Report No. 10441 -EAP Pacific Regional Energy Assessment Overview Report July 31, 1992 The World Bank in Cooperation with The UNDP/ESCAP Pacific Energy Development Programme The Asian Developmnt Bank and the Forum Secretariat Energy Division FOR OFFICIAL USE ONLY MICROFICHE COPY Report No.:10441-EAP Type: (SEC) Title: PACIFIC REGIONAL ENERGY ASSE"S Author: LIEBENTHAL, A Ext.:82507 Room:A10067 Dept.:EA3IE 12 VOLUMES TOTAL Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ACRONYMS AND ABBREVIATIONS ADB Asian Development Bank ADO automotive diesel oil AIDAB Australian International Development Assistance Board EC European Community ECU European Currency Unit EIB European Investment Bank .:com PNG Electricity Commission EPC Electric Power Corporation (Western Samoa) ESCAP Economic and Social Commission for Asia and the Pacific FEA Fiji Electricity Authority FINAPECO Fiji National Petroleum Comipany FS Forum Secretariat FSED Forum Secretariat Energy Divisivn FSM Federated States of Micronesia GTZ Gemeinschaft fur Technische Zusammenarbeit IDO industrial diesel oil IFO industrial fuel oil IOC international oil company NZ New Zealand OTEC ocean thermal energy conversion PEDP Pacific Energy Development Program PICHTR Pacific International Center for High Technology Research PNG Papua New Guinea PPA Pacific Power Association PREA Pacific Regional Energy Assessment PV photovoltaic PWD Public Works Department RECM Regional Energy Committee Meetings RPU Regional Petroleum Unit SOPAC South Pacific Applied Geosciences Commission SPEC South Pacific Bureau for Economic Cooperation SPIRE South Pacific Institute for Renewable Energy SPREP South Pacific Regional Environment Program TSECS Tuvalu Solar Electricity Cooperative Society UNELCO Union Electrique du Vanuatu MEASUREMENTS Unless otherwise indicated, the notation "$" signifies the U.S. dollar. bbl barrel - 159 liters bbl/d barrels per day kgoe kilograms of oil equivalent kV kilo volts kW kilowatt kWh kilowatt-hour kl kiloliter mmtoe million tons of oil equivalent MW megawatt mt metric ton mtoe thousand tons of oil equivalent toe tons of oil equivalent FOR OMCIAL USE ONLY ACKNOWLEDGEMENTS The Pacific Regional Energy Assessment (PREA) is a collaborative effort of the World Bank (WB), the UNDP/ESCAP Pacific Energy Development Program (PEDP), the Asian Development Bank (ADB) and the Pacific Forum Secretariat Energy Division (FSED). Twelve countries requested to participate and have been included: Cook Is., Fiji, Federated States of Micronesia, Kiribaci, Marshall Is., Palau, Papua New Guinea, Solomon Is., Tonga, Tuvalu, Vanuatu and Western Samoa. This report is r.mainly based on the findings of a January/February/March 1991 mission carried out by four teams: Central Team (Fiii. Tuvalu. Kiribati): A. Liebenthal (Team Leader, WB), M. Manzo (WB), C. Filiaga (PEDP), W. Matthews (WB cons.), M. Charleson (WB cons.), D. Macdonald (WB cons.) and H. Wade (WB cons.). Melanesia Team (Vanuatu. Panua New Guinea): K. Jechoutek (Team LeaAer, WB), S. Khwaja (WB), K. Venkataraman (ADB), G. Baines (WB cons.), M. Mendis (ADB cons.) and S. Tsukahara (WB cons.). Micronesia Team (Marshall Is.. Fed. States of Micronesia. Palau): P. Johnston (Team Leader, PEDP), C. Cheatham (PEDP), G. Tavanavanua (WB cons.), V. Morup-Petersen (WB cons.) and R. Lucas (FSED cons.). Polynesia Team (Tonoa. Western Samoa. Cook Is.): T. Holtedahl (Team Leader, WB cons.), P. Hunt (ADB), D. Cleland (PEDP) and J. Morgan (FSED). The Solomon Is. were covered as a separate but coordinated activity under the Joint UNDP/World Bank Energy Sector Management Assistance Program (ESMAP). The Overview Report was prepared by A. Liebenthal, P. Johnston, C. Cheatham and S. Mathur (WB cons.) with inputs from D. Cleland, C. Filiaga, M. Lawrence (FSED), G. Tavanavanua, H. Wade, G. Baines, M. Charleson and M. Mendis. A grant from the South Pacific Facility of the Australian International Development Assistance Bureau (AIDAB), which made it possible for the World Bank to participate, is gratefully acknowledged. The World Bank's contribution was also supported by the Danish, Japanese and Norwegian Consultant Trust Funds. The mission wishes to express its special thanks 1:0 the energy ministers, secretaries and officials of the Pacific island countries, too numerous to name, for their generous cooperation and assistance in the course of the visits. Without their gracious sharing of their extensive knowledge of and experience with the energy sector in the islands, this work would not have been possible. The preliminary results of the PREA were presented in July 1991 at the Third Pacific Energy Ministers' Conference, sponsored by the PEDP/Easty West Center in Honolulu, Hawaii. Draft country reports were presented and dis¢ussed in October 1991 at the PREA Energy Policy and Planning Workshop, organized in conjunction with the 1991 Regional Energy Committee Meeting in Apia, Western Samoa. An overview of PREA findings was discussed at the Third Meeting of CEOs of Pacific Power Utilities, held October 1991 in Pago Pago, American Samoa. In addition, a Briefing for Aid Donors, sponsored by the Forum Secretariat, was held in October 1991 in Suva, Fiji. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. PACIFIC REGIONAL ENERGY ASSESSMENT OVERVIEW REPORT TABLE OF CONTENTS EXECUTIVE SUMMARY .... . . . . . . . . . . . . . . . . . . . . . . . . . I. INTRODUCTION .1... . . . . . . . . . . . . . . . . . . . . . . . . II. INDIGENOUS RENEWABLE RESOURCES: VIABLE OPTIONS . . . . . . . . . . .11 Recent Experience with Renewable Scources of Energy . . . . . . . . Solar Energy .... . . . . . . . . . . . . . . . . . . . . . . . 13 Hydropower .... . . . . . . . . . . . . . . . . . . . . . . . . 19 Biomass. . . . . . . . . . . . . . . . . . . . . . .. 20 Other Renewable Resource Technologies . . . . . . . . . . . . . . . 23 Energy Conservation .... . . . . . . . . . . . . . . . . . . . . 24 Rural Electrification Options . . . . . . . . . . . . . . . . . . . 26 Ilu. PETROLEUM IMPORTS: EFFICIENT MANAGEMENT . . . . . . . . . . . . . . 32 Role of Petroleum in Pacific Island Economies . . . . . . . . . . . 32 Petroleum Product Costs and Prices ... . . . . . . . . . . . . . 32 Receiving Facilities and In-country Distribution . . . . . . . . . 35 Quality and Safety Issues .... . . . . . . . . . . . . . . . . . 37 Implications for Governments' Role . . . . . . . . . . . . . . . . 39 IV. POWER SUPPLY: PERFORMANCE IMPROVEMENT . . . . . . . . . . . . . . . 41 Inadequate Technical Performance ... . . . . . . . . . . . . . . 42 Inadequate Financial Performance ... . . . . . . . . . . . . . . 44 Planning and Evaluation of Power Investments . . . . . . . . . . . 48 Need for Institutional Reform .... . . . . . . . . . . . . . . . 51 Need for Training and Regional Cooperation . . . . . . . . . . . . 54 V. INSTITUTIONAL AND POLICY PRIORITIES FOR GOVERNMENTS . . . . . . . . . 56 Constraints on the Development of the Energy Sector . . . . . . . . 56 Streamlining the National Energy Offices . . . . . . . . . . . . . 56 Staff Development and Training ... . . . . . . . . . . . . . . . 57 Addressing Environmental and Social Concerns . . . . . . . . . . . 60 Improving Management of Donor Resources . . . . . . . . . . . . . . 65 Potential for Regional Cooperation ... . . . . . . . . . . . . . 67 Tables 1.1: PaciEic Islands: Physical Characteristics . . . . . . . . . . . . . . 2 1.2: Pacific Islands: Development Indicators . . . . . . . . . . . . . 4 1.3: Pecific Islands: Petroleum Imports . . . . . . . . . . . . . . . . 8 1.4: Pacific Islands: Petroleum Demand Shares by Sector . . . . . . . . . 9 1.5: Pacific Islands: Petroleum Demand by Product . . . . . . . . . . ... 10 2.1: Comparison of Alternative Technologies for Rural Electrification in Pacific Island Countries ..................... . 31 3.1: Pacifi(. Islands: Petroleum Product Prices . . . . . . . . . . . . . . 34 Figures 1.1: GDP and Commercial Energy Consumption . . . . . . . . . .5 1.2: Pacific Islands: Primary Energy Sources (1990) . . . . . . . . . . . 6 4.1: Pacific Island Electric Utilit:es: Rate of Return . . . . . . . . . . 47 Boxes 2.1: Comparison of Costs of PV Solar and Diesel Mini-Grid Systems . . 15 2.2: Tuvalu Solar Electricity Cooperative Society . . . . . . . . . . . 18 2.3: Benefits of Energy Efficient Lighting in Urban Households . . . . . 25 Statistical Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 ?aI I,BRD 23443 Annexes (Issued seRarately) A: Cook Islands: Issues and Options in the Energy Sector B: Federated States of Micronesia: Issues and Options in the Energy Sector C: Fiji: Issues and Options in the Energy Sector D: Kiribati: Issues and Options in the Energy Sector E: Marshall Islands: Issues and Options in the Energy Sector F: Palau: Issues and Options in the Energy Sector G: Papua New Guinea: Issues and Options in the Energy Sector H: Tonga: Issues and Options in the Energy Sector I: Tuvalu: Issues and Options in the Energy Sector J: Vanuatu: Issues and Options in the Energy Sector K: Western Samoa: Issues and Options in the Energy Sector PACIFIC REGIONAL ENERGY ASSESSMENT OVERVIEW REPORT EXECUTIVE SUMMARY Obiectives 1. The Pacific Regional Energy Assessment (PREA) reviews issues and options associated with energy development in the Pacific island countries. Twelve countries are covered: Cook Is., Fiji. Federated States of Micronesia (FSM), Kiribati, Marshall Is., Palau, Papua New Guinea (PNG), Solomon Is., Tonga, Tuvalu, Vanuatu and Western Samoa. The main objective is to define a strategy for the management of the energy sector in each country that would serve as ths basis for planning and implementing recommended policy measures, institutional strengthening priorities and investments in the sector. The Regional Overview highlights findings and recommendations of regionwide interest. Main Findings and Recommendations 2. Four major findings emerge from the PREA: (a) Disappointing results of new technological options: In spite of high expectations from the development of indigenous renewable energy rRsources using nonconventional approaches (wind power, wave power, ocean t'iermal energy conversion (OTEC), biogas digestors, biomass gasifiers, plantes'on- based power plants, solar cooling), these technologies have largely fat' d to develop into viable alternatives to conventional approaches (base - imported petroleum, biomass and hydrcelectric power). This is mainly dee to the lack of technical, economic and/or financial viability of these options in the Pacific context and their unsustainable institutional. support requirements. Among the few exceptions are soiar photovoltaic (PV) power for remote islands, especially when provided through a utility-type institution, solar water heaters and the use of biomass wastes by agroindustries. (b) Continued reliance on petroleum imports and biomass: The Pacific islands will continue to-rely on imported-petroleum products to meet the bulk of their commercial energy requirements and on biomass for non-commercial energy needs. The only exceptions are hydroelectric power in a few countries and the development of oil resources in PNG, and possibly in Vanuatu and Tonga. In most areas, the continued use of biomass (mostly fuelwood and coconut wastes) by households for cooking and copra drying appears to be sustainable and does not require immediate government attention. In regard to petroleum, the main issues relate to the need to improve the surveillance of offshore and onshore transportation and distribution costs, storage safety standards, waste oil disposal, and defining the most effective role for the government. (c) Inadeauate performance of power utilities: In spite of extensive assets invested in the power sector, most countries suffer from unreliable power supplies, with frequent voltage fluctuations and outages. For the natio:nal utilities, the main issues are weak management, poor maintenance and operation, high costs and inadequate cost recovery through tariffs, and excessive reliance on government funding. For rural electrification, which has barely started, the same issues appear in more severe form. ii (d) Ineffective aovernment management of the sector: In most countries, the government's management of the energy sector has been weak and ineffective. Direct government involvemenc in the operation of facilities and consumer subsidies have wasted scarce financial and managerial resources. Energy offices, which are supposed to formulate policies and screen projects, are unable to do so because they tend to be inadequately staffed and have little influence. 3. Given the above findings, the main recommendations for the development of the Pacific islands' energy sector during the 1990s are as follows: (a) Indigenous resources: the development of indigenous energy resources should focus on the few options that have survived the initial period of trials and errors and hold some promise for technical, economic and financial viability in the Pacific islands. These include the development of solar PV based utilities for remote islands, the development of large scale and mini-hydro power plants where adequate sites and institutional support are available, and the prcmotion of biomass use by agroindustries. (b) Petroleum imports: the landed costs and retail prices of petroleum products should be kept under regular surveillance to ensure that they are justified based or world mri.ike conditions and the local costs of transportation and distribution. Storage safety and waste oil disposal standards should be formulated, monitored and enforced. (c) Power supply: the improvement of power sector performance and efficiency deserves the highest priority. The recommended approach is the strengthening and transformation of the existing power supply agencies into financially and managerially autonomous corporations. To underpin this transformation the governments should treat the utility as a business, with appropriate incentives for financial performance and -technical efficiency. In most countries, there is no justification for additional investment in generation capacity in the medium term. (d) Government Rolet governments should move away from the management and operation of the sector. Instead, they should focus their scarce resources on: (i) formulation of policies to provide the appropriate incentives for both private and state-owned enterprises in the sector, (ii) manpower training and planning to meet the technical skill requirements for the sector, (iii) formulation and enforcement of policies for the management of the environmental impacts of energy production, transport and use, and (iv) management and coordination of donor resources. For those countries that do not have the means to do this effectively, regional energy assistance mechanisms need to be strengthened as a backup resource. Pitfalls and Potential of Indigenous Energv Resources Development 4. The Pacific island countries vary widely in terms of resource endowment and energy use patterns. However, they share a heavy dependence on imported oil (which accounts for 45Z of primary energy consumption on average, with a range of 34-99Z) and a relatively low energy consumption (averaging about 567 kgoe/cap annually, with a range of 400-1,800 kgoe/cap). The indigenous energy resources are poorly known. Most islands have abundant solar energy and some wind resources, albeit with long periods of calm and occasional cyclones. Some mountainous islands have significant hydro potential and geothermal indications. iii A number of islands have good biomass cover. In the long term, ocean thermal and seawave could also be substantial energy sources. The availability of these indigenous energy resources, combined with the heavy dependence on imported oil and its high c,st have, since the late 19708, encouraged a large number of attempts to develop them. 5. The efforts to develop indigen-,us inergy resources have encompassed a wide range of demonstration and investment projects, using a variety of technologiess large and small scale hydroelectric powcr, biomass based steam power, biogas from animal dung, biomass gasifiers, alcoh,' fuel, solar thermal, wood and charcoal stoves, small scale wind systems and bo,ar photovoltaics. Preliminary studies have also been carried out on geothermal, OTEC, tidal power and seawave potential in several countries. These efforts raised major expectations in terms of their ability to substitute for imported oil and took up a significant, and in some cases excessive, share of the limited administrF'ive and technical capacity of government energy departments and regional energy organizations. Most of these expectations have met disappointment. In terms of energy produced, hydroelectric projects have been relatively successful (although cost and time overruns have been routine), b'it the small, mainly rural, demonstration-type projects have generally been i..-cessful, largely because of inadequate linkages with the energy needs of - ,ients and unsustainable exLernal sur--rt requirements. Donors need to be ; cautious before supporting such projects in the future. 6. Hvdroelectr:.c 1csouecess Over tile last fifteen years, the implementation of large scale (10-80 MW) }ydzo scM'emes has transformed the public sector power systems of Fiji and PNG fro, bein5 mostly diesel based to mostly hydro based systems. Other (2-4 MW) proj'cts 'have also been built in PNG and Fiji aa well as FSM and Western Samoa, and aLe ut.- study in Solomon Is. and Vanuatu. Hinihydro (under 1 MW) projects have bLen built in PNG, Fiji and Solomon Is. The high capital costs of hydroelectric * velopment, when compared with the diesel alternative, have been justified on the basis of fuel cost savings. However, such a rationale cannot be taken for granted, particularly in view of the extremely high costs often associated with construction in remote locatiors and difficult geological conditions (porous and unstable soils). Thus, the justification of each project needs to be carefully evaluated based on a realistic estimate of electricity demand, project construction costs and schedule, and the value of diesel substitution taking into account the lower petroleum prices experienced since the mid-80s and ant Icipated during the 1990s. 7. In regard to the development of minihydro projects, the main issue relates to their excessive costs. Minihydros have been extremely expensive in the Pacific region, compared to other localities, because the topography, where suitable at all, is difficult to work in and the geological conditions are often poor. These factors led to high capital costs of $8,000 to $10,000/kW in schemes built recently or un" - c,nstruction. Such costs render these projects uneconomical in comparison to ..sel generation, which has capital costs of about $1000/kW. 8. Solar Photovoltaic SXstems: As an example of successful indigenous energy development, solar photovoltaic (PV) systems may provide a technically and financially viable option for electrification in rural areas and remote islands. This relatively successful outcome is the result of extensive trials and errors throughout the Pacific islands. Aside from extensive communications systems, iv about 4,000 small-scale stand-alone PV systems have been installed, typically involving 2-8 panels for household lighting, radios, water pumping and/or refrigeration. While the performance of these systems has varied, recent experience indicates that PV systems for remote island communities, although initially expensive, can be competitive at current costs with small diesel based electric power systems. On this basis, the overall market for PV-based electricity can be estimated at about a quarter of a million or more households, equivalent to nearly a quarter of the total population. 9. To overcome the constraints associated with the low density, low skill levels and remoteness of the rural communities, the institutional approach that is most likely to succeed 'a the provision of PV-based electricity as a utility service, rather than through the mere installatio;n of hardware. In other words, the utility should retain ownership and maintain the small-scale systems installed in its customers' premises. The model for this approach is the Tuvalu Solar Electric Cooperative. 10. Biomass Ucilization: Fuelwood and coconut residues have traditionally been widely used in the Pacific region; in many countries, fuelwood accounts for over half of total primary energy consumption. Fuelwood is used mostly for domestic cooking, with a smaAl amount used for crop drying and institutional cooking. In some peri-urban areas, the clearing of nearby forests for agricultural use has increased the pressure on traditional sources of fuelwood. Projects to alleviate the problem through tree planting or dissemination of efficient woodstoves have not been successful. The population in peri-urban areas and crowded atoll communities where fuelwood availability has decreased has responded by increasing the use of coconut resJdues, kerosene and LPG, and expanding the collection raditus from nearby natural forests, with the res:lt that there generally appears to be no foreseeable shortage of biomass to meet. household needs. 11. Biomass use for: power generation and agroindustrial purposes has had a mixed record in the Pacific islands. Attempts to combine timber or coconut plantations with power generation proved to be unfeasible due to the difficulties of coordination, land access and resource sustainability. Power gasifiers have proven to be expensive to build and difficult to keep operating. Heat gasifiers, on the other hand, encountered some success in providing process heat for the drying of crops (in the copra, cocoa, coffee and tea industries), mostly in PNG. Direct combustion of biomass wastes for steam and power generation, as in sugar mills and saw mills, appears to have succeeded where there were adequate commercial incentives and technical skills to sustain it. The main issue relates to the need to provide appropriate incentives, svch as enabling the producers to sell surplus electricity to public utilities at a price that reflects the utility's avoided cost. Pricing a.nd Safetv in Petroleum Products SuDDly 12. Petroleum products constitute one of the main commodities in the balance of trade of the Pacific island countries, accounting for 6-30! of total imports. The level of consumption varies widely, both in absolute terms (ranging from 800 mtoe/year in PNG to 2 mtoe/year in Tuvalu) and on a per capita basis (ranging from about 1,800 kgoe/year in Palau to 145 kgoe/year in Kiribati). In view of the continued heavy reliance of the Pacific island countries on petroleum imports, V it is of interest to discuss the major i63ues that emerge in relation to this activity, including price monitoring, safety and environmental standards and the role of the government. 13. Price Monitorina: Given the frequency of changes in the market prices of petroleum products, as well as other components in the price buildup, the approach used to justify ths supply price to each Pacific. island country can have a significant impact on the level of prices in each country. To avoid the susp:cion of overpricing and reduce delays in the adjustment of prices, it is recommended that the governmen..s of those countries that are not effectively monitoring petroleum product prices: (i) negotiate and agree with the oil companies on a transparent formula for incorporating the cost components into the price build-up, monitor the pricing decisions of the oil companies, and verify the accuracy of the cost components, based on publicly available trade information, and (ii) strengthen their capacity to carry out this function by hiring, training and retaining appropriate staff. 14. Safety Standards: In most island countries governments have given insufficient attention to the safety aspects of petroleum handling, storage and distribution. The petroleum companies have been largely self-regulating, applying a mix of international standards. Downstream of company installations, the application of safety and engineering standards has gone virtually unchecked. The installations and practices of local agents, transport companies, commercial storage retail outlets, etc., are frequently described as disasters waiting to happen. There is thus a clear need for (i) appropriate safety and environmental standards to be developed and applied, (ii) government officials to be trained in monitoring and enforcing their applicatinn, and (iii) safety awareness programmes to be introduced in all island countLies. 15. Government Involvement: Aside from monitoring prices and formulating and enforcing safety and environmental regulations, there is little need for additional government involvement in the petroleum sector. A particular area where intervention is not advisable relates to the establisiuent of strategic storage reserves to ensure security of supply in times of international crisis, such as the 1990/91 Gulf War. In the Pacific islands' context, the most effective way of ensuring a secure supply of petroleum products is to keep it attractive for the oil companies to supply. 16. Past Pacific islanu government involvements in the petroleum sector have not yielded the expected results. There was (in the mid 1980s) a national petroleum products supply tender in an attempt to achieve economies of scale, but it was allowed to lapse due in part to problems '- administration. There are two examples of government borrowing on commercie' cerms to fund major bulk fuel storage facilities (in conjunction with power -' ant projects) with the objective of red"cing freight and on-shore distr. .tion costs and servicing the international fishing fleet. In both cases, the expected bunker sales failed to materialize. The repayment of the debt has led one goverrnment into financial difficulties and the other into a major lawsuit tc determine reponsibility. Also, the storage facilities are being poorly managed and maintained and at present fail to meet engineering and safety standards for the products now being stored. vi 17. The most recent example of an unnecessary diversion of government resources to the petroleum sector relates to the establishment of the Fiji National Petroleum Company (Finapeco), with a monopoly on the import of oil to Fiji. The establishment of Finapeco is inconsistent with Fiji's broader development objectives (such as reducing the role of the state and increasing the level of competition) and also likely to impose incremental costs on neighboring countries that are linked to Fiji through the existing petroleum supply network of the internatioral oil companies (see Map). The incremental econ)mic and financial costs to Fiji are estimated at about $2/barrel. The incremental costs to the neighboring countries will depend on the alternative arrangements that are mad;e by the oil companies once Finapeco begins delivert.ng oil to Fiji (in mid-1992). Regulation and Efficiency in Power SuPlPY 18. The power sector of the Pacific islands is composed of the major utih'-ies serving the cities and nearby rural areas, more than 500 small trd government-owned rural electrification schemes, and extensive captive s Lf generation capacity in the major industries. On average, the public systems ser'rc about 25? of the population, ranging from about 10? in PNG to 96? in Palau. In early 1991, the total installed capacity of the public systems was about 542 MW, ranging from 249 MW in PNG to 0.6 MW in Tuvalu. Most of the utilities are predominantly diesel based, but 47? of capacity is hydro, which is concentrated in PNG (162 MW), Fiji (83 MW), Western Samoa (8 MW) and FSK. (2 MW). 19. The technical performance of most of the utilities needs to be improved. For example, electrical losses (technical and non-technical, including unmetered sales) of the Pacific utilities average 13.82, compared to a desirable target of about 102 or lower, and there are cases (Palau - 59Z, FSM -55Z, Marshall Is. - 292, Tuvalu - 21Z, Tonga - 17?, Kiribati, 17?, Western Samoa - 15Z) where losses are alarming and merit a concerted effort to reduce them. In addition, the general impression is that in most countries voltage fluctuations are high, unplanned outages are common, restoration of power after a failure is sl"-- and wiring standards appear to be ignored. 20. The financial condition of the utilities is generally poor. Power tariffs in the region are typically at the $0.15-0.20/kWh level, with a range from $ 0.04/kWh in FSM to $0.35/kWh in Kiribati. Despite these relatively high tariffs, only six utilities (PNG, Fiji, W. Samoa, Tonga, Kiribati and Vanuatu) are able to cover their operational costs. Even so, Fi i has major liquidity and debt service problems, as indicated by debt servict. requirements in excess of net operating income. Only PNG, Tonga, Kiribati and Vanuatu r:e able to self-finance a reasonable share of their investments. 21. Thus, the principal issue in the sactor is the inadequate technical and financial performance of the power utilities. This is a major concern, as the power subsector absorbs a substantial amount of donor and domestic resources but only serves about a quarter of the total population. To be sustainable in the long term, the utilities, with the'support of the governments and the donors, need to improve their efficiency and cost recovery levels. The recoomended approach can be summarized as: (i) physical assets need to be operated and maintained at high levels of efficiency; (ii) investments need to be based on realistic demand forecasts and least cost expansion plans, taking into account vii options for purchasing power from captive generation and the potential for demand management, e.g., through promotion of efficient fluorescent lights; (iii) tariffs need to cover operating costs and an adequate share of tnvestmentsI (iv) competent staff reads to be attracted and developed at all levels; (v) to sustain the above, the government agencies in chi,rge of power supply need to be transformed into financially and managerially autonomous corporations; and (vi) the financial performance and technical efficiency of the enterprises needs to be stimulated through appropriate regulatory incentives. All of these measures need to be underpinned by appropriate institutional arrangements 22. Institutional arrangements: Apart from PNG's Elcom and Fiji's PEA, the government-owned Pacific Island utilities can be characterized as government agencies. In such cases, the utility manager is only responsible for keeping the power system operating within a budget provided by the government, rather than revenues from customers, and there is little incentive to operate the systems efficiently, carry out preventive maintenance, minimize investment and financing costs or even improve the quality of supply. The recent initiatives in several countries, including Cook Is., Tonga, Tuvalu, Palau and the four states of the FSM, to corporatize their pover utilities represent a first step toxiards addressing this problem. 