The energy access challenge in the Pacific [part two]
2 June 2022
By Paul Makumbe, Camco's Regional Director for the Pacific
Kia ora and welcome to the second and final part in my mini-series exploring the energy access challenge in the Pacific. In my last post, I made the case for the urgent rollout of renewable energy mini-grids as an integral part of achieving universal energy access in the Pacific Islands and in helping to build islands’ resilience to the impacts of climate change.
To make that happen requires a range of innovative solutions encompassing the entire value chain and all major stakeholders, which I will now explore in more detail.
The current regulatory environment across the Pacific has largely been developed to cater for the existing national grids operated by state-owned enterprises. To achieve the UN’s Sustainable Development Goal 7 (ensure access to affordable, reliable, sustainable and modern energy for all) and encourage private sector participation, the regulatory environment needs to evolve to ensure an optimal operating environment for both the existing utilities and new private sector developers whilst ensuring the goal of equitable energy access for all is achieved.
The successful roll-out of mini-grids in the Pacific islands presents an opportunity for developers and regulators to explore suitable business models that take into account the prevailing and nuanced energy access challenges in the region. Factors such as affordability, capacity, and capability to pay create unique constraints that can be solved through the innovative use of donor capital to create supporting mechanisms such as results-based financing programs that help bridge the viability gap.
The basic principle for grid operation is to deliver electricity to the consumer at the least cost while meeting pre-defined service levels. To ensure that this is achieved in mini-grids throughout the Pacific, the roll-out of renewable energy generation needs to be coupled with storage systems to form the basis of the generation required. This combined with smart metering that enables both post- and pre-paid payments, as well as off- and online operation (all of which can be integrated with consumer loads) present a fertile ground for innovative cleantech companies to bring to market solutions that make a difference.
Private sector involvement
Encouraging private sector participation in solving the Pacific’s energy access challenge is critical to ensuring sustainable solutions that deliver benefits to all stakeholders. But to convince the sector to support the development, building and operation of mini-grids requires (1) an economically viable project (achieved through the use of viability gap support) and (2) the right regulatory structure to encourage the deployment of innovative technology through island-specific business models that adequately rewards all stakeholders.
The reality in the Pacific is that there is currently minimal private sector involvement in addressing energy access, largely driven by the perception that Pacific island investments carry a higher risk. Solutions such as Camco’s TIDES blended finance facility supported by innovative use of catalytic grants from DFIS to bridge the viability gap funding can play a key part in de-risking private sector investments in delivering equitable energy access.
Read the first post in this series here.