bank and now SOPAC/PIEPSAP, the ED is developing new national energy and rural electrification policies. There has been at least one public workshop in 2005 to consider drafts and further develop them.

PNG has a range of energy sector legislation but this has not been assessed. Observers have suggested that the legal rights of IPPs to provide electricity to C centres and rural communities is unclear. It seems likely that regulation of IPPs providing rural power (rather than feeding into PNGP’s grids) may require clarification.

4. Capacity issuesAlthough the ED is probably the largest government energy office among the FICs, it requires improvement in its capacity for both energy policies and plans and the development of practical mechanisms (including regulatory and financial systems) for wider rural electrification. If the GoPNG decides to pursue large-scale production of biofuels, this will also require considerable capacity development.

5. Knowledge repositories and information deliveryDiscussions with Papua New Guineans suggest that access to reliable, affordable, relevant and up-to-date information regarding energy technologies, energy policies (and implicitly ways to address poverty through energy interventions) is a serious issue. Many public servants lack regular email and Internet access. Public Internet is expensive and largely restricted to urban areas. There are no libraries with relevant information available to the public. The huge number of languages, and the largely verbal culture in rural PNG, exacerbate these problems.

K. Recommendations

1. OverviewConsidering the country’s size, diversity and the range of energy sector issues and opportunities, it is recommended that REP-PoR seriously consider a separate national study for PNG including a mission to the country and travel beyond the usual consultants’ stops of Port Moresby and Lae.

There are likely to be a number of technical, policy and regulatory approaches to large-scale biofuel development that are at least partly common to PNG, Fiji, the Solomon Islands and possibly Vanuatu and Samoa. External assistance should consider appropriate multi-country PIC studies or other interventions to address these jointly at lower cost than single-country studies. For example, both PNG and Fiji have sugar industries and have produced, or seriously considered, fuel ethanol. It may be appropriate to carry out a preliminary study of the practicality of jelled ethanol (called gelfuel in Africa) as a kerosene replacement for cooking and lighting, including experience elsewhere, the costs of jellification, its safety compared to liquid fuels, and the types (and costs) of cooking appliances needed for their use.

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An analysis is recommended of the feasibility and effect of large-scale use of coconut based and palm oil based biofuel as a diesel replacement on small and large scale producers, on the price structure of the local coconut and palm oil market, on the logistic requirements for moving raw materials to processing centres and on the locations and requirements for those processing centres. The end result should be a plan for the rational development of the industry in PNG (and possibly the Solomon islands and Fiji).

2. InstitutionalIt is premature to recommend specific assistance to PNG on institutional issues. However, the ED may require assistance to further develop its structure in line with revised core responsibilities. It may need assistance in shifting away from project implementation to management and oversight.

3. Policy and legislationIt is premature to recommend specific assistance to PNG on policy and legislative issues. However, it would be appropriate to liaise with the ED and SOPAC/PIEPSAP to determine whether there are areas in which any external assistance could work with PIEPSAP in helping PNG develop practical policies and plans for energy overall and rural electrification in particular, and supporting legal tools and regulatory mechanisms.

PNG apparently has no regulations that incorporate minimum energy standards in new commercial buildings and major renovations to new buildings. It would be appropriate to help PNG develop minimum energy efficiency standards for commercial or industrial investments in which the investor receives a tax break or other incentives. Assistance will be needed to draft such legislation and associated regulations and this is recommended if PNG so requests. There may be opportunities to develop standards which are appropriate for PNG as well as other larger PICs such as Fiji.

4. Capacity issuesA renewed effort to more fully electrify rural PNG will also require considerable capacity development within the ED and any new authority it may oversee. It is premature to suggest specific needs, however.

5. Knowledge repositories and information deliveryTechnologies and mechanisms for effectively accessing, storing, and delivering knowledge widely, cheaply and effectively throughout the large main island of PNG and its widespread outer islands are changing rapidly. Other initiatives are underway through the ITU, UN system, SOPAC, PIFS, etc, regarding provision and delivery of appropriate knowledge and information to PNG and the wider Pacific for technical decision-making. Initially we propose that knowledge systems for the energy sector be specifically included in such initiatives.

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XXV. SAMOA

A. Background

1. Physical conditionsSamoa’s 2,934 km2 of land area and exclusive economic zone (EEZ) of 120,000 km2 lies northeast of Fiji extending between 1315’ and 145’ S Latitude and 17123’ and 17248’ W Longitude. There are two main islands, both mountainous of volcanic origin, Savai’i (1,708 km2) and Upolu (1,123 km2), plus several smaller inhabited volcanic islands including Manono (2.89 km2) and Apolima (1.01 km2).

Samoa’s climate is tropical with November through April considered the wet season and May through October the dry seasons. The annual rainfall averages 2,880 mm, ranging from 2,500mm in the west of both islands, and in the north/northeast of Savai’i, to about 6,000 mm in the higher mountains. About 75% of the rainfall occurs during the wet season. The mean annual temperature varies from a low of 20C to a high of 30C with small seasonal variation. Tropical cyclones (hurricanes/typhoons) pass through Samoa several times in a decade with recent years seeing major damage to crops and structures due to cyclones.

The islands are of geologically recent volcanic origin with lava flows on Savai’i occurring during the early 20th Century. Rivers have a large seasonal flow variation but water supply for human use has not been a problem. Soils are relatively rich for lowlands agriculture and dense forests cover large areas of the mountain slopes and steep high valleys.

2. Population and demographicsAt the time of the last national census in 2001, Samoa had a population of 176,848 in 23,000 households and an annual average growth rate (AAGR) of 0.56% over the prior decade. In 2001, Upolu contained 76% of the population though it has only 38% of the land area. Savai’i has 58% of the land but only 24% of the population. Apia, the only urban area, had 22% of the population and it has been increasing at 1.5% per annum. The 78% of the population counted as rural live in 330 villages, of which about half have from 100 to 500 inhabitants. The life expectancy at birth (2001) is 72.7, one of the highest in the PICs.

Over the ninety-year period from 1911 to 2001, the AAGR has been 1.7%. This has dropped to 0.6% from 1981 to 2001, due largely to emigration to New Zealand, Australia and the United States. Samoa has a young population, half being 19 years old or younger. Future population growth will depend substantially on the extent of continued access to New Zealand and other countries. Although there are no official projections of future population growth, the AAGR is likely to remain well under 1%, with continued high migration rates. An estimated 100,000 Samoans officially live in New Zealand. Under existing treaty arrangements, a quota of 1,100 Samoans are able to emigrate to New Zealand annually. There is also considerable unofficial migration allowed to reunite families and a number of unofficial “overstayers” who remain in New Zealand illegally. This has resulted in slow growth of the population in Samoa and a population of expatriate Samoans growing rapidly at around 6% per annum, which has resulted in an

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expanding remittance flow from expatriate Samoans to family members remaining in Samoa.

3. Socio-Economic structurea. Political

In the late 1800s, Samoa was designated a protectorate of Germany but New Zealand occupied the country at the beginning of World War I and administered the islands until 1 January 1962 when independence was gained and Western Samoa became the first Pacific Island Nation to gain its independence from European colonisers. “Western” was dropped from the name in 1997 and now it is simply Samoa.

All citizens of age 21 or older are eligible to vote in elections for members of the 49 member Fono (the unicameral legislature) who serve five year terms. Members of the Fono elect a Prime Minister as Head of Government. The traditional leadership is integrated into the government system in that traditional clan leaders, Matai, are the only persons allowed to run for Parliament. Cabinet Ministers are appointed upon the recommendation of the Prime Minister and they in turn appoint Chief Executive Officers (CEOs) who administer the various ministries as civil servants. The next election is in March 2006. The government has been stable with little corruption and continuity of its programmes has been good.

Full religious freedom is practiced in Samoa though the Christian religion counts over 90% of the population as members with numerous well kept churches and a strong social support system.

b. Economic

A 2003 IMF report gives Samoa good marks for its economic management with the Samoan Statement of Economic Strategy (SES)/Strategy for the Development of Samoa (SDS) providing possibly the most successful example of economic reform in the region. Since the inception of the SES in 1996, Samoa has enjoyed broad-based economic growth that has benefited all levels of society. The real GDP in 2002 was stated to be around US$275 million making the per-capita GDP about US$1545. Total imports were US$140 million of which US$28 million was for petroleum products (20%). Exports in 2002 amounted to only US$14.4 million, about 5% of GDP while remittances from family members abroad amounted to US$58.5 million, around 21% of GDP. Exports are heavily based on fish products with the remainder largely agricultural produce (mainly coconut products and taro). A facility for manufacturing automobile wiring harnesses for an Australian car manufacturer is the largest manufacturer and the only one with significant export volumes. The tourism sector is growing and several large investments in tourist facilities are either underway or planned for the near future. Overall economic growth is projected to be around 3-4% per annum for the near term.

4. Poverty issuesWithin the Pacific region, Samoa would be in the middle group of countries with regards to poverty issues. There is virtually no abject poverty, hunger or lack of access to reasonable health care. Nearly 100% of Samoan homes are connected to the power grid and communications systems are well developed all over the country. Rural incomes are

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much lower than those of urban residents but at the same time cash outlays for shelter and food are much higher for urban dwellers making the difference in actual quality of life much lower than the disparity in incomes would seem to indicate. Unemployment, particularly of youth, is considered a problem though the small net population growth has been a factor in making it less serious than in some of the PICs.

a. MDG progress

A national MDG Taskforce comprising the Ministries of Finance (includes Planning and Statistics), Women Affairs Social and Community Development, Natural Resources and Environment, Education and Health as well as NGOs was established to spearhead the MDG efforts. In 2004, 6.6% of the population was considered below the poverty line. Households headed by women and those with disabilities were considered the most vulnerable. All the MDGs have already been reached except for halving poverty, halving basic needs (water and sanitation) and halting and reversing the spread of HIV/AIDS (no cases had been identified by 2002). With only 6.6% poverty and 88.6% that have basic needs met, the Taskforce considers it a strong likelihood that the MDG will be met. In place of the malaria MDG (there is no malaria in Samoa), halving youth unemployment has been added as a goal for Samoa to halve by 2015.



The Government of Samoa owns the bulk oil storage facilities and tenders for exclusive supply of refined petroleum products (excluding LPG) for a specified period. The contracting approach has allowed Samoa to consistently maintain the lowest petroleum product prices in the PICs (although nearby American Samoa has lower fuel import prices than Samoa). The contract arrangements are managed by an Energy Unit within the Ministry of Finance (MoF).


The Electric Power Corporation (EPC) is responsible for all electrical supply. It is a wholly government owned commercial entity. Cabinet appoints an eight member Board of Directors with the Minister of Works as its chairman.

c. Renewable Energy

EPC provides the primary institutional structure for renewable energy in Samoa. EPC operated hydro power systems provide over half the electrical energy for Samoa though further hydro expansion is limited and diesel generation is the likely mode for meeting increasing demand. The large scale development of biofuels (mainly coconut oil based) for use in EPC power generation is currently being planned with ADB technical and financial support and SOPAC advisory services as part of a UNDP funded technical assistance project (CocoGen).The implementation of a nine household solar photovoltaic powered grid on the small island of Apolima (to replace an existing diesel generator) is in the process of implementation by EPC. This projct is funded by the Government of

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Samoa and UNDP. Furtheremore EPC in coorporation with the Meteorology Division, Government of Samoa will undertake a wind resource assessment project on Upolu. This project is funded by SOPAC and UNDP.

Solar water heaters are common on tourist accommodations and high end dwellings though not yet common for mainstream housing. There is no formal institutional structure for solar water heater implementation; it is market based within the private sector.

d. Regulation

The Energy Unit within the Ministry of Finance provides for the national petroleum monitoring process (although actual petroleum contracting is done at a higher level in the Ministry of Finance) and is generally the government interface for donor funded energy projects. Each month, the MoF sets and monitors the retail price of petroleum fuels based on international fuel prices and a formula established during the supply bidding process. Maximum LPG prices are set by the Ministry of Commerce, Industry and Labour (MCIL), an agency with responsibility for price control of products other than the major petroleum fuels.

Electricity tariffs are proposed by the EPC with final approval by Cabinet. EPC is itself responsible for technical regulation (electricity installation standards, power quality standards, etc.) for electric power.

There is no regulation relating to energy efficiency though a high level committee is proposed for consideration of energy efficiency issues and standards and regulations would be considered by that body.

Though solar water heaters are not specifically covered by regulations, their installation is generally regulated by the application of building codes.

2. Policies and legislationA National Energy Policy and Strategy document is in the final stages of preparation by the Energy Unit with the support of the Pacific Island Energy Policy and Strategic Action Planning (PIEPSAP) project.

The Price Control Act establishes the process for setting the maximum price of certain commodities including petroleum fuels.

The 1972 EPC Act with later amendments forms the legal basis of operations by EPC. Though EPC does not have exclusive rights for power generation, it does regulate private supplies through the provision of operating permits based on technical and safety inspections. Connection of non EPC generation to the EPC grid is at the discretion of EPC.

The Public Bodies Act of 2001 requires state owned enterprises, including EPC, to operate in a commercially accountable manner. Included, however, is a requirement to meet community service obligations (CSOs) which in the case of EPC includes the non-economic supply of power to remote or low-income customers. EPC can apply to government for payment for CSOs that represent uneconomic activities for the corporation.

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The Petroleum Act establishes the process for tendering for petroleum fuel supply and makes the MoF responsible for oil storage licensing, inspection, monitoring and safety regulation.

The Foreign Investment Act opens (though with some conditions) all but a few types of business to foreign investment. Protected businesses include public transport, vehicle hire, food retailing, the sale of household goods (other than electrical appliances) and sawmilling.

3. Capacity issuesThe Energy Unit, Ministry of Finance includes one experienced person and essentially a trainee. This has been adequate to handle the petroleum monitoring and the development of the National Energy Policy and Strategic Plan. However, the present capacity of the office is not sufficient to handle regulatory activities that will develop should planned energy efficiency programmes develop that include appliance labelling and certification and regulation regarding the efficiency of imported air-conditioning equipment. Both added personnel and specialty training will be important if such programmes are to be successful.

4. Knowledge repositories and information deliveryEPC and the Energy Unit represent the primary knowledge repositories relating to policy and energy institutions in Samoa. Samoa has access to regional agencies and programmes such as SOPAC including the PIEPSAP project where additional knowledge of energy policy issues and energy related institutions resides.



With regard to energy access EPC and the Government of Samoa since 1989 has undertaken a very significant rural electrification program. The total costs for the rural electrification program from the period 1989 to 2002 have been approximately WS$35 million. This have let to a situation where today around 95% of the population has accesses to power.

Samoa has not been the recipient of any significant regional energy programmes that affect access to energy and energy as relates to poverty. EPC has received development assistance from ADB, JICA and other donor agencies for the implementation and expansion of its hydro capacity and general operations but none directly related to REP-PoR activities.

In the 1970s and 1980s there was a significant logging and sawmilling industry on Savai’i though the rate of logging has fallen dramatically in recent years and is expected to cease in another few years. During the peak logging years of the mid to late 1980s, biomass waste from one large mill was sufficient to power a 2.5 MW steam power plant that provided electricity for the mill with some surplus delivered to consumers in parts of Savai’i but was closed down after several years of operation.

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Small regional energy efficiency programmes have included Samoa but have had little known effect in relation to the REP-PoR targets.


REEP (EPC/ADB/Government of Denmark) – Add capacity to EPC generation with diesels using coconut oil based fuel (~3 MW) and Upolu hydro (~2 MW).

PREGA (EPC/ADB/Government of the Netherlands) – Add capacity to EPC generation with Savai’i mini-hydro (1.8 MW)

CocoGen (EPC/UNDP/SOPAC) – determine the feasibility of coconut oil use for existing EPC diesel generators, determine the overall coconut resource and test the use of various blends of coconut oil and diesel fuel in an existing engine.

PIEPSAP (SOPAC/UNDP/Government of Denmark) – assist the Samoa government with the development of its National Energy Policy and Strategy Plan.

PIREP (SPREP/UNDP/GEF) – have undertaken assessment of key energy issues in Samoa, barriers to the development of renewable energy to mitigate climate change, and capacity development needs for removing the barriers.

The Promotion of Environmentally Sustainable Transportation in the Pacific Islands (PESTRAN) project. This joint SOPAC/UNDP/GEF project where Samoa, Fiji and Vanuatu is participating will prepare a GEF Medium Size Project (MSP) with a focus on efficient and effective energy use in the transport sector.

Demand Side Management in the Pacific Island Countries. This project funded by UNDESA and implemented by SOPAC in several PIC electric power utilities including EPC to carry out energy audit training for their staff, conduct energy audits, and assist with implementation.


EPC “Road Map” for operations improvement.

Apolima Island solar electrification by EPC to replace 20kW of mini-grid diesel generation with a solar PV mini-grid system. The project is funded by Government of Samoa, UNDP and a Danish NGO.

Upolu wind resource assessment by EPC and the Meteorology Division. The project is funded by SOPAC and UNDP.

The Pacific Islands Greenhouse Gas Abatement through Renewable Energy Project (PIGGAREP) where Samoa is participating. This is a planned joint SPREP/UNDP/GEF barrier removal project building on the preparatory work undertaken as part of PIREP.


Large scale coconut based biofuel use with existing EPC engines.

Investigating the replacement of kerosene use by biofuels using either esterified coconut oil or other plant oil.

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Development of the institutional structures necessary to implement energy efficiency measures including appliance labelling procedures and import regulations providing for energy efficiency in air-conditioners.

2. InstitutionalProgramme activities for pipeline programmes and programmes under consideration have not all been allocated to specific institutions except for EPC and the biofuel use in existing generators. The Energy Unit is expected to incorporate energy efficiency programmes and the Women in Business NGO to be the institutional focus for the replacement of kerosene by biofuels.

3. Policy and legislationAlthough policy is being developed, there is presently no specific policy or legislation that directly applies to programmes in energy except the EPC Act that empowers EPC to develop the necessary capacity to provide reliable electrical services to all of Samoa.

4. Capacity issuesEPC appears to have adequate capacity for day to day operations but needs additional capacity in the planning and project implementation areas. Planning and project development relies heavily on external consultants who have not always proved to understand the Samoa context and the preparation and implementation of development projects has typically been very slow.

5. Knowledge repositories and information deliveryEPC and the Energy Unit represent the primary knowledge repositories for energy programmes. The Women in Business NGO is adding biofuel production and use to its knowledge base and should be a significant resource in the future for programme development and implementation, particularly in rural areas.



Samoa currently has the lowest per litre cost for petroleum fuels among the Forum Island Countries. The May/June 2005 wholesale cost of gasoline and automotive distillate respectively (excluding all taxes and duties) was about US$0.39 and 0.42 and the wholesale price for diesel fuel was $0.63 per litre. These are the latest available prices from the PIFS Pacific Fuel Price Monitor of 27 July 2005. There are no subsidies for rural users of fossil fuels.


In August 2005, EPC tariffs for domestic users were WS$0.58/kWh (about US$0.19/kWh) for the first 50 kWh/month, WS$0.69/kWh (about US$0.23 per kWh) for 51-200 kWh/month and WS$0.83/kWh (about US$0.28/ kWh) for usage higher than 200 kWh/month. For all other consumers the tariff is WS$0.69/kWh. There is no fuel price

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adjustment component and the recent rapid fuel price changes have caused serious problems for EPC profitability. To change the tariff there must be a Cabinet decision.


EPC has connections to nearly all households in Samoa. The few households that are not connected are typically too far from power lines to allow for a connection at a reasonable cost. EPC is considering solar PV as a possible option for those households with the Apolima solar PV project acting as a trial installation.


All households in Samoa have easy access to fossil fuels through neighbourhood retail outlets.


Solar and biomass energy are universally available. Wind may have potential for supplementing EPC generation at a few sites and a resource assessment will be undertaken initially for Upolu island, but wind is not generally considered to be a major, reliable source. Though firewood is readily available in rural areas, the use of firewood is decreasing in importance as household incomes increase and LPG or kerosene becomes the preferred cooking fuel. However, the traditional Umu, or underground oven, that uses considerable firewood remains the standard for Sunday cooking so biomass use for cooking can be expected to continue at a significant level even if all households switch to kerosene, LPG or liquid biofuel as their primary cooking fuel.

Biofuel based on coconut oil has considerable potential in Samoa though rehabilitation of the resource appears to be needed if the potential is to be realised. Coconut trees are common in all populated areas of Samoa both as formal plantations (up to 7,000 ha) and as numerous small household plots. Currently, coconut production has fallen to a low level due to the relatively low price that can be offered for copra or mature coconuts if exported coconut products are to be competitive on the world market. However, with current high diesel fuel prices, coconut based biofuels have the possibility of becoming locally competitive at higher coconut oil production costs than those allowed by the export of coconut oil. This may make the gathering of coconuts once again an acceptable economic activity. Most rural households would have some income opportunity if the coconut can become a source of fuel for EPC engines.

2. InstitutionalPetroleum products are imported and distributed at wholesale level by a petroleum company selected by the MoF through competitive tender. The present importer is Shell.

EPC provides access for electrical energy to all of Samoa with well over 95% provided through either the Upolu or the Savai’i grid.

3. Policy and legislationBoth policy and legislation require the Government to provide universal access to energy and that has essentially been achieved among others through the rural electrification program.

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4. Capacity issuesThere are no known capacity issues regarding energy access.

5. Knowledge repositories and information deliveryStatistics and information relating to access to energy include census information, EPC records (for electricity), Energy Unit records (for petroleum), Agriculture records (for biomass) and Meteorology records (for rainfall, sunshine hours and wind). SOPAC also has some information relating to wave energy in Samoa.