23. For the institutional transformation to be successful, the governments need to begin treating the utility as a business. Basically, once the electricity corporation has been established, the governments should provide management with the autonomy that it needs to operate the utility efficiently subject to accountability for performance. The utilities' financial objectives, rights, jurisdiction, obligations, procedures, etc. need to be defined, and policies on scaffing and salaries, subsidies, procurement and debt need to be specified. Institutional and Policy Priorities for the Governments 24. In general, it is recommended that the governments streamline their involvement in the energy sector by using their powers only to define the policy framework and ensure that agreed objectives are met in an efficient, sustainable and socially equitable manner. Governments should not be involved in the direct administration, implementation or maintenance of energy projects but rather rely on private or government-owned enterprises. If appropriate companies do not exist, the government should consider creating them, but should not become involved in their operation. In addition to streamlining their energy management functions, governments should also support the development of the er.s.rgy sector by enhancing the supply of technical manpower, addressing environmental concerns, coordinating assistance from the donors and strengthening regional cooperation. 25. Streamlining the National Energy Offices: While there are many areas where the governments' involvement in the energy sector can be reduced, there are a number of monitoring, analysis, coordination and regulation functions that need to be carried out in a dependable manner. On this basis, a recommended set of functions for the national energy offices can be outlined as follows: (a) general energy planning functions: (i) monitoring and reviewing of energy markets; (ii) formulation and analysis of policy options and policy changes; (iii) donor coordination (technical assistance and investments); viii (iv) intra-spctoral coordination (among existing institutions); (v) inter- sectoral coordination. (b) regulatory functions: (i) formulation of quality and safety standards and legislation (for petroleum storage and handling, electrical wiring, environmental standards, emergency plans); (ii) monitoring of energy company operations (petroleum purchasing, financial performance, quality of service, investment plans); (iii) promotion and regulation of petroleum exploration and development (in PNG, Vanuatu and Tonga); (iv) petroleum product price and electricity tariff monitoring; and (v) representation of government interests on the boards of state-owned energy companies. 26. Enhancing the Supply of Technical Manpower: Many Pacific island power utilities and government departments find it difficult to attract and retain adequately trained and motivated personnel. While low public service pay scales are usually cited as the primary cause and some equalization of pay scales between public and private organizations may be appropriate, a more basic cause is the insufficient number of competent technical personnel in the country. If governments succeeded in attracting the best technical staff, the private sector could be deprived of the capable technical personnel it needs to grow and diversify. The shortage of competent teci.nical personnel should therefore be addressed as a national problem. The following measures are recommended: (a) increased emphasis on mathematics and applied sciences in primary and secondary education; (b) improved cooperation between government, technical training institutions and employers to improve recruitment of students and make training systems more responsive to demands; (c) improved access for industry to overseas training, including establishment of twinning arrangements with developed country utilities; (d) greater use of expatriate staff for training local staff on the job rather than performing a technical task; and se) improved job support and working conditions for technical staff, including access to proper tools and equipment, access to current technical information and regular contact with overseas peers. 27. Addressina Ervironmental and Social Concerns: The production, transportation and consumption of energy is accompanied by environmental disturbances. Spillages from oil storage and transportation, and the disposal of waste oil, constitute a hazard to the water table and the marine environment. The construction of hydroelectric projects has required the settlement of customary land, use and water use rights. Several proposals for the generation of electricity from the incineration of imported tires or hazardous waste are also a matter of concern. To strengthen the governments' capacity to evaluate and manage such environmental challenges associatec. with energy development, the following measures are recommended: (a) the mandatory environmental assessment of all proposed projects, the results to be incorporated into project design, with provision for long term monitoring of results; (b) the consideration of customary land and sea rights for all projects, with participation of the rightholders and adequate compensation for loss of valid rights; ix (c) the development and strengthening of training and education activities to enhance the environmental awareness of energy sector staff and their understanding of the complexities of customary land and sea tenure; and (d) where the scale of operations allows, the development of in-house capability for environmenta' assessment and management; otherwise, the development of cooperation with appropriate national and regional agencies. 28. Improving the Management of Donor Resources: While oil has traditionally been supplied by private companies, development of power supply and most attempts to develop new and renewable energy sources have been largely funded by donors. The availability of donor assistance contributed to an improved understanding of the energy sector, facilitated the development of power utilities and enabled them to undertake major investments and expand their service beyond the urban core, but the effectiveness of these resources has fallen short of the expectations of both cr'untries and donors. Major contributing factors weret (a) optimistic proiect assumptions: the best indicator is the poor success rate of most Pacific island energy projects. In hindsight, these projects appear to have been justified on the basis of optimistic assumptions about demand, costs, output, reliability and/or skills required for operation and maintenance. The optimism may be related to a decision-making environment where the major parties, including donor staff, expert consultants, and country/utility staff tend to have strong incentives to deliver the projects, rather than to make a realistic assessment of downside risks and institutional weaknesses. (b) inadequate institutional support: the absence of donor funding for the operational phase of the projects has made it difficult 'or the utilities and other agencies to strengthen or even sustain their institutional capacities as required for the successfu: operation and maintenance of projects. (c) inadequate sectoral framework: project preparation and approval is often carrl.ed out without an adequate understanding of the sectoral framework for the projects, including the needs of the intended beneficiaries, institutional support requirements and policy environment. 29. To reduce the impact of the factors above and improve the effectiveness of foreign aid, the governments need to work closely with the donors to: (a) strengthen the Project planning and screening capabilities of the governments, to verify that economic, technical and financial feasibilities have been evaluated and that projects are consistent with sectoral, social and environmental policies and objectives. (b) suRPort the transformation of power supply agencies into efficiently managed, financially autonomous enterprises. In particular, specific targets need to be set for enhancing their ability to recover costs from sales revenues. Government subsidies and ;oncessional finance should be phased out or tied to the achievement of defined social objectives, such as rural electrification. (c) improve the policy and regulatory framework for the sector, with the development of appropriate incentives for efficiency in enterprise management and energy use. x The above measures are recommeneded for the support of bilateral donors, through their assistance for the strengthening of institutional capacities and technical manpower development, as well as multilateral lenders, through their financing of major investments. 30. The Potential for Regional Cooperation: The small size and limited markets of the Pacific island countries have long stimulated a search for regional approaches to take advantage cf economies of scale. The international oil companies developed integrated regional supply networks to remain competitive. For the national power utilities and energy offices, regional cooperation has been driven more by a desire to share experience and information, and develop areas of fruitful cooperation. 31. For the power utilities, regional cooperation began in 1989 with efforts to increase the utilization of Elcom and FEA's training facilities by other utilities, produce a regular newsletter, request regional agencies and donors to organize joint workshops on issues of common interest, and collect comparative power sector data. In 1991, the Pacific Power Association (PPA) was created by 15 island power utilities. The PPA has the potential to succeed as a regular and formal mechanism for strengthening regional cooperation in areas of benefit to the member utilities. 32. Regional cooperation among the national energy offices began in the early 1980s, with a series of annual Regional Energy Meetings (REM) sponsored by the UNDP and SPEC (now the Forum Secretariat). Over the years these meetings led to the establishment of (i) the UNDP-funded Pacilic Energy Development Program (PEDP), to develop the countries' sectoral planning and regulatory capabilities; (ii) the Forum Secretariat Energy Division (FSED) to administer regional training and technical assistance programs, and (iii) the Regional Petroleum Unit (RPU), to provide assistance and advice on petroleum matters. Pursuant a decision of the 1991 Pacific Forum, these three programs are being consolidated into the FSED, which has been given the regional mandate to provide energy sector assistance. 33. Based on the past experience with regional energy assistance programs in the Pacific, and to improve the effectiveness of the FSED, it is recommended that the Forum Secretariat, with the support of the donors:' (a) restructure the FSED consistent with the objective of assisting the countries in the areas of greatest priority, i.e., with strengthened staffing for power sector and, at least proportionally, a reduced share for the development of renewables. (b) recognize the Regional Energy Committee Meeting as the mechanism for the member countries and donors to review progress, decide upon policy and approve work programs; and (c) enable the FSED to respond rapidly to sp3cific country requests, using appropriately designated quick response ce.tegories in the budget. These recommendations do not necessarily reflect the views of the FSED. I. INTRODUCTION Obiectives 1.1 The Pacific Regional Energy Assessment (PREA) reviews issues and options associated with the development of the energy sector in the Pacific island countries. Twelve countries are covered: Cook Is., Fiji, Federated States of Micronesia (FSM), Kiribati, Marshall Is., Palau, Papua New Guinea (PNG), Solomon Is., Tonga, Tuvalu, Vanuatu and Western Samoa (see Map IBRD 23443). The objective is to define a strategy for the management of the energy sector in each country that would serve as the basis for planning and implementing recommended policy measures, institutional strengthening priorities and investments in the sector. 1/ The purpose of this Overview Report is to highlight findings and recommendations of regionwide interest. Economic Context 1.2 The twelve Pacific island countries covered by the PREA have many features in common, but they also differ in terms of size, population and physical characteristics. All the countries consist of a number of islands, though the size of the islands varies considerably. For example, Kiribati consists of 33 islands in three main groups, and Fiji has about 300 islands,though most of the population and economic activity is concentrated on the two largest ones. All the countries are far from the major markets in Europe, North America, and Japan, though some are relatively close to two industrialized countries, Australia and New Zealand. 1.3 The total population of the Pacific island countries is approximately 5.6 .:illion, with a total land area of 530 thousand km2. Papua New Guinea (PNG) is the largest, with a land area of nearly 463 thousand km2 and a population of approximately 3.9 million. Thus, PNG has approximately 87% of the land mass and 70% of the population in the region. In size, PNG is followed by Fiji, which has a land area of 18 thousand km2 and a population of approximately 725,000. In contrast, six of the countries (Tonga, Kiribati, Marshall Is., Cook Is., Palau and Tuvalu) have both a land area less than 1 thousand km2 and a population less than 100,000. The smallest country covered by the PREA, Tuvalu, has a land area of only 26 km2 and a population of only approximately 9,500. (Table 1.1) 1.4 The population density varies significantly by country. The density is the lowest (8 persons/km2) in PNG, the largest country, and the highest (363 persons/km2) in Tuvalu, the smallest country. On a regional basis, most Gf the population lives in rural areas. However, most of the population in Palau (67%), Tonga (67%), Cook Is. (56%) and Marshall Is. (55%) lives in urban areas, and the urban population is also substantial in Fiji (39%), Kiribati (35%), Tuvalu (32%), and FSM (29%). The average size of the household (5.6 persons) is large by comparison with North American or European households, but similar to that found 3/ One country report, Solomon Islands: Issues and ODtions in the Energy Sector, has been issued as World Bank Report No. 9797-SOL (March, 1992) under the joint UNDP/World Bank Energy Sector Management Assistance Program. The other country reports are being issued as Annexes to this Overview Report. PACIFIC ISLANDS: PHYSICAL CHARACTERISTICS (All figures 1990) Country TotalLand TotalSea -----------Population-------------- Average Area Area Total Density Urban Rural Annual Household Size ('000 km2) ('000 km2) ('000) (persons/kim2) ('000) ('000) Growth Rate (persons) Papua New Guin Pa 462.84 3,120 3,907.0 8 586.0 3,321.0 2.2% 6.0 Fiji 18.27 1,290 725.0 40 282.0 443.0 1.6% 5.8 Solomon Islands 29.79 1,340 318.7 11 n.a. n.a. 3.8% 6.4 Western Samoa 2.94 120 157.9 54 31.6 126.4 0.4% n.a. Vanuatu 11.88 680 142.6 12 26.0 116.6 3A% n.a. FSM 0.70 2,978 101.0 144 293 71.7 3.0% 8.5 Tonga 0.70 700 95.9 137 65.0 30.8 0.8% 7.0 Kinrbati 0.69 355 723 105 25.2 47.1 1.8% 7.0 Marshall Islands 0.18 2,131 46.2 255 25.2 21.0 3.5% 8.7 Cook Islands 0.24 1,839 17.9 75 10.0 7.9 -03% 5.0 Palau 0.42 629 15.2 37 103 4.9 2.0% 1 53 Tuvalu 0.03 900 9.5 363 3.0 6.4 23% 7.0 Regional Total 528.67 19,277 5,609.1 11 Z 2.2% z 5.6 Sources: National Statistics Offices Pacific Energy Development Progranmme EIU Countiy Profiles Notes: 1. Urban households only 2. Weighted average .E_~~~~~~~~~~~~~~~~~~~~~~~ -3- in other developing countries. 1.5 The geographical fragmentation of the Pacific island countries, their remoteness e-i their small size are fundamental constraints on their economic development The average 1990 GDP per capita in these economies was approximately US $ 1,000, ranging from $ 3,300 in Palau to $ 430 in the Solomon Is. Except for PNG 2/, their exports are significantly less than their Imports, and the economies are heavily dependent upon remitt--nces, external assistance and borrowing. (Table 1.2) Most of these countries are unable to take advantage of all the potential external assistance that could be available to them because they lack the skilled management and implementation capacity to absorb it. 1.6 The economic assets of these countries consist mainly of their marine resources, relatively fertile agricultural land and tourism potential. The larger countries have been relatively successful at exploiting these resources. For example, Fiji is a middle-income country with a diversified economy that has an internationally competiti-ve sugar industry,a significant industrial base, well-developed tourism and good prospects for further development of forests, fisheries and agriculture. The Role of Energy 1.7 The total annual gross energy consumption per capita is approximately 0.6 toe/capita, on average. The per capita consumption of commercial energy in the Pacific island economies is closely linked to the per capita GDP, so that countries with low (high) levels of GDP per capita also have low (high) levels of commercial energy consumption. (Figure 1.1). 1.8 Of the indigenous fuels, biomass, collected on a non-commercial basis, accounts for approximately half of the total energy supply, as it is extensively used by households for cooking, for copra drying in coconut plantation, and as fuel in a variety of agro-industries, including sugar mills, and coffee, cocoa, and rubber processing plants. (Figure 1.2) Hydropower has been extensively developed in PNG, Fiji, and Western Samoa, where it accounts for 5-lOZ of total energy supply. Other indigenous renewable sources of energy, such as wind or ocean energy, have not made a significant contribution to energy supplies, though there has been some success with solar energy. 1.9 Imported petroleum is the chief source of primary commercial energy; indeed, with the exception of hydropower in PNG, Fiji and Western Samoa, it is the only source of primary commercial energy in many of the economies. However, on an international basis, the Pacific island countries are not significant consumers of-petroleum. The total consumption of petroleum in these countries is estimated to be about 1.4 mmtoe per year (equivalent to 23 thousandibbl/d), of which PNG accounts for about 809 mtoe (11.6 thousand bbl/d) and Fiji for about 323 mtoe (equivalenc to 6.4 thousand bbl/d). These consumption levels are low compared to Japan (4.8 million bbl/d) and Australia (670 thousand bbl/d). 21 PNG has substantial exports of copper and gold, which account for more than 50Z of its total exports. PACIFIC ISLANDS: DEVELOPMENT INDICATORS (All figures 1990 unless otherwie indiated) Country GDP at GDP per Average GDP Total Total Annual ODA per Exchange current prices Capita Growth Rate Imports (cif) Exports (fob) ODA Capita Rate 1990 (USSmil) (USS) (real % p.a.) (USSmil) (US$mil) (US$mil) (USS) (local/USS) Papua New Guinea 3,013.7 828 3.0% 1,060.5 3 1,176.1 1 381.0 98 0.96 Kina Fiji 1,185.7 1,635 4.0% 685.8 516.11 54A 75 1.48 FID Solomon Islands 367.0 t 430 4.0% 103.8 2 67.7 1 58.3 183 253 SBD Westem Samoa 109.4A 693 2.8% 74.9 2 125 1 31.1 1 197 2.33 Tala Vanuatu 140A 2 826 2.5% 92A 18.9 1 393 276 11657 Vatu FSM 144.7 1,520 3.0% 67.7 1 S. 2 114.4 2 1,166 1.00 USD Tonga 1005 1,048 3.2% 56.9 9.0 2 18.9 1 197 1.28 Pa'aga Kinrbati 40.1 555 4.0% 22.0' 5.2 1 16.3 2 234 1.28 AUD Marshall Islands 68.7' 1,631 3.0% 444 2 23 1 44.7 1,013 1.00 USD Cook Islands 45.73 2,589 73% 433 2 2.8 2 12.0 1 670 1.68 NZD P818u 50.0 3,289 4.5% 24.6 2 0.6 2 31.6 2,079 1.00 USD Tavni 6.6 702 4.0% 4.47 1 02 1 13.9 1 1,471 1.28 AUD Regional Total 5,273 940 4 33% 4 2,281 1,816.8 815.9 145 4 Sources: PREA Missions 1991 estimates EIU Country Profles Pacific Economic Bulletin (June 1991) Notes: 1. 1988 estimate 2.1989 estimate 3. 1987 estimate 4. Weighted average Figure 1.1 Pacific Islands: GDP and Commercial Energy Consumption (1990) cD 2.0 1.8 Palau 0 - 1.6 o 1.4 E ~~1.2- CO 1.0 ' Cook Is 0 oz 0.8 Marshall Is. Cook Is.. 9 0.6 FSM Fiji C 0.4 W. Samoa PNG WI O. A imon Is.,* PNG ToIlga W V. * Nanuatu Q 0.0 Kin-l,bti Tuvalu g 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 cL Per Capita Income (US$ '000) Source: StatsticaI Appendbx -6- o^ t B tE ta~~~~~ o~~~~ _ X n~~~~~~~~~~~~ e e e §~~~~~~~~ .r. _~~~~~~~~~ U) 'da) R * C.) -7- 1.10 For these Pacific island economies, the share of petroleum imports in total imports is approximately 12% on average, ranging from a low of 6% for FSM to a high of 30% for Palau. While these levels are comparable to other developing countries, the ratio of petroleum imports to total exports is 15%, ranging from a low of 10% for PNG to a high of over 400% for Marshall Is., Palau and Tuvalu. (Table 1.3) The high proportion of petroleum imports in relation to total exports indicates that most of the Pacific island economies are vulnerable to external economic shocks, such as sharp increases in petroleum prices. 1.11 Most of the imported petroleum is used for transportation (48%) and power generation (37%). (Table 1.4) In each of these countries, automotive diesel oil (ADO) is the chief imported petroleum product, accounting for nearly 60% of petroleum imports, on average, with a range from about 37% in Cook Is. to about 74% in Solomon Is. In the Pacific island economies, a significant amount of ADO is used in diesel-based electricity generation, e.g., approximately one-third of the imported diesel oil in Kiribati is used in power generati( The next two largest components of petroleum imports are gasoline and a- tion fuel at approximately 17% each on a regional basis. The share of kerosene is less than 10% in all of these countries and is less than 1% Palau and Cook Is. (Table 1.5) Following the recent closure of the Bougainville copper mine in PNG, there is very little demand for fuel oil in the region. 1.12 In many of these countries, a substantial part of the population is already being supplied with electricity. While data are not available for all the countries, over 50% of the population in Cook Is., Marshall Is., Palau, Tonga, Tuvalu, and Western Samoa has been electrified. However, in most of the countries, grid-based publicly distributed electricity is provided only on the main island(s), and the supply of electricity to rural areas and outer islands is very limited. 1.13 For the future, growth in the demand for energy depends upon the growth in the economy. For the period 1990-2000, the real GDP of these Pacific island economies is projected to grow at annual average rates ranging from 2% to 5%. i./ Consistent with these rates, the demand for imported petroleum is projected to grow at an average annual growth rate ranging from 2.9% (Solomon Is.) to 7.7% (Tonga), except for PNG, which had a very low growth rate in the late 1980s, and is expected to have a high rate in the early 1990s as a result of major new mining and hydrocarbon development projects. (Table 1.5). The structure of consumption will not change significantly, and as in the 1980s, imported petroleum will continue to be used mainly in transportation and power generation. ]/ For a discussion of the economic situations and prospects of the principal Pacific island countries, see Toward Higher Growth in the Pacific Island Economies: Lessons from the 1980s, World Bank Report No. 9059-ASIA, January 18, 1991. PACIFIC ISLANDS: PETROLEUM IMPORTS (All figures 1990 unless otherwise indicated) Country Import value Percentage Percentage CIF of Total of Total (USSmil) Imports Exports Papua New Guinea 117.3 3 11.1% 10.0% Fiji 97A 14.2% 18.9% Solomon Islands 99 1 9.6% 14.7% Western Samoa 7.0 9.4% 56.2% Vanuatu 7.5 8.2% 39.9% FSM 4.1 6.0% 76.0% Tonga 5.9 10.4% 65.6% Kinibati 2.3 2 10.6% 44.8% Marshall Islands 9.2 23.0% 400.0% Cook Islands 5.1 11.7% 183.4% Palau 2.8 30.0% 500.0% Tuvalu 0.8 17.0% 450.6% Regcion . Total 268.7 11.8% 4 14.8% 4 Sources: PREA Mission 1991 estimates EIU Country Profiles Pacific Economic Bulletin 1991 Notes: 1. 1989 estimate 2. 1988 estimate 3. 1987 estimate 4. Weighted average m I- PACIFIC ISLANDS: PETROLEUM DEMAND SHARES BY SECTOR' (All figures 1990) Country Transport Electricity Domestic Gov./IndJ/Comm.Z Other Share Share Share Share Share Papua New Guinea 34.4% 52.6% 1.5% 115% 0.0% Fiji 75.8% 4.4% 7.2% 12.5% 0.0% Solomon Is. 265% 17.1% 3.4% 47.9% 5.1% Western Samoa 79.9% 15.7% 4.5% na na Vanuatu 70.9% 23.2% 5.8% n.a na FSM 62.0% 36.0% 2.0% n.a na Tonga 72.0% 23.1% 4.9% n.a n.a Kiribati 71.0% 19.4% 9.7% n.a n.a Marshall Is. 40.7% 53.4% 1.4% 3.8% 0.7% Cook Is. 70.6% 262% 3.1% n.a n.a Palau 53.1% 39.4% 0.7% 6.8% 0.0% Tuvalu 74.0% 18.5% 75% 0.0% 0.0% Rezional Weirthted Averaie 48.3% 36.7% 3.2% 11.7% 0.2% Source: PREA Mission estimates Notes: 1. Gross Demand 2. Includes agro-industries PACIFIC ISLANDS: PETROLEUM DEMAND BY PRODUCT (All figures 1990 unless otherwise indicated) Country Total Imports ADO 3 Gasoline 3 Jet Al Kerosene Annual Annual Annual Annual Annual Average Average Average Average Average Growth Growth Growth Growth Growth Rate Rate Rate Rate Rate 1984- 1990- Import 1990- Import 1990- Import 1990- Import 1990- 1989 2000 Share 2000 Share 2000 Share 2000 Share 2000 Papua New Guinea -0.1% 9.2% 66.4% 4 10.4% 15.7% 5.8% 12.4% 4.4% 2.3% 4.8% Fiji 1.2% 3.7% 47.4% 4 5.3% 16.9% 3.0% 26.4% 0.0% 5.9% 1.0% Solomon Islands2 4.0% 2.9% 73.2% 2.4% 15.1% 4.5% 5.4% 5.1% 3.3% 3.5% Western Samoa2 8.2% 4.6% 42.4% 4.3% 29.7% 5.0% 22.4% 5.0% 4.3% 2.8% Vanuatu 0.5% 5.5% 57.7% 6.2% 16.3% 4.2% 15.5% 4.3% 3.1% 3.6% FSM 4.3% 4.7% 55.6% 4.0% 27.0% 4.6% 15.0% 7.6% 2.0% 1.5% Tonga2 4.2% 7.7% 42.0% 9.9% 33.6% 4.9% 16.0% 7.3% 2.2% 2.6% Kiribati 5.5% 3.2% 51.4% 4.9% 19.5% 2.7% 14.0% 0.0% 9.6% 0.9% Marshall Islands 1.1% 4.1% 65.0% 5 4.6% 13.9% 2.6% 19.5% 3.2% 1.4% 3.2% Cook Islands2 6.1% 4.1% 36.4% 4.5% 19.1% 2.0% 35.4% 4.0% 0.6% 3.1% Palau 8.4% 4.7% 56.5% 4.6' 23.9% 4.6% 18.4% 5.2% 0.7% 4.1% Tuvalu2 14.8% 3.8% 42.9% 4.5S-. 18.3% 4.0% 26.1% 4.0% 7.1% 2.0% Regional Weighted Average 0.9% 6.8% 59.0% 8.3% 17.5% 4.8% 17.0% 3.0% 3.4% 2.8% Sources: PREA Mission estimates Pacific Energy Development Programme Notes: 1. Minor quantities of Avgas and LPG, not shown in this table, are also imported. 2. 1989 estimates 3. Includes bunkers 4. Includes IDO and IFO 5. Includes IFO -11- II. INDIGENOUS RENEWABLE RESOURCES: VIABLE OPTIONS Recent Experience with Renewable Sources of Energy 2.1 A decade ago, Pacific island governmznts had high expectations for the development of indigenous renewable energy resources. Most of the islands have abundant solar energy and some wind resources, albeit with long periods of calm and occasional cyclones. Some volcanic islands have significant hydro potential and geothermal indications. A number of islands have good biomass cover. In the long term, ocean thermal and seawave could also be substantial energy resources. The conventional wisdom, expressed by many field missions and in expert reports, was that renewable energy technologies were becoming technically and economically viable and that the islands' energy environment -- remote locations, small demands, high costs of petroleum imports, and abundant supplies of indigenous solar, biomass, hydro, wind and oceanic resources -- was ideal for the new technologies. 2.2 The efforts to develop indigenous energy resources have encompassed a wide range of demonstration and investment projects, using a variety of technologies: large and small scale hydroelectric power, biomass based steam power, biogas from animal dung, biomass gasifiers, alcohol fuel, solar thermal, wood and charcoal stoves, small scale wind systems and solar photovoltaics. Preliminary studies have also been carried out on geothermal, OTEC (ocean thermal energy conversion), tidal power and seawave potential in several countries. While most proposals were never implemented, their assessment absorbed a disproportionate amount of government staff time. The projects that were implemented were mostly funded by international donors. Most of the regional energy assistance i. during the 1980s was devoted to re-.wable energy. 2.3 In spite of this focus on renewable sources of energy, during the 1980s petroleum product demand grew at an aver&ge annual rate of nearly 5% ./, and the growth rate is projected to increase to 7% during the 1990s (Table 1.5). These figures suggest that, in aggregate, the dependence of the Pacific island countries on petroleum has nct been appreciably reduced, and will not be reduced i/ Here, regional energy assistance is assistance provided on specifically a regional, and not on a national, basis. The European Community's (EC) Lome II (ECU 6.19 million) and Lome III (ECU 4.6 million) Regiornal Energy Programmes, administered by the Forum Secretariat, are the largest components of regional energy assistance. Others have included the United Nations Pacific Energy Development Programme (PEDP), the Commonwealth Heads of Government Regional Meeting's Asia-Pacific Energy Programme, the East-West Center's Energy Programme, the Tahiti-based South Pacific Institute for Renewable Energy (SPIRE), the Asian Development Bank (ADB), the World Bank, Norwegian support for seawave power to the South Pacific Geosciences Commission (SOPAC), and bilateral funding to the Forum Secretariat and/or PEDP from Australia, Canada, France, Germany, Japan, and New Zealand. 5.1 Except for PNG, which had a decline in petroleum consumption in the late 1980s. -12- over the coming decade, despite the considerable investment of time, money and skilled personnel. Overall, as shown in Figure 1.2, while the development of hydropower, and to a limited extent, solar photovoltaics, has been successful, the development of other new and renewable energy technologies has not made a significant contribution to the energy balance in the Pacific island countries, and is not expected to do so in the next decade. 