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PSDI presents on renewable energy transition at Pacific Power Association Conference
Renewable energy can bring cost savings for Pacific utilities, but achieving these benefits requires strategic planning, careful integration of storage systems, and appropriate regulatory frameworks, according to the Pacific Private Sector Development Initiative’s State-Owned Enterprise Reform and Public-Private Partnership expert, Ms. Laure Darcy, speaking today at the Pacific Power Association’s (PPA) 31st Annual Conference in Nuku’alofa, Tonga.
Ms. Darcy presented the PPA conference with key insights from PSDI’s recent policy brief, Powering the Pacific: The Cost Implications of Renewable Energy, which explores the connection between renewable energy investments and associated electricity costs in six Pacific island countries.
The presentation emphasized that electricity generation costs include more than fuel and consumer tariffs also factor in costs associated with transmission, distribution, administration, and regulatory compliance. Prices are further influenced by subsidy arrangements and political directives, making the link between fuel costs and tariffs quite complex—and different in each country.
Still, as Pacific countries look to achieve their ambitious renewable energy targets, diesel fuel consumption will decrease, which will ultimately mean cost savings for utilities. The policy brief found that the utilities with the highest mix of renewable energy generation (Energy Fiji Limited, Electrical Power Corporation [Samoa], and Papua New Guinea Power Limited) had the lowest fuel costs per kilowatt hour generated.
“All other factors being equal, if the fuel savings exceed the capital expenditure costs of the replacement renewable energy systems—including storage—then the total cost of electricity service delivery should decrease,” said Ms. Darcy.
Ms. Darcy also highlighted that while utilities in Tonga and Papua New Guinea are already seeing cost savings from new solar and hydro projects, large-scale renewable adoption will require integration with existing grids, particularly battery storage systems, which add significant cost. While storage costs are beginning to decrease, careful planning is still essential.
“These batteries are required to smooth the intermittent nature of solar, wind, and some hydro and can also be used to power the grid for periods of time,” said Ms. Darcy. “Battery costs have historically added 100% or more to the total cost of renewable energy installations globally but have started to decrease. This trend is expected to accelerate.”
The presentation also emphasized the need for robust regulatory frameworks that support the utilities’ commercial viability. Ms. Darcy called for utilities to operate efficiently, free from political interference, and for more competitive tendering processes to drive down costs.
“In smaller Pacific markets, competition has been introduced—including for the operation of service concessions in Vanuatu and in the competitive tendering of renewable energy IPP contracts in Palau, Samoa, and Tonga,” said Ms Darcy. “This has allowed the private sector to bring innovation and ensure that public utilities achieve value for money in their renewable energy investments.”
Ms. Darcy concluded the presentation by discussing solar rooftop programs as a potential avenue for increasing renewable energy generation—particularly where land is unavailable. Finally, the presentation emphasized that while the Pacific’s transition to renewable energy is promising, it requires strategic investments, strong oversight, and careful planning if the cost-saving potential is to be fully realized.
Download Powering the Pacific: The Cost Implications of Renewable Energy here.