In 2003, transport and household use of fossil fuels totalled about 66 million litres and electrical generation about 21 million litres. Though there are no sector use statistics available, it appears that land transport and sea transport used around the same quantity of petroleum fuels, on the order of 20-25 million litres in each sector.

All electricity is provided by EPC. In 2003 total generation was 93.07 GWh and sales were 84.48 GWh with an overall loss (both technical and non-technical) of 9.49 GWh. This 10% loss is somewhat better than the average of PICs but considerable cost effective improvement is possible. Household use of electricity averaged around 100 kWh per month in recent years. In 2001 over half of the households had refrigerators and over 60% had TV with the percentages rising rapidly.

In 2002 there were almost 11,000 registered vehicles (with four or more wheels), mostly burning petrol (motor-spirits) though the percentage of diesel vehicles is known to be significant.

Though there are no statistics available for the use of biomass for cooking, such information as is available indicates that it represents as much as 40% of the total energy used for all purposes in Samoa. This percentage is falling as more and more households switch to kerosene or LPG as their normal cooking fuel.


On a per-capita basis, Samoans use 44 kWh/month of electricity and 440 litres of petroleum products per year. Both figures are in the middle group of PICs for per-capita energy use.

There are opportunities for substantial improvements in energy efficiency in both domestic and commercial sectors. Although there are no energy efficiency standards presently in effect, the Energy Unit is aware of the potential for improvement and there is a pending proposal for the creation of a high level energy efficiency committee that would be expected to consider an appliance labelling programme, the development of standards for air conditioning systems, the integration of energy efficiency into existing building codes and the development of programmes for public information regarding the efficient use of energy for households and personal transport.

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SOPAC and the REEP (ADB) programme are presently assisting the Energy Unit and/or EPC in the implementation of energy efficiency measures. Energy efficiency improvement is also a component of the new national energy policy and strategy that is in the final stages of its development with the support of PIEPSAP.


Hydro, solar and biomass represent the renewable energy resources currently known to be economically developable in Samoa. Hydro development is approaching its practical limits with 45-50 GWh/year of electricity production each year (about 50% of the total electrical production). Hydro power is seasonal and all but one plant is run-of-the-river. There is over 10 MW of capacity available in the wet season but only around 4 MW in the dry season.

Although there have been several small scale trials of solar photovoltaics for rural village electrification, those have all been replaced by grid extensions. In 2006, the small village on Apolima island (located between Upolu and Savai’i) is expected to have the 20kW diesel generator replaced by an equivalent solar PV generator. One standalone installation is also included as a trial for possible future use of solar PV to electrify the few remaining houses that lie too far from the grid for connection.

Solar water heaters are commercially available though thus far typically used only on tourist accommodations and upscale housing. As few mainstream homes are fitted with any form of piped hot water, the demand for domestic water heating devices remains small though it is reasonable to assume a slowly increasing demand as household incomes rise.

Biomass represents the largest mainly undeveloped renewable energy resource. Since logging has ceased to be a significant local industry and there are no other major sources of agricultural or forestry residues for energy production, the primary biomass related energy source is the production of biofuels from coconut or other plant based oils. SOPAC and the ADB presently are cooperating in the preparation of feasibility studies for biofuel development through the renovation and further development of the coconut resource along with the industrial production of biofuel based on coconut oil. Early results from the feasibility studies indicate that the existing resource, if fully tapped, would be sufficient to provide most if not all of the fuel required by EPC under present load conditions. The primary limiting factor does not appear to be the resource but rather one of economics and logistics.

The wind resource is known to be seasonal and local, but until now there have been no dedicated wind resource assessments in Samoa. I.e. wind power could be a possible supplement to the EPC generation. A resource assessment will be undertaken for Upolu and then later most possibly to include Savaii.

Geothermal resources are known to be present but are not economically developable. A wave energy resource is known to be present but currently there are no commercially available wave energy conversion devices that fit the conditions in Samoa.

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2. InstitutionalThere is no specific institutional home for energy efficiency matters. In the past, EPC has been the main focus of regional programmes for electrical energy efficiency improvement and has been the recipient of technical support for both supply side and demand side improvements. The Energy Unit has done some in house work on appliance labelling and public information regarding demand side management. Establishing a high level committee on energy efficiency is under consideration and the Energy Unit is expected to be at least the initial home for energy efficiency programmes in Government.

3. Policy and legislationThe National Energy Policy that is in the last stages of preparation and acceptance includes energy efficiency. There is no legislation nor are there regulations relating to energy efficiency.

4. Capacity issuesIn developing its programmes for Samoa, the REEP found little capacity in the private sector for energy auditing or for the specification and implementation of energy efficiency devices. There are no companies specialising in energy efficiency activities and the local shops and providers of appliances were found to have little understanding of the relative energy efficiencies of the products they are selling. The EPC has carried out energy audits under regional programmes and for government but has no experience with DSM energy efficiency measures beyond audits.

5. Knowledge repositories and information deliverySince energy efficiency has not been addressed, there is little practical information on the subject readily available in Samoa for domestic, commercial or industrial energy users. The Internet and SOPAC are the most accessible energy efficiency knowledge repositories.


1. OverviewSince Samoa is essentially fully electrified, there are no issues relating to access to energy and associated entrepreneurship. Any development or rural income generating activities will be dependent on other factors than energy, notably training in business management and to a lesser extent access to finance.

For the foreseeable future, it does not appear likely that independent power producers can be viable in Samoa since there are no economically reasonable power generation resources known to be available that are not already in use by EPC or in EPC’s development pipeline. EPC has considered the possibility of outsourcing its diesel generation along the lines that FEA in Fiji has followed.

If EPC proceeds with plans for the use of biofuels in its generators, a small business opportunity will be the production of coconuts or other plant materials that have the potential to be a base for biofuel production. Though EPC biofuel production will need to be on an industrial scale to provide the quantity and consistent quality needed, there also

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is expected to be an entrepreneurial opportunity for the small scale production of biofuel as a kerosene replacement.

The REEP is in the process of developing a programme to encourage companies to get into energy efficiency work. The Energy Efficiency Service Company (EESCO) concept would provide intensive, focused training to interested companies and a loan and risk mitigation fund would support energy efficiency investment. Several Samoan companies and individuals have expressed an interest in becoming an EESCO though the programme could not be implemented before 2006.

2. InstitutionalRural entrepreneurship development is largely left to NGOs with no significant Government programmes specifically focused in that development area. The Women In Business NGO headquartered in Apia does promote rural business and cottage industry and is in the process of developing a proposal for supporting small scale coconut or jatropha based biofuel production at the village level to replace kerosene and wood for cooking. Their project development efforts are being assisted by the REEP.

3. Policy and legislationNo references were found relating to either specific policies or legislation that would either promote or discourage rural entrepreneurship. The government does have as a priority the improvement of the standard of living in rural areas but there is no focus particularly on entrepreneurship.

4. Capacity issuesRural entrepreneurship is limited largely by a lack of business skills and knowledge of management techniques. Access to finance for rural business development is theoretically available through the Development Bank of Samoa but in practice small scale, first time entrepreneurs have difficulty in obtaining finance.

5. Knowledge repositories and information deliveryBusiness skills are taught at the University of the South Pacific (USP) campus, the University of Samoa, Samoa Polytechnic, Don Bosco School and several small private business skills training facilities that mostly emphasise computer skills. However they do not provide any programmes that integrate the teaching of the various skills needed for the small cottage industry into a single programme. The Women in Business NGO does have advisory services and can be considered a knowledge repository for small scale entrepreneurship.


1. OverviewSince essentially all of Samoa has access to energy, finance for access or access development is not an issue.

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2. InstitutionalSamoa has one local and two international full service commercial banks. Also the Samoa Development Bank provides loans for development oriented activities at essentially commercial rates but with looser requirements for acceptance. There are no micro-credit agencies for developing cottage industries though often development programmes include their own finance packages focused on facilitating the type of investment required for that particular project. Individuals who wish to start a small rural business but who have neither experience in business nor collateral must rely on family and friends for finance.

3. Policy and legislationPolicy related to access to the electricity supply is the responsibility of EPC under the EPC Act. The National Energy Policy and Strategic Plan will include policies relating to the further development of energy supplies and energy efficiency.

4. Capacity issuesThere is little formal capacity for the provision of high risk, small entrepreneur loans for start-up cottage industries.

5. Knowledge repositories and information deliveryCommercial Banks, the Development Bank of Samoa, the Samoa Central Bank, the Ministry of Finance and NGOs are the main repositories of financial knowledge. Samoa Polytechnic, Don Bosco, USP, the University of Samoa and several private training schools include training in finance and related skills such as accounting and financial management.


1. OverviewFor energy programmes, two types of monitoring and evaluation are usually needed, one for the technology and one for the management. Since Samoa has few energy programmes and most of those are carried out by EPC in the course of their provision of electricity, monitoring and evaluation have been relatively straightforward processes.

2. InstitutionalEPC and the Ministry of Finance/the Energy Unit are the local institutions engaged in monitoring and evaluation of energy programmes. Regional programmes providing services in Samoa typically provide their own monitoring and evaluation processes. Currently, the primary monitoring task for the Energy Unit is that relating to petroleum imports, a process that clearly works well since Samoa has consistently maintained the lowest petroleum import prices in the PICs. EPC internally monitors and evaluates its own activities on an ongoing basis. NGOs are variable in their monitoring and evaluation efforts though the tendency is to implement a project but not follow-up for more than a short time.

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3. Policy and legislationNo policy or legislation specifically addresses or affects monitoring and evaluation of energy programmes as far as could be determined.

EPC is in essence self-regulating with only major capital investments and tariff modifications requiring external approval. There are concerns both in Government and in regional organisations such as ADB that EPC has grown both in size and national importance to the point where external regulation may now be appropriate. This would require development of a new government regulatory structure that has the capacity to provide an independent review and comprehensive analysis of EPC tariffs as well as EPC’s operations and investment programme.

4. Capacity issuesThere is limited capacity in EPC and the Energy Unit for monitoring and evaluation. Both organisations would benefit from increased training and added resources in the area of monitoring and evaluation. In particular this applies to management monitoring and evaluation.

5. Knowledge repositories and information deliveryThe Statistical Services Division, the Energy Unit, EPC, the Ministry of Agriculture, and the Meteorological Service represent the primary repositories of energy related monitoring and evaluation information.


1. OverviewSamoa has a well-developed country-wide communications system including broadcast television, radio stations, several daily newspapers and full coverage of both land line and mobile telephony. In addition, satellite television and broadcasts from nearby American Samoa can be received. Access to the Internet is available to anyone with a computer and a telephone line at a cost substantially lower than in Fiji or other nearby PICs. Broadband access is also available for businesses, government and private subscribers in the Apia area.

2. InstitutionalThe school system in Samoa is also well developed with universal primary education and there is no gender disparity with respect to education with almost equal numbers of males and females in primary and secondary schools. Samoa has one of the highest secondary enrolment ratios among the PICs, 88% of those completing primary school, and an adult literacy rate of 98.7%. The Don Bosco school offers trades training, particularly for low income students, as an alternative to the usual secondary school system and Samoa Polytechnic provides a post-secondary technical and trades curriculum and is in the process of the construction of new facilities provided under Japanese funding. The new University of Samoa provides post secondary academic studies, as does the University of the South Pacific on its Samoa campus though the USP campus is primarily focused on studies relating to agriculture.

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The University of Samoa and Samoa Polytechnic are presently in the early stages of combining resources and administration into one institution and when the integration is completed the resulting institution will offer a wide range of technical and non-technical subjects for its students at a cost that is expected to be significantly lower than USP though the quality of instruction in some areas is not likely to be up to the standard set by USP for some time.

There are several private “business schools” that provide training in computer use, accounting, secretarial skills and other business related subjects. These appear successful despite being relatively expensive since the courses are intensive and short allowing the quick accumulation of skills expected to be needed to be accepted in the job market of Apia.

3. Policy and legislationGovernment policy is that there is no formal censorship of information flows. Public access to schools and the creation of institutions of higher education is embodied in law.

4. Capacity issuesThe Samoa Polytechnics curriculum includes some solar water heating training but only includes a passing reference to other forms of renewable energy and to energy efficiency. Support for the development of these areas will be needed in the future. Don Bosco has a plumbing trades programme but does not include more than a passing reference to solar water heating. Don Bosco has no electrical trades programme, apparently due to a lack of facilities and instructors.

5. Knowledge repositories and information deliverySince over 95% of the Samoa population is on two large, adjacent islands, national information delivery coverage is not as difficult as in many of the more geographically dispersed PICs. In general, the information delivery system in Samoa appears to be one of the best in the Pacific as it is both reliable and available nation-wide at a cost that can be borne by most households.

Public information about energy is largely considered to be the realm of EPC since the electricity supply is a government owned monopoly that reaches into almost every home. To date this information channel has not been used effectively to promote energy efficiency or to provide public information on other energy matters. The Energy Unit has considered using public information channels for informing the public regarding energy efficiency in transport as well as electrical use though no significant public information programmes on energy efficiency have yet to be implemented.

J. Conclusions

1. OverviewSamoa has no energy access problems for REP-PoR to address. However the transformation of the coconut industry from export focused to local biofuel production has the potential for major rural income improvement and further reduction of the already low level of poverty. In relation to the other PICs, Samoa probably has the smallest range of problems relating to energy though energy efficiency issues remain unaddressed.

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2. InstitutionalThe EPC has been able to provide reliable power to all of Samoa with reasonable efficiency and competence. The Energy Unit within Ministry of Finance has effectively managed the imports of fossil fuels and the development of the National Energy Policy and Strategic Plan.

3. Policy and legislationThe National Energy Policy is in the final stages of preparation and is expected to be approved and in force by 2006. Legislation appears to be adequate with regards to energy services though a review should be carried out to propose any changes in existing legislation that are needed to support the National Energy Policy and Strategic Plan.

4. Capacity issuesIf the National Energy Policy is approved as expected, there will need to be increased capacity, particularly to cover the issues of energy efficiency that would be added to their existing work portfolio.

5. Knowledge repositories and information deliveryOverall, Samoa is near the top in the Pacific regarding the adequacy of knowledge repositories and information delivery systems. The primary, secondary and tertiary school system is well developed and provides most of the educational opportunity needed for energy related activities other than technical support of energy efficiency measures which is weak. The information delivery system through broadcast radio and TV reaches into essentially all homes. Internet access is available both for home and business use though still relatively expensive. Telephone service is available through out Samoa both wired and wireless.

K. Recommendations

1. OverviewBy far the greatest impact on both energy and rural poverty in Samoa can be through the development of biofuels to replace fossil fuel imports and actions to provide support in development of coconut based biofuel production are recommended.

Improvements in the efficiency of energy use can also help keep energy cost down and reduce the rate of increase of investment needed for energy delivery systems. A programme to encourage investment in energy efficiency measures and public information programmes that promote energy efficiency actions are recommended.

2. InstitutionalThe development of institutional structures to support energy efficiency improvements is recommended.

In the long term, should coconut based biofuel become a major commodity in Samoa, there will need to be institutional development focused on its regulation (quality, processes used, price, environmental impacts, etc.) and to ensure that small suppliers are encouraged to participate. Although it is too early to recommend that such an infrastructure be developed now, it is recommended that a high level committee be

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established to consider the development of the necessary institutions in pace with industry development.

3. Policy and legislationAssuming that the National Energy Policy is completed and approved, no additional policy development is recommended at this time.

It is recommended that a programme to examine existing legislation be initiated with the goal of recommending any legislative changes that may be needed to support the implementation of the new National Energy Policy and Strategic Plan.

4. Capacity issuesEPC capacity issues with regards to forward planning and general operations are expected to be addressed by the ADB projects currently active.

It is recommended that the need for additional capacity to manage energy efficiency programmes that address both electricity and transport energy be developed within the Energy Unit.

The proposed EESCO programme under the REEP addresses the lack of local capacity in commercial and industrial energy efficiency implementation and no further action is recommended unless the regional EESCO programme is not implemented. In that case, the provision of training in commercial/industrial energy efficiency auditing and intervention is recommended.

5. Knowledge repositories and information deliveryAdvanced training for instructors and laboratory equipment to improve instruction in solar water heating is recommended for Samoa Polytechnic and Don Bosco schools. Further training for instructors and laboratory equipment to improve instruction in electrical energy efficiency improvements is recommended for Samoa Polytechnic.

Development and delivery of public information regarding household and personal energy efficiency actions is recommended. Development and delivery of energy efficiency improvement information for Samoa industry and commerce is also recommended.

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XXVI. SOLOMON ISLANDS

A. Background

1. Physical conditionsThe Solomon Islands total about 28,500 km2 between 155o 30' and 170o 30' East longitude and between 5o 10' and 12o 45' South latitude, north east of Australia with an exclusive economic zone (EEZ) of 1.34 million km2. There are nearly 1,000 islands scattered in a double chain. Six islands (Guadalcanal, Malaita, Makira, Isabel, Choiseul and New Georgia) provide 80% of land area and over 90% of population. The climate is tropical monsoon, with few extremes of temperature and weather. The islands are mostly of volcanic origin, rugged and mountainous although the group includes some low-lying coral atolls. The country is relatively rich in mineral, hydropower and forest resources but uncontrolled and destructive logging has been a long-standing and serious problem with irreparable damage to the environment, the forests and the country’s economic future.

2. Population and demographicsThe most recent census (1999) counted 409,042 people residing in the country, of whom about 95% were Melanesian and most of the rest Polynesian. The 2004 population is estimated to be 460,100. In 1999, about 86% (65,000 households) lived in rural villages leaving only 14% as urban, with over 3/4 of households in the Honaria area. Unlike other Pacific Islands, the capital island is not the most densely populated nor does it have the largest population. Guadalcanal, where Honaria is located, had a 1999 population of 62,225 and a population density of 11/km2 whereas poorly-developed Malatia had 122,620 people and about 29 people/km2. Overall, there were 13 people per km2 in 1999 spread throughout country’s nine provinces.

From 1986-1999, the population increased rapidly at an average annual growth rate (AAGR) of 2.8%. The urban population grew more rapidly with an AAGR of 3.8%. The Ministry of National Planning (MNP), assuming that these AAGRs will continue, estimates a national population of 716,000 by 2019 with Honiara reaching 105,000, more than double the 1999 population. These estimates are highly uncertain, as the country has only recently emerged from a period of considerable unrest, during which much of the large migrant population on Guadalcanal returned temporarily to their home islands. The Pacific Islands Forum Secretariat ((PIFS), based on SPC reports of 2004, estimates a 2015 population of 589,700, suggesting a lower AAGR than the MNP estimate. In part, this probably reflects poor national statistics and the loss of much statistical information during the civil unrest of the late 1990s-2003.

3. Socio-Economic structureThe British Solomon Islands Protectorate became independent from Britain in 1978. The Independent State of the Solomon Islands is a Westminster-style parliamentary democracy with elections normally held every four years. In recent years, there has been serious civil unrest, primarily on Guadalcanal, beginning in 1998, leading to a state of emergency in June 1999 and a coup d'é·tat in June 2000. A peace agreement was signed in late 2001 supported by an Australian-led intervention force, the ‘Regional Assistance Mission to Solomon Islands’ (RAMSI), which has been in the country since 2003. After

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near collapse, the economy is recovering, a new constitution is being developed, and local people are cautiously optimistic about the future. A new draft constitution with a stronger focus on provincial strengthening has been prepared but is not yet ready for consideration by Parliament. Some national and provincial politicians have been implicated in corruption and the political situation remains unstable.

The economy consists of a mixed subsistence sector on which over 80% of the population depend, and a small monetised sector dominated by large-scale commercial enterprises. Between 1996 and 2002, Gross Domestic Product (GDP) declined in real terms by 24%, roughly 35% per capita. Performance was considerably worse for the monetised sector. In 2003, GDP grew by about 3.8%, nearly equalling the 1992 level. A National Economic Recovery, Reform and Development Plan for 2003-2006 focuses on five areas: 1) normalising law and order; 2) strengthening democracy, human rights and governance; 3) restoring fiscal and financial stability; 4) revitalising the productive sectors; and 5) restoring basic social services. In 2004, the Central Bank expressed concern about a precarious level of foreign reserves, very high debt, relatively high inflation, excessive Government of the Solomon islands (GoSI) deficit, and a weakened financial system. However, it notes that the country remains well endowed with natural resources, and that the recovery plan provides an opportunity to address fundamental weaknesses comprehensively. The PIFS Regional Economic Outlook of June 2005, which draws on Asian Development Bank (ADB) and other analyses, revaluated the 2003 GDP growth rate upward to 5%, estimates 2004 growth as 4.6% and projects 2005 and 2006 growth as 3.0% each. The World Bank is slightly more optimistic, projecting over 4% growth in both 2005 and 2006.

4. Poverty issuesThe UNDP’s 1999 Pacific Human Development Report ranked the Solomon Islands as equivalent to 147th in the 1998 Human Development Index (HDI), the second lowest of the 14 PICs ranked, the others ranging from Palau at 46 to PNG at 164. The 2005 global Human Development Report ranked the Solomon Islands as 128th, between Vanuatu (118th) and PNG (137th), a considerable improvement, and a ranking within the lower range of the medium human development category.

The 2002-2003 ADB series of studies of poverty in the subregion, which included participatory assessments as perceived by the poor in eight PICs, did not include the Solomon Islands. The REP-PoR consultants are not aware of any recent poverty assessments and did not locate any through UNDP or ADB sources. However, the Solomon Islands remains one of the poorest of the PICs with a high degree of hardship relative to most countries of the subregion.