2.4 There are many reasons for the failure of most renewable energy technologies in the Pacific island region. Among these are: (a) InapproRriate proiects: There has been a tendency for project ideas to originate from those interested in carrying out the project, rather than from an objective assessment of the need for the project and a careful comparison of the options. Often, the proposals have been characterized by over-optimistic assumptions about costs, reliability, replicability, and the skills required to manage the proposed projects. This results in the choice of equipment that has not been thoroughly tested elsewhere, is poorly designed , or is not appropriate for the site. The problem is compounded by a limited understanding of the energy needs of the recipients and inadequate involvement of the recipient community at the planning stage. In particular, there has been a tendency to treat renewable technologies as equipment to be sold, leaving users without follow-up support, rather than as a service to be provided in the manner of public utilities. Some of the projects had overhead management requirements that were disproportionate to the benefits, and which the small national energy offices could not provide without assistance. There has also been a tendency to build projects ahead of energy demand, due to over-optimistic forecasts, or due to lower than expected economic growth. (b) Donor preferences: Donors prefer short-term funding commitments (1-3) years for capital costs of projects, rather than longer-term (5 or more years) support Lor ins-itutional development. Further, there are weak links between the assistance to the energy sector, and assistance to the other sectors, such as training and complementary rural development projects that would be enhance the financial and institutional viability of energy projects. (c) Lack of training. support, and commitment: Most of the renewable energy projects were characterized by (i) lack of adequate training for the local people in system operation and maintenance i/, (ii) inadequate support for local organizations to plan, operate, maintain, manage, finance, expand and evaluate the projects in the field, (iii) inadequate initial support (commissioning, instructions, spare parts, etc.) for some projects, and (iv) on occasion, no clear evidence of commitment of the recipient (government, agency, utility, community, etc.) to the project. (d) Problems associated with remoteness: The physical remoteness of the islands has led to difficulties in supervision of projects and in W/ A notable exception is training in PV systems, for which there were numerous courses. -13- providing maintenance and spare parts. The remoteness has also meant that there is a limited understanding of the social, economic and geographic characteristics of the area. Further, it is difficult to attract high- quality consultants and contractors to work on small projects in remote locations. 2.5 The experience with, and potential of, the various renewable technologies is discussed below. Solar Energy 2.6 In the Pacific islands, solar energy has been used in two ways: (i) for solar water heating in urban houses as well as commercial establishments, and (ii) as solar photovoltaic (PV) systems for electrification in rural areas and remote islands. Solar water heating 2.7 Following a few demonstration projects in the early 1980s, solar water heating has become widespread throughout the region in upper-income homes /, hotels, and to a lesser extent, commercial establishments. Fiji and PNG already have several thousand systems each, and in Tonga, about 100-150 new systems are being installed every year. Although some of the systems are being imported into the region, many are locally fabricated, even in the smaller countries. 2.8 Most of the solar water heating systems in the Pacific islands are now being provided on a commercial basis. These systems appear to be working well, and their continued use is recommended. Since the market for these systems appears to be functioning properly, there is no need for further government interventions, except to ensure that developers of commercial and residential properties consider the possibility of using these systems. Solar PV systems 2.9 Solar PV systems are of particular interest because they appear to offer an economical alternative to diesel generation for the electrification of remote rural areas. Given the poor experience with conventional power systems and the desire to restrict petroleum imports, most Pacific island countries experimented with PV systems for rural electrification. Excluding communications systems (which are extensive) there have beezL about 4,000 small-scale stand-alone PV systems installed in the Pacific island countries, typically involvi.ng 2-8 panels for household lighting, water pumping and refrigeration. In addition, several countries have ambitious plans for PV expansion. 2.10 Recent experience indicates that PV systems, although initially expensive, can be competitive at current costs with small diesel based electric power systems for remote island communities. For electrification with low load density, such as is usually found in rural districts with mainly house lighting 1/ At a typical cost of $ 1,000-2,000 per household, solar thermal systems will not be widely used in lower income homes. -14- loads, and where money-income growth is not expected, individual solar PV systems may be cheaper than small diesel systems. While costs will vary from case to case, household-sized PV systems can be cheaper than grid-based diesel systems in small remote villages for consumers with a limited number of appliances, such as a few household lights and a TV/VCR system (see Box 2.1). On this basis, the overall potential market for PV-based electricity is estimated to be about a quarter million households, equivalent to nearly a quarter of the total population. 2.11 Technical lessons learned: In view of the economic potential of household-size solar PV systems, as well as the relative newness of this technology, the technical and institutional lessons learned from the experience in the Pacific deserve particular attention. In the past, the performance of the PV systems has varied, and there have been many technical failures. The principle reasons for the technical failures of the PV sys;:ems have been: (a) Inappropriate design: For PV systems to function properly, they should be designed so that all the components (PV panels, controllers, wiring, and battaries) match, and the overall capability of the system matches the electrical needs of the users. Undersized solar panels create many problems, while adding panels to small lighting systems not only improves system performance but also improves battery life. §/ Undercized, initial low-cost batteries are likely to fail frequently. Further, discharge controllers must be included in the system to prevent excess discharges that damage batteries. (b) Unreliable components: The reliability of components is very important in the outer islands of the Pacific island countries because transportation is infrequent and expensive. The repair costs associated with cheap components lead to high life-cycle cost. There have been frequent problems with batteries and controllers, though early battery failures are often indicative of problems elsewhere in the systems, and not necessarily indicative of problems with the battery itself. (c) Improper installation: Improper placement of PV panels by inexperienced technicians has reduced the power actually available to less than the theoretical capability. There have also been wiring mistakes, which has led to voltage loss due to poor connections or undersized wire; many installers did not realize that the wiring specifications for 12V DC systems are quite different from 120V or 240V AC systems. (d) Poor maintenance: Untrained users and technicians do not know how to maintain PV systems. Frequently, they misuse batteries, misdiagnose problems as battery-related even though the problem is elsewhere, and use automobile batteries as replacements, even though they are not suitable. Good maintenance by trained technicians is very important, particularly to extend the life of the battery, which is the most expensive component of PV systems. t/ The PV panels themselves have not failed frequently in the Pacific island countries. -15- .:..i..*. >.... Often the two options: for rural e::e trfication f ritf P aat ..jl" do-Axie solar PV. .ystems a.d. stad-.a1one sel-haed *t5.... g.4.. . PV *ystems.'.. chief economic advantage.. isAthat they. haveo fio: os:t:e 4hie ..4tuel systems have high". fuel coats, given the landed ,Leee.$ $1400,'^,O.,O,/l,ter i...$n remote -Pacific i.lan'd. rurther. fa:i.ur: of o V ) -ayst: affects onLy Q.n. household, whileo . 4Iesel nyste. ua,e -$ect.a ,s grid. Final. yI unlike diesel u'. Oair. -pollution. . .... 2. Th~eae adantages are; pata ly fse byhe ige itl ap4 cos 'associa'ted wit =v Vsystems, both.. for g atio 1u'e ,'oQns' r' appliances. Further,0 unXike- PV syste -, e :e a *..aignj.ficant economies of scale s80that they tend t- beome more vompet btive with'PV so6lar systems as the.scale of ope ti .Q"' as 3 ~The..discounltedypresn au rte cst o erving w i4gith 4 Ctstomrs foe a 15 y'ear pe r iod with~ PV:' solr. -system cnb esta h 'cost".of diesel mini-grids.. under .aapop,ite: c.nTditions : t.e 1) . :Qn o th.ae .conditions is the provisioo-of PV solar systems:-asa a utiltyeer.v.i.c with.; ` a iow maintenance fee, so that the PV-systems ..do.o sufe fr 'conditions'such as poor battery.matintenaance,sha-,ding"o' P.Vpanels et.(.See Box 2.2 for the Tuvalu experience.) Other conditions are high fufl cOSts and' ,,elatively smalliloads. If, as expected, the.costs of solarP d .decline significantly in the future but-':die.se,l costs.. remai nessentially unchanged, then PV solar systems will'become attractive. :'-Table 1: Costs Per Customer of PV.Solar and DieselvMi.ni-gridSystems IA PV Solar. Di S .:;n--a. ---d:- 4Lb3 i,, ti-htsO 0 nl ...... initial Capital Costs $ 073 75 -0 Future Capital);Costs $ L '64 - Initial Cost of Appliances S : 120 10 : Future Cost of Appliances 9$3 . 121 Variable Costs /d . 137 593 . :otal Costs . 1,373 1,470. oad: 4 Liqhts and 1 VCR & TV . ' -.:.'Initial.Capital Costs $ 2,256 ..1875 . Future Capital Costso g I ,44 , - -, -- initial Cost of Appliances .-$ a -720 '. F,uture.Cost of Appliances' $. .L 4 ' ..Variiable'Costs $413148 Total Costs $ .4,051 . j! O6i*ountd present value, 10X discount,rate, Of quipment app.an, e and var ots.for'1,'year F Por br, 1 panel (47W) 0 $325 (life:15 'years), design hnsolation5 9 kWh I battery (12V) i .S,1504 years) 100 Ah at 12v, 1 control:ler:' $ 120 (8 years), etherf.hardware $-: 100:(:15 years),hstatlatJo *ost, t 36; for diesel mini-grid, 2X5 kW gensets (15 years) to serve 40 customer$, with demand Qf 1, w e.a.ch',ata generation, reticulation and connection cost'of $ 3001kW ig for solar, 4 tights @ $ 30 (5 years); for diesei,'4 f,fuorescent lights 2 $ 25 (1. years). _dF.For 'sotar, monthly O&M cost, S$-1.50/month, 'for dlesel, variable 'c4s at 65 t/kh,-for 10 kWhousehold1month for Lights only, 25 kWh for tights and video.:- '::-; .e As in Z, except for solar: 4 panels,'4 battertes. (6V)W $120 (6 years) 160. Aht 24 V,:othber'hardwar* $240 (15 years); for diesel, 2U15 kW gensets (15 years), dema-d 300W, generatIon, ete cast, $2,500/W$ fS Auin '., ptus for solar, 1 TV/VCR. set. S 600. (7 yeara), to :r diesel4 1 TVVCR set S S 5 7 year,). Box 2.1 Comparison of Costs of PV Solar and Diesel Mini-Grid Systems -16- 2.12 Institutional Lessons Learned: While equipment failure was an important source of problems with PV systems in the past, the technical aspects are now well understood. It is expected that in the future the main challenge will be institutional support for proper maintenance and expansion of the PV systems. The institutional models used to introduce PV systems in the Pacific island countries can be classified into six categories, based on ownership of equipment, manner of technical support, etc: (a) Village cooperative owned and maintained individual home systems. government installed, with government technical support. This model was first used in Fiji in 1982-84 in three village cooperatives. The village cooperatives were unsuccessful at collecting maintenance fees, so that funds were not available for repair or replacement parts. This approach did not work satisfactorily in any of the villages: today, no systems are functional in two of the villages, and only a few are functional in the third one. (b) Government owned and installed, basic maintenance by owner. with energy office technical assistance on call. This approach has been used in the Cook Is., PNG, Tonga, Palau, Fiji, FSM, and Marshall Is. In practice, the users did not provide the basic maintenance, and Government maintenance was generally sporadic, of widely varying quality, with long repair delays common. Fee collections generally ceased after the initial few months. In no case have the PV systems consistently performed as intended by the Governments or expected by the users. The systems have either been abandoned, are operational at reduced capacity, or have had unacceptably high maintenance costs due to frequent battery replacements. (c) Commercially sold. vendor or user installed, user financed, owned and maintained systems. with commercial maintenance available on call. All Pacific island countries have some domestic rural installations of this type, with Fiji, Kiribati and PNG having the largest number. These systems were sold to two types of customers: religious institutions and private individuals. i/ The maintenance by private individuals was usually poor, though the religious institutions often had "handymen" who could provide a reasonable level of maintenance. Thus, this approach proved successful only for users who were relatively well-off and had some technical skills. (d) Commercially installed and owned. commercial maintenance on call. In 1983-85, a foreign owned private company installed nearly 200 lighting systems under a leasing arrangement in Fiji. This business failed, partly because the maintenance costs proved to be higher than anticipated, as the i/ In general, these systems were undersized, because of a desire to keep down the initial capital costs. The actual installation of the systems was rarely satisfactory, particularly for owner installed systems, with common problems being poor panel orientation and placement, inadequate wire size, poor standard of wiring, and poor battery connections. Early battery replacements were common to these systems, partly because the batteries were replaced even though the problems were elsewhere in the PV systems. -17- systems were dispersed over a wide geographical area, and the systems were undersized, leading to early battery failures. Further, the company had a poor collection rate for the monthly fee. (e) Commercially installed and owned. commercial Reriodic maintenance. Day-as- you-use. These systems were designed to be used with a plastic "key", to be bought from the village store, which would allow the user to use the PV systems for 24 hours. This feature was designed to mimic the practice in Fiji of villagers buying the amount of kerosene they need on a daily basis. The systems were designed to be of a high quality, and the users appeared to like them. However, the business did not have adequate financing, and it failed before the systems could be evaluated meaningfully. (f) Cooperative owned and installed. Deriodic maintenance and fee collectimo by cooperative. This approach was used by the Tuvalu Solar Electricity Cooperative Society, and can be regarded as a success. It is described in detail in Box 2.2. This model is going to be followed in Kiribati, where the government is planning co re-organize the Kiribati Solar Energy Company along the lines of TSECS. If the project proceeds, it would provide a good test of the applicability of the TSECS approach in a larger country and a different cultural context. 2.13 Based on the experience of the Pacific island countries, the main institutional lessons learned are: (a) Maintenance: In the outer island environment of the Pacific island countries, user maintenance of PV systems is rarely successful, and frequent visits by trained maintenance personnel are very important. Institutional "handymen" have been partially successful in maintaining their PV systems, but rural households lack the skills to diagnose the problems and make effective repairs. (b) Fee collection and management should be from outside the community, because collection is lax with local organizations, and the collected funds are often spent on non-PV projects in the early years when the need for repair and replacement funds is relatively low. (c) Snare Rarts must be readily available in the field. The substantial expenditure required to maintain such stocks is necessary to prevent the long delays associated with ordering parts from headquarters or overseas. (d) Technical assistance: Field technicians should have ready access to technical assistance and continuing training programs. (e) Local arbitration: There should be an arrangement for local arbitration between the users and the external services supplier. 2.14 In conclusion, to overcome the constraints associated with the low density, low skill levels and remoteness of the rural communities, the institutional approach that is most likely to succeed appears to be the provision of PV-based electricity on a fee-for-service utility basis, rather than through -18- T a lu Solar EleQtricity $Cope ra-tiveoietyai l984~" After many years of chbe,adtiladerr t9 prvider..eli1.fle: PV-based electrici.ty :fo.r ligtn eed tg~nmbro coopertLvas islimitd dby: the av'aila.bid:ty f e g y u . n.:i andntb h numbe ol2; hueholds:.will;ing. to. j.oin .TSECS. 1ouhehnca.polmhve .ep ii=syse@mS from efrig to theA ful exettoso h ar. ge eF ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. i;£r- ..~ ... ........ ... .. . .......................... .n .. .. . an.d th~~~~~~~u.s utrvaind Z~~~~~~~~" TSi osss fac mrl adiitain. Tuvi.za capita-l, with br'anches" in each of the outrilad,. ch bfic ha,s':it's ,:.*,','ana 'm.ent ,committee,','elected by,th ''.br o' th' isad.'' an th.fie:bira^n.ch..chairmen. meet .annually in,Fu.na,futi ,-t,o .se,t,us.e,r tees Lo ,the,;t.t -follOin ye ar.'....-" . 3 . At present ' SECS 'does ,not .ha the.... capital.....to.......ovi....e..new itn.stall,at.ion's,t and must rely, on donors. Howe.vexf it ............................is's~ae $th s;a.t 1tS wsill b.eco.me..financially seflf-sufficient and sustaintabl-e.in thfe lnemwe it Xease a s'.acustomer base.:of 500 ,households pil.us2''all.B ~Vsed gOeren .fac.l.lties, distributed over seven islands ........................ ::s .:;.-. .f s-:... :: :4+. S .:...Maintenance and fee collections .are. .performe.d fmonth.ly.:bya.. br:anch' t'echn.ical- assistant, who' is a full-time- TS.' epoee Thstenian have .*...re*.ceived formal training. Further, seniLor .technician.s vsit¢ve=r setet a ft lXea.st t.wice a years . Spare parts are..sto'cked b:o.th- a.t .t.he maix':.o.fic e."'' by th- i'.'.'branch technicians1 t while inent ry conl is a y t 't~~~~~~~~_~ nt com itee::.ec' ::: :- .:f -ssS. ~~~~~~~~a m n.- m.et-;a all.- ... - i. . ......n ... ... fu-t ev.%S ........ .'5...+: f.'. Th.e s min eingredients 'dofes .t: su' ces 'ae a nac rovidedll bybl ocalby:n ii adsti a :h=. co. . i.y.nd the use of the f.ees eusely fos the. £ oee (iii lo' ' -Us- ma.nageme..n-.` whichscan arbitrate disputes'betweenvsersa.nd- t i s- but' .fe-e:-ollections, disconnections, and poorly f.unctin i.ng"s system. .s' an'd kee' 'i :.us.'ews. i'ntormd about.the £.nctioni.ng of.the:enter'pris'e(: S exlusive fo.cu .on: B .sy.stems; .(v) an availability :of diff. rent s . y. ems.to.m.et the varyingeectrical needdsi and fina-ncia -resour$es o 'th usr,.d(L ... .: f-:: ". .-...-. --... ........... . ::. -:.. : .... : good e'Xieraltechnical andvieec6le. tov.:,a..-.r Box 2.2 Tuvalu Solar Electricity Cooperative Society the sale of hardware. Such an approach would require that the utility retain ownership and maintain the small-scale systems installed in its customers' premises. Trained staff would visit the customers regularly to maintain the system, carry out repairs as needed and collect a service fee. The aim.of the service fee would be the recovery of the utility's operating costs including a capital recovery charge. A headquarters office would manage the accounts, the inventory of spares, training and procurement. -19- Hvdropower 2.15 The development of hydroelectricity has been relatively successful, at least in terms of producing energy. Hydropower projects with capacities ranging up to 80 MW have already been developed in Fiji, PNG, the Solomon Is., Western Samoa, and FSM. Over the last twenty years, the implementation of hydropower schemes has transformed the public sector power systems of Fiji and PNG from being mostly diesel based to mostly hydro based systems. While hydropower projects have been technically successful, there have been many financial and institutional problems associated with them, and cost and time overruns have been common. These issues, which are linked to those of the power utilities as a whole, are discussed in paras 4.35-4.37. Minihydro 2.16 In addition to major hydro projects, there is potential for minihydro (under 1 MW) development in at least half of the Pacific island countries. PNG has the largest minihydro development program in the region, allocating an average of about US$ 3 million per year in government and external aid funds for the design and construction of minihydro projects to replace diesel generators in rural areas. Fiji has a more recent, but smaller program. Elsewhere, in Vanuatu, Solomon Is., Cook Is., and Western Samoa, a number of minihydro projects are under construction, planned or proposed. 2.17 The main issue related to minihydro projects is their high cost. Minihydro power is expensive in the Pacific region, compared to other localities, because the topography is difficult to work in and the geologic conditions are often poor (unstable and porous soils). These conditions require very costly designs; unit costs of $8,000 to $10,000 per kW are typical of schemes built recently or under construction. The 320 kW Tari project in PNG cost about $ 10,000/kW. The subsequent Telefomin (100 kW and 60 kW) PNG projects were cheaper because they benefitted from the earlier experience and used less capital- intensive construction methods. These high costs make these projects uneconomical in comparison to diesel generation, whose capital costs are approximately $ 1,000/kW. In addition to the monetary costs, the administration and supervision of a small project puts a heavy burden on the scarce professional capacity of the national energy offices. Thus, even where minihydro projects can be economically justified, their successful implementation will require outside assistance with construction management and supervision. 2.18 At the smaller end of the scale, microhydro (under 100 kW) systems represent a potentially attractive option for rural electrification because of the possible participation of village labor in the construction and operation of the system, with the attendant savings in out of pocket expenses. Several countries, including Fiji and PNG, have implemented pilot projects, with.mixed success, but none has expanded into a sustainable program. The main difficulties encountered relate to (i) the high cost of the external technical expertise required for site survey, system design, construction supervision (with every stage lasting at least six months) and, after commissioning, the diagnosis of breakdowns, (ii) the difficulty of obtaining appropriate equipment and spares, and (iii) the remoteness of the sites, which aggravates the previous factors. -20- 2.19 Given tbis experience, the minihydro and microhydro projects would appear to be of interest only where several projects can be pursued together on a program basis, allowing for economies of scale in (i) the establishment of specialist technical teams, (ii) the design of projects, and (iii) the procurement of equipment and spares. It is understood that this is the strategy that will be followed by the FSED, with German (GTZ) assistance, for reducing the cost of microhydro projects that could be implemented by local efforts with only limited technical assistance. Hundreds of such sites have had preliminary assessments: five on Rarotonga, over seventy in Fiji, and large numbers in the Solomon Is. and Vanuatu. Notwithstanding any benefits of economies of scale, the economic and financial feasibility of each project would have to be demonstrated separately, based on realistic estimates of costs, and tested under a wide range of cost and construction time scenarios. Biomass 2.20 Energy from biomass accounts for approximately half of the total energy consumption in the Pacific region. Of this, fuelwood accounts for about 67%, coconut residues (shells, husks and stemwood) for about 18%, and the remaining 15% is accounted for by bagasse (from sugarcane production in PNG and Fiji), residues from coffee, cocoa and rubber production (mostly in PNG) and other minor crops such a maize, cassava, peanuts and rice. In terms of energy consumed, households account for about 59%, industry for 39% and commerce for about 1%. Domestic consumption is primarily for cooking, while industry uses biomass primarily for process heat. Biomass Use for Cooking 2.21 While the biomass resource base of the region is large, only a limited portion is easily accessible. The high population growth rates in many of the Pacific island countries have increased the demand for agricultural land, resulting in clearing of the natural forests. Logging has also reduced the forest areas. As a result, traditional sources of fuelwood supply that are close to major urban centers such as Port Moresby, Lae, Port Vila, Honiara and Tongatapu are under pressure. Similar pressures have been observed in some of the main, densely populated islands of the smaller countries. Nevertheless, fuelwood seems to be easy to obtain. Even in the urban areas, most supplies continue to be obtained by collection without payment. The small quantities on sale in the market appear to be purchased by expatriate or affluent households, when families require supplies quickly or for special occasions. 2.22 The consumption of fuelwood is likely to increase in the future, the extent of the increase dependent upon the rate of population growth and the numbers of households switching to kerosene and LPG. As consumption increases, the pattern of supply is likely to change. Based on experience in other zegions, expansion of the urban areas and increased clearing of peri-urban lsnds for agriculture, as well as fuelwood cutting, will cause a gradual depletion of the nearby forest resources. This will almost certainly lead to fuelwood being transported in from further away and a progressive commercialization of fuelwood. Tho role of the market will consequently become more important and trading in fuelwood will become a source of employment for a growing number of people. While the gradual depletion of the forest cover in peri-urban areas is a matter of -21- concern, the scope for effective government intervention in this process is very limited. 2.23 At present, when families are able to obtain fuelwood without any cash payment, there is no incentive to invest in energy saving stoves. For example, in the early 1980s, over half of all Tuvalu households are reported to have received "improved" woodstoves in an effort to reduce fuel use. Due to poor design and materials, most deteriorated rapidly and the program, although still active, diminished. In Fiji, about 600 stoves were distributed to rural communities in the mid 1980s. By 1990, most had failed and the program was dropped due to high unit costs and the difficulty of providing maintenance. Charcoal stove programs were tried on an appreciable scale in PNG, and on a limited scale Fiji and Solomon Is., but arrangements for a regular supply of charcoal were never satisfactory. In general, the only stove programs which have worked reasonably well in the region have been those aimed at institutions - mainly rural schools - rather than households. 2.24 There have been a number of proposals for the development of social forestry or fuelwood plantations, with trials underway in several countries (Fiji, Vanuatu, PNG, and W. Samoa) and community reforestation elsewhere. However, as long as fuelwood continues to be available at no financial cost from natural forests, or households can switch to no cost alternatives such as coconut residues, it is unlikely that planting trees for fuelwood will be financially attractive to farmers. The promotion of tree plantations as a means of slowing the rate of depletion of wood resources is therefore unlikely to be effective. 2.25 Overall, there do not appear to be any energy-related policy interventions available which are likely to have any significant effect on the rate at which forest land is cleared. Even if major reductions in urban fuelwood use could be achieved, the process of deforestation in the vicinity of the city would continue unabated. This process is primarily driven by agricultural needs and the changing economics of peri-urban land. The only way in which the clearing of forest land can be significantly influenced is by effective government control over land use, which is difficult to achieve given the custom land tenure systems in the areas being affected. Biomass Use for Industrial Process Heat 2.26 Industrial consumption of biomass in the Pacific is primarily for copra, coffee, tea and rubber drying and the drying of fish and other foodstuffs. These processes require primarily low-temperature heat that has been traditionally generated by direct-cor ustion of the biomass residues in simple brick-type furnaces or open-fires. In some of the larger tea, copra and coffee drying installations, fuel oil and diesel oil is used for generating steam and hot air. With the increasing costs of obtaining biomass fuels and the rise in the,costs of petroleum fuels in the early 1980s, some industries attempted to improve the efficiency of their biomass fuel consumption through the adoption of more efficient "heat-gasifier" technology. Over 80 heat gasifiers were reported installed at industrial and commercial establishments throughout the Pacific, primarily PNG, Western Samoa, Vanuatu and Fiji. In almost all cases, the costs of these gasifiers were borne by the establishments employing them. -22- 2.27 An assessment of the performan';e of heat gasifiers used in the Pacific, conducted by the University of the South Pacific, indicates that "the success (of heat gasifiers) has been limited in that the heat gasifiers used were plagued with smoke contamination problems which affected the quality of the dried agricultural products". 1_/ Many of these problems were the result of poor operation and maintenance of the heat gasifier systems and use of wet or poor quality biomass fuels. Subsequent improvements in the design of heat gasifiers, stricter control on the quality of biomass fuels used, better training of operators as well as the employment of more skilled operators have eliminated many of the initial problems associated with heat gasifiers. Another factor that assisted in this improvement is that the industrial plants in which these systems are deployed are usually staffed by trained technicians who are able to maintain and operate the systems. Additionally, the financial incentives for successful operation are apparent and direct. 