As with many Pacific Islands, Vanuatu faces a number of fuel challenges, the main one being that it continues to depend on imported fossil fuels. The constraints of the geography, with its population distributed over 65 islands and spread over more than 12,000 km2, makes this an expensive and laborious option.
Diesel oil accounts for the largest share of fuel imports (63.3 per cent), with a volume of 33 million litres during 2012. Over 80 per cent of all electricity generated is from diesel fuel, which is imported by the Pacific Petroleum Company and brought by tankers from Australia or Singapore. The result is very low electrification rates and among the highest fuel prices in the region.
However, a renewable energy NAMA within an enabling policy and regulatory environment, and with sufficient technical and financial support, can now be a real catalyst for transformational change in the energy sector. This will lead Vanuatu along a low carbon pathway as well as bringing multiple co-benefits such as poverty alleviation, local job creation, better health, education and environmental conditions.
NAMA on Rural Electrification in Vanuatu
This NAMA, seeking support, complements the National Energy Road Map (NERM) to provide electricity access to all households in Vanuatu. The NAMA will reduce greenhouse gas (GHG) emissions by replacing fossil fuels with renewable energies, contributing to sustainable development, strengthening public–private partnerships and fueling sustainable growth in the remote areas of the country.
The NAMA’s total cost is estimated at around US$5.5 million, including the investment costs of the two projects below as well as extensive capacity-building efforts.
Establish micro grids:
Rural communities, tourism and agricultural facilities, health centres and schools will be targeted due to their demand for electricity for lighting, cooling and appliances. The micro grids will use renewable energy sources (solar, wind, hydro) providing electricity for lighting, radio and phone charging for households, and for service and production activities in Rural Productivity Zones (RPZs).
Extend existing electricity grids on different islands:
Households, public institutions and tourism/commercial consumers in the proximity of lines will be connected. Electricity will be provided for lighting, audio/TV, mobile phone charging, coastal fishing (refrigeration of the fish catch), tourism facilities (lodges), agricultural facilities (preparing, processing and packaging produce) or the production of handicrafts.
In its first phase, the NAMA aims to establish five micro grids under Intervention 1 and support the extension of five electricity grids in Intervention 2. This will provide electricity to around 1,000 households and around 4,700 people. Over the 15-year lifetime of the NAMA, emission reductions will reach around 13,500 tons of CO2.
Working towards transformational change in Vanuatu
Currently tariffs are calculated based on cost. This system will be applied in both the micro grids and the grid extensions. However, there is a risk that consumers in rural areas (households, companies, institutions) will not be able to afford their electricity bills. This risk is especially true in the initial phase when households might struggle to budget for electricity bills and new companies will have start-up costs. This in turn could jeopardize the revenues of energy operators.
To overcome these problems, a Stabilization Fund (recommended to be US$ 700,000) will be established by donors and the Government to provide funds for electricity bills, managed by the NAMA Coordinating Authority. The initial funding will support the operation for at least three years after which the fund will be reassessed, with either the government making further provision or ensuring that a donor can do so, for a further three years.
Special emphasis will be given to identifying and supporting the development of income-generating activities in the Rural Productivity Zones (RPZs), as this is the key to positive rural development.
This NAMA establishes two baselines, a GHG baseline and a sustainable development baseline. This allows effects to be comprehensively assessed and quantified through the monitoring activities described in the Measurement, Reporting and Verification (MRV) system.
Cyclone Pam, which hit Vanuatu in March 2015, has curtailed the ability of the Government to contribute to the NAMA financing. In total, the Vanuatu government is committed to providing around 12 per cent of the required funding and is looking to the private sector to contribute around 6 per cent. The remaining 82 per cent is expected to come from NAMA donors.
The NAMA will receive capacity development support over a period of five years. Initial efforts will focus on securing national and international funding as well as establishing the institutional structure.
The first five projects in each of the two interventions will be prepared and implemented in the years 2016 and 2017. Upon availability of additional funding, further projects can be implemented in the two interventions. After the implementation of the interventions, the NAMA will operate over a period of 15 years.
Implementation of the NAMA will be led by the Ministry of Climate Change and Natural Disasters as the NAMA Coordinating Authority (NCA). The National Advisory Board (NAB) will be appointed as NAMA Approver/Focal Point to the UNFCCC. The role of NAMA Implementing Entity (NIE) will be taken by the Department of Energy (DoE) in cooperation with the Project Management Unit (PMU).