5. MDG progressIn 2003, in a report on the progress of its Pacific Developing Member Countries (PDMCs) toward meeting the Millennium Development Goals, the ADB reported that

“the Solomon Islands is far behind in meeting the MDGs by 2015. Existing data are outdated and updating them extremely difficult under current circumstances. There are indications that the poverty situation has been exacerbated by law and order problems, the ongoing financial crisis, the contraction of economic activities and rising

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unemployment, compounded by high population growth rates. Many people have been displaced by the inter-communal conflict that is still simmering. Funding for essential social services has diminished impacting upon the health and education indicators, particularly in remote areas. Education indicators are very low. Primary enrolment rates are the lowest of all PDMC. The gender gap has narrowed but remains noticeable in school enrolment and literacy rates. Health indicators are poor. Available data suggest that child mortality rates and malaria prevalence have decreased slightly. Maternal mortality rates are very high. Access to water and sanitation has improved slightly but urban-rural disparities are extremely high. For all indicators there are great variations between the different provinces / islands.”

Women’s participation in decision-making is improving but remains relatively low. The UN’s Common Country Assessment for the Solomon Islands (2002) reported that “some leaders are prone to treat ideas of human rights and democratic values as contradictory to traditional principles and beliefs. This impinges particularly on the rights of women and children.” The situation has since improved but UNDP’s 2004 regional MDG report has no more recent data for the Solomon Islands.


1. OverviewThere is an Energy Division – with only three approved positions – within the Department of Energy and Mines of the Ministry of Natural Resources (MNR). The Energy Division is in principle responsible for energy policy, renewable energy project development, project implementation and monitoring each if these. It advises the GoSI on all energy matters; is to act as a focal point on petroleum price control, supply, storage and distribution; and convenes the meetings of a national energy coordinating committee. There are numerous other responsibilities including energy database development and maintenance, electricity tariff analysis, energy resource surveys, and energy sector training. However, the Division has extremely limited access to funds for even basic functions such as communications, power and office expenses. There are also overlapping responsibilities with others, e.g. the Prices Advisory Committee (PAC).

87% of the land area of the Solomon Islands is under customary resource tenure, an important consideration for energy development. The traditional land and sea resource management regimes of the Solomon Islands are community based, and participatory. In essence, a “corporation” owns an area and its resources, the directors of which are "primary rights holders" who collectively have the authority to allocate use rights (through the Chairman, the spokesman for the line). Ordinary members are those who hold "secondary" rights. Customary tenure systems, although ancient in origin and constant in principle, have changed. Much of this change is positive since it demonstrates a capacity to adapt to new circumstances.

a. Fossil Fuels

Refined petroleum products are imported by Shell Oil and Markworth Oil, which bought the local assets of Mobil Oil in 2003. The storage depots of both companies are located at the main port in central Honiara, a location with serious safety issues and limited land

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area. Origin Gas Ltd. of Australia is the sole importer and distributor of liquid petroleum gas (LPG). Origin’s main LPG storage is in Honiara and it sells only in Honiara to private outlets, some of which distribute in turn to more remote locations.


The Solomon Islands Electricity Authority (SIEA) is responsible for electric power supply and distribution to all urban and provincial centres – Honiara, nine provincial centres and Noro Township in Western Province. SIEA is a GoSI-owned statutory body with a long history of under-investment, insufficient resources, poor revenue collection and under-skilled staff inherited from former mismanagement. The ethnic tension of the late 1990s and its aftermath, the GoSI refusal to raise tariffs to required levels, rocketing inflation and the ever increasing cost of diesel fuel (which reportedly now accounts for about 72% of SIEA income), has exacerbated the problems faced by the authority.

The Minister responsible for energy (the Minister of Natural Resources Mines & Energy) appoints an SIEA board of seven members including the chair.

A recent World Bank (WB, 2005) audit found that the SIEA made a small operational profit in 2004. However when outstanding loans from the ADB, the Solomon Islands National Provident Fund (SINPF) and the GoSI (some dating back to 1995) were accounted for, SIEA had financial losses of US$ 25 million in 2004 and that 2005 obligations of US$25.2 million were about double the expected revenue. Accordingly, the GoSI has signed an agreement with the WB to restructure the SIEA, manage it jointly with the Solomon Islands Water Authority, restore financial integrity, and attract private sector participation in power supply, particularly in rural areas. The agreement, apparently to run for five years, was only reached in October 2005 and details are not yet known.

c. Renewable Energy

The Energy Division works with the Mines Division of MNR to assess renewable energy resources including hydro and geothermal potential. The Energy Division implements small-scale solar PV and microhydro projects with external financial and technical assistance. SIEA and GoSI discussions underway with the World Bank are understood to include consideration of an IDA loan for hydropower development and the use of coconut oil diesel/fuel blends in two SIEA power plants in Provincial Centres.

d. Regulation

According to an August 2005 PIEPSAP review, the [World Bank] consultant sees the MNR, supported by the PAC as the main electricity price regulator, a specialist function requiring skills and resources that are currently lacking within the government. The same combination of MNR and PAC are responsible for petroleum pricing, which is also a specialist function for which the PIFS provides some ongoing support. There is limited effective regulation of storage and transport of liquid fuels.

2. Policies and legislationThere have been numerous drafts of national energy policies over the past two decades but no policies or plans have been effective. In 2005 PIEPSAP has been advising the

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Energy Division on a Corporate Plan and assisting it to develop a national energy policy framework.

Acts of Parliament dealing with energy issues generally are outdated and require substantial revision if they are to be effective:

The Electricity Act of 1969 establishes the responsibility of SIEA for providing electricity to urban and provincial centres and gives SIEA sole authority to provide and/or supply electricity to urban centres. Private generation in areas where SIEA operates must be licensed by SIEA. It is understood that legislation is being reviewed under the October 2005 agreement with the WB.

The Consumer Protection and Price Control Act (revised in 1995) establishes price control rules throughout the country. In effect, of 16 products mentioned in the Act, only petroleum and LPG are systematically price controlled. The legislation is outdated and difficult to enforce, based on a percentage mark-up of import cost, which varies from supplier to supplier. It also refers to brand-named products and package sizes, many of which are either not found in the market or are sold alongside new brands and package sizes that are apparently not price controlled. Fines for non-compliance are small. The Prices Advisory Committee, an extra-governmental body established under the Act and chaired by the price controller, advises the Minister on price regulation issues. The PAC has advised the GoSI that the Act should be updated and revised.

Fuel storage and handling are covered generically under Chapter 109 of the Laws of the Solomon Islands, written in 1939 and requiring major revision.

The Environmental Act of 1998 was gazetted in 2003 and relevant regulations are not yet in place. There are formal requirements for environmental impact assessments but no specific requirements for energy sector investments such as power stations or oil storage. As far as the REP-PoR consultants are aware, no EIAs have been conducted under the Act but they would be required for projects such as major hydro development.

3. Capacity issuesThe Energy Division is very small (three positions, with perhaps one or two new junior positions) and grossly under resourced, as is the public service in general. As PIEPSAP has concluded, improved capacity will be needed to effectively deal with electric power tariff and structural issues. If the GoSI agrees to private provision of power at provincial centres, and for rural electrification more widely, capacity is required to negotiate and monitor such agreements. Capacity is needed to better establish, monitor and enforce petroleum product prices. If biofuels are to be used by SIEA, capacity will be needed within the utility to effectively test and monitor fuel blends, determine what blends are appropriate for its engines, and assure that warranties (if any are extant) remain valid. In general, capacity is required to assess the new policies, legislation and regulations that will be developed and recommended for adoption.

4. Knowledge repositories and information deliveryThere is an outpost of the University of the South Pacific (USP) in Honiara and access to USP’s wider resources and a satellite teaching programme. Staff of the Solomon Islands College of Higher Education (SICHE) have had at times an interest in energy matters.

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Several NGOs have had various programmes dealing with rural energy and development (e.g. Solomon Islands Village Electrification Council, Guadalcanal Rural Electrification Agency, Solomon Islands Development Trust) and often have skilled people working with them although the SIDT has been less active during 2005. Within the private sector there are individuals and companies with experience in biofuels (Solomon Tropical Products) and solar photovoltaics (Willies Holding Company). There are young technical graduates with an interest and skills in energy issues, some with Internet access, but no formal mechanisms for effective information dissemination.

With 460,000 people speaking 65 distinct languages, an oral rather than written tradition, and sharing a lingua franca, Solomons Pijin in which little is published, information delivery is difficult. At the time of the 1999 census, only 41% of households had a radio and there was (and is) no television. Newspapers are hardly read outside of Honiara. There is a national email communications system under development called PFNet (People First), based on radio communications, with numerous rural stations in place. Dial-up Internet is available in Honiara.


1. OverviewMuch of the information available to the REP-PoR consultant on the energy programme framework in the Solomon Islands is about a year old. As the country is going through rapid change, and both aid-funded and private energy developments have been under discussion for some time, this section is only indicative.


As noted, the SIEA is responsible for developing programmes for urban and provincial centre electrification. The Energy Division has worked with donors and regional organisations since the early 1980s in demonstrating energy auditing and management initiatives, mostly for demand-side management in public sector buildings. None are known to have lasted more than several years. The Energy Division has also developed and implemented a number of rural energy systems, mainly based on solar PV or micro hydro, but there is no formal national GoSI rural electrification programme per se. Some provincial governments have developed nascent rural electrification programmes, and these have been developed and implemented mainly in cooperation with local NGOs, often with overseas resources and links.

SIEA developed two small hydro schemes in 1986 and 1996, 32 kW on the Malu’u River on Malaita; and 185 kW at Buala on Santa Isabel. Three small hydro schemes (total capacity 0.5 MW) were under consideration in 2004. An Australian development organisation, APACE, and several local NGOs (particularly SIVEC) have developed village-based micro-hydro. On Kolombangara, three microhydro schemes (about 5 kWe of output each) were installed between 1983 and 1997 followed by four more robust APACE systems between 1997 and 2004 in Malaita and New Georgia (typically 15 kWe each). Communities desiring similar schemes make significant financial and in-kind contributions.

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There are perhaps 100-150 solar water heating systems in the country; the market is quite small. Solar PV has been used since the 1970s at church missions for lighting, for vaccine cooling in the early 1990s in health centres (failed within a year or two), and Solomon Telekom has PV radiotelephones in most provinces, the largest a 1.6 kW peak repeater station on Ngella. The American Solar Electric Light Fund, working with local NGOs, provided over 110 solar home systems in Guadalcanal in 1997-1998 but most were damaged or stolen during the civil crisis. Only one company (Willies) specialises in PV and provides training. Willies had sold, or had confirmed orders for, about 200 systems from mid 1998 to early 2004.

In the late 1980s, 28 wood-fuelled water boilers were installed at ten boarding schools for cooking root crops. Their current status is unknown. Nearly 100% of rural Solomon Islanders cook with wood, mostly using open fires. An NGO, Voice Belong Mere Solomon has trained women to make sawdust stoves and produce fuel from coconuts to substitute for kerosene. It is not known if the programme has produced and disseminated many stoves or remains active. A local joinery reported in 2004 that it planned to make sawdust briquettes as fuel, estimating that it could supply the fuel wood needs of 20% of Honiara’s households.

Biomass has been used to produce electric power on a small scale and there have been proposals to use sawmill and agro-industrial waste for power generation since the early 1980s. From about 1973-1993, Solomon Islands Plantations Limited, a palm oil producer, generated steam and electricity from a small biomass system. Their plans for a larger 2.5 MW system never eventuated. In the 1970s, small biogas digesters were built at several piggeries. In 1985, the GoSI planned a larger biogas system at Tambea for digesting waste from 800 pigs initially but the cost was high and it was abandoned. Around 1990, a biomass gasifier for power generation was tested at the Batuna sawmill at Vangunu. It produced 15 kWe from charcoal but only functioned for about a year.

In 2004, several small-scale coconut oil producers usd an Indian system (Tinytech; 300 l/day of oil) or a smaller Australian DME technique (30 litres/day) to produce coconut oil as a fuel or for blending with diesel. In 2003, SIEA tested coconut oil as a fuel at a remote power station, Temotu, where diesel fuel was 60% more expensive than coconut oil. There were minor technical problems and but SIEA remains interested in the concept. There have been a few trials of coconut oil as a diesel fuel replacement but on a very small scale.


PIREP (SPREP/UNDP/GEF) – have undertaken assessment of key energy issues in the Solomon Islands, barriers to the development of renewable energy to mitigate climate change, and capacity development needs for removing the barriers. The PIREP national report for the Solomon Islands estimated that the country could potentially use coconut oil to displace as much as 25 million litres of distillate per year. It is understood that the World Bank is currently working with the SIEA to test the practicality of using coconut oil as a fuel in two diesel plants in Honiara.

It is also understood that the GoSI and SIEA are discussing possible mine-related hydropower development, with possible IDA loan finance.

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PIEPSAP (SOPAC/UNDP/Government of Denmark) – co-operation defined in the area of National Energy Policy development.


SOPAC is working with the Energy Division to develop priorities for its future programme.

UNDP’s support programme for the Solomon Islands includes a renewable energy initiative but this has apparently been changed to a community conservation project. No details are available.

The Pacific Islands Greenhouse Gas Abatement through Renewable Energy Project (PIGGAREP) where the Solomon Islands is participating. This is a planned joint SPREP/UNDP/GEF barrier removal project building on the preparatory work undertaken as part of PIREP.


The REP-PoR consultants has no knowledge of new programmes under consideration except a draft World Bank concept proposal for a GEF ‘Sustainable Energy Finance’ Project to improve supply-side energy efficiency, demand-side energy efficiency and renewable energy use in Fiji, Papua New Guinea, Solomon Islands (and possibly other PICs) with possible support through the EU Energy Initiative and others.

2. Policy and legislationThis has been covered.

3. Capacity issuesThis has been covered.



1. OverviewAbout 90% of Solomon Islanders have no access to electricity and a majority probably have little or no access to petroleum fuels. Access to modern forms of energy is largely limited to towns, provincial centres and a few schools and other institutions.


According to the PIFS Pacific Fuel Price Monitor of July 2005, in June 2005, the wholesale price of petroleum fuels in Honiara (excluding all taxes and duties) was about US$0.49/litre for petrol and US$0.55/l for automotive diesel oil (ADO) or distillate. The ADO price was about average for Forum Island Countries and petrol was about US 5¢/l below average. The wholesale (US$0.53/l) and retail (US$0.67/l) prices of petrol were the lowest of Forum Island Countries, primarily because of low import duties and taxes (US 5¢/l, well below all other PICs (except Kosrae state in FSM). The retail price of

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kerosene (US$0.75/l) was about average, despite negligible rates of duty. These prices are for Honiara; for the rest of the country they are considerably higher.


SIEA has a national tariff, with – in principle – substantial cross subsidies from Honiara consumers to all others. In early 2004, the price of electricity was about 17.6 US¢/kWh for domestic consumers and 21.1 US¢/kWh for commercial or industrial consumers. There was also an ‘automatic fuel price adjustment’ (AFPA), varying with the cost of diesel fuel so 2005 tariffs would be considerably higher. The tariff , however, has been largely academic as few customers have been paying their bills and supply has been erratic. Many businesses have their own generator due to frequent SIEA outages. If a business generates its own power in an SIEA service area, it is (or can be) charged at a rate of half of the normal SIEA charge per kWh, except in Honiara where SIEA has been unable to meet demand.

The current tariff is not known but it is assumed that collection (and service) will improve dramatically under the new management arrangements reached in October 2005 with the World Bank. In October 2005, the GoSI introduced an automatic tariff adjustment mechanism whereby 95% of the change in fuel costs and 90% of the Retail Price Index is automatically reflected in tariff adjustments.


In principle, SIEA provides power to urban centres through diesel generators, except for Buala town on Isabel Province and Malu’u substation in Malaita with small hydro. It is not known which diesel or hydro systems are currently operational. Various boarding schools, rural training centres, health centres, rural fisheries centres, tourist resorts, private shops and residents use their own diesel generators for electricity. During the past twenty years, peak demand in Honiara has usually exceeded firm capacity and outages have long been common.

In 2002, the latest year for which the REP-PoR consultants has data, total consumption within the SIEA system was about 42 GWh of which domestic consumers accounted for 27%, commercial/industrial 63% and government 9%. The Honiara system accounted for 76% of total demand, Noro 11% and eight others less than 4% each. Domestic SIEA consumers typically consumed about 132 kWh per household per month.

In 1999, 16% of households nationally had access to electricity, ranging from less than 1% in Rennell-Bellona to 73% in Honiara. However, excluding Honiara city, the electrification rate nationally was under 9%. This is unlikely to have improved and may weel be worse in 2005. Overall, 69% of households electrified in 1999 received power from SIEA. Outside Honiara, 41% of electrified households had SIEA service, 28% had their own power system, and 23% received electricity from a private company. In 2002, SIEA had 9,200 customers of which 76% were household, 17% commercial, and about 2% each were industrial, government or other.

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Fuel is generally available in Honiara and larger centres but the REP-PoR consultants have no firm data on supplies to rural parts of the country. However in general the availability of kerosene and other petroleum fuels is very limited outside of main town areas.


About 89% of all households rely mainly on biomass for cooking, increasing to 95% away from Honiara. As noted above, a very small number of communities have access to electricity from microhydro systems and solar PV but it is not known how many of these are functioning.

2. InstitutionalThis has been covered.

3. Policy and legislationThere is no legislation assuring access to energy services. It is not known to what extent petroleum product price control is effective away from Honiara.

4. Capacity issuesThe capacity within the Energy Division to improve access to energy services to a larger percentage of the population is severely limited by low numbers of staff, skills, resources and the sheer numbers of those – probably 90% of all households – without access to modern forms of energy. The capacity of SIEA to address its core problems has been extremely low for years. There is no effective capacity to address energy efficiency issues although there could be a small demand for energy management services in the commercial sector.

There is some capacity to develop and manage small rural electrification systems, primarily within the NGO community but they rely on a few key individuals and access to overseas support. There is very little capacity to develop programmes to produce biofuels on a large scale or assess their social or economic relevance to the Solomon Islands.



1. OverviewThe Solomon Islands is almost totally dependent on imported refined petroleum fuels for its commercial energy needs but biomass accounts for roughly 61% of gross national energy production, petroleum 38%, and hydropower and solar about 1%. Imports of petroleum fuel have increased less than 2% annually by volume since 1990. There has been little attention to energy management. There are significant opportunities for

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biofuels throughout the country and for geothermal energy and hydro on some islands. There is generally a good solar resource.

a. Uses of energy

In 2002 petroleum imports were about 78 million litres with transport accounting for 56%, electricity 28%, commerce and industry 15% and direct household use (mostly cooking and lighting) 1%. As noted, nearly 90% of Solomon Islanders use biomass for cooking and even in Honiara wood is the main fuel for a quarter of households. There is no reported use of coal and LPG is largely restricted to the capital.


For about a decade form the early 1980s, there were numerous activities, all with donor support, to improve energy efficiency in government office buildings and health facilities. There are opportunities to improve efficiency of lighting and air conditioning in commercial buildings Honiara, and possibly fish processing facilities at Noro. There are no recent studies, as far as the REP-PoR consultants are aware, of opportunities.

It is likely that the diesel systems of SIEA in Honiara and elsewhere have been operated inefficiently for some years, with considerable supply-side efficiency improvement opportunities in production, transmission and distribution.


In 2000, Japanese experts identified about 330 MW of hydro potential in seven islands. Nearly ¾ of this was on Guadalcanal, probably because it was the most studied, and accounts for the bulk of national electricity demand. There are possible geothermal energy resources on four islands (Guadalcanal, Vella Lavella, Simbo, and Savo) of which a site of about 10 MW potential in west Guadalcanal is the most studied. There have been limited assessments of ocean thermal, wind and solar energy potential, none of which is likely to be of large-scale interest in the near future.

In the mid 1980s, copra output exceeded 40,000 tonnes, sufficient to produce about 27 kilotonnes or nearly 30 ML of oil, equivalent in energy terms to 28 ML of distillate. In principle, if it returned to mid-1980s copra production levels, the country could displace about half of diesel fuel imports with coconut oil-derived biofuel, although this magnitude is unlikely to be practical for technical, economic, environmental and social reasons. Palm oil production is expected to resume soon, as the New Britain Oil Palm Company of PNG has purchased the palm oil plantation on Guadalcanal where it plans to create 7000 jobs. According to UNDP, the company has submitted an environmental impact assessment (EIA), which suggests that the environmental impact should be minimal. There may also be plans to develop palm oil in Malaita. Palm oil could in principle be significant source of biofuel, depending on its relative value as a local fuel and an export commodity.

2. InstitutionalThe relevant institutions have already been covered

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3. Policy and legislationThis has already been covered. There is no legislation pertaining to energy efficiency or fuel options.

4. Capacity issuesAt the household level, there is no capacity within the Energy Division or SIEA at present to introduce or implement a programme to (for example) replace incandescent lights with high-efficiency compact fluorescent lights (CFLs) nor the capacity to assess the relative costs and benefits of such a programme to the country, SIEA and consumers

5. Knowledge repositories and information deliveryThis has been covered. There are no additional significant knowledge repositories of which the REP-PoR consultants are aware.


1. OverviewSeveral private companies based in Honiara have recently been involved in production of energy (coconut oil based biofuels), solar photovoltaics (training and installations) and investigations of a low-cost biomass stove market. At the provincial level, there have been attempts to develop rural electrification schemes that provide business opportunities for electrified communities but no details are available on sustainable successes, if any.

2. InstitutionalThere is no institutional support from the government specifically for energy-based entrepreneurs.

3. Policy and legislationThere is no legislation to promote private providers of energy services. It is not known if the current agreement between the GoSI and the World Bank includes development of legislation or regulations for private power production for sale to the SIEA provincial grids.

4. Capacity issuesThe capacity for energy entrepreneurship in the Solomon Islands is very limited, being confined to a few key individuals rather than organisations.