2.28 Industrial and comnercial consumption of biomass energy can be increased through the use of agro-industrial residues especially for process heat needs. Significant opportunities for such applications exists in the copra, palm oil and rubber industries. However, additional technical improvements in the current heat-gasifier technology are necessary in order to improve its reliability and minimize its negative impacts on the processed products. Specifically, heat gasifler systems should be designed to be more tolerant of varying fuel quality and wider fluctuations in operational loads. However, investments in upgrading production facilities at some of these agro-industries may not be warranted in vLew of the declining demand and prices for their products. Biomass Use for Power Generation 2.29 In the early 1980s, the primary focus for increased biomass utilization was the replacement of diesel in power generation in remote areas. This interest led to the promotion of power fuel gasifiers in the region. To date', approximately two dozen attempts at demonstrating small-scale (less than 300 kWe) power gasifiers have been identified in the Pacific. Of the proposed gasifiers, only four were eventually installed. The primary reasons for failure to install the other units included higher procurement costs for the gasifier systems than initially estimated, lack of acceptable and sustainable biomass fuels, lack of trained manpower, regional organizational delays and a general reluctance on the part of recipient institutions to accept the technology due to the poor performance of existing units in the region and elsewhere. Of the four units that were finally installed, only one (Onesua, Vanuatu), a 25 kWe unit, is still in operation. The technical success of this unit can be traced to three key factors: (i) the dedication of a well trained and qualified technician; (ii) the establishment of a well organized and managed operational procedure and sustainable fuel supply; and (iii) the consistent utilization of a uniform, high quality biomass fuel. 2.30 There have been a few successful steam-based power plants operated in the islands, based on nearby wood wastes (Fiji, Western Samoa) or bagasse (Fiji) and IV Biomass Gasifiers in the Pacific, Energy Studies Unit, University of the South Pacific, June 1991. -23- numerous proposals for new 1-5 MW biomass systems (Cook Is., Vanuatu, Solomon Is.). Most of these proposals have been imprudent: land access is difficult, long-term fuel supply unknown, environmental effects underestimated and power demands uncertain. However, the initial costs are less than those of hydropower I/, and there may be some scope for the future development of power generation based on the utilization of agricultural wastes at cost that is lower than the local gencration cost of the utilities. To stimulate investments where economical, it is recommended that the governments provide the appropriate incentives, such as enabling the producers to sell surplus electricity to the public utility at a price that reflects the utility's avoided cost. Other Renewable Resource Technologies Ocean-based Energy 2.31 Ocean energy systems are unproven, expensive and currently not commercially available. However, a high level of interest has developed and been sustained within the regioa for the past decade. There have been at least a dozen proposals for electric power based on ocean thermal energy conversion (OTEC) 1j/, often combined with fresh water and seafood production (Cook Is., Fiji, Kiribati, Guam, PNG). For OTEC, the most favorable conditions are sites with high power costs and scarce water, where a constant load can be maintained with a seawater desalination plant, e.g., Majuro in Marshall Is. A 1991 study L3. indicates that a 1 MW open-cycle prototype could be available by 1995 at an initial cost of $ 18 million; this system would also provide 500,000 US gallons per day of potable water. In view of its high costs and unproven technical viability, OTEC should be regarded as experimental research that is too risky at present for Pacific island countries to invest in. 2.32 There !lave been at least four proposals to develop electric power plants using the energy of seawaves: an $ 8 million 2 MW (of which, only 0.2 MW firm) Norwegian project in Tonga in the late 1980s, two more recently in Marshall Is., and one in Fiji in 1990 based on designs developed for Mauritius. In all cases, the cost to the utility would exceed the current cost of diesel power even if the highly tentative output and construction costs turned out to be accurate. Other resources 2.33 Geothermal resources have been identified in a few countries (Fiji, PNG, Solomon Is., and Vanuatu) but mainly in areas far from suitable markets. Numerous small (1-5 kW" wind electric systems have been tried with little 2./ A 2.55 MW residue-fueled plant proposed in the Solomon Is. is estimated to cost about $ 4-5 million. U/ OTEC uses the 20-25 degree Celsius difference in temperature between the warm ocean surface and the cool depths to operate a generator at a low thermal efficiency. fl/ By the Hawaii-based Pacific International Center for High Technology Research (PICHTR). -24- success, although many wind pumping systems have worked well. There have been proposals for multi-megawatt wind systems (Guam, Western Samoa) but these have not been implemented. Many dozens of small biogas systems, for producing methane from animal wastes, were built throughout the Pacific, including one municipal system (in Lae, PNG). Although useful for pollution control if properly designed, they never produced an appreciable amount of energy and have been largely abandoned. The production of alcohol fuels, based on a large variety of feedstock (cassava, sorghum, sugar, molasses, breadfruit, nipa palm, sago) have been studied and proposed at a range of outputs (0.5-30 kl/year) but the projects have not been financially attractive. The only operating system (4 kl/year from molasses in PNG) is Justified by unique conditions (low molasses value) which may be temporary. Energy Conservation 2.34 The Pacific island countries can benefit from programs designed for energy conservation, both on the supply and demand sides. On the supply side, the focus is on the reduction of petroleum product losses from storage drums and on the efficient generation and distribution of electricity. These issues are discussed in Chapters III and IV, respectively. 2.35 On the demand side, the foc-:s is on energy efficiency in appliances and vehicles. At present, a large amolint of electricity is wasted due to inefficient appliances (cooling, freezing, water heating and lighting) and excessive air-conditioning. A considerable potential for energy conservation exists through proper maintenance and operation of existing equipment and by phasing out inefficient appliances. Even simple conservation measures such as cleaning air conditioning filters, de-icing refrigerators and freezers, time controls on air conditioning, solar heat.ng of water, etc. could achieve important savings. 2.36 As an example of the type of conservation option that deserves to be pursued, it is useful to point to the replacement of incandescent light bulbs by more efficient compact fluorescent bulbs. As illustrated in Box 2.3, this option could lead to an over 70% reduction in electricity use per bulb, with a up to 50% savings in life-cycle costs to the consumers. While the estimated savings will vary, this option should have a high priority in countries facing a shortage of electricity, such as Tonga. To overcome the reluctance of consumers to incur the higher initial costs of compact fluorescent bulbs, a recommended approach would be for the power utility to offer the bulbs to consumers as a service, with consumers paying for them on a monthly basis along with the rest of their electric bill. 14. It is estimated that power utilities coula supply the compact fluorescent bulbs at a monthly charge of US ¢ 50/month 1_/, which consumers should be willing to pay because each compact bulb would save them over US 0 90 per month on electricity costs. JA/ The reluctance of consumers to incur the higher initial capital costs could derive from (i) difficulties in obtaining credit for such purchases, (ii) consumers' discount rates, which may be higher than that of society as a whole. I/ A monthly payment of US ¢' 47 is needed to amortize a sum of US $ 26.00 over 10 years at an interest rate of 18%. -25. l~~ A ~~om~~rison f h 41sOunte lf.yeotasw that eeg tQ the standard incandrescent"'bulb""the ... ..u.esen bulbM ue .abou.... a quarter of theenergy,: Ahs 4 higher:. soervice li u't bu al s o a hher.capia cost. At ~a discount rat-of lOX,-: the~ htgher enrgyeficincy n longe service lifeof th'e cmctfoesnt btulbmr hnofe h lg A standard ~~~60'-watt noanescont bub :L stn i aou tIQ ours, n has " itlco st of: abou't US$;'1 ntea~fcsad~IntePcfc is1ax~4, the ae~ragehou'se'hold :sssc n lcrCbuIbVrAT. eO ~ ,QQ hours pez~ year. t: a iot,o S~2/w (pxmtl th r"ate- for. resid~~~nti4 onsumn'rs -in Tonga tu 1. og)thanulvibectofhs bulb would be ~ 15.00. -Aomntact furecnt1.t bul prvas: a] least." t.. saejlmntion ~as 'a 60-i Jh ncnecen ub last foaot IQ hours and ha a aital- cost of: abou6 S 60T h aii'sad,A US ~ 25/kwh, the annual varia'ble" costothsblwudbeU 4.0 1'ble I~ Life -cycle cotcoprson o lcrcbls A~~U&lHour..Of Use 100 ,0 Annua Slecricil UC kh 01 ~~ectricity eice JS~ 0 254kWh Anr~~ual VarDiable Eetricit CO's t' 15 .00.4 0 Life-cycV Vriable Css(J$ A 113 70 T~~~tal fe.'c~~~~~~~~~'c1e Costs(US~~~~~~~~~~~~)A . ..'~~~~~~$ ~~~~ 42....... 4~ Provl4es the oaerth ilwI6njA'tio. -* ineset"uh Box 2.3 Benefits of Energy Efficient Lighting in Urban Households -26- 2.37 For energy conservation to be artractive, the most effective policy measure is the pricing of electricity and other fuels at levels that reflects their economic cost. In many Pacific island countries, subsidized electricity tariffs have encouraged excessive and wasteful use of electricity. When tariffs are raised, as discussed in paras 4.19-4.21, to cover the total costs of production, a government energy conservation and management program could reduce the impact of the tariff increase on the consumers' electricity bills by working ahead of time with importers to assure that efficient lights, time switches and appliances are available, that import duties and taxes discourage wasteful appliances (standard electric burners and ovens) and encourage efficient '.aes (modern kerosene pressure stoves, LPG stoves, microwave ovens, fluorescent lights, etc). Such a program is recommended in concert with, in.some countries, an increase in electricity tariffs. Rural Electrification ORtions 2.38 The main rationale for implementing new and renewable energy technologies (other than large scale hydro) in the Pacific islands has been a desire to bring the benefits of electricity to rural areas, by improving their access to modern conveniences and stimulating economic growth. However, most of the small, rural, demonstration-type projects have failed because the low population densities, usually low skill levels and remoteness of rural settlements on isolated islands have made it impossible to develop most renewable technology systems at a reasonable cost in the small communities for which they had been intended 1§/. 2.39 The conventional approach to rural electrification, through the establishment of isolated diesel stations operated by public works departments or national utilities, has also experienced disappointing results. In spite of considerable assistance from donors, a large proportion of rural power supply schemes are in decrepit condition and provide an unreliable supply, far below the standards required to stimulate economic development or meet even the modest household needs of the consumers. This is largely a consequence of (i) lack of sufficient funds to cover operating costs, due to the governments' inability to provide funds on a regular basis (as donor funds are normally limited to capital expenses) and the absence of adequate organization and incentives to collect revenues from the customers, and (ii) difficulties in attracting and keeping technically skilled staff to operate and maincain the schemes. IV In remote Pacific islands, most of the consumers can be expected to have a limited number of appliances, se that their demand for electricity will be low. In a village of 40 houses, initially about 30 will use electricity for household lighting only; the other houses will also have video set (TV/VCR) or a refrigerator, with a few households having both a video set and a refrigerator. Consequently, for most of the households, the monthly consumption of electricity will be less than the amount designated as the "lifeline" tariff block by urban utilities. In the Pacific region, the lifeline tariff blocks are: Cook Islands 120 kWh/month, Papua New Guinea 100 kWh/month, Tuvalu 100 kWh/month, and Vanuatu 60 kWh/month. *27- Institutional Options 2.40 As discussed in previous sections, institutional factors have been as important as technical ones in determining the viability and sustainability of rural electrification schemes. For a rural electrification scheme to be successful, the implementing organization needs to possess the requisite technical and managerial skills and be financially viable in the long term. To develop such institutions, three principal approaches have been tried in the Pacific islands, viz., using a government agency, the national utility, or a specialized rural electrification organization. 2.41 Government agency: The Public Works Department (PWD) or the energy offices establish the schemes in the villages and transfer it to the village leadership to operate, with occasional maintenance support. This option has been almost routine in the Pacific islands, typically with the PWD responsible for isolated diesel systems and the energy offices involved in PV and small hydro systems. The results have been unsatisfactory, as the initiating agency does not have the mandate to operate the scheme as a business and the villagers find it difficult to operate the scheme in a businesslike manner, i.e., in making the financial decisions required to cope with fuel price fluctuations, repairs and replacement of equipment, as well as deal with non-payment of bills. 2.42 National Utility: The public power company extends its grid into a rural area, establishes an isolated diesel station or takes over an existing diesel station. This option addresses the issue of cost recovery by having an entity from outside the village set the price of electricity and collect the bills, as well as take responsibility of operation and maintenance. 2.43 However, the manner in which this option has been implemented, (e.g. in Fiji and PNG) with the utilities charging the same price in rural as in urban areas, has made rural schemes financially unattractive for the utilities, as the price they are expected to charge (based on their main system costs) is not adequate to cover costs in the rural schemes, even if (as is often the case) the governments funded the initial investments on a grant basis. Responsibility for rural schemes also stretches the managerial and technical skills of the utility, possibly to the detriment of supplies to their main grid in urban areas. To alleviate such problems, it is recommended that: (a) The utilities be allowed to raise the price of electricity in rural areas as required to recover the costs of supply, i.e., that rural schemes be subject to the same financial performance standards as the main urban system. (b) To the extent that a commercially based price is not feasible on social grounds, the gap between it and the costs of supply be covered with a transparent subsidy from the national budget. For the long term, of course, as rural electrification expands, such subsidies are likely to become unsustainable and the gap will need to be closed through appropriate price increases. 2.44 SRecialized entity: A few countries have established separate enterprises to bring electricity to rural areas using solar PV technology. Their main -28- characteristics are that (i) they have been given the mandate by the government to operate the schemes as a business, including full recovery of costs through an appropriate level of prices and are expected to become financially viable and sustainable as soon as external support ends, (ii) they have a simple but self- sufficient organizational structure based outside the village and are able to enforce collections, and (iii) they have been able to establish and maintain their own technical and managerial capability through appropriate incentives and staffing decisions. As discussed in paras 2.12-2.14, the Tuvalu Solar Electric Cooperative would appear to be a good model for this approach, which can be replicated in other remote and rural areas. While the choice of a new technology appears to have been the main reason why these programs were not carried out by the national utilities, there is no reason why this approach cannot also be used to take over rural electrification schemes based on diesel generation. Technological ORtions 2.45 The disappointing experience with most new and renewable energy options makes it necessary to continue to rely on diesel fuelled power generation as the backstop technology for rural electrification in the Pacific islands. This means that for every proposed rural electrification scheme, the feasibility of a technology other than diesel needs to be justified on the basis of its having a lower cost than the diesel option. 2.46 A comparison of the costs of the various technological options should be based on the life-cycle costs associated with the various options. The broad components of life-cycle costs are: (i) initial capital costs of the equipment used to generate electricity, (ii) replacement costs of this equipment, as it wears out over time, (iii) initial capital costs of consumer end-use appliances, (iv) replacement costs of consumer end-use appliances, and (v) operations and maintenance (O&M) costs. 2.47 The costs of diesel and other options depend, in part, upon decisions made in specifying the technological parameters that are used to design a power supply system. One critical design parameter is the reliability of the system because the initial capital costs tend to increase sharply when the reliability of the system is increased. For example, in the case of a diesel system, a high level of reliability may imply the installation of back-up genset, which will be used only when the first genset is not available. Similarly, in the case of a solar system, a high level of reliability may imply the installation of a larger number of PV panels, some of which will be necessary only when there is an extended period of cloudy days. 2.48 Another key parameter in the design of a power supply system is the number of hours for which electricity will be available. For example, in the case of a diesel system, the use of a refrigerator requires that electricity be supplied on a 24-hour basis. At the same time, for most of the households, the demand for electricity (based on lights, video) may be concentrated in 4-6 evening hours. A decision to supply electricity on a 24-hour basis will raise unit O&M costs significantly. 2.49 While over-designed systems may raise both capital and O&M costs, under- sized, unreliable power supply systems give rise to frustration among consumers, -29- some of whom may continue to maintain their own back-up systems. Therefore, it is necessary that care be taken to design the power supply system so as to strike a balance between the level of reliability that is consumers wish and the level of costs that the consumers can afford. 2.50 The costs of the various options also depend upon a number of site- specific conditions. Among these are (i) the availability and cost of qualified technicians to install and maintain the power supply system, (ii) the difficulties and costs involved in delivering fuel, (iii) the availability of alternative resources, e.g., the amount of sunshine received at the site, (iv) the average distances between houses, and (v) the premium attached to non polluting sources of energy. 2.51 Solar Photovoltaic (PV): In general, solar PV has an advantage over other technologies when: (a) There is no existing power grid. The cost savings of not having to build an expensive grid, particularly for communities with widely separated houses, tend to make solar PV competitive with diesel. In general, in the Pacific region, there tend to be two types of villages: one with a compact group of 30-50 houses, about 60 to 90 feet apart, and second, with a dispersed group of 10-100 houses, about 600 to 1,500 feet apart. (b) Access to land is a problem. Solar PV does not require land for equipment or right-of-way for transmission and/or distribution lines. (c) Diesel fuel is costly and/or reliable transportation for fuel is unavailable or costly. Solar PV requires no fuel. (d) There is a high peak load for a short time. Individual solar PV systems, operating from batteries, can provide very high power levels for a short period of time. For example, a small individual PV system with only 120 watts in peak-panel generation capacity can power a movie projector drawing 1,500 watts for a few hours per week, while a diesel system must be sized to generate and distribute the full 1,500 watts. (e) The number of customers is likely to increase over time. Individual solar PV systems can be added as needed, while central systems may have to be sized larger than initially necessary in anticipation of future load growth. (f) Noise or air pollution is a concern. Solar PV does not create either, while diesel systems generate both. In the Pacific, diesel generators are often located 300 feet or more from the village to reduce the local pollution effects, which adds to the cost of the diesel system. 2.52 However, solar PV is at a disadvantage over other systems when: (a) Individual demands are high. Diesel systems benefit from the economies of scale, while solar PV does not. -30- (b) There is dense vegetation around homes or the level of cloudiness is high, which reduces the sunlight falling on the solar panels. (c) The special appliances or power conversion equipment necessary with the DC electricity provided by PV systems are unavailable or expensive. Usually, the DC appliances are designed to be more energy-efficient than the conventional AC appliances, which is responsible for part of the cost difference. 2.53 While the relative costs of the alternative options will vary, based on site specific considerations and design decisions, a rule-of thumb is that in remote Pacific locations, solar PV technology could be a viable option for rural electrification for consumers with limited energy needs, such as for household lights and TV/VCR (see Box 2.1). For larger loads, diesel-based generation is the least-cost option, unless biomass or hydro is available in the area. 2.54 Biomass: Biomass-based electricity generation is viable only for agro- industries that sell surplus power to a local grid. While, because of the usual absence of a firm supply of biomass in all seasons, biomass-based generation is not a viable option on a stand-alone basis for village electrification, additional opportunities exist for the co-generation of power in the sugar and timber industries of Fiji and PNG. Where industrial co-generation is technically and economically viable, guidelines for power purchase agreements between the utility and the co-generator need to be established to stimulate such development. 2.55 Minihvdro: In general, because of their high costs and seasonality, minihydro projects are best suited to rural areas that are already electrified with diesel and have a daytime load in addition to the night lighting and recreation load typical of isolated rural communities. The existence of a daytime load brings about a better utilization of the installed capacity and helps to spread the capital cost over a larger quantity of electricity sold. 2.56 Based on the earlier discussion, it is recommended that: (a) the solar PV option be considered for remote Pacific locations where it is desired to meet limited electrical loads, such as those arising from household lighting and TV/VCR. Solar PV power should be provided as a utility service, with qualified technicians installing and maintaining the PV hardware (panels, battery, wiring, etc.). (b) biomass and minihydro options be considered as complements to diesel generators in areas that are already electrified. A summary comparison of these options is shown in Table 2.1. Comparison of Alternative Technologies for Rural Electrification in Pacific Island Countries Initial Operations Fuet Cost, Repair and Parts Pollution Prospects Capital Costs, Availability and Maintenance Machinery Life, Storage Physical Characteristics Diesel Lowest initial Rapid Good in urban Trained technicians Large in Toxic fuel, Factors that make it CentraL capital cost, short response to areas, low in usually available, number, noise, noxious suitable are existing System useful machinery load rural area, easy high maintenance readily smoke and smell power grid, low fuel life, moderate in changes, to store, high cost, inefficient available transportation costs, bulk and weight quick start- cost, imported at light loads high load requirements up, easy fuel over an extended period shut-down per day Solar Moderate capital Immediate Good, free fuel, Technicians can be Few in Low enviromnental Factors that make it Individuat costs (no grid), response to subject to weather trained, relatively number, impact suitable are lack of System rapid installation load low maintenance easily existing grid, high fuel possible, shade changes, but costs, Little available transportation costs, free area needed operations change in high peak load for short could be efficiency with period of time, differing unreliable load changes needs of various households, concern about air or noise pollution, increasing number of customers over time Biomass Intermediate Rapid Local fuel, future Well trained Limited Quiet operation, Suitable on agro- Central capital costs, long response to supplies operators needed avaitabitity smoke, serious industrial locations as a Stem useful life, bulky load uncertain, large for safe damage possible complement to an existing and heavy changes, but storage space operations, high local diesel-based grid slow start- need, low present labor needs, up and shut- cost, but may be treated fresh water down high in future needed, inefficient at light loads Smat High costs, long Slow Not many suitable Unattended Poor No noise or Suitable as a complement Hydro construction time, response to sites, unavailable operation, except availability smoke, but water to a locaL diesel-based Centrat long useful life, load in poor weather, at start-up and diversion, grid System specialists needed changes, flood damage shut-down, very low construction, to design and quick start- possible, free maintenance costs water output may construct, high up and shut- fuel, possible have negative local share in down secondary use of impacts total cost possible water. _ ___ i) -32- III. PETROLEUM IMPORTS: EFFICIENT MANAGEMENT Role of Petroleum in Pacific Island Economies 3.1 Petroleum products are the main source of primary commercial energy in the Pacific island countries, except for Fiji, PNG and Western Samoa, which also have substantial installed hydropower capacities. In the Micronesian countries, where the role of traditional biomass energy is small, the share of petroleum is particularly high, at approximately 99% in Palau, 88% in FSM, and 81% in Marshall Is. in 1990. 3.2 The level of consumption (gross) varies widely, both in absolute terms (ranging from 809 mtoe/year in PNG to 2 mtoe/year in Tuvalu) and on a per capita basis (ranging from 1,800 kgoe/year in Palau to 145 kgoe/year in Kiribati, with a weighted average of 252 kgoe/year 11/). In view of the difficulties associated with the development of indigenous resources (Chapter II), it is clear that the Pacific island countries will remain dependent upon imported petroleum products in the foreseeable future. It is projected that the gross demand for petroleum products will grow at an annual average rate of 6.8% over the period 1990-2000, ranging from 2.9% for Solomon Is. to 9.2% for PNG (Table 1.5). 3.3 There is no operating petroleum refinery in the Pacific island countries, and the imported petroleum consists of refined products. The share of ADO in total petroleum products in higher in the Pacific island countries than the international average because the Pacific island electric utilities use ADO for power generation, their scale being too small for the economic use of fuel oil. Because of this, and the growing electrification of the economy associated with higher living standards, the growth in ADO demand is projected to be higher than the projected growth rate of total petroleum products. The virtual absence of any demand for fuel oil, combined with small size of the market and long transportation distances, makes it unlikely that any petroleum refinery could be economically based in the Pacific islands. 3.4 Given the importance of petroleum products, which account for about 6-30% of total imports, it is useful to discuss the major issues that emerge in relation to this source of energy. The major issues are price monitoring, safety standards, and the role of the government. Environmental concerns, which are also important, are discussed in Chapter V. Petroleum Product Costs and Prices 3.5 The prices for the major petroleum products in each country are shown in Table 3.1. The C.I.F. prices are high by international standards, which is a matter of concern to the Pacific islands countries, given the significant share of petroleum products in total imports. 1Z/ The weighted average tends to be dominated by PNG, the largest economy in this region. -33- Role of International Oil ComRanies 3.6 The supply of petroleum products to the Pacific island countries is principally from Australia and Singapore, with some minor supplies from New Zealand and, occasionally, Hawaii (See Map IBRD 23443). Irrespective of the actual source, the international oil companies (IOCs) deem all petroleum products to be imported from Singapore, and use the Singapore spot and posted price quotations to determine the base price for petroleum products in the Pacific island countries. 3.7 This practice of basing prices on Singapore quotations when the major part of the petroleum products is actually supplied from Australia or New Zealand has caused much confusion among the people and governments of the Pacific islands, who sometimes view this practice with suspicion. However, this practice has economic justification because Australia and New Zealand import some of the petroleum products they need from Singapore. Hence, Singapore is the central petroleum market for the entire Pacific region and that is where supply and demand are balanced. It follows that the Singapore price quotations constitute the appropriate market-oriented base for the build-up of the petroleum product prices in the Pacific islands. 