1. Climate Change and Energy Access in Island States -
Enabling Factors Facilitating an Increase in Access to Electricity in Rural Areas – Fiji as an Example
Thomas Lynge Jensen, Environment and Energy Specialist, UNDP Pacific Centre (PC)
Climate Change and Energy Access in Island States -
International Parliamentary Hearing for Legislators from Island States in the ACP Regions, Port Vila, Vanuatu, 6‐8 Nov 2009
United Nations Development Programme

2. Structure of Presentation
Energy Services & Human Development
Fiji Case
Rural Electrification – Enabling Factors
Role of Policy Makers
References

3. Energy Services & Human Development
Are benefits that energy carriers produce for human well being
What matters Most for People in Poverty/Hardship
The energy service not the source
Whether the energy services are accessible, reliable, and affordable
Energy Services and Human Development
Lack of access to quality energy services, including from electricity is a situation that constraints the delivery of social services, limits opportunities for people and erodes environmental sustainability
It is clear that without access to adequate quantity and quality of modern energy services, achievement of the MDGs will not be possible
Energy Services
Energy services are the benefits that energy carriers produce for human well being. Examples of energy services include heat for cooking, illumination for home or business use, mechanical power for pumping or grinding, communication, and cooling for refrigeration
What matters Most for People in Poverty/Hardship
The energy service not the source
Whether the energy services are accessible, reliable, and affordable
Energy Services and Human Development
Lack of access to quality energy services, including electricity is a situation that constraints the delivery of social services, limits opportunities for people and erodes environmental sustainability
It is clear that without access to adequate quantity and quality of modern energy services, achievement of the MDGs will not be possible

4. Energy Services & Human Development (#2)
Main Areas of Policy Action to Achieve the MDGs
Energy for cooking
Electricity for lighting, ICT, and appliances
Mechanical power
Modern fuels for heating
Main Areas of Policy Action
Any realistic hope of meeting the MDGs requires access to at least these types of improved energy services
Energy for cooking
Electricity for lighting, ICT, and appliances
To support household and commercial activities and the provision of social services
Mechanical power
To operate agriculture and food processing equipment, to support enterprises and other productive use
To transport goods and people
Modern fuels for heating
In rural industries to create livelihood opportunities

5. Energy Services & Human Development (#3)
Rural Electrification Objectives
To assist with poverty/hardship reduction
To assist in the provision of basic social services
To improve the standard of living and increase quality of life
To address local health and safety issues
To assist with economic development including income generation
To assist with the reduction in the number of people migrating to urban areas
To assist with national integration
Why are we doing rural electrification? Some of the reasons mentioned are included here.

6. Fiji Case Significant Increase in Access to Electricity in Rural Areas
a) In % of the population in Fiji had access to electricity - in 2007 this had increased to 88.9%
b) With regard to rural areas during this 20-years period there has been a 50%-point increase in the proportion of rural households in Fiji that had access to some form of electricity

7. Fiji Case – How? ‘Bringing People to Electricity Supplies’
Very Little Population Growth
Increasing Urbanization
‘Brining People to Electricity Supplies’
Very Little Population Growth
During the last two decades the national population growth rate has remained almost the same
Increasing Urbanization
In 2007, the urban population is larger than the rural population. A continuation of present urbanization trends implies that, by 2030, 61% of the population will be urban

8. Fiji Case – How? (#2) ‘Brining Electricity to the People’
A consistent political goal over several decades
Supportive policies
In particular a Rural Electrification Policy
A dedicated government institution that focuses on rural electrification
Rural Electrification Unit at the Department of Energy
Setting of quantitative access targets
Allocation of recurrent allocations from the national budget
Supported by resources from development partners
The noteworthy results achieved as part of the Fiji Rural Electrification Programme have been possible by setting up critical enabling structures including
a) A consistent political goal over several decades (basically since independence in 1970) to achieve 100% electricity access including in the rural areas, which changing political administrations have supported
b) Supportive policies. In particular a Rural Electrification Policy, which include
i) Capital subsidy – currently 95%
ii) User choice among different technologies: 1) extension of the FEA grid or government station mini-grid providing 24 hour service; 2) a diesel generator with a mini-grid system; 3) solar PV for lighting and basic appliances; and 4) small hydroelectric plant and mini-grid
c) A dedicated government institution that focuses on rural electrification - Currently the REU consists of 15 staff
d) Setting of quantitative access targets
e) Allocation of recurrent allocations from the national budget supported by resources from development partners.
From 1994 to 2007 average yearly government funding for rural electrification have been FJ$3.6 million or approx US$1.87 million. For 2009 a total of F$7.795 million were made available for the Rural Electrification Program and in October 2009 additional F$12 million were made available. Thus for 2009 Government of Fiji is providing a total of approximately F$20 million for US$10.5 million for the Rural Electrification Programme, which is the highest ever.
Such enabling structures are the direct result of political will to make things happen.