5. Knowledge repositories and information deliveryAs above: this is confined to a few key individuals. As far as the REP-PoR consultants are aware, the only company dealing full-time with solar PV is Willies and knowledge lies with its proprietor, David Iro and his extensive contacts overseas. Solomon Telekom, with solar PV in all provinces presumably has some PV knowledge but the extent is not known. Solomon Tropical Products Limited (SPTL) has some practical experience in using coconut oil in blends with diesel fuel, and Hocking Construction and Joinery has studied the production of sawdust briquettes as wood fuel replacements.

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In general, those interested in biofuels, other forms of renewable energy, or energy efficiency rely on SOPAC, overseas suppliers or colleagues or other external information sources. Those with Internet access rely on web-based information sources.


1. OverviewIt is understood that a World Bank mission is currently (October 2005) exploring opportunities for improving access to finance in the Solomon Islands for both renewable energy and energy efficiency.

2. InstitutionalBanking and financial services are provided by three commercial banks, and by the Development Bank of Solomon Islands (DBSI), credit unions and specialised financial institutions such as the National Provident Fund (NPF), Housing Finance Corporation and insurance companies. There are also informal financial activities in lending, including individual moneylenders. A commercial bank in Honiara has had discussion with overseas investors regarding investment in large-scale hydro facilities, but the status is not known.

UNDP, through its Regional Sustainable Livelihoods Programme, is working with the Australian New Zealand Banking Corporation (ANZ), to provide rural banking services. Rural banking and financial literacy training is scheduled to begin in November, the initial two years in the Guadalcanal Plains region.There are no plans for energy-specific loans but the programme would welcome suggested approaches.

3. Policy and legislationThere is no legislation specific to finance for the energy sector.

4. Capacity issuesAs for the energy sector in general, capacity to deal with financial aspects of energy, whether large urban commercial systems or small-scale rural schemes, is very limited.

5. Knowledge repositories and information deliveryThe REP-PoR consultants have no information on knowledge repositories and information delivery for energy-based entrepreneurship.


1. OverviewWhat limited monitoring that is carried out of energy policies, programmes, initiatives, etc, is through the SIEA, the Energy Division or more usually the regional organisations or donors which provide assistance to implement the SIEA and government programmes.

2. InstitutionalThe SIEA and Energy Division have this institutional responsibility. However, SIEA has been unable to monitor its own operations effectively and the Energy Division lacks the skills or authority to monitor SIEA.

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3. Policy and legislationThere is no specific legislation in place regarding energy sector monitoring.

4. Capacity issuesAs noted, capacity is limited. It is not known to what extent RAMSI has been able to build up the capacity of the GoSI in monitoring such key energy matters as a fair price for electricity and fuel and the extent that price control has functioned effectively.

5. Knowledge repositories and information deliveryFor petroleum pricing, the PAC and Energy Division are the key knowledge repositories but rely on the expert knowledge of PIFS staff to monitor global and regional petroleum prices and negotiate terms of supply. For determination of SIEA tariffs, it is assumed that monitoring has been primarily within the Finance Ministry with some support from the Energy Division but neither has expert knowledge in this area.

The Energy Division is responsible for monitoring those rural projects it has implemented. In recent years, it has not had the resources to do so and was in any case unable to do much during the period of political crisis.


1. OverviewAs noted, the Solomon Islands is largely an oral society with limited written material available in Solomons Pijin. There are typically only 7,000 speakers of each language and English is not widely spoken away from town centres. Less than half the population have access to radio and few to modern communications such as the Internet. Access to information is not restricted by the GoSI but it is far from easy.

2. InstitutionalThere are no local institutions with library materials on energy matters, whether policy-related or technical. The Energy Division probably has the most material and much is outdated and hard to access.

3. Policy and legislationThere is a constitutional right to freedom of expression and association. The print media are vibrant and essentially uncontrolled by the GoSI. There is no legislation that restricts press freedom or access to information. During the political disturbances, the print and radio media were generally not hindered in their comments and criticisms regarding public affairs (although there were incidents of personal intimidation by politicians). Published letters to the editor of the local newspaper, Solomon Star, consistently demanded proper public sector management, accountability, adherence to the law, and transparency.

4. Capacity issuesThe capacity to access and make available relevant information on energy sector issues is very limited.

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J. Conclusions

1. OverviewThe Solomon Islands, with nearly 500,000 people is one of the largest PICs and it has an abundance of natural resources that could be developed to produce modern forms of energy and, in principle, reduce levels of poverty. The use of biomass to produce liquid fuels is one such option. There is a considerable hydro potential but this is not likely to have much direct impact on employment (outside of mining) or poverty. For historical reasons, most of the infrastructural development, investment and provision of services have been within Guadalcanal, whereas most of the population and resources are elsewhere. Much capacity was lost or reduced during the civil disruptions of 1998-2003, and the economy is only beginning to recover. There is a need for considerable assistance to greatly improve capacity across all elements of the energy sector.

2. InstitutionalThere are a very small number of institutions, mainly within the GoSI, that deal with energy issues. None specifically focus on energy and poverty although some NGOs development programmes include this implicitly in their rural development initiatives.

3. Policy and legislationThere is a limited amount of energy sector legislation, most of which is outdated and requires substantial revision. If the GoSI is seriously considering the provision of electricity to provincial centres through private independent power producers (IPPs), this will probably require legislative and regulatory changes.

4. Capacity issuesCapacity is very limited across the board.

5. Knowledge repositories and information deliveryThere are individuals with knowledge of a range of energy sector issues, technologies and opportunities but very limited institutional repositories of up-to-date and appropriate knowledge and mechanisms for its effective delivery and use.

K. Recommendations

1. OverviewThe recommendations below are implicit from the above discussion and conclusions. They will require technical assistance and funding from appropriate sources.

It appears that the SIEA wishes to seriously consider some form of coconut oil-based biofuel in Honiara and perhaps other centers. It also appears that biofuels — based on coconut resources, palm oil or other biomass — could eventually replace a significant amount of imported petroleum fuel while creating substantial rural employment. The GoSI is likely to require advisory services (technical, policy, institutional) regarding

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large-scale commercial biofuel development. However, it is premature to make specific recommendations.

It is recommended that there be an analysis of the effect of large scale use of coconut based and palm oil based biofuel as a diesel replacement on small and large scale producers, on the price structure of the local coconut and palm oil market, on the logistic requirements for moving raw materials to processing centres and on the locations and requirements for those processing centres. Environmental and social implications should be assessed. The end result should be a plan for the rational development of the industry in the Solomon Islands. Other PICs (Fiji, Samoa and others) are seriously considering large-scale biofuels so this could be an element of a wider subregional study.

2. InstitutionalSOPAC (through PIEPSAP) is advising the Energy Division on capacity needs, a corporate plan and a practical energy-planning framework. It is likely that the results will lead to specific areas in which further assistance to the Energy Division could be developed further. It is recommended that specific support be considered when these plans and polices have been substantially completed.

If the GoSI is serious about expanding the provision of reliable rural electrification services to rural areas, it will need to restructure SIEA, consider alternative arrangements (e.g. IPPs), and consider financial mechanisms and tariff policies that are fair to providers and rural consumers. This will require institutional reform but detailed recommendations are premature.

If the GoSI intends to expand the provision of rural electrification through solar PV and/or microhydro, support should be provided to appropriate training institutions (e.g. SICHE) in offering practical, hands on community programmes for their effective operation and maintenance.

3. Policy and legislationDepending on the mechanisms chosen for provision of expanded rural electrification, and the relative powers and resources of the national government and the provinces under the new constitution currently under discussion, there is likely to be a need for new power sector legislation. Assistance is recommended to assist the GoSI develop appropriate new power sector legislation (unless this is being undertaken effectively by others).

The GoSI needs to develop a clear policy on power sector tariffs (a single national tariff, separate provincial tariffs, life-line tariffs) and understand the implications of each for the likely rate of rural electrification. As noted by SOPAC/PIEPSAP, if the GoSI pursues the option of IPPs, there needs to be an understanding of their operations and motives and effective regulation of their operations. Assistance is recommended for these related areas.

4. Capacity issuesThe areas covered above — power sector reform and tariffs, IPP regulations, biofuel studies, etc, —will all require assistance to improve the capacities of the Energy Division, SIEA and others. The details of the need will depend in part on GoSI decisions in the

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coming months but general upgrading of analytical, management, financial and technical skills are needed and will continue to be needed for some time.

5. Knowledge repositories and information deliveryTechnologies and mechanisms for effectively accessing, storing, and delivering knowledge widely, cheaply and effectively throughout the widespread islands of a small country like the Solomon Islands are changing rapidly. We are aware that other initiatives are underway through the ITU, UN system, SOPAC, PIFS, etc, regarding provision and delivery of appropriate knowledge and information to the Pacific for technical decision-making. Initially we propose that knowledge systems for the energy sector be specifically included in such initiatives.

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XXVII. TOKELAU

A. Background

1. Physical conditionsTokelau has a total land area of only 12 km2 located about 500 km north of Samoa. It consists of three atolls, Atafu, Fakaofo and Nukunonu lying in an isolated group on a line running south-east to north-west. Nukunonu, the central island, is about 65 km to the north-west of Fakaofo, the most south easterly island. Atafu, the north-western most island, is another 95 km beyond Nukunonu. Each atoll includes a lagoon enclosed by a curving reef on which there is a string of coral islets (motus), each typically less than 200 metres wide, separated by stretches of reef. The highest point is less than 5 meters above sea level. None of the three islands has a deep water inlet to the lagoon and even small boat passages have had to be blasted through the reef for transit at low tide. Ships must all anchor outside the reef and goods are transferred to shore on small boats and lighters.

Atafu is the smallest atoll with its 42 islets totalling about 3.5 km2, and its small lagoon is about 17 km2 in area. Fakaofo is next larger with 62 islets and a land area of 4 km2 plus a lagoon of about 50 km2. The atoll of Nukunonu is the largest and includes about 4.7 km2 in 24 islets and a large 98 km2 lagoon.

The climate is tropical oceanic and similar to lowland Samoa but Tokelau is close enough to the Equator to have few problems with winds from tropical cyclones though high seas can cause problems when major cyclones pass to the south. The islets are mostly covered with coconut forest with pandanus, mangrove and breadfruit trees also relatively common. Most fresh water is from rainfall catchments though a fresh water lens is available and of reasonable quality on all three atolls. Droughts do occur but usually are not of sufficient extent to cause serious problems with fresh water access for the populace.

2. Population and demographicsThough the chain of islets extend over a long distance, in all three atolls the population is concentrated in a small area. Only on Fakaofo are there two villages (located on adjacent islets); on both Nukunonu and Atafu all the people live in a single village on one islet of the atoll.

Tokelau held its last census in 2001. It counted 1,515 persons in Tokelau (including persons working permanently in Samoa for the Tokelau Public Service), as compared with 1,616 for 1996, nearly a 7% drop due to outward migration to New Zealand. Since Tokelau is a dependency of New Zealand, there is free access by Tokelauans. Around 60% of the nearly 5,000 Tokelauans living in New Zealand were born in New Zealand.

In 2001, the median age in Tokelau was young, around 20. As a result, the dependency ratio in Tokelau is high with 103 persons considered dependent (younger than 15 or older than 59) on 100 persons of normal working age (15-59).

Atafu had 41% of the population (588), Fakaofo had 34% (479) and Nukunonu had 25% (361). The remaining 87 are residing in Samoa but are part of the Tokelau Public Service and considered as residents of Tokelau for census purposes.

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The population has been relatively constant since the 1972 census indicating that there is a continuing emigration to New Zealand.

There is no defined urban/rural boundary. Essentially all the population lives under the same conditions of housing and access to services. Government is split among the three atolls and the head of government position rotates among the three so there is little incentive to migrate from one atoll to another.

3. Socio-Economic structureIn 1996, 63% of the population considered themselves as Protestant (Congregationalist), and 35% as Catholic. A small community (2%) of Jehovah’s Witnesses is also present. In 1996, around 98% of Atafu residents were Congregationalist while 94% of Nukunonu were Catholic. Fakaofo had 76% Congregationalist and 21% of residents stating they were Catholic.

Social unions are stable with less than 1% of the population stating in 1996 that they were divorced or separated from their spouse. Also there is little permanent migration of people among the islands of Tokelau.

Each atoll holds independent elections every three years (on Atafu and Fakaofo all citizens 18 and over can vote. On Nukunonu all citizens over 21). There are no national elections. National leadership rotates through the three island leaders (Faipule) annually.

The primary source of funds is New Zealand with the sale of licenses to foreign fisheries a distant second. Remittances from Tokelauans living in New Zealand is a major source of cash for families.

4. Poverty issuesPoverty issues are minimal. Anyone over 15 that wishes can gain short term employment from the local government (Taupulega) at any time. The Tokelau Public Service (TPS) is the largest single full time employer with about 16% of the workforce. New families can receive a new, modern house from government and all housing is of high quality. With free access to New Zealand, poverty of opportunity is not a serious issue. All three islands have a small hospital and access to reasonable levels of health care is good with no one living more than about twenty minutes from a hospital. Education is mandatory through primary school.

5. MDG progressThere are no MDG reports for Tokelau as it is still a dependency of New Zealand.



Kerosene and petrol are shipped from Samoa in 200 litre drums on cargo-only journeys about every 8-12 weeks since passengers are not allowed to be carried when drums of petrol are on board. Diesel fuel is carried to Tokelau in bulk within the fuel tanks of the delivery ship and transferred to 200 litre drums on arrival.

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Retail purchases are made through an agent in Samoa. The local government store places the orders for fuel delivery and maintains an enclosed storage area on each island. Kerosene is used for cooking, petrol for outboard motors and diesel for electricity generation and the one or two trucks or tractors that typically are found on each island. Diesel would be required for the existing cold storage facilities if they were to be used but that appears unlikely since the cost of operation is high and the need for cold storage low. In 2002, about 162,000 litres of diesel fuel (almost all for power generation), 181,000 litres of petrol (almost all for outboard engines) and 57,000 litres of kerosene (almost all for cooking) were imported.

Bad weather or shipping problems have resulted in short term shortages that in turn result in rationing of fuel but completely running out of fuel is rare.

Retail pricing is based on a mark-up from the purchase price in Samoa to cover shipping, storage, handling and the government store’s profit. There are no taxes or price controls.

Distributing fuels is a matter under the control of local government. On Fakaofo, for example, petrol is rationed to boat owners in order to minimise unnecessary boat use.

LPG is imported by individuals (tanks filled in Samoa then returned empty for refilling) for their own household use. There is no commercial supplier in Tokelau.


The populated area of all three islands is fully reticulated. Fakaofo, with two villages separated by a short area of reef, has 11 kV transmission with an undersea cable connection between the two islets. The other two islands have only low voltage distribution.

The telecommunications company (TeleTok) uses solar PV to supply some of its communications power as does the University of the South Pacific (USP) centre on Atafu. Both are, however, also connected to the local grid.

c. Renewable Energy

Except for the solar PV for telecommunication purposes at TeleTok and the USP centre presently there is no other renewable energy use; even biomass for cooking is minimal. By end of October 2005 it was informed that the 10kWp solar photovoltaic mini-grid installation on Fakaofo has been installed. The Tokelau Department of Energy within the Public Works Ministry will manage renewable energy projects not specifically under another ministry.

d. Regulation

The individual local governments provide all aspects of management and regulation though the Department of Energy (DoE) provides technical support and assists the local governments develop their regulatory system. The DoE has developed standards and guidelines for electric power systems and those have been adopted by the local governments.

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2. Policies and legislationIn 2004 a National Energy Policy and Strategic Action Plan (NEPSAP) was prepared and approved. This was funded via UNDP/UNESCO. Energy efficiency and increasing use of renewable energy are a strong component of the policy. It is official policy that Tokelau has as its long range goal 100% renewable energy for local use and a per-capita reduction of electricity use.

3. Capacity issuesCapacity is very limited. The loss of one well trained individual employed by one of the three power systems is a serious problem. The present head of the DoE is has strong small power system experience but he is an expatriate from Tuvalu and when he leaves, his replacement will have had only a few years as a trainee. There is no capacity in Tokelau for the installation, operation or maintenance of renewable energy systems. That capacity will need to be developed quickly if the 100% renewable energy goal is to be reached.

4. Knowledge repositories and information deliveryInformation delivery is effectively through word of mouth. The only repositories of energy information are the manuals and records associated with the energy installations. USP has an extension facility on Atafu for basic courses but all teaching is through video, satellite and self-study.



Until about 2003, the energy programme had focused entirely on developing electrical power that is adequate and reliable.

The Tokelau Power Project (TPP) funded by the Government of New Zealand had as a goal a fully functional power generation and distribution system that would give reliable services to Tokelau for the next 20 years. The TPP included refurbishment of the diesel electricity generation capacity as well as the distribution network on each of the three atolls.

Until the present there has been no renewable energy development that affects households, only the TeleTok and USP satellite power systems. In the period 2002-2004 preparations were laid for adding a significant solar PV component to the Fakaofo grid.

In 2003, the first draft of the National Energy Policy was prepared, which endorsed by end of 2004.


A 10kWp solar photovoltaic installation is to be made late in 2005 on Fakaofo. It will provide independent power to a section of the grid until the battery charge level reaches a preset minimum. At that time that section of the grid will be connected to the rest of the grid that is powered by diesel generators. Considerable technical complexity is avoided

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by not attempting to “mix” the PV power and the diesel power but the end result is still a reduction in fuel use by the diesel generator. This project is funded by the Government of France, Government of New Zealand, and UNDP. PIREP (SPREP/UNDP/GEF) – have undertaken assessment of key energy issues in Tokelau, barriers to the development of renewable energy to mitigate climate change, and capacity development needs for removing the barriers.When the TPP project ended in December 2003 there were outstanding works, which are now being addressed by a major follow-up project. This follow-up is funded by the Government of New Zealand.


There are no pipelined energy projects at this time.d. Programmes under consideration

If the 10 kWp PV installation proves reliable and the economics look reasonable, a second stage phase is proposed to expand the size of the Fakaofo PV installation and/or install a similar system on of the other two atolls.

2. InstitutionalThe two person Department of Energy provides operating standards and guidelines for the three electrical power systems and provides a programmatic interface for external energy programme providers.

3. Policy and legislationA National Energy Policy that emphasises renewable energy use and energy efficiency has been adopted. There is no specific energy legislation.

4. Capacity issuesThere is minimal capacity for developing or implementing energy programmes and the small size of the country and the ease of migration to New Zealand by trained personnel makes it unlikely that significant capacity will be developed in the future.

5. Knowledge repositories and information deliveryNone of significance is based in Tokelau.



The cost of fossil fuel tracks that of Samoa (the lowest cost among the Forum Island members) with shipping and handling adding on the order of 15% to the Samoa price.


Each island government establishes the charges for electricity (in 2003 NZ$0.30, NZ$0.35 and NZ$0.50 per kWh respectively). In no case is the cost of power delivery

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fully met by user payments since real costs range from about NZ$1.02 on Fakaofo to NZ$1.82 on Atafu.


Effectively 100% of the population lives in a home connected to the grid. Power typically operates 15-18 hours per day though hours can be extended on request (and with added payment by those requesting).


Problems with shipping have caused fuel shortages. There is no bulk storage of fuels and there are only a few weeks of reserve available should the M.V. Tokelau breakdown (as happened a few years ago) or should there be a period of bad weather preventing offloading of drums of fuel.


The solar resource is good with one of the higher insolation levels among the PICs. The wind resource has not been properly evaluated but indications are that it is not likely to be economic. There are a huge number of coconut trees so potentially biofuel production is possible but complex land issues, the cost of transport from distant islets and the relative affluence of the population make it difficult to develop.

2. InstitutionalEach island government arranges for new connections and for the distribution of electrical power to all households.

3. Policy and legislationIt is policy that there be universal access to electrical power and that renewable energy be developed to provide an increasingly large percentage of that power.

4. Capacity issuesThere are no capacity issues regarding access since all of Tokelau has access to both fossil fuels and electricity on an equal basis

5. Knowledge repositories and information deliveryNone relating to access.



Almost all diesel fuel is used for power generation, almost all petrol is used for outboard motors on boats and kerosene is used for cooking as is LPG and firewood.

Electricity is largely used for refrigeration since almost every household has either a refrigerator or a freezer (some have both). Lighting and entertainment devices are second in household electricity use (mostly radios though an increasingly high percentage of

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households have a video system). Washing machines are also common. Household use represents the majority of electrical use. Households average about 30-40 kWh/month. Large fish freezers were installed on each island as a part of a failed attempt to attract local people to commercial fishing. The freezers are not used. If they were repaired and returned to service, they would represent the largest electrical load on each atoll.


The efficiency of electrical use appears to be relatively poor. Freezers and refrigerators typically have little of value in them – the cost of electricity often far exceeds the value of the items inside – and lights are often left switched on, going on and off when the power goes on and off. Lighting efficiency can be greatly increased through replacement of existing fixtures with units having electronic ballasts. This would also increase the efficiency of the power system by increasing the power factor.

The efficiency of diesel use for the power system appears about average for the size of system installed. The efficiency of petrol use on Fakaofo is relatively good since petrol is typically rationed (20 litres per fortnight per family group) to boat owners to help ensure that boat trips are useful and not “joy-rides”.

Firewood has mostly been replaced by kerosene with LPG use increasing. However, the traditional Umu (underground oven) remains in use for special days and requires substantial amounts of firewood.


Only solar energy appears developable for the foreseeable future though there is the potential for development of biofuels if land and economic issues can be solved. For the distant future, there is some wave energy and ocean thermal (OTEC) development possibility.

2. InstitutionalThe DoE operating guidelines include maintaining a good efficiency of power generation but there is no institutional structure for demand side efficiency improvement.

3. Policy and legislationThe national energy policy includes improving energy efficiency with specific strategies for both electricity and petroleum. No legislation is directly relevant to energy efficiency measures.