3.8 In the past, there have been suspicions that the IOCs are overpricing petroleum products. While such suspicions do not appear to be warranted in general, there have been a number of occasions when the Pacific islands countries do not appear to have paid the lowest feasible price for petroleum products. For example, in Vanuatu, the price of oil was set just before the world oil price collapse in 1986, but there was no change in the C.I.F. petroleum price until 1990. Similarly, in FSM, evergreen contracts were negotiated with the individual States many years ag- (some as far back as 1982), and they have not been critically reviewed by the governments since then j8/, even though they appear to be favorable to the oil company. Price Monitoring by Governments 3.9 Any monitoring of petroleum product prices must take account of all of the components (base oil price, freight, insurance, port handling, import duties, distribution, wholesale and retail margins, and taxes) that determine the final price to the consumer. Since the base oil prices (F.O.B. Singapore) change frequently, and the values of the other components of the final price can also change, the accuracy and the method used by the Governments to determine the deemed base petroleum prices can have a significant effect on the level of prices that the Governments consider to be reasonable and fair. 3.10 At present, Fiji, Tonga, Western Samoa, the Solomon Is., and PNG exercise strict control over petroleum product prices, though the methodology for calculating the allowed values of the components, as well as the actual values, varies. Kiribati and the Cook Is. have a loose price control system, Tuvalu attempts to monitor prices, while Vanuatu, Marshall Is., FSM, and Palau have IfV/ These contracts have been reviewed by PEDP and RPU, but these reviews have not led to any actions by the governments. PACIFIC ISLANDS: PETROLEUM PRODUCT PRICES CI.F. Prices Wholesale Prices Retail Prices Gasoline Kerosene ADO LPG Gasoline Kerosene ADO LPG Gasoline Kerosene ADO LPG (USe0/) (USeO/) (USe) (USe/) (USeW ) (USe/) (US/I) (USe0) (USeM) (USe-) (USe/) (USe/) Papua New Guineal 17.27 26.85 27.00 n.a. 49.37 42.08 45.41 n.a. 55.61 48.32 51.64 n.a. Fiji2 15.90 n.a. 21.65 n.a. 47.50 n.a. 40.28 n.a. 50.44 n.a. 42.37 45.85 Solomon Islands3 18.75 28.08 27.07 n.a. 38.37 41.07 44.10 n.a. 42.59 n.a. 48.33 44.85 Western Samoa4 22.00 26.00 25.00 n.a. 42.00 38.00 41.00 n.a. 57.00 41.48 46.00 n.a. Vanuatu5 22.22 22.79 22.32 22.91 69.06 56.19 52.76 n.a. 75.23 60.39 57.48 71.75 FSM6 34.52 43.25 34.48 u.n. 40.21 45.67 40.42 n.a. 50.33 53.32 52.39 n.a. Tonga7 23.00 31.18 30.22 n.a. 46.01 48.30 58.41 n.a. 50.61 53.02 63.63 n.a. Kiribati" n.a. 27.12 22.64 n.a. 65.00 33.35 32.59 n.a. n.a. 37.90 37.51 n.a. Marshall Islands9 n.a. n.a. n.a. n.a. 44.65 40.69 33.32 n.a. 56.01 50.73 48.61 n.a. w Cook Islandst° 26.21 n.a. 36.37 n.a. 42.07 52.34 49.36 n.a. 51.26 61.99 58.42 84.19 Palautl n.a. n.a. n.a. n.a. 30.94 33.61 33.04 n.a. 45.53 65.26 48.08 n.a. Tuvalut2 31.54 39.56 34.52 n.a. 49.13 51.35 48.30 n.a. 63.44 63.44 63.44 55.79 Sources: PREA Mission 1991 estinates Energy in the Pacific Islands-Issues and Statistics (East-West Center 1991) Forum Secretariat Energy Division Notes: 1. Port Moresby 11.4.91 2. Vuda 17.5.91 3. Honiara IA.91 4. Apia 9.2.91 S. Port Vila 1.12.90 6. Pohnpei 16.10.90 7. Tongatapu 6.5.91 8. Tarawa 1.10.90 9. Majuro 6.5.91 10. Rarotonga 23.5.91 11. Koror 1.10.90 12. Funafuti 22.4.91 -35. neither price controls nor price monitoring. It appears that those countries that exercise strict control tend to have lower C.I.F. prices than the other countries. 3.11 However, given the number of other factors that significantly affect the C.I.F prices, this result cannot be interpreted as a justification for price controls. Further, any system of price controls is hard to implement successfully because it requires a considerable amount of expertise and access to information on the part of the controllers. Unless the controlling authorities are responsive to the legitimate claims of the industry, relations between the companies and governments may sour to the extent that the companies do not undertake necessary investments or, in extreme cases, even withdraw from the country. On the other hand, inexperience on the part of controllers may lead to a "cost plus" pricing system, with the companies getting a guiaranteed return on their investment, irrespective of their level of efficiency. 3.12 Potential Benefits of Competition: International experience suggests that competition is an effective way of maintaining petroleum prices at reasonable levels. It is recognized that, given the relatively small size of the markets in the Pacific islands countries, it may be difficult to create competitive conditions in the import of petroleum products in the near future. 3.13 In order to reduce and avoid the misgivings about the relatively high prices of imported petroleum products, it is recommended that the Pacific island governments: (a) negotiate and agree with the IOCs on a clear and explicit formula for incorporating the cost components into the landed price build-up; (b) monitor the pricing decisions of the IOCs, and verify the accuracy of the cost components, based on publicly available trade information; (c) strengthen their capacity to do the above by hiring and training appropriate staff to carry out this function. Alternatively, this function could be contracted out to a technical firm that can provide this service; (d) consider the possibility of creating competitive conditions. If such conditions can be successfully created, petroleum product prices should be deregulated, accompanied by effective subsector regulation in non-price areas such as weights and measures, facilities design and inspection, safety and quality control. Receiving Facilities and In-country Distribution 3.14 Some of the countries may be able to attain reductions in the landed/cost of fuel if some of the existing constraints to shipping and discharge facilities can be addressed and corrected. For example, supplies to Port Vila are subject to draft restrictions that not only limit the size of the vessels accommodated but also require vessels to be only partly loaded. These restrictions add substantially to the freight cost, almost doubling it compared to fully loaded vessels. A pipeline to the main wharf at this location can immediately allow a -36- change from local coaster tanker (LCT) to medium range t. ..zr (MRX) supply, which would reduce the freight rate by as much as 10 C/liter. 3.15 The in-country distribution of petroleum products in the Pacific island countries is generally complex due to the need to distribute small volumes over many islands that are separated by long distances. While the main population centers are well-s_.red by bulk distribution, bulk supply to the outer locations are restricted by small volumes, unreliable shipping service, and other physical c,nstraints, such as the lack of wharf facilities, risky anchorage and lack of other infrastructure. 3.16 In the urban locations and main centers, where bulk fuel is available, distribution is mostly completed in bulk, using road tankers with capacities in the 4-30 kl range. These vehicles deliver fuel from bulk fuel installations to service stations and other retail outlets, airports and main consumers' own storage facilities. Lubricating oil, solvents and other specialty products are normally sold and distributed in packages. Retail Network 3.17 The retail network in some of the bigger countries includes modern service stations that are comparable to those found in the industrialized countries. In most countries, there is a variety of outlets, including some that do not mee- modern specifications and are dangerous. For example, the Fusi Coop in Funafuti, Tuvalu, has two above-ground horizontal tanks for motor spirit and kerosene, as well as drums of ADO, outside its store in the built-up area of the town. To reduce the safety risks associated with substandard retail outlets, it is recommended that all Pacific island countries adopt minimum safety and quality standards for service stations. 3.18 Some of the smaller countries have many mare service stations than is. economically justified. The proliferation of s.ub-standard low-volume sites contributes to higher pump prices. Therefore, it is recommended that governments should establish guidelines for the development of new service stations, enccurage the divestment of uneconomic, low-volume sites and the development of a limited number of high-volume sites. Rural Distribution 3.19 From the main ports, petroleum products are distributed in four main ways: (a) in bulk to other outer ports, either by local coastal tankers or by barges and other smaller vessels; (b) in bulk to inland agencies and distributors, using road tankers; (c) in portable oil tanks (1,000 liters capacity) either on truck traylor as deck cargo on inter-island vessels; " (d) in 200 liter steel drums to remote locations, carted on trucks or shipped as deck cargo on inter-island vessels. 3.20 The shipping of fuel in 200 liter steel drums adds significantly to the cost of fuel in rural and outer island locations. There are instances where the -37- rural prices are three to four times higher than the urban supplies. The freight cost difference between bulk supply and drum supply for some locations in PNG, Fiji, and Tonga in early 1991 were of the order of 25¢/liter, which amounts to a six-fold cost difference. Further, apart from the additional freight cost, the cost of damages sustained on the drums (in handling and transportation) and fuel losses (through evaporation, leakage and decanting) add substantially to the high cost of fuel in remote locations. 3.21 As an alternative to 200 liter steel drums, the use of fabridrums (1900 liter (500 US gallons) capacity collapsible containers) was introduced by PEDP, in cooperation with Mobil, Fiji, in late 1988 on a trial basis in order to reduce the cost of supply, compared to steel drums and portable tanks. While the test has not been fully evaluated, the tentative results indicate that the fabridrums can reduce the costs, without jeopardizing safety. In view of the potential freight cost savings, it is recommended that the regional energy agency (FSED) complete and fully evaluate the fabridrum tests. Quality and Safety Issues Product Ouality and standardization 3.22 In most of the Pacific island countries, there are no checks on fuel quality. For the sake of consistency, the Pacific island countries should adopt standard product specifications to guide the industry. Since over 70% of the petroleum products in the region are imported from Australian refineries, the Australian Products Standards could be easily adopted for this purpose. 3.23 The governments should also periodically test the petroleum products to ensure that they meet the specified standards, as the need arises, but at least three or four times a year. 129/ These tests can be carried out by contracting them to a qualified laboratory. 2_0/ 3.24 Gasoline Grades: Overall, there are five different grades of gasoline being marketed in the Pacific island countries. In one of the countries, there are four grades (regular leaded, regular unleaded, and two premium unleaded) being marketed, but the consumers are not aware of the different grades because 12/ In the early 1980s, a batch of ADO received by one of the three oil companies did not come up to standard. The ADO precipitated a white powdery deposit that affected engine performance. When customers complained, the oil company tested the product and confirmed the problem. In Vanuatu, in 1991, there was an outbreak of Cledesporiam Resine in the PWD's storage tanks, which may have come from either the PWD's or the oil company's storage tanks. There was a case in Micronesia where a load of diesel fuel was put into a motor spirit tank, so that testing of the weathered product will be essential before any of it c24n be used. I 2./ The University of South Pacific established a laboratory for testing petroleum products in 1987, but there has been minimal use of this facility. The laboratory officer trained to test fuels has left the university, so that further training will be necessary if these facilities are to be used in the future. -38- the price at the pumps is the same. Even for the bigger countries in the region, the justification for marketing two or more grades is questionable because the fragmentation of the market leads to higher logistic and distribution costs. There is financial justification for a compromise gasoline grade to be marketed in the Pacific island countries. The need for a compromise also presents an opportunity to phase out the use of leaded gas, with the attendant environmental benefits. On this basis, it is recommended the Pacific islands adopt that 93 octane unleaded gasoline as the standard for the region. Safety 3.25 In most Pacific island countries, insufficient attention has been given to the safety aspects of petroleum handling, storage and distribution. With very few exceptions, there are no local engineering and safety standards. The lack of legislated safety standards has meant that the petroleum companies have been largely self-regulating, applying a mix of international standards, though there are a few exceptions where the IOCs have deliberately maintained sub-standard facilities; in Tonga and the Cook Is., an IOC established join-venture local agencies for marketing and distribution of its products in the early 1980s with apparent disregard for prevailing standards. Even where international standards were adopted, many of the older oil company installations are showing signs of their age and while they may have been adequately engineered in terms of the standards prevalent at the time of construction, it is questionable whether at least some of them would measure up to today's standards. 3.26 Downstream of IOC installations, the application of safety and engineering standards has gone virtually unchecked. The installations and practices of local transport agents, commercial storage, retail outlets, etc., can frequently be described as disasters waiting to happen. The storage and handling of LPG is of particular concern, given the flammable nature of the product and the general lack of public awareness of the behavior and properties. of the product. Some of the other important deficiencies that need to be addressed include separation distances between tanks and between the tank farm and other oil depots, multi-usage buildings, bunding capacities and structures, sealing of tank compound floors, tank and pipeline relief systems and vapor control systems, spill containment and drainage, general safety provisions such as the posting of warning signs, and proper maintenance of assets. 3.27 Given the evident safety risks discussed above, it is recommended that the governments: (a) develop and apply appropriate safety standards. In view of the expertiser required in developing safety standards, this task could be done on a -regional cooperative basis; (b) train their officials in monitoring and enforcing their applicatioi; and (c) introduce community safety awareness programs. -39- Implications for Governments' Role 3.28 On the basis of the previous discussion, there is strong justification for governments to c-velop and maintain an institutional capacity to monitor prices, and formulate and enforce safety regulations. The projected increase in demand for petroleum products will require significant new investment by the oil industry in storage, shipping and onshore operations over tLue next eight or nine years. It is important that government policies, particularly those relating to price control and rate of return on investment, do not inhibit this essential investment, if supply security is to be maintained. Appropriate policies will encourage the oil companies to undertake the necessary investments. 3.29 Beyond these regulatory functions, there is little need for additional government involvement in the petroleum sector. In the past, most government interventions have not been successful. 3.30 Security of supply: Government intervention to establish strategic storage reserves in order to ensure security of supply in times of international crisis, for which interest was stirred up again during the recent 1990/91 Gulf War, is not advisable. Strategic reserves are expensive to maintain and even major petroleum consuming countries have not implemented a sound management strategy. For a variety of reasons, they have been unwilling to draw down the reserves when prices are rising and also unwilling to release them when prices are falling. In the Pacific islands context, the most effective way of ensuring a secure supply of petroleum products is to keep it attractive for the international oil companies (IOCs) to maintain their operations. As the supply and transport of oil and oil products is in the hands of IOCs, their involvement is essential for security of supply. Governments do not have the international flexibility in meeting the needs of the market to be able to displace the industry in times of crisis. 3.31 Past government involvements in the petroleum sector have not yielded the expected results. There has been one attempt (in the mid 1980s) to arrange for a national petroleum products supply tender to achieve economies of scale, but it was soon terminated due to problems in administration. There are two examples of government borrowing on commercial terms to fund major bulk fuel storage facilities (in conjunction with power plant projects) with the objective of reducing freight and on-shore distribution costs and servicing the international fishing fleet. In both cases, the expected bunker sales failed to materialize. The repayment of the debt.has led one government into financial difficulties and the other into a major lawsuit to determine responsibility. Also, the facilities are being poorly managed and maintained and at present fail to meet engineering and safety standards for the products now being stored. There is also one case of a national oil company being established to handle the onshore storage and distribution of petroleum products. After years of weak management, it is now undergoing a pairnful retrenchment of its staff from a peak of 54 to about half that level. 3.32 FinaReco: The most recent example of an unnecessary diversion of government resources to the petroleum sector relates to the recent (November 1990) establishment of the Fiji National Petroleum Company (Finapeco), with a monopoly on the import of oil to Fiji. The establishment of Finapeco is a matter -40- of concern because of its inconsistency with Fiji's broader development objectives (such as reducing the role of the state and increasing the level of competition) and the incremental costs it imposes on neighboring countries and territories (Kiribati, Solomon Is., Tonga, Tuvalu, Vanuatu, Western Samoa, Niue, and Wallis & Futuna) which are linked to Fiji through the existing petroleum supply network of the international oil companies. The incremental economic and financial costs to Fiji are estimated at about $2/barrel. The incremental costs to the neighboring countries will depend on the alternative arrangements that are made by the oil companies once Finapeco begins operations (in 1992). -41- IV. POWER SUPPLY: PERFORMANCE IMPROVEMENT Overvie 4.1 The power sector of the Pacific islands consists of the major utilities in each country serving the cities and nearby rural areas, more than 500 small isolated government-owned rural electrification schemes, and extensive captive self generation capacity in the major industries. On average, the public (non- captive) systems serve about 25% of the population, ranging from about 10% in PNG to 96X in Palau. In early 1991, the total installed capacity of the public systems was about 542 MW, ranging from 249 MW in PNG to 0.6 MW in Tuvalu. The maximum demands on the systems added up to 240 MW. 4.2 Most Pacific island utilities are predominantly diesel based, as this is the most economical option for urban power generation, especially in the small atoll countries. Nevertheless, the cost of diesel generation is high because of the small scale of the systems. For the majority of Pacific island power utilities IV, with diesel capacities of between 5 and 20 MW, the cost of production is about US C 20/kWh, with a range of US C 17-25/kWh; by comparison, developed-country generation costs are commonly between 10 and 15 cents. For utilities of less than 5 MW capacity 22/, the costs are higher, with an average value of US C 27/kWh, and a range of US P 24-33/kWh. 4.3 Well over 90% of the hydro capacity is concentrated in PNG (162 MW) and Fiji (83 MW), the two countries with the largest power systems. Given PNG's and Fiji's large size, hydro accounts for 47% of the total generation capacity in the Pacific region, though only a minority of the countries have hydropower plants. Apart from PNG and I.iji, only Western Samoa (8 MW) and FSM (2 MW) also have significant hydro capacities. Production costs are lowest, at about US ¢ 13/kWh, in Fiji Electricity Authority (FEA) and the PNG Electricity Commission (Elcom), mainly because of the economies of scale associated with their large hydropower facilities and high-voltage transmission systems. 4.4 In the 1990s, most of the Pacific island utilities are expected to install additional diesel-based generation capacity to meet the increasing load. There may also be relatively small scale (1-15 MW) hydropower capacity additions in PNG, Vanuatu, Western Samoa, and Solomon Is. 4.5 The inadequate technical and financial performance of the power utilities is the principal issue in the energy sector. This poor performance is particularly troublesome in view of the fact this is a capital-intensive sector that absorbs a substantial amount of donor and. domestic resources even though it serves a limited number of people. / Including Vanuatu, Tonga, the Solomon Is., the Micronesian countries, and Western Samoa. Western Samoa also has hydro resources but these have been seriously damaged, partly by cyclones, and in 1991 the majority of generation was diesel-based. 2/ Such as the main grid in Cook Is. (Rarotonga), Kiribati (Tarawa), and Tuvalu (Funafuti). -42- 4.6 To be sustainable in the long term, the utilities need to improve their technical efficiency and financial condition. In general terms, the utilities need to (i) operate and maintain their physical assets at high levels of efficiency, (ii) ensure that their tariffs cover operational costs as well as finance an adequate share of new investments, (iii) base their investments on least-cost expansion plans, and (iv) recruit, train, and retain competent staff at all levels. In order to provide an institutional arrangement to sustain the above, the government agencies in charge of power supply need to be transformed into financially and managerially autonomous corporations. Further, the financial and technical performance of the enterprises need to be stimulated and put on an accountable basis through appropriate incentives. Inadeguate Technical Performance 4.7 The unsatisfactory technical performance of most Pacific island power utilities is evident from the widespread unreliability of power supply. While data on reliability is not available, the general impression is that in most countries voltage fluctuations are high, unplanned outages are common, and restoration of power after a failure is slow. These problems persist in spite of the unusually high average reserve margin of 126% (ranging from 41% in Tonga to 196X in FSM). Fiji, PNG, and Vanuatu provide the most reliable urban power, as measured by the comparatively small number of outages per year and the effectiveness of voltage and system frequency regulation. 4.8 The cost to consumers of the utilities' inadequate technical performance is high because voltage fluctuations result in frequent appliance repairs or replacements, and numerous outages lead consumers to invest in backup equipment. Further, the lack of reliable power supply for large commercial consumers has raised costs and adversely affected private sector investment and economic growth. Not surprisingly, this effect is most visible in countries that provide high power tariff subsidies, because these utilities have limited financial means to expand their generating, transmission, and distribution capacities to meet the load growth spurred by subsidized tariffs. 4.9 The inadequate technical performance of the Pacific island utilities has led to: (a) Accelerated Deterioration of Eguipment: The utilities are characterized by excessive deterioration of capital equipment, which is a significant problem because about 25-33% of the total costs of diesel-based utilities is attributable to capital costs, including aepreciation and interest. It is not uncommon to find diesel gensets that have broken down beyond repair after use of less than ten years even though their rated life is 15 years. Further, unscheduled outages of generators for repair or overhaul strain the remaining capacity in the system, thus also shortening its life. (b) High Distribution Losses: The power networks suffer from excessive distribution losses, which significantly reduce the utilities' revenues. The average distribution (technical and non-technical, including unmetered sales) loss of 13.8% is high, and there are. cases (Palau - 59%, FSM - 55%, Marshall Is. - 29%, Tuvalu - 21%, Tonga - 17%, Kiribati, 17%, Western Samoa - 15%) where loss levels are alarming. These losses can be -43- economically reduced to about 10% or lower, and some utilities are already making the efforts to reduce them. (c) Excessive Fuel Use: The diesel-based utilities are characterized by excessive fuel use. While the small Pacific island utilities are unable to take advantage of economies of scale in fuel use, the Pacific islands' average generation of 3.32 kWh/liter of diesel is lower than the typical developing country value of 3.55 kWh/liter, with many cases much below 3.32 kWh/liter. The corresponding excess fuel use is significant, as fuel accounts for about 33-50% of the total cost of power generation for the diesel-based Pacific island utilities. 4.10 Lack of Proper Maintenance: The prime cause of the inadequate technical performance is the lack of proper maintenance. For example, many Pacific island power utilities have operated their diesel gensets far beyond the manufacturers' recommended maintenance intervals, in some cases until the engines break down. When major overhauls become necessary, they are often deferred because adequate funds for spare parts have not been allocated in the budget and/or because of delays in recruiting temporary specialists to supervise the overhauls. 4.11 Improper or insufficient maintenance of distribution lines, transformers, and service drops is a prime contributor to high distribution losses 23/. It is common for line faults to be improperly repaired, leading to excessive sagging; sometimes lines are not earthed properly. In most countries, distribution transformers are never inspected or maintained, and are therefore not replaced when necessary to handle increasing load; undersized transformers are often responsible for a majority of a small utility's distribution losses. Loose customer connections are another leading culprit which persists in most countries due to a lack of routine inspection and repair. ImDroving technical performance 4.12 Most of the operational and maintenance difficulties experienced through the 1980s in the Pacific island utilities are growing pains amplified by the absence of an appropriate management environment. For example, while it is true that rapidly expanding small utilities lack trained technical and managerial manpower to service power systems that are experiencing increasing strain, maintenance is often neglected even in areas where apprepriate manpower is 23/ Overload of the distribution system is also responsible for high distribution losses. For example, in the Cook Is., Kiribati, Tonga, and Western Samoa, consumer demand has overloaded the capacity of the primary distribution systems, which in some areas are still limited to 6.6 kV and 3.3 kV, leading to high losses. While most utilities have begun upgrading their primary distribution to at least 11 kV (13.8 kV in Micronesia) at considerable expense, it is likely to take until at least the mid-1990s for the upgrading to be complete in all countries. -44- available to do the work Z_/. Thus, in many Pacific island utilities, poor maintenance is not primarily due to a lack of financial resources, but rather a lack of incentives for the management to direct resources towards better maintenance. 4.13 The benefits of an appropriate institutional arrangement are illustrated by the examples of FEA, Elcom, and UNELCO (Vanuatu). These utilities, the most developed in the Pacific region, operate under institutional arrangements that make managemert responsible and accountable for the utilities' financial and technical performance /. Consequently, management devotes resources to preventive maintenance and to troubleshooting as required and, most importantly, invests in facilities to ensure continuous availability of technical training for older staff and new recruits. 4.14 Thus, an improved institutional arrangement that provides the right incentives to the management can go a long way in solving the technical problems facing the Pacific island utilities. Each utility should consider the internal adjustments that it has to make in order to meet the load growth while improving the quality of power supply. These adjustments include redefining the utility's objectives, lengthening its planning horizon, devising strategies to overcome problems before they become crises, and marshalling the considerable resources necessary to institutionalize maintenance and training activities. Inadeguate Financial Performance Changing Financial Environment 4.15 Over the last decade the financial environment of the Pacific region's power sector has been in transition from primary reliance on grants and subsidies to growing reliance on loans from multilateral lenders and commercial banks. The major reason for the transition is the declining share of the power sector in bilateral aid programs. Over time, the objectives of bilateral aid programs have gradually been re-directed from infrastructure to social programs and, recently, towards private sector initiatives. Since electricity supply mainly benefits the urban cash economy, the power sector has a declining priority in foreign aid 2/ An approach that may work in some areas is to have rural engineers who would look after simple inspection and maintenance of not only power facilities but also water, roads, school buildings and any other public infrastructure. W/ In each of these utilities the development of this institutional and regulatory framework largely preceded the physical development of their current extensive power networks, though UNELCO differs from Elcom and FEA to the extent that it is a small urban supply utility only, with no rural electrification. In other Pacific island utilities, physical development has usually been attempted without first developing an institutional structure capable of ensuring balanced long term growth. -45- programs designed to relieve poverty and promote rural development. 