The development of the Pacific region’s energy sector is getting more and more attention from donors.
At the recent Pacific Energy Summit, donors pledged a total of NZ$635 million ($533 million), with NZ$255 million in grant funding and NZ$380 million in concessional loans to fund over 40 projects for the region’s energy boost.
The chief donor – the ADB – has also thrown its support behind the growth of the renewable energy sector for developing countries in the Pacific, a region crippled by energy crises and a chronic dependence on costly and environmentally-unsound fossil fuels.
In its recent Pacific Economic Monitor, the multilateral institution noted that economic growth in Pacific has softened, as crude oil prices maintain a steep climb.
This does not bode well for the region’s 14 developing countries.
In fact, New Zealand Foreign Affairs Minister Murray McCully has said that the region still meets about 80 percent of its electricity generation needs from imported fossil fuels.
This, coupled with the report’s findings that economic growth and energy demand come together, is a reminder that more sources need to be tapped to go beyond the present electricity reach of only 25 percent of Pacific households.
Robert Guild, director of transport, energy and natural resources for the ADB’s Pacific department, agrees as he discusses why the region’s leading development bank has committed to powering Pacific’s future with energy efficiency.
Of the $533 million pledged by donors during the Pacific Energy Summit, how much was ADB’s share?
We expect funding for the Pacific energy sector from 2013-2015 of $270 million, comprising of $194 million in loans, $27 million in grants and $49 million in cofinancing from other partners.
The ADB has an existing public sector financing portfolio in renewable energy and energy efficiency of $187.5 million ($169.5 in loan/grants and $18 million in technical assistance grants).
What can the Pacific’s developing countries look forward to under this pledge?
The ADB is already a major financier of renewable energy and energy efficiency improvements for the power sector in the Pacific, and is implementing or preparing projects in 12 out of 14 Pacific countries.
These projects include hydropower plants (new and upgraded), grid-connected solar power plants, wind farms and biofuel pilot plants. Other projects also cover both supply-side and demand-side energy efficiency through efficient household and street lighting, efficient power usage in the hotel sector, improved regulatory environment and prepayment meters.
We work through governments to hire contractors and consultants. All tendering for these projects is public, open, and competitive.
What are the remaining challenges for the Pacific energy sector?
The energy challenges facing the Pacific are vast.
Isolation, sparse populations, limited infrastructure, and narrow economic bases have led to a near-total reliance on fossil fuels for power generation. This is not only bad for the environment — it also makes the region vulnerable to price fluctuations.
While many energy projects — such as hydropower, solar plants, wind farms and biofuel plants — have been put in motion, the high cost of start-up infrastructure associated with green power technologies has hindered renewable energy development in the region.
Because of this, the Pacific island nations will have to look more into ensuring the efficiency of their systems and the productiveness of their power utilities to be able to trim costs while still keeping the lights on.
What role will the ADB play in helping the Pacific region face these challenges?
A number of Pacific countries have developed comprehensive sector plans and set ambitious targets to respond to these challenges. There is definitely a lot of positive momentum on this right now.
The ADB is working closely with these Pacific countries, as well as with development partners, to boost energy efficiency and develop renewable energy to reduce the region’s dependence on fossil fuels. Boosting energy efficiency means reducing the energy used to provide energy services such as lighting, refrigeration, cooling or electric motor power.
The ADB, and other development partners, play a vital role in supporting Pacific nations as they aim to secure their energy future. This could be done in two ways — by offering financing, and by helping develop regulatory frameworks that promote renewable energy and energy efficiency.
The private sector also plays a part in this, as private investments are needed to supplement public financing for energy efficiency, which is often lacking.
Together, we will be able to achieve energy security in the Pacific region despite tough challenges.
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