4. Capacity issuesThere is very limited capacity for supply side efficiency activities and almost none for more than the most basic demand side measures.

5. Knowledge repositories and information deliveryNone within Tokelau outside of the very limited repositories of DoE.

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1. OverviewThere is none.

2. InstitutionalThere are none.

3. Policy and legislationThere are no policies or legislation relating to energy entrepreneurship.

4. Capacity issuesThere is no capacity specifically for energy entrepreneurship.

5. Knowledge repositories and information deliveryNone within Tokelau.


1. OverviewThere are no formal banks in Tokelau. Each island government has a banking function though it is not well developed. Purchases can be arranged on credit through the local government store and sometimes private shops. For some purchases made in Samoa (e.g. large appliances and boats) credit can often be obtained through sellers.

2. InstitutionalNo formal finance system.

3. Policy and legislationNone.

4. Capacity issuesNo capacity beyond very basic provision of credit.

5. Knowledge repositories and information deliveryNone.


1. OverviewThe power system operators on each island provide the DoE with operational statistics on a periodic basis and DoE evaluates the data to see how system efficiency is being maintained and whether the operations indicate problems with equipment or the overall system. In general the quality of the data are poor and often not provided on a timely basis.

There are no statistics available for fuel purchases other than purchase receipts.

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2. InstitutionalThe DoE provides what little monitoring and evaluation of Tokelau energy systems as exists.

3. Policy and legislationThe national energy policy does not specifically include data collection but does so implicitly. There is no legislation relating to energy monitoring and evaluation other than as relates to safety issues.

4. Capacity issuesThe poor quality of the data provided by island utilities indicates a need for training in monitoring. Local capacity for evaluation of energy data also would benefit from additional training.

5. Knowledge repositories and information deliveryRecords at power houses and the DoE.


1. OverviewRadio broadcasts from Samoa and the expensive overseas telephone service provide the bulk information from outside Tokelau. There are no local newspapers or TV stations, but a FM radio station exist on each of the three atolls.. Internet access is very expensive, even by Pacific standards, and where used is typically limited to basic email and essential downloads of data.

Village meetings are a common means for information delivery.

2. InstitutionalThere are no public libraries though a small collection of books can be found at the USP centre on Atafu and at the public schools. Technical reports and data may be available in government offices but are not well organised or easy to access.

3. Policy and legislationThere is no legislation or policy specifically oriented toward information delivery or repositories.

4. Capacity issuesNone known.

5. Knowledge repositories and information deliveryAbout 55% of the population older than 15 do not have a school certificate but the percentage of certification is much higher in the younger segments of the population and the average level of education is rising over time. School is compulsory age 5 to age 15. A school to form 4 (16 years old typically) is present on each atoll. The boarding school located in Fenuafala, Fakaofo, reaches form 5 and serves all of Tokelau. In 1996, 83% of 16 year olds and 58% of 17 year olds were still in school. Tertiary education is only

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available overseas (except for the USP distance education facility on Atafu) and, for those who can qualify, scholarships are available for matriculation in Fiji and New Zealand.

There are no television broadcasts originating in Tokelau. There is a FM station on each island and there are short wave radios and satellite communications with Internet available but at high cost, it is necessary to connect to an Internet Service provider (ISP) in Samoa by overseas phone since there is no local ISP. The USP extension site has its own satellite connection for delivery of educational materials.

J. Conclusions

1. OverviewNeither poverty nor access to energy is an issue in Tokelau.

The very small size, isolation and dispersed nature of Tokelau (effectively three states of 500 persons each) combined with free access to New Zealand make it impossible to maintain the skills needed for dealing with energy issues at other than a basic level.

2. InstitutionalFor the size and needs of the islands, the institutional system – a Department of Energy providing standards and guidelines for energy related operations by local governments – appears a reasonable approach for electric power management.

3. Policy and legislationThe National Energy Policy and Strategic Action Plan (MEPSAP) is new and so far has been weakly implemented. Assistance in its implementation and codification are needed, particularly in the area of energy efficiency and in trying to solve the problems associated with biofuel development.

4. Capacity issuesBecause of the constant loss of trained personnel to emigration, there needs to be continual access to (and funding for) technical training in Samoa, Fiji or New Zealand. Apprenticeships of power utility staff with the small utilities of Tuvalu, Niue or even Samoa should be encouraged.

5. Knowledge repositories and information deliveryKnowledge repositories are largely external. With the small population concentrated in each island into a very small area, village meetings, information boards and written handouts can be low cost and effective means for information delivery.

K. Recommendations

1. OverviewThe goal of 100% renewable energy for Tokelau should be supported wherever possible. Assistance in obtaining funding and design expertise for expanding the solar power

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systems already installed should be provided. Assistance is warranted in working out a process whereby the problems associated with biofuel development could be overcome. Technical assistance in establishing specific energy efficiency measures and energy monitoring systems would be of great value.

2. InstitutionalLocal government stores should be required to stock only high energy efficiency lights. All local governments should follow the lead of Fakaofo and ration petrol for outboard motors. Tariffs should be re-evaluated in the light of studies of generation costs.

3. Policy and legislationNo additional policy or legislation development is recommended at this time.

4. Capacity issuesProvision of further training and capacity building support should be provided to DoE and the island power utilities. In particular there is a need for training to allow island power managers to be able to determine the real cost of power and to understand the social and economic effects of different levels of electricity tariffs. Training and capacity building relating to energy efficiency needs to be carried out with DoE staff and the local governments.

5. Knowledge repositories and information deliveryDevelopment of a local ISP to allow Internet access to become more generally affordable could significantly improve information access and delivery. The DoE should develop handouts and other information delivery processes focused on energy efficiency improvement that are delivered through the local stores at the point of sale.

The DoE should be assisted in the further development of their power system standards and guidelines, particularly as relates to data gathering and monitoring of system operation.

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XXVIII. TONGA

A. Background

1. Physical conditionsTonga consists of 176 islands with a total area of 748 km2 and an EEZ of about 700,000 km2. Tonga is about 2/3 of the way from Hawaii to New Zealand, located between 15 and 2350 South Latitude and 173-177 West Longitude. There are four groups of islands (Tongatapu, Ha'apai, Vava'u and Niuas) and 36 islands are inhabited. The largest island is the capital island of Tongatapu. Most islands have a limestone base formed from an uplifted coral formation but some have limestone overlying a volcanic base. A few are purely volcanic in origin though among these only Niuafo’ou in the Niuas has significant population. There is volcanic activity at present and there have been several eruptions over the past century.

The climate is tropical with warm (December to May) and cool (May to December) seasons. Winds are seasonal with tropical cyclones most likely between November and March. Although a number of tropical cyclones typically pass through Tonga each year, it is relatively rare for a major cyclone to pass over a heavily populated area.

2. Population and demographicsTonga is a Polynesian country with a language similar to that of Samoa and other nearby Polynesian states. The 1996 census counted 97,784 people and showed an average annual growth rate of 0.35% for the previous ten years. Over 2/3 of the population is on Tongatapu. Urbanisation increased at nearly 4% per annum with Tongatapu 80% urbanised. Tonga is presumably even more urbanised now, nearly a decade later.

3. Socio-Economic structureThe four island groups were joined in 1845 into a Kingdom that became a Constitutional Monarchy in 1875. Tonga became a British Protectorate in 1900 but has never been considered a colony. Protectorate status was rescinded in 1970 though Tonga remains a member of the Commonwealth. His Majesty King Taufa’ahau Tupou IV was crowned in 1965.

The executive branch consists of the King in Privy Council, the Prime Minister, Ministers of the Crown and Governors of Vava’u and Ha’apai. Cabinet consists of the Prime Minister and Ministers of the Crown. All members of the Privy Council are appointed by the King. The legislative branch is unicameral with 30 members. Twelve are for Cabinet Ministers, 9 are nobles elected by the country’s 33 nobles and 9 seats are filled by popular election. There is growing public pressure to change the system so that elected members have more of a voice in Cabinet. Elected members serve 3 year terms. The Judiciary branch consists of an Appeals Court, a Supreme Court, a Lands Court and Magistrate Courts. The US State Department’s 2004 Tonga Country Report on Human Rights Practices reports that Tonga’s human rights record was poor as citizens have noright to change their government.

Tonga has a small open economy with squash, coconuts and vanilla the main export crops and these make up 2/3 of total exports. A high proportion of food used in urban

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Tonga is imported, mainly from New Zealand. Remittances are important to the economy as is tourism. Private sector development is emphasised in Tonga’s Strategic Development Plan and there is a reasonably sound basic infrastructure and well-developed social services. Fisheries and tourism are considered as having the most potential for further economic growth.

In recent years, GDP growth has been nearly 3% per year. There have been concerns about inflation and declines in foreign reserves. ADB projects growth at 2.6% in 2004 and 2.8% in 2005. The GoT is projecting an optimistic 5.4% through 2009 though that high growth rate appears unlikely given the current political instability and the high cost of imported fuels. Export growth is vulnerable to increases in oil prices and transport costs and tourism is vulnerable to increasing transport costs and to any perception of political instability.

In 2002, petroleum accounted for only around 5% of total imports by value though the doubling of crude oil prices since early 2004 is expected to have increased that percentage substantially.

4. Poverty issuesAs with most PICs, poverty issues are not ones of access to money, the subsistence and barter economy of the rural islands does not require much money for the maintenance of a comfortable lifestyle, but rather there is a poverty of opportunity: opportunity for good health care, opportunity for a good education and opportunity to advance in social and economic position. As is the case with a number of PICs, rural resident’s nutrition and health is often better than that of urban residents due to the relative affluence of urban dwellers leading to life-style diseases caused by an increased incidence of alcohol abuse, “junk” food use, obesity, stress and insufficient exercise. However urban areas have better schools, better health care access and lower costs for fuel, basic amenities and most services.

In late 2003, the ADB undertook a survey of 16 communities form the four outer island groups to detrmine their own perceptions regarding poverty. According to the resulting report (Priorities of the People: Hardship in Tonga, ADB, 2004), most people perceived an improvement in their situation in the previous five years citing increased numbers of permanent homes built; improved services; availability of skills training for women and youth; and better living conditions because of money earned from commercial farming. However, people also noted a declining trend of more school drop-outs; more joblessness; higher prices of goods; and deteriorating quality and/or rising costs of services (particularly water supply, education, roads, and transport). The higher cost of living and falling value of the Tongan Pa’anga, as well as perceived in-fighting in the Parliament and waste of public funds, were said by several communities to contribute to hardship. Hardship was said to be present in both urban and rural areas, with a larger concentration in rural areas and outer islands with less access to a good water supply, electric power and markets. Data from a 2001 Household Income and Expenditure Survey (HIES) suggested that 23% of all households nationally were below a basic needs poverty level of T$28 per person per week.

In both urban and rural areas, family ties remain strong and the extended family provides social and financial support for its members. Of the six Pacific countries for which the

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UN determined a Human Development Index in 2004, (PNG, Solomons, Vanuatu, Fiji, Samoa, Tonga), Tonga had the highest ranking of the six. It was ranked 54 out of 144.

5. MDG progressThe ADB reports that “Tonga has already achieved or almost achieved several of the targets specified in the Millennium Development Goals. It has a very high literacy rate and high primary and secondary enrolment ratios. Health indicators have been steadily improviing, but there is a rapid increase in life-style diseases. Available data suggest that access to safe water and sanitation is widespread….There are, however, signs of rising unemployment and a rural-urban drift towards main islands …. Efforts need to be strengthened to ensure that all parts of the population have assess to essential basic social services and quality education.”


1. OverviewThe Ministry of Lands, Survey and Natural Resources includes an Energy Planning Unit (EPU) that is expected to deal with energy planning, policy development and project coordination. The unit has four staff on Tongatapu and maintains staff on rural islands to manage solar rural electrification projects. One representative is on Ha’apai and one assigned to the Niuas.

a. Fossil Fuels

Petroleum products except for LPG are supplied and distributed by Shell and BP under contracts through government tenders. Pricing is annually negotiated with bimonthly validation. LPG is imported by Tonga Gas and distributed through Tonga Home Gas.


Electricity on the urban islands is provided by Shoreline Power, Ltd., a locally owned private company. The larger rural islands have community operated diesel grids. Individual tariffs are established for each island system, there is no cross subsidy from Tongatapu consumers to those of other islands.

c. Renewable Energy

The smaller rural islands have solar power provided in independent solar home systems of a size sufficient to provide 24 hour power for lighting and entertainment appliances such as radios and CD players.

d. Regulation

The Tonga Electric Power Board (TEPB) is in principle an independent utility regulatory agency though its independence from Shoreline interests has been questioned. Any entity wishing to generate electricity on an island or islands with a Shoreline grid must first obtain approval from Shoreline. All electrical generation for public use must have a license from the TEPB. Tariffs are not regulated.

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The Competent Authority (CA) establishes the maximum wholesale and retail prices for key petroleum products.

The EPU has established informal, internal standards for the installation and maintenance of solar PV systems and since the EPU purchases the necessary solar components and contracts for the installation of the systems, those standards are used for PV project implementation. The EPU also acts as advisor to the PV management committees for Ha’apai and the Niuas though there is no legal requirement for the advice to be taken by the committee.

2. Policies and legislationThere is a draft Tonga National Energy Policy that had not been endorsed as of mid 2004. There are several committees and working groups that meet on an ad hoc basis to consider energy related matters. The SOPAC / PIEPSAP project is assisting the EPU finalise a renewable energy planning framework.

Key legislation and regulations relating to energy include the Price & Wages Control Act, the Electric Power Board Act, the Draft TEPB Bye-Laws, the Draft Energy Bill, the Draft bye-laws on regional rural electrification, the Cooperative Societies Act, the Petroleum Act (relating to petroleum exploration) and the Forestry Act. The Environment Impact Assessment Act and the Draft Environment Management Bill could also affect energy development (Bills are draft Acts that are to be considered by Parliament but have yet to be passed into law).

3. Capacity issuesThe capacity of the EPU appears generally adequate for its primary Cabined designated role of managing renewable energy development.

4. Knowledge repositories and information deliveryThe EPU maintains a small, but not well organized library of project reports, operational and monitoring reports, training manuals and general energy information. Information is delivered on request.



Until 1998, the TEPB was a government owned utility serving the urban areas of Tongatapu, Ha’apai, Vava’u and ‘Eua. A private company, Shoreline, took over the TEPB operations in 1998 and the TEPB has now become a licensing and, on paper at least, a regulatory body.

Since 1984, rural electrification has largely been carried out through solar PV provided to individual households with most funding coming from the EU though Australia and France have provided funding. In 2002, an AusAID project installed diesel power grids on several larger islands of the Ha’apai group. All the rural electrification projects are managed by island group committees with EPU technical support.

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Fossil fuel supply has developed in a purely commercial sense. Presently Shell and BP have the storage facilities in Tonga and both supply and distribute a full range of petroleum products (except LPG).


Solar PV based electrification of the Niuas group of islands is underway using New Zealand funding. The project will be completed in 2006 and will affect a total of around 100 households. When the project is finished, the EPU will be providing technical support for nearly 1,000 solar home systems installed in Tonga.

PIREP (SPREP/UNDP/GEF) – have undertaken assessment of key energy issues in Tonga, barriers to the development of renewable energy to mitigate climate change, and capacity development needs for removing the barriers.

PIEPSAP (SOPAC/UNDP/Government of Denmark) – co-operation defined in the area of a Renewable Energy Policy framework.


The Pacific Islands Greenhouse Gas Abatement through Renewable Energy Project (PIGGAREP) where Tonga is participating. This is a planned joint SPREP/UNDP/GEF barrier removal project building on the preparatory work undertaken as part of PIREP.


Under consideration is the rehabilitation of the Vava’u solar PV rural electrification project to bring it up to current technical standards and to operate it under a committee format as has been adopted for the Ha’apai and Niuas PV projects.

2. InstitutionalThe EPU, Central Planning, the Ministry of Finance and, where donor funds are involved, the Ministry of Foreign Affairs all have some part in the development and/or implementation of energy programmes. In some cases, Cabinet also will be involved.

There are no clear lines of responsibility for energy projects or what agency is responsible for renewable energy projects. Though several PV powered rural electrification projects were implemented by the EPU beginning in 1984, the large 1996 EU funded rural solar PV electrification programme for Vava’u was developed and implemented without consultation with the EPU even though the only technical competence and experience in solar PV for rural electrification was at the EPC. The project has not been sustained and is being considered for rehabilitation since it failed to provide a long term, sustainable electrical supply due both to poor technical and poor institutional design.

3. Policy and legislationAlthough there is a draft energy policy that affects programme development and implementation, that policy has not been accepted by Cabinet. A Renewable Energy Policy framework is being developed with support from PIEPSAP. There is no legislation that specifically applies to energy programmes or projects.

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4. Capacity issuesThe EPU has developed good capacity for the technical support of PV based rural electrification. Additional capacity is needed if energy efficiency programmes are to be handled by the EPU as is proposed under the draft energy policy.

5. Knowledge repositories and information deliveryThe files and reports available from the EPU provide a good information resource regarding their programmes. However there is no accessible information regarding the development of Shoreline programmes or for BP or Shell.

Australia and New Zealand Aid offices on Tongatapu also can be considered programme knowledge repositories at least for the projects they have funded in Tonga.



The Forum Secretariat Petroleum Price Monitor places Tonga as at the median level for PIC petroleum wholesale prices (excluding tax and duty). However, the import tax on petroleum products is 35% for motor spirits and distillate and 30% for aviation gasoline and jet fuel. This makes the retail price for petroleum products substantially higher than many PICs and has helped force users to maintain a higher efficiency of fuel use for transport than most PICs. Fuel for electricity generation by the urban utility and outer island community electricity systems is imported duty free, however.


The cost of electricity to domestic users in 2003 was T$0.455 (~US$0.24) per kWh on Tongatapu, a price that is little changed in real terms since 1992. Fuel adjustments are applied to tariffs so the recent fuel price increases have been passed on to electricity customers.

For the 12 hour per day community operated diesel powered electricity systems of Ha’apai, the cost of generation from the AusAID provided diesel systems is as high as T$2.00 per kWh (~US$1.10) due largely to an improper system design by the AusAID consultants that does not match actual household needs, and fees received are generally insufficient to pay operating costs. This has required “fund raisers” on Tongatapu to be needed to buy fuel for the diesels since cash available on the islands has been inadequate to pay the fuel bills. Unfortunately the system is too expensive to operate on a 24 hour basis and the part-time power that can be made available is not generally of much use for economic development. Indeed, there is concern that the AusAID diesel projects have increased island poverty due to the increased export of hard to earn cash from the island residents in order to purchase fuel


In 1996, nearly 80% of homes were electrified and due to rural electrification programmes since that time, coverage is estimated to have risen to around 95%.

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Electricity on the urban islands of Tongatapu, ‘Eua, Lifuks (Ha’apai) and Neiafu (Vava’u) is generated solely by diesel engines. The quality of power has been good and reliability high. Small grid systems for larger Ha’apai islands (‘Uiha 168 customers, Ha’ano-106, Ha'afeva-69 and Nomuka-110) were constructed with AusAID funding in 2001-2003. The systems are powered by diesel generators and operated by an electricity cooperative on each island under license from TEPB. Hours of operation vary by island but typically are less than 12 hours a day. The design of the systems is not appropriate to the requirements of the islands and the per kWh cost of operation has been markedly higher than predicted by the AusAID contractors. The cost for equivalent service is substantially higher than that provided by the solar PV installations on nearby islands.

There is some private generation, particularly on Church and commercial properties in the outer islands.

Solar home systems provide power for most of the smaller outer islands with the most recent installations including 150 Wp of solar capacity which is sufficient to provide 24 hour power for lighting and small communications and entertainment appliances. The cost of the services to households is about the same as that which was required for the fossil fuel purchases for lighting and for the purchase of radio batteries in the past. Therefore the quality and convenience of the services have greatly improved with no additional cash outlay by rural households.


Outer island household access to fossil fuels is generally available though stored reserves are typically low and a late delivery usually means fuel rationing or no fuel at all. For those islands with solar PV for lighting and radio power, the requirement for fossil fuels on outer islands is limited to outboard motor fuel. Since most families have a traditional canoe available for fishing, on those islands losing access to fuel for a short time is annoying but not a serious problem. On islands where diesel engines power the electrical system, it can be a major problem though power outages due to lack of fuel are more likely due to lack of funds to buy sufficient fuel than to delivery delays.


Biomass for cooking has increasingly been replaced by kerosene and LPG is presently replacing kerosene as the cooking fuel of choice. Therefore biomass energy use has fallen over the recent years though it is still used extensively on rural islands and everywhere for the umu (underground oven) mode of cooking that is traditional for special occasions and Sunday meals. There are no recent surveys of household biomass use.

Copra drying is typically done by burning the husks and shells to provide heat for the drying process making copra drying a significant use of rural biomass resources in those areas still producing copra.

2. InstitutionalShoreline has institutional responsibility for electricity access on the urban islands and EPU has accepted responsibility for the rural islands. BP and Shell provide access to fuel on all urban islands with private distributors or government ships delivering to other islands.

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3. Policy and legislationIt is considered government policy, though unwritten, to provide electricity and fossil fuel access to all of Tonga. There is no specific legislation relating to energy access.

4. Capacity issuesSince access is approaching 100%, there does not appear to be significant capacity problems relating to providing access for either electricity or petroleum products.

5. Knowledge repositories and information deliveryShoreline, BP, Shell and the EPU are the main knowledge repositories for energy access information though only the EPU can be expected to cooperate and provide requested information.