6/ Though government grants are still often provided for emergency needs and sometimes for rural electrification, 27/ the increasing size of power sector financing requirements makes reliance on grants increasingly infeasible. Another reason for this transition is the increasing interest of multilateral lenders, who find it attractive to fund larger infrastructure projects. 4.16 Multilateral lenders became the dominant source of power sector finance for many Pacific island utilities in the 1980s and are likely to remain so in the 1990s. 28./ These lenders require that the projects that they support be financially and economically viable. Financial viability requires assurance that sufficient income will be generated by the borrower utility to maintain a satisfactory financial condition. As a result, to maintain the utility's creditworthiness with the multilateral institutions, it typically agrees to maintain certain financial performance ratios, which substantially increase the utility's required liquidity and profit margins from earlier-levels. 4.17 Commercial bank lending to developing countries has been curtailed as a result of the international debt crisis of the 1980s. Recent commercial loans to the power sector have been negotiated in the Cook Is., the Marshall Is. and Papua New Guinea, and in Fiji in the early 1980s 2.9/. Against its higher interest cost and shorter loan maturity, commercial finance has two features that could make it attractive to borrowers: (i) it is relatively flexible and can be organized more quickly with less documentation than other lending arrangements, (ii) commercial lenders are generally less motivated to influence domestic power sector policies. There are also special circumstances in which commercial banks 26/ Bilateral assistance (concessionary loans and grant aid) to the power sector continues to be available from Japan, which has financed large projects such as the 30 MW Rouna IV hydroelectric plant outside of Port Moresby, PNG. Other bilateral donors have recently completed or are considering assistance to urban power sector projects in a few countries (e.g., AIDAB in Kiribati and New Zealand (NZ) Aid in the Cook Is.). Given the changing priorities of the donors, this type of funding for the power sector is expected to phase out by the mid- 1990s. 1 However, there are exceptions: in Palau, Marshall Is., FSM and the Cook Is., government has directly borrowed or provided guarantees for major debt- financed urban power sector capital investments. 28/ The Asian Development Bank (ADB), the World Bank, and the European Investment Bank (EIB) account for virtually all multilateral finance to the Pacific island power sector. 29/ Sometimes loans from commercial banks result, in spite of higher cost, from a country's or utility's desire to break away from dependence on traditional sources of finance. Thus a loan negotiated in 1989 in the Cook Is. with a French government credit facility for an additional generator and transmission system refurbishment replaced a NZ government offer of grant assistance to the same project. -46- may indirectly finance power projects in the region, for example when a power plant forms part of a major resource project such as a gold mine or timber mill. Improving Financial Performance 4.18 The transition to relatively costly debt finance is occurring at a time when the financial condition of most of the utilities in the Pacific region is generally poor. Only two utilities in the region have been consistently profitable: Vanuatu's privately-owned UNELCO and Elcom. All other utilities are either making losses (the power utility's rate of return is negative in about half of the countries) or at best are breaking even. (See Figure 4.1) 4.19 Given the higher financing costs and stringent conditions associated with loans from multilateral institutions and commercial banks, the transition from grants and subsidies to debt financing has far-reaching implications for the financial management of the utilities. Essential requirements will be (i) the establishment of cost-based tariffs that allow for an appropriate level of self- financing, (ii) the improvement of revenue collection, and (iii) the strengthening of financial systems. 4.20 Cost-based Tariff Adjustment: It is important that utilities and governments implement a power tariff adjustment mechanism that is predictable, reliable, and well understood by the public, so that tariffs are viewed by consumers as primarily economic and financial issues, and not as political issucsa. 2Q/ At present, tariffs vary widely in the Pacific island countries mainly because of differences in the governments' policies towards cost recovery by the utilities. In 1991, the rates nominally charged per kWh to domestic consumers in the Pacific islands were in the US * 3-42/kWh range. The lowest tariffs were prevalent in several states of FSM, under a government policy that heavily subsidizes both capital and operating costs. For most utilities, the tariffs were not high enough to cover total (i.e., operational costs and capital) costs. 4.21 The shift from subsidized to cost-based tariffs is already underway, as shown by several recent tariff increases. In 1991, tariffs increased in Tonga by more than 40%, and in Western Samoa by more than 20%, in both cases due to the influence of multilateral loan agreements; in Fiji, tariffs increased nearly 10%, due in part to cash requirements to meet payments on a 1983 multilateral loan for the $ 200 million Monasavu hydroelectric project II/; and in both the Cook Is. and the Marshall Is., tariffs increased by 10-15% following capital loan agreements with commercial banks. 2/ Tariffs in Tonga have increased to a point that tariff adjustments have become a political issue. The ability of the utilities to absorb future multilateral loans for c&pital investment is in question, if these loans are contingent on further tariff increases. 11/ Encompassing the dam, power station, cross-island HV transmission lines, and a control center. Figure 4.1 Pacific Islands: Power Utilities' Rate of Return (1990) 20% 10% 2 -096% _ n.a n.a n.a 0 0% 0 0 -30%_ D a-. -40% -50% PNG Fiji W. Samoa Marshall Is. Palau Vanuatu Tonga Kiribati Solomon Is. FSM Cook Is. Tuvalu Source: Statstical Appendix -48- 4.22 In addition to recovering the costs of supply, the adjustment of tariffs also needs to consider the mobilization of resources for future investments. Although often difficult for small utilities to provide, limited in-house financing of small projects is the most flexible form of finance and helps to reduce the cost of financing, both by substituting for debt and by improving the creditworthiness of the utilities. For this reason, it is recommended that utilities ensure that their tariff policies provide for internal cash generation. Multilateral lenders usually make a minimum level of self financing an objective of loan covenants. 4.23 Inadequate Revenue Collections: Many utilities are still hampered by slow, inaccurate, and incomplete electricity billing systems, some of which are still manual. A surprising number of utilities have no accurate records of consumer connections, and illegal connections and meter tampering are common problems. Moreover, revenue collection by many utilities is poor, often less than 75% of billings and in several cases less than 50%. Poor revenue collecLion usually results from inadequate systems for monitoring customer payments (in some utilities, the billing office and the collection office are separate and maintain separate records) and often from a reluctance or inability to disconnect customers for non-payment. For these reasons, the actual average revenue collection per kWh of electricity produced is less than the nominal kWh tariff. 4.24 Since the mid-1980s several utilities, e.g., Pohnpei (FSM), Tonga, and the Marshalls Energy Company have installed personal compucer-based automated billing systems, with the result that billings and collections have significantly improved J2/. Although improvements in billing and collection are gradually spreading to other Pacific island utilities, inadequate systems will continue to plague the financial health of many utilities for the foreseeable future. 4.25 Strengthening Financial Systems: A major contributing factor to the generally poor financial performance of the region's power sector is the inadequacy of financial systems and controls. Many utilities do not know what their costs are. Most utilities lack clear and formal mechanisms for determining revenue requirements, setting tariffs, and collecting revenues. Further, unsound financial practices are common, such as undertaking large capital expenditures without dLveloping least-cost expansion plans. Planning and Evaluation of Power Investments 4.26 Most of the power utilities in the region e:panded rapidly in the 1980s, and it is expected that there will be significant expansions in the 1990s also, albeit at a slower pace. As a beneficial side effect of change in the financial environment, the majority of new investments are being subjected to the type of appraisals required by the multilateral lenders. The multilateral institutions' focus on economic viability usually requires an evaluation of the system end/or a planning study to determine the justification of the project as part 'f the utility's least-cost expansion plan. As its name implies, the purpose of such a plan is to minimize the costs of future expansions of the power utility. The 22/ The utilities in Fiji, PNG, and Western Samoa have used computerized billing for many years and are generally experiencing few billing problems. -49- costs are kept down by ensuring that only necessary expansions of the system take place and that various options are considered in order to find the least expensive way of expanding the system. 4.27 The first step in the formulation of a least-cost expansion plan is the development of a realistic load forecast of energy sales and peak demand. These forecasts should be based on all the available relevant information, such as likely commercial developments, expected changes in economic variables such as per capita income, anticipated taAiff changes, etc. 33/ In general, load forecasts should be revised on an annual basis to take account of up to date information. 4.28 The next step in least-cost planning is the formulation of reasonable reliability criteria, such as the loss-of-load probability. In general, increasing the reliability of power supply tends to raise the need for generation or transmission reserve capacity, and hence the costs of production, which ultimately results in higher tariffs. Hence, the reliability criteria should be based on a determination of the extent of the consumers' willingness to tolerate occasional power outages in return for lower tariffs or smaller increases in tariffs. The reliability criteria are combined with the load forecasts to develop an estimate of the required future generation and transmission capacity. 4.29 The final step in least-cost planning is to consider a range of possible op*.ions for meeting the anticipated load, and compare them on the basis of costs. Of particular interest in this regard is the review of options beyond the conventional response of adding generation and/or transmission capacity, such as, on the supply side, the purchase of power from external (industrial) captive generation and extension of the lives of existing diesel generator capacities by repair and rehabilitation, and, on the demand-side, the promotion of demand management. 4.30 Power purchase agreements: The option of purchasing surplus power from captive generation may often be favorable to a utility as when, for example, cheap hydropower or biomass-based generation replaces expensive diesel-based electricity. Examples are sales by the Fiji Sugar Corporation to FEA, by Niugini Goldfields to Elcom and by Samoa Forest Products to EPC (in Western Samoa). In other cases, there are direct sales through the power grid, as occurs with privately owned hydropower development in Tahiti. 4.31 The prospects for purchased-power agreements in several island countries with undeveloped resources (such as PNG, Fiji, and Solomon Is.) are good. For most such countries, large scale resource development (e.g., minerals and timber) is the most likely path to rapid economic growth. An expansion of industrial power plants may well provide power to utility customers at a cost which is below the cost of utility generated power. f3/ While the larger utilities may find it possible use formal statistical methods, such as econometric models, to develop these forecasts, the smaller utilities may find it more convenient to use simple extrapolation methods in conjunction with available information about the plans of large commercial and government customers. -50- 4.32 Demand Management: On the demand side, the power utility should consider the possibility of managing the load by providing incentives for energy conservation, such as offering high efficiency light bulbs to consumers (See Box 2.2) or promoting more efficient household refrigerators. These incentives will be most effective when the tariffs reflect the economic cost of production, including both the capital and operational costs. It may also be possible to develop special tariffs for large consumers, such as separate charges for peak and off-peak hours or interruptible supply tariffs 4i/. Under the peak/off- peak tariff, consumers pay a higher tariff for electricity consumed in peak hours, and a lower tariff for electricity consumed in off-peak hours. Large consumers are often able to alter their consumption patterns to a significant extent in order to avoid paying high peak period rates and take advantage of low off-peak rates. The consequent reduction in peak demand tends to reduce the need to add capacity. Choices in Capacity Additions 4.33 Even after considering all of these options, in some instances, it will still be necessary to add capacity to meet the anticipated load. In the Pacific island countries, the only viable choices of urban power generation are diesel generation and hydro power. 4.34 Diesel-based Generation: For the Pacific island utilities, diesel generation is the benchmark against which other options need to be compared. In contrast to hydropower, diesel-based capacity additions require relatively lower capital expenditures of about $ 1,000/kW. Also, the capacity can be built-up in phases, so that additional capital costs are incurred only when the load growth justifies them. Further, the risks of time and cost overruns are small with diesel-based capacity because this is a mature, standardized technology that is not significantly affected by site-specific factors. The main disadvantage of diesel-based generation is that its fuel costs are high, and that it relies on an imported petroleum product whose price is susceptible to wide fluctuations. 4.35 Hydropower: In the Pacific island region, hydropower projects tend to be expensive. For example, the 2 MW Nanpil scheme in the FSM, which is limited 1.8 MW output, cost about $ 10 million, or over $ 5,000/kW. The proposed 6.6 M4W Komarindi development in the Solomon Is. is relatively inexpensive at an estimated cost of $ 3,200/kW. In addition, it is difficult to construct large- scale hydro projects in phases, so that large-scale hydro projects require substantial initial capital investments, which often exceed the available concessional finance, and lead the utility to borrow on commercial or near- commercial terms. 4.36 When funds are borrowed on commercial terms, the required debt repayment in the initial years are high. At the same time, in the early years, the demand i§/ Some consumers, and/or an identifiable group of consumers, may be particularly willing to tolerate occasional outages in return for a lower tariff. For example, FEA supplies power to Emperor Gold Mines, a large industrial consumer, on an interruptible basis at a tariff that is approximately half of the standard commercial and industrial tariff. -51- for electricity may be substantially less than the project's capacity, so that the required debt repayment can exceed the fuel savings or incremental revenues from the project in the initial years of oper;A-ion. This problem is worsened by any delays in the commissioning of the proje'tt, because the delays postpone the revenues from the project, while the debt repayment schedule remains firm. Such a situation can put severe pressure on the cash flow of the utilities and contribute to a short term requirement to raise the tariffs above the economic cost of supply. For example, this factor has contributed to the projection that, to maintain a satisfactory financial performance, FEA and Elcom will have to raise their tariffs by about 10% per year for four years and 7%/year for three years, respectively, to enable the utilities to return to a satisfactory financial condition. 4.37 The problem of large-scale investments ("lumpiness") is often aggravated by the fact that the utility undertaking the hydro project does not have prior experience with such projects. Thus, hydro projects are routinely associated with implementation problems that lead to cost overruns and delays in construction and commissioning of the project, as utility personnel learn to deal with unfamiliar issues. These factors can substantially reduce the benefits from the project. For example, the post-project evaluations carried out by the World Bank recalculated the rate of return of the Upper Ramu hydroelectric project in PNG to be only 13.5%, significantly lower than the 18.8% rate estimated at the time of the appraisal. Similarly, for the Monasavu-Wailoa hydroelectric scheme in Fiji, the post-project rate of return was evaluated to be only 10%, as compared to the 14-18% rate of return estimated in the appraisal. Therefore, even if it is economically feasible to substitute hydropower for diesel generated electricity, it is necessary to undertake a detailed and realistic examination of the downside risks and costs associated with hydro projects before they are undertaken. Need for Institutional Reform 4.38 The wide differences among Pacific island utilities, especially in subsidies, tariffs, profitability, and the quality and reliability of power, are strongly related to differences in their institutional structure. Thus, an institutional transformation is often the best way to improve the performance of these utilities. 4.39 All Pacific island utilities except one are government owned 1_/, but range from financially autonomous and fully commercialized power corporations (i.e., FEA and Elcom) to government Public Works Departments responsible for maintaining the public power supply. Examples of the latter include the utilities in Palau, the Cook Is., and until recently in FSK and Tuvalu. Utilities in other countries, e.g., Tonga, Kiribati, Marshall Is., the Solomon Is., FSM and Tuvalu, are between these extremes: while organized as autonomous utilities, their commercial objectives and government's role in tariff regulation and oversight of utility operations are not consistent or well defined. Even IV. The exception is UNELCO (Vanuatu) which is a subsidiary of a privately- owned French utility corporation. -52- when the utilities are autonomous public sector corporations, many Pacific island governments provide cash subsidies to utilities to cover both operating revenue shortfalls and the financing costs of capital investment. From Government Agencies to Business Entities 4.40 Government agencies: Apart from Elcom and FEA, government-owned Pacific island power utilities can be characterized as government agencies. Usually, essential functions are shared between the utility and one or more government agencies. For example, in the Micronesian countries and until recently in the Cook Is. and Tuvalu, the utilities' operating budgets are determined by officials in the Treasury or Finance Department, or by a Parliamentary committee. Similarly, recruitment of utility staff is often handled by the government's Public Service department, rather than by utility management. In some cases, the utility managemer 's responsibilities are restricted to operating and maintaining the power system's physical plant; all other utility functions including meter reading, billing, revenue collection, budgeting, recruitment, and even purchasing are handled elsewhere. 4.41 Where the utility operates as a government agency, it is subject to direct political involvement and control, especially when, as is commonly the case, Cabinet Ministers and political appointees serve on the utilities' Boards of Directors. Further, the utility manager is responsible only for keeping the power system operating on a budget provided from government funds rather than receipts from customers. Thus, the managers have little incentive to improve the performance of the utility by activities such as preventive maintenance, planning efficiently to meet future needs, cost-saving improvements, or improving the quality of supply. Consequently, the financial performance is poor, and governments are unable to control the magnitude of the subsidies required to meet the utilities' inevitable revenue shortfalls. In some countries, the drain of power sector subsidies on the public purse has become unsustainable. 4.42 Business Entities: In order to improve the technical and financial performance of the power utilities, the Pacific island governments should treat the utilities as business entities that are operated and managed along commercial lines. The recent "corporatization" initiatives in th,e power sector, with new legislation introduced or passed in the Cook Is., Tonga, Tuvalu, Palau, and the four states of FSM in 1990 or 1991 are steps in this direction. The transformation from government agencies to business entities requires the governments to develop an arms-length relationship with the utilities, while clearly specifying the utilities' financial objectives, rights, jurisdiction, and obligations. Further, the governments would also have to specify policies on staffing and salaries, subsidies, procurement and debt. The governments would remain responsible for broader developmental functions such as the formulation of sectoral and economic policies, provision of an adequate supply of technically trained manpower, regulation of environmental matters, and coordination with '-,ors and multilateral lenders. 4.43 In order to assist the power utilities in becoming successful business entities, the governments should ensure that the utilities are operated by qualified and experienced professionals; in some situations, this may require the replacement of the present management. One way of achieving this change would -53- be for the governments to enter into management contracts with private organizations for managing all aspects of the utilities; another possibility is to consider co-operative arrangements ("twinning") under which an experienced, developed utility provides managerial and technical assistance in all major aspects of the operation of the Pacific island utility. In other situations, cost efficiencies and improved performance can be achieved by contracting for the supply of specific services (e.g., maintenance, meter reading, accounting) with outside vendors. Similarly, the construction of new capacity could be contracted out. For the long term, the governments should also consider privatizing the utilities, for example, through the issuance of shares, in order to enhance the incentives for efficient management as well as take advantage of the availability of capital, both at home and abroad. 4.44 While the utilities in PNG (Elcom) and Fiji (FEA) are significantly larger than those of other Pacific island countries, they provide good models for other utilities to follow as they have already met some of the difficult challenges now faced by many of the smaller power utilities in the region. 26/ Elcom and FEA have taken the initial steps necessary to operate as business entities, and their commercial objectives are clearly spelled out in their charter and supporting legislation. 27/ 4.45 Both Elcom and FEA are operated under a centralized management structure that has an explicit commercial orientation. Both utilities are composed of divisions covering all essential utility functions, including operations, budgeting, revenue collection, administration, personnel, physical and financial planning, and design and construction. Both utilities provide their full financial operating requirements from sales rever.ues, develop least-cost capital expansion plans to meet the needs of their customers, and secure their own financing for capital investment 8/. Where government provides subsidies, they are generally limited to social objectives such as extension of electrification in rural areas. Elcom is prohibited by the PNG government from 26/ Although the utilities in Fiji and PNG have been fully corporatized since at least the early 1980s, each began by taking over the electricity operations of government departments and (in Fiji) of several small private and public power companies. In PNG, Elcom was formed in 1963 from a merging of government- operated power centers supplying several major urban areas and gradually assumed control of all government-operated power facilities with the exception of about 100 small centers in remote rural areas. FEA was formed in the 1960s from a merger of a collection of private power companies operating in western Viti Levu and in the late 1970s took over the Suva power system then operated by the Suva City Council. 2Z/ Elcom has consistently operated at a profit (the only government-owned power utility in the region to do so), and paid both income taxes and dividends to the PNG government in addition to meeting its debt service obligations. 28/ Both utilities have received cash injections from government in times of financial difficulties in the past (e.g., in PNG in the early 1980s and more recently in Fiji), but these occasions are infrequent. -54- undertaking any investment for which a real rate of return of at least 10% cannot be demonstrated. 4.46 The governments of both Fiji and PNG manage utility operations through legislation defining policies and through civil service representation on the Boards of Directors 29/. Tariffs are formulated by management in accordance with financial objectives and approved or rejected - but not determined - by Cabinet. Though the utilities negotiate directly wirn multilateral lending institutions for capital finance, both governments control, but do not subsidize, the utilities' capital investments and overseas debt obligations by acting as the official borrower in power sector loans. Under agreements with multilateral lenders, the governments accept the proceeds of power sector loans and "on-lend" them to the utilities at a higher rate of interest than that charged to the government; the utilities must meet their government debt obligations from sales revenue. Thus the utilities never obligate themselves or their governments to overseas debt without the latters' approval. Need for Training and Regional Cooperation Need for Training 4.47 Utilities which are being transformed into autonomous corporations now o. in the future must accomplish difficult management tasks with which they are unfamiliar, including budgeting and accounting, long term investment and financial planning, tariff formulation, and (most importantly) recruitment of staff qualified to carry out the wide range of new responsibilities. Governments, too, face the considerable challenge of retreating from a direct management role and adopting a more distant regulatory one. They must provide utilities with incentives to improve service quality and contain costs but must also allow them to bear the consequences of technical problems and of managerial mistakes without interference. However, most Pacific island countries lack local expertise to carry out either the management or the regulatory functions required for an autonomous public enterprise, and temporary overseas recruitment may be necessary in many countries. 4.48 In the long term, successful utility reorganization requires that training in virtually all aspects of power utility operations (both managerial and technical) and in regulation be started immediately. Far greater allocations of resources to training are required now than are presently made in most countries; governments' short term manpower and financial costs of utility reorganization may therefore be considerable. The sustainability of this investment in human resources will also require that the corporate framework be put on a business-like basis (as discussed in para 4.37 ff.) to provide an attractive working environment for the trainees. Multilateral ! lending institutions and regional assistance programs can help, but governments must provide much of the impetus in defining new positions, specifying qualifications, 29/ Political representatives are sometimes _ncluded on FEA's Board. Independent outside experts with management experience have served on Elcom's Board of Directors. .55- restructuring pay scales, recruiting trainees, allocating trained personnel to the new positions, and creating the appropriate institutional framework. The training issue is discussed further in paras 5.6-5.16. Potential for Regional Cooperation 4.49 Most utilities in the region face similar difficulties, i.e., rapid growth of operations in a tropical environment, isolation, and relatively small scale, but serve different markets and are at different stages of physical and institutional development. A regional mechanism to foster inter-utility linkages would ease the strain that small utilities are now experiencing and provide a significant boost to power sector development throughout the region. 4.50 Some regional efforts, which began to take shape in 1990, can help small utilities to develop training programs and improve operations and maintenance (O&M) practices. The largest utilities in the region have training resources and managerial expertise from which all utilities can benefit. For example, the training resources maintained by FEA and Elcom could be expanded at relatively small cost into regional training centers to provide continuous technical training services to small utilities. Also, senior engineering and managerial expertise could be shared (i.e., on short term secondments) to assist small utilities to overcome an inevitable series of specific problems as they develop into mature utilities through the 1990s. 4.51 Regional cooperation can also be used to attract and maintain a critical mass of specialized expertise in the region. At present, many of the utilities find it difficult to recruit and/or retain staff with the expertise needed to carry out specialized functions such as planning and evaluating investments, design of accounting systems, formulation of tariff adjustment policies, training programs, etc. These difficulties could be ameliorated through a regional arrangement that could pool the requirements of the individual utilities and organize a more cost-effective way of meeting them. The power utilities have already undertaken some initial steps to form the Pacific Power Association, whose focus is the power sector. -56- V. INSTITUTIONAL AND POLICY PRIORITIES FOR GOVERNMENTS Constraints on the Development of the Energy Sector 5.1 The upsurge in the Pacific islands' interest in energy was a response to widely fluctuating, but generally increasing, oil prices since the early 1970s, which had significant impacts on the open and fragile island economies. Following the ^onventional wisdom of the time and encouraged by donor interest the governments' energy strategies assigned high priority to reducing dependence on petroleum imports, based on the expected development potential of indigenous and renewable energy resources. However, the experience of the 1980s indicates that such expectations cannot be met in the foreseeable future. Based on this, the energy strategies of the region need to be refocussed on improving the management and regulation of conventional power supply and petroleum imports. This will require a substantial transformation of the governments' role in the sector. 