What if shifting from fossil fuels to renewable energy could result in citizens paying not more, but less for electrical power? That’s precisely the goal of an ADB-supported project in the Maldives.
Many developed countries—and even some developing nations—are embracing renewable energies such as solar power to lessen their dependence on fossil fuels and reduce their carbon footprints. There’s a catch, though. The normal paradigm is that renewable energy comes at a higher price cost than conventional fossil fuel technologies, and that added cost is passed on to the consumer’s electric bill via subsidies or feed-in tariffs.
So what if there was a way for shifting to renewable energy to result in citizens paying not more, but less for their electricity?
Many people talk about grid parity when the cost of supply in conventional power systems equals that of generation cost of renewable energies, but that does not account for many shadow costs. In the Maldives, however, the justification to promote renewable energy is that it will significantly reduce the cost of the electricity on the outer islands of the archipelago, virtually unknown to international tourists but where half of the country’s population lives. Each of the outer islands gets electricity through a diesel-powered mini grid system, a highly pollutant solution that also costs the nation about 30% of its annual GDP in oil imports and subsidies.
The Government of the Maldives has succeeded in providing electricity to the most remote atolls, resulting in 100% connectivity – but, sadly, also 100% dependency on diesel fuel to power the generators. The country now has one of the highest rates of carbon emissions per unit of electricity in the region, apart from facing the threat of rising sea levels caused by global warming.
Decarbonizing the energy sector has direct implications over the government’s ability to adapt to the effects of climate change, and moving from a fossil-based to a renewable energy-based energy model is the best way to not only make electricity cheaper for all, but also protect the environment of what is considered one of the last pristine natural paradises on the planet, and a popular destination for high-end beach enthusiasts and scuba divers alike.
The Maldives has significant renewable energy resources, especially solar and some pockets of wind. Energy sector studies claim that transitioning to these sources from imported fossil fuels would reduce generation costs by up to 50% in some cases. In addition, the government’s plans to harness and utilize its indigenous renewable energy resources would contribute to enhancing the country’s energy security, reduce the pressure on the balance of payments, and improve its fiscal position.
ADB approved in September 2014 a $50 million grant—comprising $38 million from the Asian Development Fund and $12 million from the Strategic Climate Fund administered by ADB—to support these efforts, that form part of a larger $124 million project cofinanced by the European Investment Bank and the Islamic Development Bank for the Maldives to lower its dependence on fossil fuels by 2019, as well as to reduce energy sector subsidies that cripple the state’s coffers.
The project, which will cover about 160 of 194 inhabited islands, has the potential to secure the long-term energy security of the outer islands of the archipelago, and could be a model for other island nations that are faced by similar challenges in the Pacific or remote locations yet to be electrified in parts of rural Bangladesh, India, or Myanmar.
We feel that we can make a difference for the Maldives’ future energy security, and hope its citizens soon start reaping the benefits of renewable energy in a way that appeals to everyone: by paying less for electricity.