Imports of Petrol in 2000 were about 13,400,000 litres, diesel was about 18,800,000 litres and LPG about 1,270,000 litres. Sectoral sales data for petroleum products was not available so demand is assumed to be equal to imports but cannot be separated into commercial use and transport use. Shoreline has not provided recent annual operational data for electricity generation but PIREP estimated it at about 33 GWh with therefore a total diesel fuel use of around 8.5 ML. That implies that about 10,300 ML of distillate was used for land or sea transport and commercial use. Petrol use is divided between land transport and small boat use with land transport dominating in the urban areas and small boat use in the rural areas. Jet fuel is used for interisland air transport. The per-capita fuel use (excluding LPG) was about 330 l/person/year.

Since recent data for annual electricity use by sector was not available, sectoral use is estimated from earlier values and trends. An AusAID study in 1999 estimated average household use of electricity at 81 kWh/month with the domestic sector accounting for 72.5% of utility customers but only 37% of sales. In 1999, about 85% of Tonga’s electricity was generated on Tongatapu. With approximately 30.3 GWh generated (1999, the last year of generation data provided for Shoreline) that represents a per-capita use of about 26 kWh/month per person. Available records show an average household use of 81.4 kWh/month for Tongatapu where about 85% of Shoreline sales are made.

The primary use for biomass is for cooking and copra drying. Even in urban areas where the primary cooking fuel is kerosene or LPG, wood is used for the traditional umu or earth oven. Fuel wood is shipped in from other islands to Tongatapu for sale in the market and at retail outlets and represents a modest income opportunity for rural dwellers particularly on nearby ‘Eua. In the late 1980s, a large scale coconut processing facility was funded by AusAID on Tongatapu that included co-generation through the burning of husks and shells. Unfortunately the system could never be made to work properly and the poor plant design caused production problems that resulted in closure of the facility.

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For nearly 20 years, Tonga has used photovoltaics for household electrification in rural areas. Though early projects did not do well, as experience was gained, each new project improved in technical and institutional quality with the current implementations in the Ha’apai and Niuas groups including 150 Wp of panels, a service fee sufficient to pay for operation and maintenance, an interest bearing battery replacement fund and an institutional structure that provides good maintenance and customer support. Tonga Telecom also routinely uses solar photovoltaic systems to reliably power outer island telephone networks.

Solar water heating has been utilized in Tonga for over 20 years with one manufacturer of modular thermosyphon units established in Tongatapu since 1986. Most hotels, guest houses and schools use solar water heating as do a significant number of private residences but the market for piped hot water is weak and the initial cost of the solar unit limits sales to households. An influx of cheap Chinese made solar water heaters is beginning in the Pacific and this may result in greater acceptance by the domestic market in the future.


The efficiency of use of electricity and fossil fuels is relatively good due to the high cost of both electricity and petroleum products though the efficiency of lighting, household appliances and government use of air-conditioning could be improved through efficiency improvement investments paying back in less than five years. PIREP estimated that these easily applied energy efficiency measures could reduce fuel use by 10% and certainly greater savings are possible.

In the mid 1990s, a PIFS initiative, funded by UNDP and working closely with PPA, assessed the demand side management (DSM) potential within ten PIC power utilities. Typical practical overall potential demand savings (MW peak) were 17% with a range of 8-28% and typical potential energy savings (MWh) were 17% with a range of 6-27%, even though not all options were investigated. The assumed benefits were confined to reduced energy consumption and deferred capital expenditure. Tonga had the highest potential savings of the ten countries surveyed, 28% for maximum demand and 27% for energy sales, respectively.


1). BiomassThough around 65% of the land area is under some sort of tree crop, (mostly coconuts) for the near term, there is little opportunity for biomass from forest products to be a significant energy resource. Plantations of pine and hardwoods for export are being planted and when harvesting does take place, there may be sufficient mill waste to provide biomass for co-generated energy, as is the case in Fiji and PNG.

2). BiofuelsBiofuel based on coconut oil offers the best opportunity for rural income generation of any energy technology. Income from copra has been in decline for many years, partly due to the low price available on the world market and partly due to other rural income opportunities offering a better return on invested time. However, the market for coconut

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oil as a diesel fuel replacement is strengthening and may make coconut production more financially attractive. In 1995, the resource was estimated to be sufficient to produce around 10 ML of coconut oil per year. If rehabilitation efforts for the coconut industry are carried out and if barriers to the use of biofuel for power generation can be eliminated, the maximum offset of diesel fuel by biofuel could be as high as 50% with a higher percentage possible in the longer term.

3). Solar ElectricThe solar resource is very good in Tonga, particularly toward the north where satellite measurements indicate as much as 5.8 kW/m2/day. Nearly 20 years of solar powered rural electrification experience confirms that there is a useable resource and one that is economically suitable for the energy requirements of rural households.

4). Solar ThermalSolar water heating is a commercially available technology widely used in Tonga on tourist accommodations and high-end homes. Its market penetration is limited partly by lack of market demand for piped hot water in homes, the availability of efficiency, low cost demand type gas and electric water heaters and partly by its initial cost of installation.

5). WindA wind and solar resource assessment carried out by the Forum on Tongatapu in 1995 indicates a developable wind resource. However, sites with clear access to wind energy are difficult to find due to the almost universal presence of tall coconut trees and the complex issues of land use. There have been some external studies regarding the feasibility of wind power for Tonga but no action has been taken. There have been suggestions by an American company for a 22 MW wind farm on Tongatapu but to date no action has been taken.

6). OTECThough a significant resource is known to exist, the technology is still experimental in nature and not adequately proven for PIC use.

7). HydroThere is no developable hydro resource in Tonga.

8). GeothermalThough there have been no geothermal energy studies for Tonga, there is strong evidence of its presence. However, the location of the probable resource is not in Tongatapu where there is the greatest need for energy. The energy demand in the Niuas and Vava’u, where the presence of a geothermal resource is more likely, is insufficient to warrant the major investment needed to develop the resource.

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9). WaveWave energy is significant and was seriously considered in the late 1980s. However the lack of commercially available wave energy conversion machines have kept the concept from further development.

2. InstitutionalEnergy efficiency programme development is the responsibility of the EPU. None of the energy delivery agencies has accepted any responsibility for or shown any indication of interest in electricity demand side management or in improving fuel efficiency for transport or industry.

3. Policy and legislationThe draft energy policy includes a mandate to work to improve the efficiency of energy use but no strategy, plan or resource allocations have yet resulted.

4. Capacity issuesThere have been no significant energy efficiency improvement programmes in Tonga and external assistance will be needed to develop the EPU capacity.

5. Knowledge repositories and information deliveryThe EPU maintains a small repository of demand side energy efficiency information.


1. OverviewThere is no existing energy based entrepreneurship in rural Tonga. The development of biofuel from coconuts could become a major rural income generator in the future if that development is handled properly.

2. InstitutionalThere are no known institutions that include development of energy based entrepreneurship for poverty alleviation.

3. Policy and legislationThough poverty alleviation is a stated policy of government, there is no policy or legislation specifically considering energy entrepreneurship for poverty reduction.

4. Capacity issuesManagement skills for rural businesses are weak as are record keeping, marketing and forward planning skills. Though finance availability is an issue, any business must first have access to the necessary operating skills before finance can be put to proper use.

5. Knowledge repositories and information deliveryThe NZODA Tonga Agroforest Project of 1996 included a survey of the coconut resource with relevant information kept at the Ministry of Agriculture, Forestry and Food.

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The EPU maintains the national energy database (incomplete and generally out of date due to lack of access to data from Shoreline and the oil companies) and is a repository of information on renewable energy projects and resources particularly solar PV for rural electrification. The EPU has limited information on demand side energy efficiency improvement.

The USP Centre is a repository of knowledge for small business practices including management, accounting, marketing and information technology for business.

Also supporting training relevant to energy and project management are the Monfort Technical School, the Tonga Maritime Technical Institute, the Community Development and Training Centre and the St. Joseph's Business College.


1. OverviewAccess to finance for energy development is dependent on the availability of collateral that can be put up by the borrower to secure loans. Since land on the outer islands often does not have clear title, most rural entrepreneurs have few assets to provide for collateral and typically cannot qualify for finance.

2. InstitutionalThe Bank of Tonga, MBf Bank and ANZ Bank provide commercial banking services. The Tonga Development Bank focuses on higher risk development oriented loans though lending rates are comparable to those at the commercial banks.

3. Policy and legislationNo information was located regarding policy or legislation that relates to either rural finance for households or businesses or for micro-finance in general.

4. Capacity issuesThere is little knowledge at the financial institutions regarding the finance of energy efficiency measures or for rural energy development.

5. Knowledge repositories and information deliveryThe commercial banks and the Development Bank are the main repositories of knowledge regarding finance for energy development in Tonga.


1. OverviewThough the private utility, Shoreline, and the oil companies no doubt monitor and evaluate their own operations, the information is not made public and is difficult or impossible to access externally. The EPU monitors and evaluates the solar PV projects under its jurisdiction and readily cooperates to make that information available if requested.

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2. InstitutionalIn theory the TEPB monitors and regulates the operation of power utilities, both public and private, in Tonga. In practice it is not clear whether this happens or not since any data collected through the monitoring process is not publicly available. The PIREP team was unable to obtain any Shoreline operational data from either Shoreline or the TEPB though it was repeatedly promised by the TEPB. Enquiry by the REP-ToR consultants has also received no response. The same has been true of the oil companies operating in Tonga, no data has been provided regarding imports or sales so the only import information is from the customs officials and that provides no indication of end use of the fuel or whether the fuel is sold locally, remains in storage or is re-exported.

The EPU has the responsibility to maintain a national energy database but without either power generation or petroleum sales data, no useable database can be developed.

The EPU has monitoring and evaluation responsibility for renewable energy and energy efficiency. The Unit has a good monitoring and evaluation programme for solar PV rural electrification. There are no significant energy efficiency programmes.

3. Policy and legislationExcept for the provision of financial accounts for tax and agency audit purposes, there is no legal requirement for monitoring and evaluation of energy programmes or projects. There is no policy presently endorsed by Cabinet that relates to monitoring or evaluation of energy projects.

4. Capacity issuesThe EPU appears to have adequate capacity for the monitoring and evaluation of the rural energy projects they have developed. There is little capacity for monitoring or evaluation of energy efficiency programmes.

5. Knowledge repositories and information deliveryMonitoring and evaluation data for EPU managed projects is available at EPU. Monitoring and evaluation data for Shoreline, Shell and BP is not available.


1. OverviewThe US State Department’s 2004 Tonga Country Report on Human Rights Practices reports that at times, authorities have infringed on freedom of speech and press by confiscating newspapers.In 2004 a New Zealand based Tongan language newspaper (Taini ‘o Tonga) was widely available in Nuku’alofa. It was banned by the government but the ban was later lifted by the courts. The newspaper resumed distribution but its current status is not known.

2. InstitutionalTonga has, or has had, several newspapers published in Nuku’alofa (iTonga, Tonga Chronicle), at least one magazine (Matangi Tonga), a government-owned radio station (Tonga Broadcasting Commission) and a private television channel (Oceania Broadcasting Network).

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3. Policy and legislationAlthough stated policy is for free access to information and freedom of information, the reality is sometimes different. There are no legal guarantees of freedom of media expression, either printed or broadcast and censorship has been used to prevent international and local information from being made generally available to the public.

4. Capacity issuesTelephone service to rural islands is very limited and expensive. Often there is only one phone connected for service and it is not unusual for that to be out of service. Health centres have HF radio for emergency use but not as a regular communications link.

5. Knowledge repositories and information deliveryKnowledge repositories relating to energy access and its relevance to poverty are not known to exist though individual references may exist scattered through reference materials at university libraries and the EPU document collection.

J. Conclusions

1. OverviewThe primary opportunity for energy related rural income generation is the development of biofuel from coconut oil for replacing imported diesel fuel.

Solar PV and diesel based electrification projects have not resulted in significant “productive use” of energy in rural areas in fact there is evidence that the AusAID diesel electrification projects may have increased poverty on the islands where they have been installed.

2. InstitutionalAll energy matters are carried out by the private electric utility, Shoreline, the oil companies and the EPU but only the EPU is cooperative in sharing its operational data. The Ministry of Finance and the Planning Office are involved in the development and administration of donor financed projects.

3. Policy and legislationThe draft National Energy Policy has not been adopted. There remains no clear definition of the responsibilities of the EPU and its institutional relationship to national energy suppliers and energy issues. The legislation that is in place does not deal well with the existing private utility and its regulation. There is no legal requirement for either oil suppliers or private utilities to divulge data relating to sales by island or customer type or to provide any of the other information needed for national energy balance development and energy policy implementation by the EPU.

4. Capacity issuesThe EPU has limited capacity for technical development of rural PV projects and has almost no capacity for the development and delivery of demand side energy efficiency programmes.

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5. Knowledge repositories and information deliveryAlthough the utilities and oil companies are major repositories of information regarding electricity and fossil fuels, the information is only available internally. The EPC has a good collection of reports and informative materials but it is disorganized and it is difficult to locate specific materials.

The Statistics Department maintains a database relating to household income and expenditure and the population census.

K. Recommendations

1. OverviewThe primary opportunity for energy related rural income generation is the development of biofuel from coconut oil.

2. InstitutionalThe alleged conflicts of interest at the TEPB need to be resolved and the Board developed into a genuinely independent regulator of electric power operators on Tonga.

3. Policy and legislationLegislation is recommended that requires companies delivering energy for public consumption to report on operations at least annually in sufficient detail to allow analysis of the national energy use situation in order to develop strategies and plans for the future.

4. Capacity issuesThe EPU needs outside assistance in developing the capacity do design and deliver effective demand side energy efficiency programmes. Further capacity development at the EPU in the specification and design of rural solar systems is also needed.

Policy development capacity and the capacity for the development of plans and strategies to implement policy needs support at the EPU.

5. Knowledge repositories and information deliveryThe EPU records and report collection is good but needs to be better organized and stored in a manner that makes it easier to access desired information. The EPU needs better access to utility and oil company data in order to develop a useful national energy database for analysis and planning.

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XXIX. TUVALU

A. Background

1. Physical conditionsTuvalu lies about 1100 km due north of Fiji centred at about 8° South Latitude and 177° East Longitude making the climate tropical to equatorial. The total land area of 26 km2 is spread over nine islands, all atolls. Six atolls have a large lagoon enclosed by a reef and three are raised coral islands having no large lagoon. The largest, Vaitupu, has an area of about 5.6 km2 while the smallest, Niulakita, has only 0.42 km2 of land. The maximum elevation in the country is less than three meters above mean sea level making the country very susceptible to sea level rise and storm surges from cyclones. Funafuti atoll has become the centre of Government as well as being the hub for international air and sea transport because of the airport and harbour development left from WWII when Funafuti was a staging area for the American assault on the Japanese held islands to the north. The EEZ is 900,000 km2 in area.

The soil is low in fertility and only a narrow range of food plants can be supported including coconut, breadfruit, pandanus and taro. The sea is the primary source of local food though imported rice has become a staple food in recent years. Tuvalu has had tropical cyclones to cause serious damage but that is unusual though storm surges, winds and heavy rain can be damaging to the low lying islands even if a cyclone does not actually hit any island. Rainfall averages 3,500 mm per year with April through November lower than the rest of the year. Droughts do occur and maintaining a fresh water supply on densely populated Funafuti is increasingly a problem. The primary source is rainwater but in recent years a 65,000 l/d desalinator is also in use. Some pumping from wells is possible but water is brackish and wells can easily be over pumped and cause an incursion of salt water.

2. Population and demographicsGrowth has been slow with the 1990 population 9,043 and the 2002 population 9,300. The slow growth is attributed to emigration, particularly to Australia and New Zealand. There are about 1570 households with nearly 6 persons each. Funafuti with 4,492 persons has more than 48% of the population. Vaitupu with 1,591 is a distant second and the other islands range from 400-700 except for tiny Niulakita with only 35 persons resident.

In the first half of the 20th Century, the population was distributed more or less along the same lines as the land area with Vaitupu having the largest population. After the war, the airport and harbour increased the importance of Funafuti then after independence in 1978 when Funafuti was declared the government centre, there was a rapid shift in population toward Funafuti and today around half of the population is on Funafuti giving it a high population density of around 1610 persons per km2. This has created serious problems for water supply and waste disposal.

The nearly static population for the country as a whole is due mainly to migration to foreign countries, particularly Australia and New Zealand, rather than to a low rate of natural population growth. Although the outward migration has kept population pressures from increasing, the people migrating tend to have a higher level of education than the

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population on average and this has been a factor that has limited the ability of Government to locate qualified local staff to fill technical and administrative positions.

3. Socio-Economic structureTuvalu is geographically linked with Micronesia and the people of Nui speak a language derived from I-Kiribati. However, cultural indicators suggest that Polynesians from Samoa and Tonga and Uvea (Wallis) settled most of the islands in the group early in the 14th century.

In 1892, the British declared Tuvalu a protectorate and it was governed as the Ellice Islands. In 1916, the Ellice Islands and the Gilbert Islands were joined for administrative purposes. In 1974 the Ellice Islands chose to split from the Gilbert Islands (later Kiribati) and became Tuvalu with full independence in 1978.

Government is organized along the lines of the British Westminster system as a constitutional monarchy with the British Crown at its head as represented by a Governor General who is appointed on the recommendation of the Prime Minister and Cabinet. The Fale I Fono (House of Assembly) has 15 members elected every four years by popular vote of all citizens 18 and older. The Prime Minister is selected from Parliament and the up to four member Cabinet is selected by the Prime Minister. There are eight island courts. A High Court sits twice a year and its decisions can be appealed to the Court of Appeals in Fiji. The outer islands are each governed by a six person council, the Kaupule, that is elected every four years.

The Tuvalu Trust Fund provides over 10% of the Government budget. Marketing of the “dot TV” Internet domain has provided several million dollars in income and there is substantial income from the sale of foreign fishing licenses and remittances from overseas residents and seamen. Copra is no longer traded and exports of products are almost nil. Government is the main employer and provides around 70% of salaried employment. The private sector consists mainly of small shops and service providers on Funafuti and agriculture for export to Funafuti on the outer islands.

Donor inputs in 2001 amounted to over one-third of the approximately A$25 million (~US$19 million) GDP with Japan the main contributor and Taiwan second. The ADB was a distant third. The per-capita GDP was therefore about US$2,000.

“DotTV” income results from the 1999 sale of rights to the internet country identifier, .tv, to a domain name rental agency, DotTV, mainly for the use of television stations having Internet sites. In 2000, Tuvalu acquired US$3 million in DotTV stock. In late 2001, VeriSign bought DotTV and the Tuvalu share of the sale was a lump sum payment of about US$10 million. VeriSign has agreed to pay about US$2.5 million annually plus 5% of any revenue over US$20 million in any one year for the following 15 years. The cost of the diesel rural electrification was covered by this windfall income.

4. Poverty issuesThe ADB places Tuvalu about in the middle of the PICs as far as poverty indicators go.

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5. MDG progressNo poverty data less than 10 years old could be located. In 1994, 29.4% of the population was listed as having income lower than US$1 per day. There is no reason to believe that the income poverty numbers have gotten worse and most indications are that they are rather improved. Social and health indicators are good with some MDG goals already achieved and the rest probably will be achieved. There are concerns about HIV/AIDS due to returning seamen but there are no statistics indicating an existing problem.



BP supplies (and has since Independence) all fossil fuels. BP owns all storage and distribution. Supplies originate in Fiji. There are no tenders or contracts between Government and BP, the concept appears to be one of mutual trust rather than confrontation – an approach that could help to ensure Tuvalu receives fuel should there be a region wide shortage. Diesel fuel for the electric power system is imported without duty or VAT. All other fuel is charged duty and VAT.

LPG is imported privately and stored in bulk at a depot adjacent to the BP storage facility near the Wharf.


The TEC is a government owned corporation operating on all island of Tuvalu except tiny Niulakita. The outer islands were electrified by diesel grids in 2000 with funds from the government treasury.

c. Renewable Energy

In general, renewable energy is under the energy office of the Ministry of Works and Energy. Initially established with two persons, when the TSECS was dissolved, the coop manager and senior technician were absorbed by the energy office. The office is responsible for keeping the outer island solar installations operating, mainly those on Niulakita, for preparing renewable energy project proposals and working with other agencies that have some interest in renewable energy.

Tuvalu Telecom has installed and maintains relatively large PV power systems on most islands (about 30kWp of panels in all), making it the seconds largest user of renewable energy (after biomass for cooking).

There is no problem with access to biomass for cooking. The usage of biomass is falling as increased affluence moves wood users to kerosene and kerosene users to LPG. Most households on Funafuti use a combination of fuels, with kerosene and LPG the most common though some biomass use remains even in densely populated areas.

d. Regulation

There is no regulation of either petroleum, electricity or renewable energy use that relates to access to energy for poverty reduction or rural energy in general.

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2. Policies and legislationA national energy policy based on a generic policy prepared by the Forum Secretariat was approved by Cabinet in 1997 but in general has been ignored by the several governments that have followed.

There is no general energy legislation or legislation relating to energy access. The TEC was established by legislation. Weak environmental laws are in place but have little effect on energy access or poverty and energy links.

3. Capacity issuesIn a country as small as Tuvalu, technical and management capacity are always a problem. Migration of experienced and well educated people is common and turnover in government posts is often frequent. As a result there is a continuing need for capacity development for all functions. For a donor dependent country like Tuvalu, project design and proposal writing skills are important but often those skills are quite weak particularly in minor departments like energy.

4. Knowledge repositories and information deliverySuch institutional knowledge repository as exists is found in the energy office and the TEC. There is no process for information delivery.