5.2 In general, the recommended approach is for the governments to streamline their involvement in the energy sector by using their powers only to (i) define broad policies and (ii) ensure that its objectives for the sector are met in an efficient, sustainable and socially equitable manner. Governments should not be involved in the direct administration, implementation o. maintenance of energy projects buy rather rely on private or state-owned enterprises. If appropriate companies do not exist, the government should either provide incentives for the establishment of private enterprises or create a state-owned enterprise, but should not become involved in their operation. In addition to streamlining their energy functions, the governments should also support the development of the energy sector by enhancing the supply of technical manpower, addressing environmental concerns, coordinating assistance from the donors and strengthening regional cooperation. Streamlining the National Energy Offices 5.3 The establishment of national energy offices in the Pacific Islands was largely driven by the need to administer doncr assistance in response to the 1970s rise in oil prices, rather than an understanding by governments of the needs of the energy sector. Partly as a consequence, a disproportionate amount of effort has been devoted to the planning and implementation of new and renewable energy options. Given the disappointing results of these efforts, government support for energy offices has tended to decline, rendering them weak and ineffective in managing the government's interests in the sector. 5.4 While there are many areas where the governments' involvement in the energy sector can be reduced, there are a number of m.. itoring, analysis, coordination and regulation functions that need to be carried out in a dependable manner. On this basis, a recommended set of functions for the national energy offices can be outlined as follows: -57- (a) General energy planning functions: (i) monitoring and reviewing of energy markets; (ii) formulation and analysis of policy options and policy changes; (iii) donor coordination (technical assistance and investments); (iv) intra-sectoral coordination (among existing institations); and (v) inter-sectoral coordination. (b) Regulatory functions.: (i) formulation of quality and safety standards and legislation (for petroleum storage and handling, electrical wiring, environmental standards, emergency plans); (ii) monitoring of energy company operations (petroleum purchasing, financial performance, investment plans, and quality of service); (iii) promotion and regulation of petroleum exploration and development (in PNG, Vanuatu and Tonga); (iv) petroleum product price and electricity tariff monitoring; and (v) representation of government interests oIn the boards of state-owned energy companies. 5.5 In order to reduce the costs associated with national energy offices, it is recommended that the governments consider the possibility of reducing the size of the staff, or even merging these offices with other government agencies. Staffing requirements to carry out the above functions will vary among countries according to the size of the energy sector (in terms of numbers of consumers served, the extent of distribution of commercial energy resources, level of development, etc). In general, the functions of a competently run energy office within most countries in the region could realistically be handled by two to three staff including a petroleum sector specialist, power sector specialist, and household/rural energy specialist. Staff DeveloRment and Training 5.6 In the Pacific region, many government agencies and public organizations, particularly those having a strong technical component, such as power utilities and public works departments, find it difficult to hire and retain adequately trained and motivated personnel. While this problem is not unique to government and public organizations, they usually have the greatest problem, with some government owned public utilities having an annual technical personnel turnover of the order of 20%. The extent of the problem varies from country to country with organizations in the less developed countries suffering most. 5.7 The fundamental reason for this shortage is that there are insufficient capable technical personnel available in the country. Given the higher pay scales in the private sector, the brunt of the shortage is felt by public organizations. However, privatizing or simply increasing government pay scales to meet those of private industry is unlikely to provide more than a temporary solution, though some equalization between public and private technical organizations may be appropriate. If public organizations raise their pay scales, other employers of technical personnel will also be forced to raise their pay scales in order to compete for the limited number of qualified, technical -58- persons. This will simply raise costs and benefit neither government nor private industry. 5.8 Even if public agencies were able to succeed in the competition for technical personnel, the country will not necessarily benefit. With the best technical personnel locked into government jobs, private industry would be unable to attract sufficient capable staff to profitably grow and diversify. Since a healthy private sector, with its drive and flexibility, is essential to economic development, the net result may be good quality technical services from government but a static economy. Causes of the Technical Personnel Deficit 5.9 Even as modern and sophisticated technologies are being introduced in the Pacific region, and the demand for technical personnel is increasing rapidly, there are a number of factors that hinder the development of a pool of qualified technical personnel: (a) the small size of many of the Pacific countries does not allow the development of .- broad based technical labor pool for employers to draw upon. In small countries, losing a single person with technical skills and decades of experience can be a serious blow. (b) poor primary and secondary school preparation for future technical training. Few schools in the region provide the background appropriate for tertiary technical training. As a result, tertiary technical students have a more difficult time in their studies. This has given technical studies the reputation of being difficult and as a result relatively few of those who finish secondary school enter technical training. (c) limited access to advanced training. Of the developing countries in the region, only PNG offers advanced training in technical subjects, and all other countries depend on overseas sources for advanced technical training. However, the majority of overseas scholarships awarded are for management, economics, accounting and other non-technical subjects. (d) migration of trained persons to more developed countries. (e) poor manpower planning and implementation. Consequently, there is inadequate development of technical training capability to meet future needs. Most governments attempt some form of manpower planning for their own needs but private sector needs are poorly catered for. 5.10 For technical organizations, liberal access to outside personnel for at leas.; temporary recruitment is important. Though it is also important to provide for the development of local capability at all technical levels, localization policies which do not recognize the necessity of filling some speciallst technical positions with expatriates can not only slow development in that technical sector but also may prevent other locals from obtaining the experience and training necessary for future competency in that field. -59- Managing the technical personnel problem 5.11 Several steps are needed to ameliorate the shortage of qualified technical personnel in the Pacific region. These include improved manpower planning, initial technical training, and middle and upper level technical training and manpower management. 5.12 Manpower Planning: The manpower planning programs need to cover at least a five year horizon because four to five years are needed to develop even a rudimentary training capability in a new technical field. Further, the plan should include the private sector, based on information obtained through business channels. The planning needs to be based on an in-depth analysis of existing and projected technical jobs, employment trend projections and an examination of planned development projects. Manpower planning must be an ongoing activity with data constantly being updated and immediately integrated into the planning effort. In order to ensure that manpower needs are met on time, there must be close coordination between manpower planners, educators, overseas scholarship administrators, apprenticeship coordinators and other agencies involved with technical skills development. 5.13 Initial Technical Training: Students desiring a technical career should be able to exercise study options with increased emphasis on mathematics and applied sciences. At present, even though most secondary schools in the Pacific region offer a few optional courses such as metal shop, mechanical drawing, computer utilization and carpentry, technical courses that specifically prepare the student for tertiary technical training are rarely available. Further, several tertiary training institutions in the Pacific region have dropped some technical courses, citing a lack of interested students, even though both government and private industry find it difficult to recruit persons with the skills taught in those courses. In the rapidly changing technical employment conditions of the region, employers need to keep tertiary training institutions aware of their present and projected needs. In turn, tertiary training institutions should quickly respond to those needs through facility and curriculum development and should actively recruit students from secondary schools. 5.14 Middle and UpRer Level Technical Training: Several steps need to be taken to provida additional technical skills to middle and upper level employees who need to properly use and manage new technology: (a) improved access for private industry to scholarship programs and overseas training. Throughout the region, g'vernment employees are the majority recipients of technical scholarships and short-term training courses. A common reason cited for not including the private sector is the difficulty of fairness in the selection of the scholarship recipients. Hence, selection criteria for scholarship opportunities should be developed in conjunction with private industry and applied rigorously to both government and private sector employees. (b) short term secondment programs (6 months or less) of personnel to larger or more competent local or overseas organizations can be of value in -60- upgrading the technical skills of personnel in the middle and upper levels. (c) expatriate staff should be used intelligently. While expatriate staff may have to be employed to perform some technical tasks, their primary role should be training of local staff rather than performing a technical job. (d) once adequately trained staff are available, any under qualified or less productive staff should be replaced. Without this type of turnover, in some countries it would take a long time to improve the situation. 5.15 Improved management of technical Rersonnel: The working conditions of the middle and upper level technical personnel should be improved by taking account of their special needs: (a) access to proper tools and equipment, without which the technical staff will be unable to do the job assigned by management, and resentment and frustration will result. (b) improved access to current technical information and more on-the-job training. Since many technical fields change rapidly, in order to keep abreast, technical personnel need to spend a significant part of their work time reading technical journals, taking specialist short courses, doing correspondence study and attending technical product shows. (c) regular contact with peers. Persons employed in technical fields in developing countries have few opportunities for discussing technical is.ues. The stimulation and insights gained through peer contacts at regional meetings, workshops and seminars often result in improved morale and productivity. (d) flexible working conditions. Productivity rather than precisely regular hours should be emphasized with technical personnel. Compensatory time off, flex time arrangements or other methods to isolate problem solving from the time clock can improve job satisfaction and productivity in middle and upper level technical personnel. 5.16 The Pacific island countries will require external assistance far staff development anc. training. This should constitute a particularly fruitful area for continued bilateral grant funds for the sector. Addressing Environmental and Social Concerns 5.17 Environmental disturbances are associated with the production, transportation and consumption of energy. Spillages from oil storage and transportation, and the disposal of waste oil, constitute a hazard to the water table and the marine environment. The construction of hydroelectric projects requires the settlement of customary land use and water use rights. Several proposals for the generation of electricity from the incineration of imported tires or hazardous waste (in Tonga, Kiribati, Palau, Western Samoa, and Marshall Is.) are also a matter of concern. *61- 5.18 Oil Transportation. Transfer and Storage: Although all of the Pacific island countries import petroleum products, levels of tanker traffic are low, and there have been no major oil spills. Further, regional cooperation in the development of oil spill contingency plans, coupled with arrangements for the sharing of equipment and skills is provided through SPREP in association with the International Maritime Organization. However, these arrangements do not imply that the Pacific island countries have the capacity to cope with large oil spills; for example, PNG is one of the few Pacific island countries with oil spill equipment in place, but it cannot handle a big spill. Further, few countries have national contingency plans, and monitoring and regulatory capacity is very limited. 5.19 Smaller spills are becoming a problem in some areas. Most of these spills are not accidental, such as oily bilge water pumped from local shipping. For example, villagers of Marovo Lagoon, Solomon Is., are troubled by persistent pollution of their waters and reefs by transiting tuna fishing boats. The Solomon Is. is not alone in its inability to deal effectively with this type of pollution and other inter-island shipping discharges of oily wastes. 5.20 Spills in the course of tanker-to-shore transfers or due to storage tank or pipeline rupture are an ever present threat. While in the past there have been few problems, mainly due to the high standards voluntarily adopted by the IOCs, there may be difficulties in the future. Many of the petroleum storage facilities are inappropriately located in urban areas; for example, in Honiara, Solomon Is., office buildings and the city center's dense pedestrian traffic are well within the explosion and fire hazard zone of the Point Cruz storage tanks. The Betio, Kiribati storage tanks are also poorly maintained and badly sited. In many cases, petroleum installations are built on coral witL no attempt having been made to seal the coral from oil spills, interceptor traps are poorly designed or too small for the anount of rainfall in the area, runoff is poorly controlled and bund walls are in poor condition or inadequately maintained. 5.21 Oil Exploration and Production: Three countries have undertaken petroleum exploration activities. In Tonga, drilling was not subjected to environmental controls. Fiji imposed some form of environmental monitoring on offshore drilling on reefs off eastern Viti Levu. In PNG, incompetent supervision of offshore drilling of a gas prospect in offshore Pasca reef resulted in a blowout in 1983, the released gas burning at the sea surface over an extensive area, with flames reaching to height of 70 m. Surface manifestations of gas liquids continued for several months and reappeared as late as April, 1990. Had it been an oil blowout, the environmental consequences could have been very serious, and not only for the rich Gulf of Papua fishery. This incident points to the difficulties that small island governments face in monitoring and regulating petroleum exploration, trying to do this without a well developed environmental management capability and in the absence of legally firm controls on exploration companies. 5.22 PNG has become the first Pacific island country to embark upon oil production -- from the Kutubu oilfield. This project was the subject of a comprehensive environmental assessment that the operator, Chevron, used as a basis for an Environmental Plan prepared to satisfy PNG requirements uno3r its Environmental Planning Act, 1978. If the Environmental Management and MoraLtoring -62- Plan and the Oil Spill Contingency Plan yet to be finalized adhere to the principles and guidelines on which the Environmental Plan was based, there is the prospect of a sound environmental program being established. Even so, doubts remain about the capacity of the concerned government agencies to effectively monitor the natural and social environment of the project area and to regulate the operator's activities. The fact that the responsibility for monitoring environmental aspects of the extraction of oil and its transfer by pipeline to a marine terminal 35 km offshore in the Gulf of Papua is spread over three Departments -- Environment and Conservation, Minerals and Energy, and Transport - - further weakens the prospects for effective government control. Heavy Metal Contamination of Ground Water 5.23 With high consumption of batteries in rural areas and expanding use of solar photovol_aic technology for rural electrification there is a need to develop an acceptable, safe, low cost method for the disposal of lead-acid, rechargeable nickel-cadmium and other batteries. Hydropower Projcts 5.24 Large hydropower projects represent an extensive manipulation of the natural drainage pattern. There is therefore a requirement for detailed environmental assessments (flora, fauna, stream flow, sediment transport, management of catchment, maintenance of water quality, traditional use, ownership, stream ecology, etc.) to be carried out early in the design phase of all projects and on a project-by-project basis. Modifications to designs (at higher cost) may be needed to minimize the disruption to natural stream ecology. Effective management programs for the catchment areas (in terms of water quantity and quality, biodiversity, erosion, silt load, etc.) need to be developed with the cooperation of several agencies. 5.25 The advantage of assessing the project's er,vironmental impact early in a project's development now appears to be generally recognized throughout the region, particularly with large projects. In contrast to the limited environmental assessment carried out for the Monasavu hydro project (Fiji) in the early 1980s, a comprehensive study of the proposed Komarindi hydro project (Solomon Is.) is underway. Initial studies involved specialists in land use, fauna, archaeology and culture, with subsequent additional studies proposed to include an examination of aquatic fauna and terrestrial flora and fauna, water quality, the design of a weir appropriate for fish migration, provisions for sediment containment, access road design and alignment and protection of archaeological and sacred sites. Conservation of Natural Forests and Biodiversity 5.26 There are localized shortages of fuelwood in areas of high population density in a most countries within the region (Solomon Is., Kiribati, Western Samoa, Cook Is., Fiji, Papua New Guinea, Western Samoa, Tonga). Although the remaining forests will meet the fuelwood requirements of the domestic and commer-ial sectors in many countries, it is the expansion of agricultural acreage and the need for timber products rather than energy which will place increasing pressures on forests. Due to high costs, concerns with sustainability and land -63- tenure problems, it is unlikely that fuelwood plantations will be established as an energy source within the region. Policies are necessary which protect biodiversity, minimize soil erosion, avoid silt build-up in natural waterways, and minimize pollution by fertilizers, changes in soil structure, salt build-up in soils, and water table changes. Energy Production from Hazardous Wastes 5.27 Since the early 1980s, approaches have been made to governments of a number of countries (at least Western Samoa, Tonga, Kiribati, Marshall Is. and Palau) by entrepreneurs proposing power investment from combustion of hazardous wastes. Governments have rejected all such offers and should remain extremely wary. The main issue relates to the ability of the Pacific island governments to design and enforce pollution regulations in a manner adequate to protect the fragile island environments. The difficulties encountered in more developed and larger countries should serve as a caution in this regard. Agencies such as SPREP, the UN Center on Transnational Corporations (UNCTC) and the Pacific Basin Consortium for Hazardous Waste Research (PBCHWR) gO/ should be approached for information on wastes and the companies involved. Socioeconomic Issues 5.28 Customary land and sea tenure is potentially incompatible with the development of indigenous energy resources in the Pacific, particularly in Melanesia. Feasibility studies associated with the Komarindi hydro project (Solomon Is.) highlighted land tenure and potential compensation claims among the principal issues to be resolved before development could proceed. Recent disputes (November, 1991) at the Rouna hydroelectric project outside Port Moresby between land owners and the government have led to major disruptions of power supply and have rekindled government efforts to address the issue directly. Current means of dealing with disputes and compensation claims are largely ineffective; often the rights of the state and landowners are not clearly delineated. Even where the rights are clearly definei in formal legal terms, they are not necessarily understood or compatible with customary law. In the absence of legislation, precedence may be the only satisfactory solution. Experience in PNG has highlighted the need for direct involvement by the project developer in the processes of determining potential environmental impacts and with implementation of environmental safeguards. Global Warming 5.29 The greenhouse effect, in large part attributable to world wida fossil fuel use and the attendant emission of carbon dioxide and other gases, has imposed a heavy burden of environmental uncertainry on Pacific island countries. While the consequences of global warming are difficult to predict, the long term survival of several atoll countries (FSM, Kiribati, Marshall Is., Tonga, Tuvalu) it/ The PBCHWR is based at the Environment and Policy Institute of the East- West Center in Honolulu. -64- is highly sensitive to even small (less than one meter) increases in sea level. Ai-/ Elsewhere in the Pacific, there are also concerns about increased crop pest and disease damage, and about the continued viability of existing ecosystems and agricultural activities, as temperatures rise and rainfall patterns change. 5.30 Given the low level of greenhouse gas emissions in the Pacific islands in comparison with other parts of the world there is little that the management of the energy sector in these countries can by itself contribute to the required solutions. As the problem is global in nature, the recommended strategy for the countries is to continue to actively participate in the search for and eventual implementation of a global solution of the problem. Further, the countries should keep themselves informed about the probable consequences and about ideas for anticipatory action to minimize the adverse consequences. Among other things, this implies some monitoring of local change to provide information that can be fed into, for example, planning for the siting of infrastructure, or decisions on which crop cultivars should be tested by the Agriculture Department so that tested replacements are on hand when climate changes make the conventional crops no longer viable. institutional Issues 5.31 The Pacific islands are not well equipped to assess and manage such environmental challenges. PNG is the only country which has consistently required environmental assessment of energy projects. As a result, Elcom has built up some in-house expertise in environmental management. The FSM and Marshall Is. have environmental laws on the US model, but little ability to implement them. In Fiji, some environmental studie6, but not a full assessment, were carried out in relation to the Monasavu hydroelectric scheme. Overall, the governments in the region have little experience or capacity to address the environmental ard social dimensions of energy development. 5.32 To remedy this situation, the South Pacific Regional Environment Program (SPREP) is coordinating a technical assistance effort to prepare National Environmental Management Strategies (NEMS) in most Pacific island countries, developing regional guidelines for Environmental Impact Assessments, and providing training for their implementation. These are useful steps towards strengthening the governments' capacity to evaluate and manage the environmental conseqaences of energy development. In general, the following measures are rtcommended: Al/ An increase in the sea level reduces the thickness of and increases the salinity in the thin, fragile fresh water lens that lies atop a layer of sea water in the sand mass of every atoll. Even where this fresh water is no longer tapped for drinking, it is still used in growing giant taro, which is a staple of the region. Thus, the production of this crop and drinking water supplies will be threatened as the sea level rises. Further, an increase in the sea level increases the capacity of storm waves to erode sand masses and, on occasion, to wash over narrow atoll islets. -65- (a) mandatory environmental assessment of all projects, the results to be incorporated into project design, with provision for long term monitoring of results; (b) the consideration of customary land and sea rights for all projects, with participation of the rightholders and adequate compensation for loss of valid rights; (c) the development of education activities to enhance the environmental awareness of energy sector staff and their understanding of the complexities of customary land and sea tenure; (d) where the scale of operations allows, the development of in-house capability for environmental assessment and management; otherwise, the development of close cooperative links with appropriate national and regional agencies; and (e) clearly specified penalties for failures to comply with environmental requirements. Improving Management of Donor Resources 5.33 While petroleum has traditionally been supplied by private enterprise, development of power supply and most attempts to develop new and renewable sources of energy has been largely funded out of donor resources, provided on grant, concessional and, on occasion, near-commercial terms. The availability of donor assistance contributed to an improved understanding of the energy sector, facilitated the development of power utilities and enabled them to undertake major investments and expand their service beyond the urban core, but the effectiveness of these resources has fallen short of the expectations of both the countries and the donors. Major factors that contributed to the difficulties have already been identified in para 2.4 in relation to new and renewable energy technologies, and in Chapter IV in relation to the inadequate technical and financial performance of the power utilities. These factors may be summarized as follows: (a) optimistic project assumptions: The poor results of most Pacific island energy projects suggest that they were based on optimistic assumptions. Another indicator is the relatively high average installed reserve capacity of the power sector. In hindsight, these projects appear to have been justified on the basis of optimistic assumptions about demand, costs, output, reliability and skills required for operation and maintenance. The optimism may be related to the donors willingness to assist exceeding the countries' ability to absorb the assistance. A contributing factor is a decision-making environment where the major parties, including donor staff, expert consultants, and country/utility staff tend to have strong incentives to deliver projects, rather than to make a realistic assessment of the risks and institutional weaknesses. (b) inadequate institutional support:. The absence of donor funding for the operational phase of the projects has made it difficult for the utilities and other agencies to strengthen or even sustain their institutional -66- capacities as required for the successful operation and maintenance of the projects. Inadequacies in these areas regularly result in reduced project life, excessive operating and maintenance costs and failure to provide the expected benefits. (c) inadeguate sectoral framework: Project preparation and approval is often carried out without an adequate understanding of the implications on the sectoral framework of the projects, including the needs of the intended beneficiaries, institutional support requirements and policy environment. (d) physical remoteness: The small size of the projects (on a global scale) and geographic dispersal of the islands has made it difficult to attract high quality contractors and suppliers. It has also made it expensive to adequately prepare and supervise the implementation of the projects. 