Two main programmes have provided improved energy access in Tuvalu. The first programme was initiated in 1984 by the Save the Children (USA) NGO using solar PV for lighting only. The initial funding came from USAID and a national cooperative was formed for its management to install the 35Wp systems that were offered. The institutional approach was copied from Fiji in that systems were owned by the Cooperative, not the people, and fully maintained by the cooperative technicians. The users were to pay a fixed fee (around US$5) per month for the use of the systems with the fee intended to cover battery replacements and the expenses of the Tuvalu Solar Electric Cooperative Society (TSECS). Over the 10 years that followed, the PV systems grew both in number to over 400 and in size to over 150Wp for most households. Unfortunately the TSECS General Manager was siphoning off much of the cash from the cooperative from about 1989 on. He was found out in 1994 and jailed but the lost of the around A$40,000 that was intended for battery replacement and repairs essentially destroyed the cooperative. It limped along for another few years but by 1998 it was effectively out of business with the systems that continued to work being mainly taken care of by the users themselves.

In 2000 the second programme for rural energy access was begun with the installation of a grid and diesel generators (operated by TEC) on all the outer islands except for Niulakita (its 35 residents remained with solar power). Unfortunately the purchase and installation of the diesel systems was not the result of careful analysis of the costs and benefits and expenditures have been much higher than expected and benefits are modest

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since power is only available part of each day and there is little opportunity for using the electricity for income generation on the islands being served (with the possible exception of the largest island of Vaitupu). On the outer islands the peak load is from around 25kW to that of Vaitupu where the peak is around 70 kW (due largely to the presence of a large secondary boarding school that serves other islands).

Power generation on Funafuti has expanded rapidly with the expansion of government air conditioning loads. The addition of a large, very energy inefficient central government building, new hospital facilities and other government facilities has the peak load for the less than 5,000 persons on Funafuti moving toward the 1 MW level.


No information was availablec. Pipeline programmes

No information was availabled. Programmes under consideration

No information was available

2. InstitutionalAll energy programmes thus far have gone through the energy office, the TEC or, in the past, the TSECS. Electricity supply at schools, clinics and public buildings is arranged through one of these entities according to the type of supply needed. The two exceptions have been the TMTI and Telecom, both of which have provided their own power systems (though Telecom also is connected to the TEC grid as well as having PV power).

3. Policy and legislationThere is no policy or legislation relating directly with energy access and poverty-energy or gender-energy linkages.

4. Capacity issuesCapacity to handle new programmes is marginal at both TEC and the energy office. TEC in particular has had human resource capacity problems for some time. The management and logistic problems of having seven outer island power systems to operate has been difficult for the TEC.

5. Knowledge repositories and information deliveryThe agencies that carry out programmes are typically the ones that keep relevant programme records and reports. There is no program for their delivery elsewhere.

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Tuvalu fuel prices in 2004 (as reported by the Forum Secretariat price monitoring programme) were well above the PIC average though Niue consistently had higher wholesale prices. There are no price controls on fuel, BP determines the selling price.


The TEC estimated the cost of power production on the outer islands as ranging from about A$1 to A$1.50 per kWh. The actual charge to rural customers is A$0.30 per kWh. On Funafuti the tariff is slightly higher at A$0.34 for domestic customers and A$0.47 for commercial and government users (including on rural islands). The cost of generation on Funafuti (excluding capital charges) is known to be more than the tariff though the data needed to calculate the exact cost of generation was not available to the team. These tariffs are essentially unchanged since 1982.


Less than 10% of the households are not connected to an electricity supply. Total electricity sales in 2003 were about 5.2GWh which represents about 46 kWh/person/month. Household use on the outer islands averages around 40 kWh/month. The average household use on Funafuti was about 180 kWh/month in 2003.


There is access throughout Tuvalu to fossil fuels. Delivery is a problem since fuel is delivered only in 200 L drums and must be transshipped from the interisland freighter to a small outboard powered boat that usually must navigate through a small difficult channel through the reef and deliver the drums to the beach. Drum damage is frequent and paying for replacement drums is a significant component of fuel cost. Though sometimes there are fuel shortages due to delayed delivery, the reliability of fuel availability on the outer islands is generally better in Tuvalu than on most outer islands of other PICs.


With the shift from 40% of outer island households on solar to 90% on the diesel grid, the use of solar PV greatly declined. Niulakita households continue to be powered by PV and a few isolated houses on other islands have retained solar for electrification. Several islands have installed PV powered ground water pumps, mainly as an emergency water supply and as such they are used infrequently.

Consideration has been given to adding PV to the rural grids making the systems a PV/Diesel hybrid. However the experience with such systems in the Pacific has been uniformly bad and plans are proceeding cautiously.

The coconut resource is large and much underused. A number of outside experts have proposed Tuvalu as the ideal location for the development of coconut oil to replace diesel

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fuel. Certainly the resource is there but the relatively high income of rural people in Tuvalu implies that the cost of large scale coconut oil production may well be significantly higher than imported diesel fuel unless the cost of petroleum increases by a factor or two or more from 2005 prices. Any programme to develop coconut oil for fuel on Tuvalu should be prepared with care, include proper financial and economic analysis and proceed with caution. In particular, an analysis of the price response of the coconut market to increasing demand must be clearly understood and found to be acceptable before a major investment is made.

2. InstitutionalThe TEC is charged with providing energy access to anyone in reasonable reach of the grid. The energy office is charged with solar electrification of those not able to connect to the grid. With a connection percentage of over 90% clearly the institutions have accomplished the core task of providing universal access to electricity in Tuvalu.

3. Policy and legislationPolicy is to provide adequate electrical services at the lowest delivered cost. The initial problem of providing access has been more or less solved, now lowering the cost has to be the priority.

4. Capacity issuesThe technical and management capacity at the energy office would benefit from further capacity building efforts.

5. Knowledge repositories and information deliveryThe energy office and the TEC are the only repositories of energy access information in Tuvalu. Information is available on request, there is no formal delivery system.



Data provided from BP does not correlate with that from Customs and the statistics department data is different from both BP and Customs. Therefore petroleum imports have to be estimated with a reasonable figure around 3.6 million litres of petroleum products imported per year with over half that used for electricity generation, the rest going mainly large sea going vessels, for cooking and for out board motor use in the lagoons. This represents a rather high 3,830 litres per year of petroleum per capita (not including fuel for aviation).

Government, domestic sector and the commercial sector used approximately equal electrical energy. This ratio probably changed when the large new government office building came on line in 2004. A significant amount of government use is for air conditioning and freezers. Most of the commercial use is also for refrigeration and freezers. On Funafuti where there is 24 hour power, most houses have a full array of electrical appliances including refrigerators, video systems, small kitchen appliances, etc.

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On the outer islands the 18 hour per day power discourages the use of refrigerators and freezers though there are a number installed. Video systems are increasingly common and small high demand kitchen appliances are increasing in number.


Energy efficiency is relatively poor largely due to the highly subsidized electrical power. But even high cost petroleum has not discouraged a rapid growth in both the number and the size of government vehicles. Personal vehicles tend to be smaller and more fuel efficient but their number is also increasing.


Solar energy is known to be a suitable and developable renewable resource for Tuvalu. Wind is not likely to be acceptable due to a relatively poor resource and serious problems with siting which would probably require wind farms to be located in the lagoon, an expensive and probably unpopular solution.

Coconut resources are large but there are many technical and difficult economic questions that must be answered before it is clear whether the resource is appropriate for biofuel development.

2. InstitutionalThough improving energy efficiency is included in the national energy policy, no institution has been designated to take the lead.

Technology selection for energy delivery has been a high level political decision and no institution has been assigned that responsibility.

3. Policy and legislationThe National Energy Policy promotes the concept of energy efficiency but there is no strategy for its implementation. No agency is responsible under the policy and there is no legislation assigning the task to a particular agency.

The National Energy Policy encourages the use of renewable energy whenever practical but there is no strategy or technology guidelines.

4. Capacity issuesThere is little capacity for implementing energy efficiency measures. There is above PIC average capacity for PV system installation, maintenance and management but little capacity for biofuel development or the use of other non-conventional technology.

5. Knowledge repositories and information deliveryThe small information base regarding energy efficiency and energy technology characteristics is located at the energy office. There is no information delivery arrangement.

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1. OverviewThere has been no documented energy based entrepreneurship.

2. InstitutionalThere are no institutions with any responsibility for developing or interacting with energy based entrepreneurship.

3. Policy and legislationThere is no known policy or legislation specifically relating to energy entrepreneurship though the law that established the TEC effectively gave it monopoly power over the electricity sector thereby limiting the possibility of IPPs forming (unlikely in any case).

4. Capacity issuesBusiness management skills are typically poor, technical skills are typically poor. Access to finance for entrepreneurial activities of any kind is very poor.

5. Knowledge repositories and information deliveryThere are no known knowledge repositories or information delivery systems on Tuvalu relating to energy entrepreneurship.


1. OverviewWith a total population of less than 10,000 persons spread over eight widely separated islands, there can be no commercial finance structure of any complexity.

2. InstitutionalThe National Bank of Tuvalu is government owned and is the only commercial bank in Tuvalu. It has working arrangements with ANZ and Westpac banks in Fiji. It is a full service bank with loans requiring 60% or more in collateral for loans where the expenditure is not itself a permanent asset. Small working capital loans for operating businesses with a good credit history are available (typically as an overdraft allowance) but start up loans are uncommon and invariably require substantial collateral.

The Development Bank of Tuvalu was established by law in 1990 but did not start operation until 1993, Though the bank has a development oriented mandate, it has had large losses and by the end of 2000 had accumulated a loss of around A$1 million and 17% arrears on it's a$1.6 million in loans.

There are small lenders, typically cooperatives, that provide consumer credit at stores and advances on agricultural product sales. This informal micro-credit system has not been used for energy related finance.

It appears that no Tuvalu financial institution has financed energy access or energy efficiency work.

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3. Policy and legislationDevelopment Bank of Tuvalu Act of 1990 created the DBT.

There are no policies relating to finance of energy access though it is heavily subsidized with outer island electricity charges typically less than 25% of the real cost of generation.

4. Capacity issuesFor the size of the country, the available financial services seem quite good htough the poor performance of the DBT indicates a possible needed for capacity building either in the DBT iself or in its oversight agency.

5. Knowledge repositories and information deliveryExcept for banking records, there are no knowledge repositories and information delivery systems related to finance for energy for poverty alleviation.


1. OverviewMonitoring and evaluation of energy programmes and projects has been poor historically. The now closed Tuvalu Solar Electric Cooperative Society (TSECS) had very poor records (perhaps on purpose as the poor records allowed the General Manager freedom to divert most of the income to his own accounts).

Poverty data for Tuvalu found in recent ADB documents is dated 1994 implying that poverty monitoring is also not taking place as it is in the other PICs who mostly reported data less than five years old.

2. InstitutionalThe energy office has monitoring responsibility for the renewable energy projects under its control (Niulakita electricity supply and several emergency pumps powered by solar PV). The quality of the monitoring and evaluation is not known.

The TEC monitors the operation of all its generating and distribution system. However the quality of information from the outer island stations is questionable. There are discrepancies in the data that indicate either poor monitoring or poor rural system management (or both).

3. Policy and legislationThere is no specific policy or legislation relative to monitoring and evaluation of energy systems other than the maintenance of basic financial accounts for tax purposes.

4. Capacity issuesCapacity is limited for monitoring and even more limited for evaluation. Project evaluations are usually carried out by external consultants.

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5. Knowledge repositories and information deliveryThe TEC and the energy office maintain records of their monitoring activity and will present them on request.


1. OverviewThe opportunity for advanced schooling and the availability of energy related information are both very small on Tuvalu.

2. InstitutionalThe only institution that provides technical training is the Tuvalu Maritime Training Institute (TMTI). Basic seaman training and advancement in rank upgrade training are available. Graduates typically enter the European merchant marine services. Remittances from the approximately 450 seamen working on foreign ships represent a major source of rural household income.

The Energy Unit maintains a collection of reports, training manuals and energy information. The TEC also has a small collection of utility related materials.

There are no repositories of knowledge or information about the linkage between poverty and energy or gender and energy.

3. Policy and legislationThere are no policies or legislation relating to knowledge repositories and information transfer regarding energy poverty links. There is a government policy to develop rural areas and to provide universal access to electricity and fossil fuel supply.

4. Capacity issuesThere is limited capacity within the energy unit regarding technology but there has been no experience or training that has provided capacity for programme development in poverty reduction through provision of energy access.

5. Knowledge repositories and information deliveryThere are no knowledge repositories or information delivery mechanisms relating to knowledge repositories and information.

J. Conclusions

1. OverviewThe small size and dispersed nature of Tuvalu makes it difficult to maintain the capacity needed for effective energy planning and programme management. Nonetheless, Tuvalu has managed to provide electricity and fossil fuel access to almost all its population. Developing energy access for poverty alleviation is therefore no longer a need in Tuvalu. At this point in energy development, concentrating on improving the efficiency of energy use can have a favourable effect both on the TEC and on customers.

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2. InstitutionalAn institutional home for energy efficiency improvement needs to be found. The TEC is not recommended. It is working at its capacity limit and asking a utility company to implement measures to reduce its revenue has not resulted in enthusiastic and good quality programmes. The energy office will need capacity building and, if the programme is to be effective, a person working on energy efficiency measures full time.

3. Policy and legislationNo new policy or legislation appears to be needed. Developing a strategy for carrying out the existing policy is needed however.

4. Capacity issuesThere is a lack of capacity in energy efficiency improvements and in biofuel development. Capacity development in those areas will be critical if new programmes are to be developed.

As with most PIC energy offices, there needs to be capacity development in financial and economic analysis, project design and proposal preparation and management.

5. Knowledge repositories and information deliveryExcept for the knowledge base on electrical technology at the TMTI, the only significant knowledge bases for energy technology in general reside at the TEC and the energy unit.

K. Recommendations

1. OverviewNo specific programmes relating to the energy-poverty or energy-gender linkages are recommended.

Energy efficiency improvements, the development of solar PV/diesel hybrids for outer island electrification, a thorough analysis of the feasibility of locally produced coconut oil replacing diesel fuel and improved solar home systems for households not presently connected to the grid are recommended.

2. InstitutionalIt is recommended that the energy office be officially designated as the lead agency for improving energy efficiency.

3. Policy and legislationThe existing national energy policy should be reviewed, changes made where appropriate and reconfirmed by Cabinet. Once reconfirmed, the energy office should be assisted in the development of strategies to carry out the policy.

4. Capacity issuesCapacity development is recommended that is focused on biofuels development from coconut oil. Also further capacity development for improving skills in financial and economic analysis, project design and project proposal development. Upgrading of skills

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is needed in PV system design, hybrid system design and characteristics, PV system component selection and PV system maintenance.

5. Knowledge repositories and information deliveryFor an energy efficiency programme to be successful, an information delivery programme is essential.

Existing knowledge repositories at the energy office and TEC should be better organized and kept up to date.

The national energy data base system needs to be examined and linkages improved between primary data sources (TEC and BP mainly) and the database manager to improve the accuracy of the data and to keep the data up to date.

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XXX. VANUATU

A. Background

1. Physical conditionsThe Republic of Vanuatu is about one-fourth of the way from Australia to Hawaii, centred near 16o degrees south latitude and 167 o east longitude, with a maritime Exclusive Economic Zone (EEZ) of 680,000 km2. Vanuatu is mostly mountainous and volcanic in origin with narrow coastal plains. About 41% of all land is cultivable with 14% utilised. Total land area is 12,200 km2 spread over six provinces with 65 of the 80 islands populated. The climate is hot and wet from November through April, and cooler and drier from May through October. In the capital Port Vila, the average temperature is 26oC and the annual rainfall 2,300 mm. Natural hazards include tropical cyclones, volcanism and occasional tsunamis. From 1990 through 1999, Vanuatu experienced more cyclones than any other Pacific Island Country (PIC), and more geophysical hazards than any PIC except Papua New Guinea (PNG).

Vanuatu has manganese and other minerals, hardwood forests and a fish resource. There is limited hydroelectric and some geothermal energy potential. The solar potential varies but is very good in some locations.

2. Population and demographicsThe estimated population was 212,000 in 2004, based on an average annual growth rate (AAGR) of 2.6% between the 1989 and 1999 censuses. About 27% of the total lived in the urban centres of Port Vila on Efate Island and Luganville on Espiritu Santo. 80% were on the seven most populated islands and 98% were indigenous Melanesians. The 2002 development plan identified population, particularly rapid growth and the young age structure, as a key development issue. The age structure, rapid overall growth, and the very high urban AAGR of 4.2%, indicate the need for strong investments in health, education and the environment.

Vanuatu has three official languages (French, English and a pidgin, Bislama) plus about 100 local languages, many of which are spoken by a single small tribal group.

3. Socio-Economic structurePreviously under joint British-French rule, the Republic of Vanuatu became independent in 1980. It is a parliamentary democracy with executive power vested in the Prime Minister and a Council of thirteen Ministers. There is a 52 member Parliament elected through universal adult suffrage. Vanuatu’s civil society is comprised of various groupings, both traditional and those introduced from outside. Church institutions play an important role in binding people together, providing a sense of belonging and a strong form of social capital.

The UN’s 2002 Common Country Assessment for Vanuatu summarises the political development as follows. In the 1990s, various coalitions governed with frequent changes in policies, disruptions in Government of Vanuatu (GoV) services, poor governance, corruption and nepotism, culminating in a comprehensive reform programme in 1997 designed to rehabilitate the institutions of governance, redefine the key roles of the public

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sector and improve public sector efficiency. Partly due to poor data and social indicators, it has been difficult to reliably assess progress. However, in general, national politics in Vanuatu is dominated by personalities rather than policies so policies tend to lack continuity. The police force is weak, many court cases are overdue, there is a lack of appropriate laws to protect women and children, and inadequate staff within the Public Prosecutor’s and Public Solicitor’s Offices.

Vanuatu has a classic “dual economy”: a small, high-cost modern sector alongside subsistence / small-scale agriculture and fishing, with most local people (the ni-Vanuatu) largely outside the cash economy. Nearly 80% of the population engage in subsistence agriculture but contribute only about 10% to GDP. Real growth in Gross Domestic Product (GDP) from 1990-2000 averaged 3%, but per capita GDP barely increased. In 2003, the GoV anticipated AAGRs of 2.6-2.8% for the next few years. However, the Forum Economic Outlook produced by the Pacific Islands Forum Secretariat (PIFS) in June 2005, relying on Asian Development Bank (ADB) and other analyses, indicated that Vanuatu’s real GDP grew 1.6% in 2003, 2.2% in 2004, and is projected to grow by 2.5% and 2.2% in 2005 and 2006 respectively. In other words, economic growth is not keeping pace with population increase. The World Bank is slightly more optimistic, forecasting 2.8% growth in 2005.

A national Priorities and Action Agenda (GoV, 2002) hopes to raise the welfare of ni-Vanuatu through better macroeconomic stability to create a stable investment climate, higher economic growth, and improved health, education and transport in rural areas. Within the energy sector, priorities are an effective regulatory framework to induce competition; transparency in the system of cross-subsidises for rural electrification, solar energy subsidised through hydropower fuel savings, and minimal direct government involvement in providing energy services.

4. Poverty issuesThe UNDP’s 1999 Pacific Human Development Report (HDR) ranked Vanuatu as equivalent to 140th of 177 countries in the 1998 Human Development Index (HDI) – and 12th among 14 Pacific Island Countries (PICs) – the others ranging from Palau at 46 to PNG at 164. The same Pacific report ranked Vanuatu 13th of fifteen in its ‘human poverty index’, below all PICs except the Solomon Islands and PNG. The 2005 global Human Development Report places Vanuatu’s HDI at 118th, a considerable improvement, and a ranking within the lower range of the medium human development category of countries.

ADB’s 2003 report Priorities of the People: Hardship in Vanuatu reported then-recent estimates that 40% of all ni-Vanuatu, and 51% of rural ni-Vanuatu, lived below the standard international poverty line of US$1 per capita per day. However, the PIFS notes that this measure refers to PPP (power purchasing parity) and no PIC has expressed economic data in PPP terms. This generic poverty line is widely used but may be of limited usefulness for Vanuatu and other PICs.

In 2002, a dozen urban and rural communities were surveyed by the ADB regarding their attitudes to poverty and its causes. As in other PICs, many reportedly perceived their situation as ‘hardship’ rather than ‘poverty’. About half felt conditions had worsened in the five-year period 1997-2002, and a quarter each reported that they had stayed much the same or improved.

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Most of those consulted defined poverty as a state of having nothing, whereas hardship was poor living conditions, inability to get jobs, inability to afford basic goods, inability to afford school fees and materials, struggles to provide for family needs, difficulty accessing health services, and continual worry about lack of money. The main reason cited for worsening hardship was higher prices of goods and services. Those who felt that life had improved cited the installation of electric power, telephones and better roads in their communities. The situation of women was seen to be slowly improving. People tend to depend on the family, church and tribe for support and improvements, not the GoV.

5. MDG progressIn 2003, the ADB stated that that progress in meeting MDGs has been slow or stagnant, with wide differences between urban and rural areas in delivery of basic services.


1. OverviewAn Energy Unit (EU) based within the Ministry of Lands, Geology, Mines, Energy, Environment and Water Resources (MLGMEEWR) is responsible for formulating and implementing energy sector policies including “energy planning and management, promoting energy programs, assessment of alternative energy, and review of electricity contracts.” The EU’s business plan for 2000-2004 indicates these responsibilities: i) studies and surveys on indigenous energy resources; ii) rural and urban energy demand surveys; iii) government petroleum products supply; iv) energy conservation; v) rural electrification by solar and hydro systems; vi) extension of urban electrification networks; and vii) energy policies and legislation. The EU has very limited financial resources and its actual powers are unclear. In 2004 it tended to focus largely on planning and implementing small-scale renewable energy technologies; this is unlikely to have changed in the past year.

a. Fossil Fuels

Shell, British Petroleum and Mobil import refined petroleum products from New Caledonia and sometimes Fiji. Shell does not own storage facilities in Vanuatu and uses those of Mobil. Liquid petroleum gas (LPG) is imported by Origin Energy of Australia with distribution through service stations and shops in both urban and rural areas.


Electricity has been supplied to the urban areas of Port Vila and Luganville by a privately owned utility, Union Electrique de Vanuatu Ltd (UNELCO) owned by Lyonnaise des Eaux of France since 1939 and 1990 respectively. In 2002 UNELCO began service to the more urbanised parts of the remote, and mainly rural, islands of Tanna and Malekula. UNELCO operates in Vanuatu through a series of long-term concession agreements with the GoV, which run for various periods, the longest being through 2031 in Port Vila. For Port Vila and Luganville, the concession areas extend 15 km from the towns’ boundaries. The others are defined on concession maps.

Except for the areas defined within UNELCO supply concessions, the Energy Unit is responsible for rural electrification through solar photovoltaics (PV) and small

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hydroelectric systems. The Public Works Department (PWD) apparently retains responsibility for operating and maintaining some small diesel generators at rural GoV facilities.

c. Renewable Energy

As noted above, the Energy Unit is responsible for rural electrification through solar photovoltaics (PV) and hydro. A Japanese-funded hydro system on Santo is owned by the GoV and managed by UNELCO under a contract with the Energy Unit.

d. Regulation

As far as the REP-PoR consultants are aware, petroleum products have not been under price control or any effective regulation since 1989. The oil companies are expected to provide changes in wholesale and retail prices to the Energy Unit, which monitors petroleum prices for GoV supply, but not for the public. Monitoring of petroleum imports by volume and value is done by the Customs Department for import duty determination and collection.

There are no effective regulations, laws, standards or codes governing the power sector.

2. Policies and legislationVanuatu has developed numerous draft national energy policies and plans over the past twenty years but none were endorsed or formally adopted by the GoV. In 2000, SOPAC assisted the Energy Division revise an earlier 1993 draft rural electrification policy and more recently JICA advisers reviewed it. In late 2000, the Council of Ministers endorsed a ‘Vision for a 100% Renewable Energy Economy’ by 2010 but there have been no follow-up activities or budget. In 2004, the Department of Economic and Sector Planning planned to work with others to draft a national energy policy but this apparently never eventuated. It is understood that SOPAC / PIEPSAP has offered its services in helping Vanuatu develop energy policies and plans.

There are no effective regulations, laws, standards or codes governing the power sector. Concession agreements between UNELCO and the GoV include provision for a weak regulator, the Electricity Commissioner, which has been unfilled for years. There are apparently no legal standards for petroleum fuel or its transport, storage or disposal. There are several acts or proposals that deal to some extent with energy issues: i) a proposed Electricity Supply Act, revised seven times since 1998; ii) an Environmental Management and Conservation Act which requires environmental impact assessments for projects with significant impacts; and iii) the proposed NEC, which will require new legislation.

In 2003, the GoV (i.e. the Council of Ministers) approved the establishment of a National Energy Corporation, which was to encourage “suppliers to operate and distribute power to unelectrified areas” and to “facilitate and/or supply stable and affordable electricity to consumers in the whole country.” Apparently, it was never sent to Parliament for its consideration. The various WB missions mentioned above have offered advice on appropriate timing, legislation and regulations for the power sector.

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http://www.ice-pac.org/

3. Capacity issuesIn mid 2004, the Energy Unit had eleven positions, of which three were unfilled. The EU was headed by a Principal Energy Officer, who oversees three administrative staff, four staff who deal with rural electrification through solar PV and small hydro, and three staff responsible for energy planning and management. Staffing is probably about the same in 2005. The unit depends heavily on donor finance for its activities. Actual responsibilities and the authority to carry them out are unclear. There is very limited capacity (including finance) for carrying out studies and surveys on energy resources, arranging and analysing energy use surveys, effectively advising the GoV on petroleum supply and pricing, involvement in energy management or conservation activities, dealing with urban electrification policy, and developing general energy policies and legislation.

4. Knowledge repositories and information deliveryThere is no GoV department with institutional responsibility as a repository for energy sector knowledge or its delivery. There is a campus of the University of the South Pacific (USP) in Port Vila with some library facilities. For some years the United Nations had an ESCAP Pacific Operations Centre (EPOC) in Vila and the Asian Development Bank had a regional office, both of which included experts with knowledge of local development issues. However, the ADB office shifted to Fiji in 2004 and EPOC have also moved to Fiji late 2005. For renewable energy, and particularly biofuels, most knowledge is with the expatriate business community. For electric power, UNELCO is the main knowledge repository. It can be difficult for ni-Vanuatu to tap these sources. As for many of the smaller PICs, Vanuatu depends on the repositories of donors (e.g. Japan and AusAID) and SOPAC for access to energy sector information. In Port Vila, there is access to the Internet for government officials and academics. There are several public Internet cafes, which are expensive.



At least twelve islands have possible geothermal potential, probably the best on Efate where about 5 MW could be developed. There is some potential for small hydropower on Efate (1.2 MW at Teouma) but with prohibitively high development costs. The 0.6 MW Japanese Sarakata hydro system on Santo could be economically doubled to 1.2 MW. The EU investigated 13 microhydro sites on six islands with about 1,500 kW of total power. Four sites in Vanua Lava, Pentecost and South Santo may be promising.

A 25 KWe wood fuelled biomass gasifier installed in the mid 1980s at a remote school in Efate functioned well for eight years accumulating nearly 10,000 operating hours. Two Efate-based companies have used coconut oil as a fuel, primarily for transport. In 2002, about 200 mini-buses used it regularly, reportedly without serious technical difficulties. However, GoV regulation in 2003 and a clamp-down on reported import duty abuses, dramatically reduced the use of coconut oil as a diesel fuel substitute.

Between 1992 and 2002, solar PV systems were installed in at least 18 health centres, 40 schools and over 200 homes. Vanuatu received technical and financial assistance from a

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range of sources including the Japanese aid agency (JICA), French aid including ACCT, the British High Commission, and the SPC’s “Pacific Rural Renewable Energy France-Australia Common Endeavour” (PREFACE) programme. In 2004, the Vanuatu Renewable Energy and Power Association, a local NGO, installed twenty small portable PV systems at aid posts in Tafea Province. Overall, donors provided approximately US$1 million for PV equipment and installation from 1992-2002. It is not known how many PV systems are currently working or the institutional and financial arrangements for their operation and maintenance.


UNDP/GEF has approved a preparatory phase grant for SOPAC to design a GEF Medium Size Project (MSP) on the “Promotion of Environmentally Sustainable Transportation in the Pacific Islands” (PESTRAN), initially covering Fiji, Samoa and Vanuatu.

PIREP (SPREP/UNDP/GEF) – have undertaken assessment of key energy issues in Vanuatu, barriers to the development of renewable energy to mitigate climate change, and capacity development needs for removing the barriers.


The Pacific Islands Greenhouse Gas Abatement through Renewable Energy Project (PIGGAREP) where Vanuatu is participating. This is a planned joint SPREP/UNDP/GEF barrier removal project building on the preparatory work undertaken as part of PIREP.


It is understood that SOPAC / PIEPSAP is considering assistance to Vanuatu regarding biofuels and geothermal development, and these may be discussed with the GoV in late 2005.

2. InstitutionalThis has been discussed. The main institutions dealing with energy programme development and activities are the GoV’s Energy Unit and UNELCO.

3. Policy and legislationThere is no additional legislation or policy known to deal with energy programme frameworks.

4. Capacity issuesThe ability to develop practical energy programmes within the Energy unit is limited by staff numbers (three staff dealing with programmes and policy) and the perennially low budget.

5. Knowledge repositories and information deliveryBeyond the Energy Unit itself, there is no knowledge repository within Vanuatu with much information on energy programmes or programming. The most accessible repository is probably SOPAC in Suva for energy in general and the PIFS for petroleum

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supply and pricing. Both provide information in an accessible manner, at least for those with Internet access.



According to the PIFS Pacific Fuel Price Monitor of July 2005, in June 2005, the wholesale price of both petrol and automotive diesel oil (ADO) in Port Vila – excluding all taxes and duties – was about US$0.68/litre. These were the highest prices for any Forum Island Country (FIC) except Niue, which has only 0.5% of Vanuatu’s population and much higher fuel transportation costs. The retail price of petrol (US$1.17/l) and the wholesale price of ADO (US$1.09/l) were also second only to Niue. The wholesale price of kerosene, an important fuel for low income ni-Vanuatu, matched that of Niue as the highest in the region (US$1.05/l), as Vanuatu has a higher rate of import duty. These prices are for Port Vila only; for the rest of the country they are considerably higher.

The GoV has several times considered establishing a mechanism to regularly tender for the supply of Vanuatu’s petroleum fuel products, similar to Samoa’s approach. This was reportedly discussed by the Council of Ministers in late 2003 or early 2004. Although the Samoa approach has resulted in low oil prices, Vanuatu lacks the consistent policy framework and Cabinet cohesion and willingness to persevere for many years that led to Samoa’s success.


Recent electricity tariffs are not available. In 2002, the average UNELCO selling price in Port Vila was about US$0.25/kWh. The cost for UNELCO consumers is lowest in Port Vila and highest in Tanna and Malekula.


As noted, UNELCO provides electricity to the urban areas of Efate Island (Port Vila), Espiritu Santo (Luganville), Tanna and Malekula. In 2002, UNELCO had a peak demand of 8.2 MW, generated 40 GWh, and sold 34 GWh in Port Vila, which accounted for 85% of its demand and 70% of all customers.

At the time of the 1999 census, 20% of all households nationally were electrified, with a wide urban/rural variation: about 61% of urban households but only 7% of rural households had electricity. Away from the four islands with UNELCO operations, the rural electrification percentage is probably lower.


The 2003 ADB hardship survey cited cases of remote communities where petrol and kerosene (and other basic goods) were delivered only once or twice per year. According to the 1999 census report, nearly 74% of all households, and 86% of rural households, use kerosene as their main lighting source, suggesting that it is widely available.

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Except for the 0.6 MW system on Santo, no hydro power plants have been built by the GoV or UNELCO. Church missions may have installed a few very small systems but no information is available. By 2004, Telecom had installed 283 PV systems for telecommunications power. There have been several villages with solar PV systems; perhaps a hundred solar home systems were operating in 2004.

According to the 1999 census report, 86% of all households, and over 95% of rural households, cooked primarily with wood or other biomass, which is the main renewable energy resource used in Vanuatu.

2. InstitutionalThere are no institutions involved in energy programme activities beyond those mentioned: the Energy Unit, UNELCO, several NGOs and several private sector companies with biofuel interests in Port Vila.

3. Policy and legislationThere is no specific legislation or policy regarding energy programmes.

4. Capacity issuesThis has been covered.

5. Knowledge repositories and information deliveryIn addition to repositories already mentioned, there are several companies with practical biofuel knowledge: Motor Traders (MT) and Vanuatu Sea Transit (VAST).



Vanuatu is almost totally dependent on imported petroleum fuels for commercial energy use. Biomass probably provides over 50% of gross national energy production, and solar and hydro together less than 1%. Petroleum imports vary considerably year-by-year but were about 47 ML in 2003, growing at an AAGR of 4% over the previous decade. Transport accounts for about 64% of petroleum fuel use (including jet fuel), electricity generation nearly 30% and direct household use 4%.


There has been little attention to energy management. It is understood that a Pacific Power Association (PPA) study of supply-side losses in seven PIC utilities in 2001 found UNELCO’s total losses to be the lowest of the utilities surveyed. This was due to its high technical standards and relatively limited distribution networks outside of the towns.

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As noted, there is geothermal potential on a dozen islands, limited hydro potential on Efate, and attractive microhydro sites on at least four islands. With annual sunshine ranging from 2,000 to 2,300 hours, with an average of 6 kWh/m2/day, there is potential in much of Vanuatu to develop solar photovoltaics. There has been insufficient monitoring of wind speeds to assess the potential for wind energy in Vanuatu but the resource is probably modest.

In some recent years, copra production has exceeded 40,000 tonnes, sufficient to produce nearly 30 million litres (ML) of coconut oil equivalent to about 28 ML of distillate. This is enough in principle to displace all diesel fuel imports. However, as many as 50% of all coconut trees may be senile, so extensive replanting would be required to maintain or increase production. There is some limited potential for electricity production from biomass at sawmills.

2. InstitutionalThere are no institutions devoted to improving the technical efficiency of fuel use or developing new fuel options.

3. Policy and legislationThere is no legislation pertaining to energy efficiency or fuel options.

4. Capacity issuesThere are a few individuals in the private sector who have produced coconut oil based biofuels but there is no institutional capacity for its large-scale development. There is some capacity for installing solar PV but limited capacity to develop and oversee appropriate institutional arrangements for its sustainability or to monitor results over time.

5. Knowledge repositories and information deliveryOther than those already discussed, there are no significant knowledge repositories of which REP-PoR consultants are aware.


1. OverviewMotor Traders (MT) and Vanuatu Sea Transit (VAST) have been active in the use of coconut oil as a biofuel on a small scale for some years. UNELCO has been monitoring wind speeds on Eafte and was considering the installation of a 250 kW wind system in 2004. Several sawmills have considered the development of power plants using wood waste but none have been built. There has been some NGO involvement in solar PV but probably no solar entrepreneurial activity other than importing solar water heaters.

2. InstitutionalThere is no institutional support for energy-based entrepreneurs.

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3. Policy and legislationThere is no policy or legislation encouraging energy based entrepreneurs. There is no provision for Independent Power Producers (IPPs) to generate electricity and sell to the UNELCO grids.

4. Capacity issuesCapacity is essentially the skills of a very few individuals.

5. Knowledge repositories and information deliveryThere a re no knowledge repositories beyond those already discussed.


1. OverviewPoor access to loan finance and the inability to use land as collateral for business loans are seen by the GoV as major obstacles to local business development. In early 2004, there had been no loans by commercial banks or the National Bank specifically for developing energy projects or services. For small business loans in general, the interest rates in 2004 were about 14% per annum or 16-17% for unsecured loans. Some credit union loans have reportedly been provided to individuals for solar PV systems but no details are available. There were some discussions in 2004 between the Credit Union and the Energy Unit for solar PV loans but this has apparently not materialised.

2. InstitutionalThere are several commercial banks operating in Port Vila and Santo. There are no programmes to encourage energy-based entrepreneurs.

3. Policy and legislationThere is no legislation pertaining to energy-based entrepreneurship.

4. Capacity issuesThere is no capacity within the Gov to encourage energy-based entrepreneurs. Several potential entrepreneurs have alleged that vested interests have resulted in decisions that discourage such activities. Several years ago a potential IPP began negotiations with UNELCO regarding provision of energy from a proposed geothermal facility in Efate. Independent studies suggested that it was viable and prices should be attractive to UNELCO but it has not eventuated.

5. Knowledge repositories and information deliveryThere is no repository of knowledge in Vanuatu regarding to energy-based entrepreneurship. Some general business courses are available through USP’s extension services.

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1. OverviewAs far as the REP-PoR consultants are aware, there is little monitoring and evaluation (M&E) of energy sector issues, beyond the petroleum pricing advisory services provided by the PIFS. The extent of effective monitoring of electricity pricing is unknown but in any case, price change formulas are built into the UNELCO concession agreements. The EU has monitored and to some extent evaluated the UNELCO hydro management contract. The extent of M&E of PV installations is unknown but the limited travel budget probably precludes much activity.

2. InstitutionalThis has been covered in the overview above.

3. Policy and legislationThere is apparently no policy or legislation requiring energy sector M&E, except for some Energy Unit involvement in monitoring government fuel supply.

4. Capacity issuesThis has been covered in the overview above

5. Knowledge repositories and information deliveryThere is no repository of knowledge regarding energy sector M&E in Vanuatu.


1. OverviewAccess to information in general is limited away from the two main urban centres. As noted earlier, USP and the Internet are key sources of information and its delivery.

2. InstitutionalVanuatu has a local television station, AM and FM radio stations and three private (independent) newspapers. A state-owned paper, Vanuatu Weekly is published in Port Vila. The only TV station was established with the help of Radio France Overseas and broadcasts in French and English in the Port Vila area. Radio Vanuatu has both shortwave and AM services plus a commercial FM station which broadcasts the BBC World Service. The AM and FM stations are controlled by the state-owned Vanuatu Broadcasting and Television Corporation.

3. Policy and legislationAs far as REP-PoR consultants is aware, there is no formal policy or legislation regarding access to information, or the right of such access, in Vanuatu. There is no human rights legislation.

4. Capacity issuesNo information beyond that above under “institutional’.

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5. Knowledge repositories and information deliveryNo information beyond that above under “institutional’.

J. Conclusions

1. OverviewVanuatu has one of the lowest HDIs among the PICs, with its people suffering considerable hardship. There is very limited access to electricity, less than 10%, among rural ni-Vanuatu. Except for a few household solar PV systems, there is almost no rural electrification except in 4 of the 65 inhabited islands. Three fourths of all households use kerosene for lighting and nearly 90% cook primarily with fuelwood.

As elsewhere in the larger land-rich Melanesian countries, the large-scale manufacture of biofuels could help reduce rural poverty through the creation of significant levels of employment. Vanuatu already has a good deal of practical experience in using coconut oil-based biofuel for transport in and around Port Vila. An obvious opportunity is to expand the use of coconut-based fuel to replace more diesel fuel for transport but also for power generation. Palm oil and other biomass-based oils could be a longer-term prospect.

2. InstitutionalThe Energy Unit of MLGMEEWR has fairly wide energy sector responsibilities but focuses largely on small-scale renewable energy technologies. Other than the private power utility UNELCO, it is the only institution dealing solely with energy.

3. Policy and legislationVanuatu lacks any effective legislation or regulation of the power sector. Electricity prices are established by formulas under long-term concession agreements with no Cabinet oversight. There is no regulation of petroleum fuel prices. There has been World Bank assistance as recently as 2004 to develop a framework for utilities regulation and consideration of a National Energy Corporation to implement rural electrification outside UNELCO concession areas; their status is not known.

4. Capacity issuesThe Energy Unit, or any new energy corporation, would require substantial capacity development if widespread rural electrification is a serious goal. There is at present little or no capacity within the GoV to develop effective legislation for the power sector or for improving petroleum supply contracting. The capacity to monitor power sector and petroleum matters, including pricing, is limited. There is little capacity to oversee the development of a biofuel industry or assist the private sector to develop it.

5. Knowledge repositories and information deliveryThere is no national repository in Vanuatu for up-to-date and relevant knowledge about the energy sector and means of using energy initiatives to help reduce poverty and hardship. Information delivery tends to be on a person-to-person level based on the knowledge of a few individuals, reports from SOPAC, NGOs and assistance efforts, and the Internet.

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K. Recommendations

1. OverviewBiofuels based on coconut resources and possibly other biomass could replace a significant amount of imported petroleum fuel while creating substantial rural employment. The GoV is likely to require advisory services (technical, policy, institutional) regarding large-scale commercial biofuel development.

It is recommended that there be an analysis of the effects of large scale use of coconut based biofuel as a diesel replacement, on the price structure of the local coconut oil market, and on the logistic requirements for moving raw materials to processing centres. Environmental and social implications should be assessed. The end result should be a plan, if the GoV so wishes, for the rational development of the industry in a manner that most benefits the bulk of ni-Vanuatu. Other PICs (Fiji, Samoa, Solomon Islands and others) are seriously considering large-scale biofuels so this could be an element of a wider subregional study.

2. InstitutionalIf the GoV plans to expand the provision of reliable rural electrification services to rural areas, whether through the Energy Unit or a GoV-owned national energy company, it will need to develop a suitable structure, possibly consider private supply arrangements, (e.g. IPPs), and develop appropriate financial mechanisms and tariff policies that are fair to providers and rural consumers. This will require institutional reform but detailed recommendations are premature.

It is not known to the REP=PoR consultants whether there has already been any institutional restructuring as proposed in 2004. Although institutional strengthening of the Energy Unit will be required if the unit is to become more active in petroleum contractual matters, in power sector regulation, in expanding rural electrification, or other functions, assistance needs cannot be determined until the core functions of the unit are decided. If not already decided, it is recommended that assistance be provided to develop a clear institutional structure.

If the GoV intends to expand the provision of rural electrification through solar PV and/or microhydro, support should be provided to appropriate training institutions to provide practical, hands on community programmes for their effective operation and maintenance.

3. Policy and legislationThere is a need for power sector legislation and regulatory mechanisms. However, unless the GoV is serious about reform, no specific recommendations are appropriate at this time. It is likely that the GoV may approach SOPAC / PIEPSAP for further advise on policies, plans and regulations. It may be appropriate for additional assistance to support these efforts with specialist assistance in areas directly related to improving energy services that help low-income ni-Vanuatu.

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4. Capacity issuesThe areas mentioned above — power sector reform and tariffs, biofuel studies, expanded rural electrification, etc. —will all require assistance to improve the capacities of the Energy Unit. The details of the need will depend in part on GoV decisions but general upgrading of analytical, management, financial and technical skills are needed and will continue to be needed for some time.

5. Knowledge repositories and information deliveryTechnologies and mechanisms for effectively accessing, storing, and delivering knowledge widely, cheaply and effectively throughout the widespread islands of a small country like Vanuatu are changing rapidly. Other initiatives are underway through the ITU, UN system, SOPAC, PIFS, etc, regarding provision and delivery of appropriate knowledge and information to the Pacific for technical decision-making. Initially we propose that knowledge systems for the energy sector be specifically included in such initiatives.

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Documents

REP PoR vol1 - Pacific Communityprdrse4all.spc.int/system/files/final_draft_100106.doc · Web viewPacific Islands Climate Change ... There was some limited opportunity to update the