5.34 To reduce the impact of the above factors and improve the effectiveness of foreign aid, the governments need to work closely with the donors to: (a) strengthen the Droject planning and screening capabilities of the governments, to' verify that the economic, technical and financial feasibility have been evaluated and that the project is consistent with sectoral, social and environmental policies and objectives. (b) support the transformation of power supply agencies into efficiently managed, financially autonomous business entities. In particular, specific targets need to be set for enhancing their ability to recover costs from sales revenues. Government subsidies and concessional finance should be phased out or tied to the achievement of well-defined social objectives, such as rural electrification. Further, in view of the current excess installed capacity, which is itself being poorly managed, proposals for installing additional capacity should be subjected to stringent review. (c) improve the institutional arrangements for the sectoL. with the development of appropriate incentives for efficieney in enterprise management and energy use. (d) develop multisectoral and regional (multi-country) agproaches to achieve critical mass, pursue economies of scale and improve bargaining leverage. 5.35 Overall, given the expected scarcity of bilateral grant funds for the energy sector, it would appear desirable for bilateral aid to be focussed on institution building and manpower development. The larger funding requirements for investment projects can be best met by multilateral institutions, with their focus on stringent project appraisal and screening, and their ability to foster institutional transformation. Further, the ADB, which already has a large presence in the Pacific islands, has the potential of co-ordinating energy activities on a regional basis as well as offering expertise and direction for energy related issues. -67- Pitential for Regional Coogeration 5.36 The small size and limited markets of the Pacific Island countries have long stimulated a search for regional approaches to take advantage of economies of scale. The international oil companies developed integrated regional supply networks to remain competitive. Efficiencies of scale and management also appear to have led to the ownership by a single private company of the power utilities in Vanuatu and French islands in the Pacific. For the national power utilities and energy offices, regional integration has been driven more by a desire to share experience and information, and develop areas of fruitful cooperation. 5.37 For the power utilities, regional cooperation began in 1989 with efforts to increase the utilization of Elcom and FEA's training facilities by other utilities, produce a regular newsletter, request regional agencies and donors to organize joint workshops on issues of common interest, and collect comparative power sector data. In 1991, there was a move to establish a Pacific Power Association (PPA) including 15 island power utilities. This emerging regional agency has the potential to succeed as a regular and formal mechanism for strengthening regional cooperation in areas of benefit to the member utilities. In order to achieve this potential, PPA should define a work program that offers real value to the member utilities. 5.38 Regional cooperation among the national energy offices began in the early 1980s, with a series of annual Regional Energy Committee Meetings sponsored by the UNDP and the South Pacific Bureau for Economic Cooperation (now the Forum Secretariat). Over the years these meetings led to the establishment of (i) the UNDP-funded Pacific Energy Development Program (PEDP), to develop the countries' sectoral planning and administrative capabilities, (ii) the Forum Se retariat Energy Division (FSED), to administer regional training and technical assistance programs., and (iii) the Regional Petroleum Unit (RPU), to provide assistance and advice on petroleum matters. Pursuant to a decision of the 1991 Pacific Forum, the PEDP and the RPU are being consolidated into the FSED. 5.39 Based on the past experience with regional energy assistance programs in the Pacific, the effectiveness of the FSED in fulfilling its expanded responsibilities cannot be taken for granted. The Pacific islands have expressed considerable reservations in the past about the FSED's ability to respond to the countries' needs in a timely fashion and provide adequate expert assistance in the areas of greatest priority. Such problems could largely be traced to the tight control of the FSED by Forum Secretariat management, and insufficient involvement of member governments and donors in the review and supervision of the FSED's work program. 5.44 Some changes are needed in the functioning of the FSED in order to improve its effe6tiveness. The following changes are recommended A2/: I (a) The Forum Secretariat (FS) should restructure the FSED consistent with the areas of greatest priority, i.e., with strengthened staffing for power A/ These recommendations do not necessarily reflect the views of the FSED. -68- sector and petroleum issues and, at least proportionally, a reduced share for the development of renewables; (b) FS should recognize the Regional Energy Committee Meeting (RECM) as the mechanlsm for the member countries and donors to review progress, decide upon policy and approve work programs. To enable the RECM to carry out tLis review, it will need access to the complete budgets of the FSED, including all expenditures, commitments and future expected income from all sources, not just the core budgets; (c) PSED should be able to respond rapidly to specific country requests, using appropriately designated quick response categories in the budget. The present procedure of handling requests by countries (i.e., requests routed through a country's energy office to the Ministry of Foreign Affairs, to the Secretary General of FS, to the Director of FSED) is cumbersome and time-consuming, and should be replaced; (d) FSED should be encouraged to initiate work on issues of regional interest without waiting for specific country requests; and (e) There should be independent outside reviews of FSED's work and future direction every two or three years, including separate assessments of its main donor-funded programs. Major donors in the region should cooperate in carrying out this review. -69- STATISTICAL APPENDIX REG.ONAL OVERVIEW STATISTICS (Edsimates 1990 mal otberwise iadicated) Now . roAD uaemo rdlc I pop mWG Fiji Iriorna WSanm Vaca[tn FSU Tonp rCsbtti U elas Cooks aimb Tenb Toal Pbpical Toalalnd Arcea(2) 4SZU0 8272 29.7S5 2.935 3irr 701 699 690 181 240 416 26 s 6s Toal Seaimre(kw2 mis_) 3.130 1.290 - I0 0.120 0.6M0 2.978 0.700 3M0 2.131 1.839 o.6 s0o __0__L2 hoplatia.(euJ990 mmlors 3.907 0.725 C.319 0.15a 0.143 0.101 0.096 o.07 0.046 0.038 0.035 o.09 5.69 rpfim,rynDean,lkyM a 40 i1 54 32 144 137 305 255 75 37 363 Is U,t. 0586 0.282 n. 0.032 o.CM 0.029 0.065 0.025 0.025 0.030 00.20 0.003 L.8 - RnWI 3221 0443 n. 0.326 0.117 0.072 0.031 0.047 0.021 0.008 0.005 0.006 4.897 Avera lonebold Sine (mppoS.) 6.0 5.8 6.4 UAL n. 8S 7.0 7.0 87 5.0 si 7.0 5.6 opoltioaa Gow b Rate(%p.&.) 212% 2.6% 3.8% 0.4% 14% 3.0% 0.8% 2.8% 3.5% ' -0.3% 2.0% 2.3% 2.2Z Devebprnern lmdincaIoz GD?(Caenm los. liSSmU) 1013.7 3l35.7 367. 1094- r4 -J _ 1j -0- _5 401 00 6.6 i GDC ap(m 9000tS 0US28 35 0430 OA0 0o.26* -.50 2048 0.555 1.631' 2.589 3.289 0.702 r 95 Avera GDIP Qa.wh Raft(raI) SAS 4.% 40% 2% 2.5% 3.0% 3.2% 4.0% 30% 73% 4.5% 4.0% 3 315 Total Inapoawn (ci.t U#ssn)3l 34160 685.8 103.8 74.9S 92.4 67.7 56.9 22.0 44.4 43.8 24.6 4.47 4 2S Toai portfe.b. uS$n) 1 .176.1 536.1 67.7 2 12.5 8.49 5.4 5.2 2.3 2 2.8 0.6 0.37 2 7 Anfln.ODA(USSm) 3858.0 544 583 52.2 39.3 114.4 1.9' 16.3' 44.7 12.0 31.6 13.9 2 529 ODAfopita(V0WUS) 0.096 0oms 0.3 0.197 0.276 1.166 0.97 0.234 1.013 0.670 2.079 1.471 z 0145 Total EmCmil DebqUSS("V"I) ' 2.496 03" 0.102 0.074 0.032 na. 0.045 .MA. nILa a-ML no.. . 3.247 No, reaom Eoummim2y Acti 192.000 222971 25.438 L s nDA. 12.560 24.324 nm 1.4 4.77 6.500 Crrncy Kium RD SBD Tab Vmtu USD Pamat AUD USD NZD USD AUD Exhang. Rate (Ioa =)6 9l550 12.480 2.5288 23300 116.5700 3.0o0 .2785 I39M 1.0000 1.6750 1.000 1.2799 Emerg Comemptioe n e W Deamm (me rnUD) ' 1.657 0.953 0.177 0.206' 0.069 0.056 0.051 0.026 0.035 0.017 0.028 0.004 3.179 Gowth Rue e% pa.) 4.31 ' 5.7%' 5.4% 262% 3.6% 4.3% 4.1% 2.8% 3.7% 3.6% 4.6% 3.1% 47 Grm Dem 1n4pltaum) 0.424 tit5 056 0.674 0.486 0.558 0.529 0358 0.764 0.929 1.812 0.410 7 Dne" by Sowm (gm .UiU) Petoled m 0.809 0323 0.059 0.037 0.027 0.050 0.024 0.030 0.029 0.014 0.027 0.002 1.412 Fewoleam Dnematodepi;t) 0Q207 O.44 0.86 0.236 0.186 0.492 0.248 0.Q4s 0.621 O0I 2.791 0.193 e.2s Petoreum(b pem) 488% 33.9% 33.4% 35.1% 38,4% 861% 46.8% 40.4% 63.3% 86.2% 98.9% 46.9% 44.45 HIydo 026 0.97 0.000 0.006 0.000 O.0 0.000 0.000 0.000 0.000 0.000 0.000 AZO Ily*o Demand C(oacapiyr) 0.02 0.134 0.000 0.037 0.000 0.006 0.000 0.000 0.000 0.000 0.000 0.000 4O14 ll)*o(% om) 7.6% 22 01% 5.5% 0.0% 1.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 7.2 Totl Commucrv Eng 0.935 0.421 0.059 0.043 0.0Q77 0.050 0.024 0.030 0.029 0.024 0.027 0.002 Total Com""Cit EnMeptoeckpia) 0239 0.580 0.16 0.273 0.186 0.498 0.248 0.145 0.621 0.601 1.791 0.193 Tota Com tlE-ff(4bpo) 565% 44.1% 33.S% 40.5% 3A4% 89.2% 46.8% 40.4% tl3% 86.2% 98.9% 46.9% Biomms 093 0.5338 0.118 0.063 0.043 0.006 0.027 0.0s 0.007 0.002 0.0w0 0.002 2.5 Btma. Demand(toIcapitayr) 0.177 0.73S 0.370 0.401 0.299 0.060 0.282 0.213 0.143 0.122 0.020 0.218 01269 O's(%* p) 42.% 55.9% 06.5% 59.5% 61.6% 30.8% 53.2% 59.6% 1.7% 13.8% 1.3% 53.1% 47.55 Sdoar O02t8 nDA. na. n.m. t .. nMU n.m n.m nm. na. n.a . n2. . Sdoar Deauan.(rodapicam) 0a. n.. UAL n.m na. nil. n.m. n.m. n.m. n.m. U.L n.. L Sola ( ) - .7% 0.0% 0.0% 0.0% 0.0% 0.0% O.0% 0.0% 0.0% 0.0% 0.0%b 0.0% OS Total ndifEnou Energ(oe milOmO) 0.848 _ .6 0._28 0069 0.043 O.OD7 0.027 0.05 0.007 0.002 0.00 0.002 2.740 Indio EnDg(toe/ adr) 0.217 0.869 0370 0.4358 0299 0.066 0.28 0.213 OL043 0.128 0.020 0.218 0.120 Indig DemI(% pon) 53.2% 66.1% 66.6% 64.9% 61.6% 23.9% 53.2% 59.6% 17% 3338% I.2.b 53.1% 54.75 REGIONAL OVERVIEW STATISS (Etimales IMO ales othewie indicated) NoSr A tacUat Idoo lst Fe6e 11 i F Sdloma. W.aSnain Vauat PSM Toe o Kbati i iwu coso owns Tuwvs Total NKa e_S (* aims) 1.265 0.871 0.370 0.098 0066 0.043 0.047 0.024 0.027 0.014 0.016 O.04 GrQatRate(% p.) 4.2* 5 2.9S 2.1S 372 4S* 3.6S 1.5* 2.9 3.4S% 3.9% 13S 4.40 Net SU ed (10to0mph3An I 0o324 1.202 0.532 0.619 0.46 0.421 0.488 0.337 0.576 0.7t0 1.215 0384 42 NO Ca. __.ptloabySe_lor Roasehold 0.619 0lsO 0.103 0.3J3 O.030 O.OOS 0.026 0.017 0.005 0.003 0.00 0.002 T l.Q5 HouebtU( oen) 49* 206 60 43JS *5.0S II.9S 55.2% 6S0% 17.7S 23.0* 6.4* 61.13% 39"L Ga'JC=nAodt 0.193 QOS2 0.030 0.002 0GOI u. 0.002 0.000 0.003 0.001 0.002 0.000 A317 cGmA2amiAod(* on) 1353% 9.5S 17.9S 1.7S 135S 0.0* 3.9% l.SS 12.0S 4.4% 3.*OS I.6% Mo Ttampwt 0.2S2 0.245 0.016 0.030 0.020 0.031 0.017 0.007 0.015 0.010 0.015 0.001 _ Q1115 Tranpwt (S net) 223* 28,3% 9.2S 30.5% 29.8* 72.4% 36.6% 30.3* 545% 72.6% 78.5%b 37.1% 26eff Apoidustries 0.170 0.361 0.017 0.023 0.015 0.002 0.002 U.n. 0.004 u.S. _ n. n.S. 2.SW woonaie( et U1.5 41.4* 10.2S 23.5S 22.24 4.7S 4.1S% 0.0 1.0* 0.00* O.Ob 0.0S - 2ZS Othbr C.003 0.003 0.003 0.001 0.001 O.OD5 0.000 nM. 0.0 u .s. 0.001 n.m. 0.l4 Olber(, tJ 0.1Q 03S 1.9S 0.6S 1.4* I1.0 0Q3S 0.0% 0.o 0.0D 4.1% 0.0* Q5S S.v or S m__ Pefroleam 0.8 0Q316 0.049 0.031 0.0231 0.032 0.0O8 0.008 0.016 0.011 0.017 0.001 aQm eldeum(% =net) 303S 36.2S 29.0% 32.2* 31.5% 74.7S 39.1% 34.6% 60.9S 758*b 89.4* 40.9% 34.2 tem eu( _loei tsr) O96 0.435 0.154 0.199 0.146 0315 0.190 0.117 0351 0.591 1.067 0.357 C143 EkcWt* 0.160 0.038 0.003 0.003 M002 0.005 0.002 0.001 0.004 0.001 0.002 0.000 Lam Ekcif(S -et) 12.7S 4.4* 16 33* 50* II.OS 33* 2.4* 34.3* 7S 8.8% 2.4S JL3 ecUyddlztoetapbJr) 0.041 0.0Q2 QO0S 0.020 0.034 0.046 0.016 0.006 0.062 0.061 0.107 0.009 de" BAbu 0.693 0.517 QIIS OA 0Q045 0.006 0.027 O.Oi 0C007 0.002 0.000 0.002 1.4k Bians (% seq) 34.8% 59.4S 69.5* 64.5* 64.6* 14.3 57.6% 63.2% 24.8S 16.4* 1.7* 567* _K5 . (tampm;Asr) Ql77 0.714 0370 0399 0.299 0.060 0.281 0.213 0.143 0.128 0.020 0.21e 0.2156 Otler 0.028W 0.000 0.00 OCO QCOOO 0.000 0.000 0.000 0.000 0.000 0.000 0O0O 8am Other (% .A) 2.2 0.0 0.0* O.0S 0.0* 0.0O 0.0 S 0.0o 0.0* 0.0Q 0.0* 0.0O J. Othber (toapit) Q007 0 O.0 0.000 0.0 0.000 0.000 0.000 0.000 0.000 0.000 0.000 OLDe.OS REGIONAL OVERVIEW SrATISTICS (Estimates 190 vales. otherwise iedicaled) Note: MD fototes folo htt imbe tNG rip Sol_mos W3scam Vefrnta FSM Tonp Kkbatu mumohf Cooks V.1m v11" Totl Petroleum Demnd,i nt etab"" i wupm(tl Ob_i) Y1990 Y1990 Y1989 Y1989 Y1990 Y1990 Y1990 Yt990 Y1990 Y1949 Y1990 Y19S9 GCmdine 106.2 62.2 10.9 12.8' 5.3 15.5 9.3 2.4 4.6 3.2 7.5 0.4 242.2 Ghboll(*fad iuppx) 16.1b 16.9* 15.1S 29.7S 16.3* 27.0* 33.6* 19.5* 13.9* 19.1* 23.9$ 16.3* 17.76 Est. Gasdin Crkowth to 200(% p.) S.5 3.0* 3.86 5.0* 4.2b 4.6S 4.9b 2.7* 2.6* 2.0* 4.6* 4.0* 4.76 Jet Al 63.5 97.1 4.0 9.7 5.0 6.6 4.4 1.7 6.4 5.9 5.8 0D5 314. let Al (* fad imprt) 12Jb 26947 554° 22.49 13.50 2.0qb 16.04 14.0* 19.5b 35.44 18.4* 26.1° 725 Est let Al Gwtlb to 200(* p..) *.4b 0.0% 4.2b 5.0b 4.3b 7.6* 7.3* 0.0* 3.2q 4.0* 5.29 4.09 9.0O Kacaune 26.0 21.6 23 1.9 2.0 1.1 0.6 1.2 0.5 0.1 0.2 0.2 56. K6otene* (fuel import) 3.92 5.9S 3.2* 4.3* 3.1b 2.0b 2.24 9.6* 1.4* 0.6* 0.7* 7.1b 4.55 Est. lerosene Growth to2000(* pa.) -0.lb 2.0* 3.4b 2.8* 3.6* 1.3* 2.6* 0.9b 3.2* 3.12 4.1* 2.0* let5 ADO " 429.9 1374.5 * 53.5 18.3 18.7 31.9 11.7 6.2 21.4 6.1 17.7 0.9 m. ADO(* fad impwts) 64.1* 47.4* 73.8* 42.4* 57.7% 55.6% 42.0* 51.4% 6S.0* 36.4% 56.5* 42.9% 57.J Ess.ADOGrmlttb o2to0tN pa.) 11.1* 3.3* 1.6b 4.3* 6.2* 4.0b 9.9* 4.9b 4.6* 4.5b 4.6* 4.5% &6.5 Avps 14.5 .8 0.8 0.3 1.1 0.2 0.9 0.6 0.02 0.8 0.0 0.1 2.2 Avps(* fad imps) 2.2% 0.b* 1.0* 0.7* 3.4* 0.4* 3.3* 3.0* 0.0% 3.0% 0.0% 5.1% 15 Est...spGrowthto 20o( ppa.) 4.8* 4.0* -2.8 4.8* 4.1* 1.6* 8.0* 0.0* 4.1S 8.2% 8.8* -1.9* 4.75 L3.G 7.0 11.1 3.0 0.2 1.3 n.m. 0.8 _ 0.1 0.1 0.6 0.1 0.01 223 L?G(* fad import) I.0 3.09 1.4* 0.3* 4.0b 0.0% 2.9* 0.5% 0.2% 3.3% 0.4* 0.3* 1.65 Est. LP Growthbo 200O(S p.m) 3.8* 10.0* 4.3* 3.9b 7.5b a.. 6.5* n.. 5.4* 4.9*b 4.S* 2.2* 7.0 Totll Impus 3 671. 368.2 72.5 43.1 32.3 57.4 27.8 12.1 32.9 16.8 31.2 2.1 5J67.S Av. Demand Growtb 19S4-I9M9( pa.) -0.I* 1.2* 4.0* 8.2*4 0.54 4.3* 4.2* 5.5% 1.1* 6.1S &4* 14.6% Q951 Aw. Foreca; Growth 1990-20X(S pa.) 9.2S 3.7* 22* 4.6% 5.5* 4.74 7.7* 3.2* 4.3* 4.1% 4.7* 3.8* 6.95 G nrm reirdewm Demnd (ien uUio) 0.609 0.323 O.0S9 0.'37 0.027 0.050 0.024 0.010 0.029 0.014 0.027 .002 5.481 Tmpt 0.279 0.245 016 0.30 0.03I 0.031 0.017 0.007 0.012 0.010 0.014 0.001 06N1 Tramr (* mare)g 34.4* 75.8S 26.5* 79.9* 68.5% 62.0* 72.0* 71.0% 40.13b 70.6% 53.1* 74.0% 6.2% Trmngpm(tooeftpitm) 0.71 0.338 0.049 0.189 0.128 0.35C 0.178 0.103 0.249 0.566 0.952 0.142 Q.121 Ekeie 0.426 0.014 OD0. 0.006 0.006 0.018 0.005 0002 Q0.6 0.4 0.011 0.000 0.38 Elac y(* maktet) 52.6* 4.4$ 17.0S 2S.7* 23.0b 36.0* 23.1* 19.4b 54.0* 26.2* 39.4* 38.5% 36d7S Eleely(ctoe/mlla) 0.309 0.020 0.0Q2 0.037 0.043 0.37 0.057 0.02 0.336 0.210 0.705 0.036 0.092 Do_mstie 0.022 0.023 o02 0.002 0.001 0.001 0.001 0.001 OO00 0.000 0.000 0.000 OLD" Domsi(S* maket) 3.5* 7.2* 3.4* 4.5% 3.5* 2.0* 4.9* 9.7% 1.4* 33% 0.7* 7.5% 3.15 DoMek(we/eite) 003 0.032 0.006 0.033 0.007 0.010 0.022 0.014 0.0 0.02s 0.013 0.014 0.e6 1admeou m 20 Q0.093 0.041 0.028 n. 0.001 n. n n.m. 0.001 na. 0.02 n. l66 Inda dwCmusma * wke" 11.5% 12.5 48.0* 5.0S 3.8* 6.8* I1S tnda hty -uaes(woehmpths) 0.024 O.36 o009 00 0.024 0.122 WO Olbef n.m DAL 00 n.a. nI. n.m. UAm 0.000 n.A . na.. amnU Other(*uubt) 5.1* 0.7* Q.2 CJtw (toeta) 0.09m Q0O4 £ .Lf. vlae (UPS) 317.3' 97A4 9.9 7. 7.5 4.1 5.9 2.3' 9.2 5.1 28 OS1 ?hcdsmulmpC Cau(USsmphs) 30 134 St 45 53 41 62 32 199 287 384 SO 3 4 * Vaduoflrtp 33.3* 34.* 9.6 9s4 82* 60*' 10.4* 10.6* - 2S.0* 11.7S 30.0* 17.0S | IIJS *VmaId p Qs 10.0* M8. 14.7* 5662* 39.9* 76.0* 6s.6* 44"S 400.0* 163.4* S.0* 436* 1 485 I1 REGIONAL OVERVIEW STATISTICS (Eslimates 1990 unless otherwise indicated) Note: AU footnotes foUow last pge IP4N Fiji Soloaons W.Samoa Vanuatu PSm Tonp Kiribati Mwashats Coons Palau TrvaIa Total PeFtdeau ftces CJ.P. Pi*mce(tISc}Gasoljlla o7.2i 15.90 -- IB.S7 22.00z2 22.22' 34 2 23.S n00. n a.3 26.21 ' n.a. 31.54 = Kwoene(t) 26.85 n.a. 28.08 26.00 22.79 43.25 31.18 27.12 n.a. n.a. n.a. 39.56 ADO(1t) 27.00 12.65 27.07 23.00 22.32 34.48 30.22 22.64 n.a. 36.37 n.a. 34.52 LPG (It) n.a. n.. na. n.a. 44.92 n.. n.a. n.a. n.m. n.a. n.a. na. Wholesale Phioe(USC) Gasoline (11) 49.37 47.50 38.37 42.00 69.06 40.21 46.01 65.00 44.65 42.07 30.94 49. 13 Kerosene lb) 42.08 n.a. 41.07 38.00 56.19 45.67 48.30 33.35 40.69 52.34 33.61 51.35 ADO4I) 45.41 40.28 44.10 41.01, 52.76 40.42 58.41 32.59 33.32 49.36 33.04 48.30 LPG(It) n.a. _ na. n.a. na. _ _ n. na. a. n.a. ta. na. n.a. n.a. __ J Fetad Prnce(uscT Gasoline(lt) _ 50.44 42.59 57.00 i5.23 50.33 5062 n.a 5601 51.26 45.53 63.144 *erosene(l "48.32 n.a. n. 42148 60.39 53.32 53.02 37.90 5073 61.99 65.26 63.44 LPG(It) 212.00 45.85 44.SS na. 140.69 n.a. n.a. n.a. na. 84.19 n.a. 109.38 -J REGIONAL OVERVIEW sATIsTICS (Estimste IM saleau otherwie indicated) 7ttG FI Sdlomas W.Sama Vaus04 PSM Toag Kiebati MshaIm Caook Ptas T.mle Total Power Sector Netlond Ms eckII r.todalon B.COM FEA SIEA EPC UNELCO FSM TEPB PUB MEC EAJUR EPS Koror TEC No. ofSystems 22 5 9 21 2 4 47 - 2' lo' - I .t'°6 lmsaIned(Derated 248.1 154.2 18.6 22.0° 881 37.6 5.8 2.6 18.8 4.6 122 0.6 D5.2 % Maximum Demand 225% 224* 206* 262* 140S 295* 124* 196% 192% 200f 180* 261% H13*o 162.0 83.2 0.03 8.3 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 255. Diesel 86.8 71.0 18.6 13.7 8. 35.6 5.8 2.6 28.8 4.6 12.8 0.6 279? FirmCapwity 128.8 202.8 12.2 9.1 6.4 20.7 4.1 1.1 13.0 2.8 8.6 0.5 sllti % Maximum Demand 117* 249%7 136% 08% 102% 1263% 8% 82% 1533% 122% 122% 222* Maximum Demand 10.4 65.8 9.0 8.4 6.3 22.7 4.7 1.3 9.8 2.3 7.1 0.2 241.1 Demand Growtb 1990- 2000 (* ps.) 6.9% 6.7% 6.7% _96 4.8 5.6_ __ __ _ Rem"dt ftodeAdlo (OWk) _ _ _ _ _ _ _ _ _ _ 1ydro 515.4 389.5 0.04 23.2 0.0 2.5 0.0 0.0 00. 0.0 0.0 0.0 0Q7 Diee 76.0 21.6 38.5 20.4 25.6 64.9 21.8 7.9 62.1 25.0 46.2 1.3 41.2 Gas TwbiA 2.5 _ 2. Frwebase 2.0 0.3 Ii Total Gneraled 595.9 411.1t 38.5 2 44.0 25.6 67.4 21.8 7.9 62.1 15.0 46.2 1.3 1 . %?btt Sane 108* 11* 112% 117% 104% 224% 122% 121% 141% 116% 242% 126% EFt. Gen. Growlbh 990-2O0(% pa.) 5.4* 2.9* 7.4% 5.3% 7.9% 5.3% 7.8* 5.9% 5.5* 4.4% 6.9% 4.0% 54 EI. Fata Comumpuion 551.9 368.9 34.4 37.5 24.7 54.9 178 6.5 50.8 12.9 36.1 1.0 IJi>7 Net Sales 551.9 368.9 34.4 37.5 24.7 30.0 17.8 6.5 44.2 12.9 19.1 1.0 §.1ZAA1 Est. Sales Growth(I990-20001(% PA.) 4.9% 2.6*b 7.4% 5.4% 6.6% 5.1% 8.0% 6.1% 5.3% 4.4% 7.1% 5.4% 5.1S Losses( neneated) 7.4S 10.3% 10.7% 14.6S 3.5% 55.4% 18.2% 17.3S 2.8S% 13.8% S8.6* 20.6% 14A1 FuelComumpuioo(k) 23.750 7.949 10.415 7.221 7.S49 2G.053 7.263 2.050 16.801 4.660 12.287 375 1737,3 Effieq(kWbWlt) 3.2 3.2 3.70 2.83 3.26 3.36 3.00 3.77 3.70 3.22 3.76 3.43 3J2 %Total Population Becufed .s 45% 15% 75S% a. 37* 80% 29* 56* 75S 96* 86S _ _ Total 15.233 72.498 6.300 11.760 3.578' 5.828g 12.623 2650 2.862 4.911 2.5S5 0.460 I rn.23s Urban DA. 25.928 4.890 Un. na. aa. na. 2.400 2.715 3.181 un. 0.460 Rura nAL 28000 1.410 .. oa n. n.. 0.250 0.147 1.730 no. 0.0D Av.MWh/OvmJmomth 858 424 455 266 574 785 II8 205 1.479 219 12165 186 JO "mm(US$ stin) Capital Cap t Value 267.80 342.20 10.70 63.31 7.10 *4.00 5.10 4.32 22.90 5.40 15.70 0.30 mmi_ GroanExpntwu. nas 56.17 u.s. 4.95 na. 12.54 am. 2.01 9.35 na. 8.13 n Aw. Cot (UStWhl) u.s 0.15 a.m. 0.23 ne. 0.23 u.s 0.31 0.31 OA. 0.22 DaL S Av.Revenu 84* 74S 546* 90* 227* 237% GemsRevnue 82.47 67.07 4.64 6n72 n. 1.26 o. 2.25 4.21 us. 1.82 .s AV. Revenue (USSIkWh) 0.15 0.18 0.13 0.1Q o.a 0.04 q.. 035 0.14 DA. 0.09 no.. AfquTax rolt oIa. 10.90 n.. l.77 n.e. 11.291 oa. 0.2. (5.241 s.n 16.311 n. Andt Debt S e us as. A u.. os. OA. IL 0.07 us. us. s. na Net Subsidie a oa. na. UAL D.. 11.29 o.e. 0.000 5.24 nus 6.31 oa. I Eat. ROR (*b auts Fe-stax) l06* 6.0S 0.OS 2sS us -25.7S 6.0S 5.4% -22.9% M.. -40.2* ma. _ _ REGIONAL OVERVIEW STATISICS (Estimates 190 *nele otherwbe indicated) Nome: AD fmooem f(dn hist pp PNG Fii Sio4m WSasat Vnuata FPS Tomp Kkbati Ku1mns Cook$ Pam. Tei Total Leu 3.. M l Cm C(USAkW) Rat I SaO. t0.22 teak 0.14 0(1-tek $0.07 I Toalem oye 1107 229 360 265 81 181 23 p4wVeu2ab I 333 164 388 67 S46 71 832 I Uhb- ma y Sup(Major) VLIS lloniara upoidu Port Via Pohayei Tongtavu Tafwoa Mairo Raro t_ Funafuti No. of SyatMa I I* I____ mstafedDerNted . CaSpty(mW) 150.89 _ 3.Z8' 143 .838 15.30 4.96 Se 12.6 5.0 See see lydo 3.2 6.1 2.00 Natkmal National Nationl Diewl 67.69 _3.28 6.2 6.838 33.30 4.98 SuPr4* 12.8 5.0 Supsl4 Suppl Frm Capoctyz(W) 0 13363 9.25 8.0 6.37 6.64 3.51 9.6 3.0 MaxiommDe.and(NW) 67.3 5.90 7.6 4.992 5.22 3.83 7.1 2.34 Demaud oimb 3990.-2000( a.) P. 8eMdq abeno (GM)_ ely*ro 379.2 0.0 20.3 0.0 2.5 0.0 0.0 Diesd 4.6 27.40 21.6 25332 22.60 20.98 429 1.7 Total Gmtad 383.9 27.40 41.9 2532 25.10 2.g8 9 13.77 East. F_I Coemiaptiu 346.6 25.03 36.1 23889 20.61 17.36 11.98 NetSaks 346.6 25.03 361 23.9 17.21 17.36 29.9 33.96 Eat SalGrowath(I 990-2000)(% pa.) 7.0% LoeMa(* gcumted) 8.6% 13.8% 5.7* 31A% 17.2% 30.4S 13.0*b Load Fae (*) 64.6S m._ 61.7S Da. na. ua. 65.0S nA. 65.1I Fled Comapin ( 1.197 7.791 6458 7.J49 6533 1L.203 32995 Etllesancy(kMt) 3.30 3.32 3.4 3.23 3.46 3.8 3.45 S Popdlarnlm Ewld 42.7* nDAL C"kau.. Totad 5l.2 72498 6300 11.760 2.795 20t0 8Ct 2.441 1.925 S.18t 2.753 402 160.370 DomesgL 4t9t6 62M2 10.617 932 1.599 1.926 1M49 2709 2.406 12 ComnAandJGO,. lI.247 e.910 l.087 1831 481 *437 292 472 349 Otir I"68 36 28 78 64 I .6S EleMicrty Sale (GWb) 552.9 36L9 S4 37.5 24.7 54.9 17.8 6 S S0.8 12.9 361 1.0 J97S Domet4ic 129. 3S8 7.4 3. 3.0 0.0 3.6 1.6 22.6 54 15.2 0.3 v.. S Dolesk 23.4% 15.* 21.6* 30.5 4.0D ma. 2D.5% 25.2S 44.4% 41.4* 42.0* 25.4% DometIc h1Wkmouahb_omuu) 0.262 0.078 uI. 0.090 mm. ns. UAL 0.071 1.215 0.165 0.525 na Couuwdmljoo.ernam- 352. 111.8 25.0 I5.7 6.9 0.0 14.2 4.0 27.1 66 4.0 0A 57.6 %Cm.ue MB. mernm t 4 6S.S% 3.3% 72S8 413% 28.0% ma. 79.5* 61.3% 5533 51.1S 1.1% 36.6% Id= 60 126.2 0O 4.3 16.5 0.0 0.0 0.9 1.1 2.5 00 0.4 *11.0 *hdataay 22.3* 54.2% na. 11.4% 67.0 DAL nA. 133.5 2.2S 11.6% ma. 37.9b ComlndlGov(MWbmonbom ) 3426 2226 n.m IQ.29 na. ma. as. 0.928 OS03 1.431 0.960 a _ _ Otber 3.0 72.7 1.9 I6. 0.2 O0 0.0 0 0.0 0.0 26.9 0.0 IOt9 * Otb 0n% 19.7* 5.6% 16.3 2.0* na. . n.m. na. nA. 46.9% n . REGIONAL OVERVIEW STAT'ISTICS N faEimates 1990 ealess otherwise indicated) Note: Afl footnotes t~ aut pape ?NG Pip Solomona WSamOa Vannatu PSM TOeP Kiebati Mwahasla Cooks Fals Tuwla Total Rwnd Sspiy(Orkd) Sawaii Lutamnalle __Christ1s, Ebe_ _ No. of Systems SD00 1.00 1.eo 3.00 3.00 1.00 Italled Derated Capndty(MW) 527 1.25 102 033 6.0 Hydro Incuded Incduded In uded Not Inuded Diuel Under Under 1.25 1.02 Under Available 340 Under Ftru Capuity(MW) EHCOM FEA 2.97 1.12 FSM 0.5S 3.40 EPS Maximum Demand (MW) 2.88 0.62 0.63 OJI 2.6S Demand Crth 1990-20O0(4 p.s) Ilydo (GWh) 0.00 0.00 Diesel(WWhi) 216 2.51 19.20 Getrted(GWb) 6.97 2.16 2.S1 3.23 19.20 1.00 Nei Sales (GWb) 6.33 1.98 2.42 2.74 14.32 Ets. Sales Growth (I 990-2000) (* pa.) 2.5% Losses(% D irated) 9.341 .34 3.4qb 25.2% 257.4% Fuel Coutsmption (kl 2.634 921 979 5.596 EfTidency(kWhAt) 2.65 2.35 3.30 3.43 Load Facor (4) 40041 S Populalo Ekectdired Total _578 2W 937 403 Domestic na. 274 781 GowJComm. na. 297 101 Other 7 55 R-d Sbppyai( sd a -CCntmIs No. of Sptems 79 66 100 I tafed Derated Csehy(MW) 22.t Dieal 221L Fh'm Caq y(MW) 5.9 Generatcd(GWb) 28.494 Net Sa (GWl) 223521 Losses(% pseta-ed) - - IS. Fuel Consumption) _k Efllciracy(kW hlaA ) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Emd Faco (41) S ?oplatson Berfid 10.0* REGIONAL OVERVIEW STATISTICS (Estimates 19"0 cbess otubwNe Indicated) NoS All foeus fi0mb pF 60PtO Fq Sutmm WASsma Vanuatt 5smt Taom Mkitli l bMNl Coeeb lsis. Tuvls Total 1.dig.m.at Reuerces _lom Oasud (kam .31cm) 0.693 0.533 0.36 o063 0.043 0.006 0.027 0.0l5 0.007 0.002 0.000 o0.02 L-a % GrOs Eer Dmand 41.8s 55.9% 66.5% 59.% 61.6% 10.8% 53.2% S9.6s 187 13.% 3.1% 533.13% 47. Domesi 0.517 0.153 0.101 C.040 0.028 0.004 0.024 0.03s 0.003 0.002 0.000 0.002 _ Q17 % DOMesi 74.6% 285% 85.3% 63.2S 65.6% 67.4% 90.2% 100.0% 39.4% 0.o 00.0% 100.0% i. sA Auicdtwa lCommel3 _76 0.554 0.037 0.02 005 0.02 0.002 .. 0.004 -. nL - S AgricuallalCommtcil 25.4% 664% 14.7% 363% 34.4% 32.6% 9.2% 0.0% 60.6% 0.0% 0.0% 0.0% SJ Otber . 0m8 ML 0.0 ns. UA. 0.000 U.S. ... U.S. OA. naa7s % Other 0% S.3% 0.0% 0.5q 0.0% 0.0% 0s% 0.0% 0.0% 0.0% 0.0% 0.0% 1.9 Toal Binumns Deund(zoelapuztyr) 0.177 0.735 0370 0.401 0.297) 0.060 0.281 0.213 0.143 0.128 0.020 0.218 | ate] Domtic Demand(toeftpitpw) I 032 0.206 0316 0.252 0.196 0.041 0.254 0.213 0.056 0.125 0.020 0.218 1 Q69 I hor S ppfl3frodtlu Anaof Natual Fat (ha) o.S. na. n.e. 150.000 900.000 31.617 4.000 D.. A.a. u.a. 3!259 Ua. 1J116.6 AccessbleForest (ba) u.s. na. asM 60.000 u.s. na. 4DOO ua. Da. na. Ua. Da. Area of Aprofores. ind.Coco(ba) uMs. Da. U.s. 31.000 91.000 19.366 30389 s. 8.910 nu. 1.109 0.s. 181.774 Total Fomt Ane (ha) na. u.a. 2.6S0.650 181.000 991.000 50.953 34.1g9 u.. 8g910 na.. 32.38 na. 397 S Total Land Ara U.S. U.S. 90% 62% 83% 73% 49% ns. 19% u.s. 78% na. 1 Eottmated No._of_T_e_s __ _I_._oil. 03__34_803 n_. na. FAt. Forestrod (m'treerT) u.s. .nL 1u.s. 0.3 ua. O.a. 0.1 uA. u.._ Fores truber AvaiblefO(OV tr) 305s840 u.s . 90. 214.2D ua. 2.1 vs. . _LtL Mill/ogRes0duD00Wt/r) nu. Oa. na. 13.0 11.90 us. 8.2 us. Da. PlanationThiinfp(000 t*) n.s L Oa. us. 0.52 u.a. uA. u.a. u.s Totl Foren ResdOGO 1116) 1.s. am. . uns. 103.0 u. us. 10.3 n a. CoamuS Stc_ __ SCEA! Under Coconut (ba) _ 24 29.945 772 Palm Stocking Destty(treesft) Is 138 100 136 185 6' Estimated No. of PnaIs(mils.) 4.30 4.07 0.25 Age Prodir -50, esn(% wnile) 45.0% 25% 7.7Sb L.S. Sie Palm Repdcemeut(%IF) 2.5% 4% 1.0% Da. CowcSten Available ('000 ty) 26.1 53.30 6.8 u. CoomaS Ramsies No. of Pains (bearinp) (mll. pusIms) 4.30 3.8 0.25 P-dwctiwity(nutstplUwr) SD _ 50 28 40 Potential Production (mi. wur) 387.8 105.2 6 10.1 _t30 Potential Redsdues (O1 t/) t2 187.8" 105.2 10.1 _ Actui ComumptSin(mg. .utsr) 13 114.4 85.1 8.9S Residues Avsable(11D tlur) 114.4 85.1 8.9 REGIONAL OVERVIEW STATSTCS (Esltimaes t990 enless otberwie indicated) Nota: AN foonoaes follw lapt pge VNG riji Solomoe WSamoa Vanosto PSM Tongp Kirbasi WwuhaUs Cooks Pdas. Tuvalu Total PAtimatd AwUaIAe B ema Fest RsRFuewood (VW We) 43.2 4.3 .s. Cocout9 Smwood 000 toe) 7.1 1.8 ns. CoCoDUt Rctidu, (1O00 toe) 62.0 34.7 10.1 Bsapse(OC toe) -na. as. n.. Other Apo Wastes(00 toe) n.&. n.. e. TOWt (1100 oc-yr) 112.3 40.6 10.1 Supply(goefplaIyr) 0.711 0.426 0.567 Esf.Resource(MW) 15,000 300 30.8 12.0 6.9 nu nD ng 0.11 1 .2 nil 1A 51 Potential Output (0Wb) 65.2 17.5 Intaed Camcik(MW) 161.0 83.2 0.07 8.0 no 2.0 nil no J% Present Otput(G9fb) 487.9 379.2 aJ. 261 2I5 Est. Re e (kW/dy) 6.0 4S- 50 42-53 Est. Utiisationtr(e million) ) 0.028 No. of'Systems _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ rhomotaik 1 200 tu 700 2 90 70 3 004 42 ItS S6 3O5 WV Est. lntaged Cap. (kW,n,) 16 56 7.2 56 240 34 94 6. 24.0 152 Water Heatlm 75_1 ocean TfermalDiff.(C) L 22-23 23-24 22-24 21-22 22-24 Max.ditanoloffirwe(kms) 1-10 1-10 Tidal Tida DifffernceQnu_) t.0 140.6-3.6 1.1 0.7 Footoltes: PNG Fiji Sodomons W.Samoa Vanuatu FSM lfnstaledcapacitylcssbrgest unit IELCOM only 11990 tHoniara 11989 11989 11990estimate 2 Indudes nut residues and stems excl. Bouganviiie 2 ncludes purchases 2 1989 rigures 2 Tlecoms only 2 Septcfber 1990 2 29Yo uwban Incdudesbunkers 2 IIA.91 3 FEA sstcms 31988 320.31 MWh hydro 3 ExcL re-exports 3 1989 estiate 4?runnpal ptilwc authorityonly 31987 44isolated 411.4.91 4Sava-i 4Rcported S849k 4 1988 estinate 5 Sourec: EIU Country Profiles 4C' centers 4 See report 5 Estimatc 5 dry season Upolu 5 Pohnpei It.10.90 6February, 1991 5 ELC)M only 5 300 installed '82-90 61981- 110,000 v 9.4 MW diesel 6 Pohnpci. Chuuk ' To 1000 metres depth 97 diesel units 400 commercial 1.8 hydro Kosrae, Yap 8 Sing1 Crop Equivaem 6 6Whgen. 6 26.073 MWh diesel 6 Upold & Savafi 7 Pohnpei only 10Assumes .6 tonnesIm3 8FEIU Countly Prorlec 8 Incl. 40,095 Its IDO 71989 prices 110.27 toeltonne 9Sohrwater beating & 15,483 Its IFO 81990 12 Assumes 1.0 kgs residues/nut '° 200 eommercial 9 1981-578,0O0 toe 9 12189 valuation 13Human and aninal consumption 11 1.2generators OAs on 92.91 14 Assumes 0.1 m31trecly1ol a r 11 Agricultural suey IS Assunmcd 13 Ind. 27.597 IDO 12 Upolu & Savarii 16 198D- 1988 &27,522 IFO 13 Dry season cap. 171988 14 1981-1.35 mtoe 1.38 MW 18 Pacife Eco. BulletinJune. 1991 14 Apia Aceounts formr-exports 150.5 m3ha/gyr 20 Inl. Gov. agroindustries, etc. 171989 Tonga Kiribati Marshalls Cooks Palau Tuvalu Total 11988 11988 1 1988 estimate 1 1987 1 1989 estimates I medium rate I Weighted Avge 2Apprm 2Kiritimati sland 21989 estimate 2 1989 2 U89n 21988 3 1986 3 Tarawa 1.1.90 3 Urban 31988 3127 grid supplied 3 Urban only '* Tongatapu 6.5.91 ' SEC'85-89 4MEC,KAJUR4 1982-87 " Koro 1.10.90 " Funafuti 22.4.91 5 EEC projet 5 arawa only 6.5.91 5 Rarotonga 23.5.91 S TECS 6Agricu!turalsurey 6 Elect. operations one6 In. 681 Its nF6 Rarotanp only 6 Funafuti 7 Tongatapu. Vava'u S140,000 to water/sw 7 Agricultural sutvey Ha'apai 'Eua To $137,000 in 1991 8Admn. by EPS -- 9Q0. m3/treer 10' Ind. store hotels MAP SECTION' VOLCANO) S h& -- MEDIUM RANGE (MR) TANKERS on, h'sn do -o'-I0 ,,, Hh. LOCAL COASTAL TANKERS ILCTI dhl h ot.A¶O 4"eIe [~~~~~~~~~~~ - -^ ° -> - -^ -" - - - - - - -.A ' A S s r I 1I F i COUNTRIES COVERED BY THE REPORT -h b-d do ,,e T'tORTHERN | WAKE -- LINES OF DEMARCATION 20-_ N O R T HERI A N A IS L AN D S |- - IN T EE N A T IO N A L S O U N D A R Y H A W AII ll S ) IARtIANA ISLANDS (U.S.) JOLLNSTON 'SAIPAN r . UA U S.1 / r------- ---- ---- ---ARSHALL ll/1° U -U ~[U SI HWA)AL:N _. '/ "'/ISLANDS !C?UR PNAPE N AALR ALDU5' TEREi:OIY f FEDERATED STATES OF ' I FPAC SANDS MICRONESIA N _ / *U5 W r -\ , | \*---4, I- ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~CHRSSTMAS 7 ~~-- - TAEAWA / ,-i -I O..-s MANUS *. |I NAURU J OCEAN I / S\ BISMARCK I z HONX I . -~~~~~~~~~~~~~ L … .J~~~~IBA I N D O N E _S . A J jdj, I ,LNS LINE \ W"EoG_ -E!~ SONMONISLNDE-E - N-E--IS-LA-N--S Li' - SOLOMON ISLANDS…~~~~~~~~~~~~~~~~~ISLANDS - SANTA SABEL TUVALF", TOI 5+n j\_o MAAIITA MARQUESAS tEon.ovo; ,j< AIX SAN SANTA CRUZ IS. -_1 I A ISLANDS |L' CASTOBAL TER[AMERICAN ~ I- -j --- H--( OTLLHA ISA A 15.5.1 TLSASAMOA IFUTS) U. - !t p FRENCH POLYNESIA PFR.) I R"U SANro_J_ COOK IUMT EFAE I " L SOCIETY PARCHIPELAGO Avcr -FIwo | / Ngbo _- -- I 9 A U S T R A L I A / / I T--d. NE u ,L____ Toonsollo NEW IT, VIj OG AIIA A/rITAEI ISLANDS -TAHIT3 20- EDO~~~~~~~~~~~~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~N ONANIUE (N.Zl StANDSo | ,f ';'SI r-A TAFtN EAU RATRIONGA\ - IL- eokhpo0n Non I " SCIALEr L …zZEU z F AUSSTRAL. ISLANDS PITCAIRN e '# ';- ( w < < x } 1 lU.K.) A A LOlo I A 30- (AUS.) ISLANDS 30--~~~~~~~~~~~~~ZALND- AU~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~CL NEW~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~oo