9. Fiji Case – Lessons Learned
The Importance of Political Will and Long-Term Commitment
Stand-Alone Diesel Schemes
Been a problematic approach to rural electrification
The Main Justification for Rural Electrification is not Income Generation
But a critical component in provision of basic social services, improving the standard of living/quality of life, etc
Making Electricity available in Rural Areas is a Formidable Challenge
But possible
The Importance of Political Will
It seems that the Fiji Rural Electrification Program is a good example that with political commitment articulated in terms of national energy access targets and investments, dramatic improvements in the provision of energy services for the poor can be acheived
The Importance of Long-Term Commitment
26 years ago it was concluded that in Fiji the ‘…Government has assigned high priority to rural electrification in its development objectives’ Over the following years such high priority by the Government has been reiterated many times in different policy documents
Stand-Alone Diesel Schemes
Have not been a successful approach to rural electrification in Fiji (as in many other countries). Among others the fuel and maintenance requirements are difficult to meet in remote areas where transportation costs are high and technical training levels are low
The Main Justification for Rural Electrification is not Income Generation
In Fiji the provision of modern energy sources in general and electricity in particular should not be justified primarily in the expectation of income generation. However this is not a problem per se as ‘…some may mistakenly believe that only energy projects that increase income are valuable’. A key message is that there are many other entry points for provision of modern energy services as legitimate as income generation, such as being a critical component in provision of basic social services, improving the standard of living/quality of life and addressing local health and safety issues
Making Electricity available in Rural Areas is a formidable task, but Possible
It seems that the Fiji Rural Electrification Program is is an example of such
The basic strategy is to encourage and support the use of fuels and technologies that are higher on the ‘energy ladder’
This implies moving from simple biomass fuels (e.g. crops, residues, firewood) to most convenient, efficient form of energy appropriate to the task at hand – usually liquid or gaseous fuels for cooking and heating, and electricity for most other uses

10. Rural Electrification – Enabling Factors
No Single Way of Achieving Electrification
Either from a financing, implementation or from an technology viewpoint
Political Will
Undertaking the challenges of rural electrification will require strong political determination
Where progress in getting modern energy services to the poor has been made, it has usually resulted from political will and appropriate public policies
No Single Way of Achieving Electrification
Experience throughout the world has shown that there is no single or unique way of achieving electrification - either from a financing, implementation or from an technology viewpoint
Political Will
Undertaking the challenges of rural electrification will require strong political determination - Including a willingness to prioritize electrification within the overall development agenda
Where progress in getting modern energy services to the poor has been made, it has usually resulted from political will and appropriate public policies - and not from market forces

11. Rural Electrification – Enabling Factors (#2)
Policy Framework
A Rural Electrification Policy (REP) is expected to facilitate in the following ways
Defining development priorities and standards
Establishing regulations and procedures for guiding project implementation and management
Developing institutional capacity and facilitating coordination
Establishing a legal and financing framework that encourages electrification development in accordance with specified priorities
Policy Framework
A Rural Electrification Policy (REP) is expected to facilitate in the following ways
a) Defining development priorities and standards that are accepted by Government, participating development agencies and the private sector
b) Establishing regulations and procedures for guiding project implementation and management
c) Developing institutional capacity and facilitating coordination between participating agencies
d) Establishing a legal and financing framework that encourages electrification development in accordance with specified priorities – for instance EIRR thresholds, renewable sources of generation

12. Rural Electrification – Enabling Factors (#3)
Legal Framework
In many cases reform of the existing legal framework is needed
Many current key laws are old and, at the time they were drafted, rural electrification was not a government priority
A broader framework is needed
To support rural electrification delivery models based on state, private and community ownership
To facilitate the development and exploitation of indigenous renewable energy sources
To provide a platform for attracting donor support and mobilizing private investment
Legal Framework
In many cases reform of the existing legal framework is needed
Many current key laws are old and, at the time they were drafted, rural electrification was not a government priority
In particular, many existing Electricity Acts concerns itself primarily with urban grid electrification based on a state-owned utility model
A broader framework is needed
a) To support rural electrification delivery models based on state, private and community ownership
b) To facilitate the development and exploitation of indigenous renewable energy sources for rural electricity supplies
c) To provide a platform for attracting donor support, mobilizing private investment and generally managing an expansion in rural electrification activity

13. Rural Electrification – Enabling Factors (#4)
Financing Framework
With a generally low willingness-to-pay and low household savings, rural people are unable to meet the relatively high costs of rural electricity
Therefore if there is to be a large uptake of rural electrification, both loan financing availability and subsidies will be needed. Mechanisms could include
Loans to households
A Rural Electrification Fund
Provide capital subsidies
Waive import duties, etc on approved renewable energy equipment
With a generally low willingness-to-pay and low household savings, rural people are unable to meet the relatively high costs of rural electricity
Therefore if there is to be a large uptake of rural electrification, both loan financing availability and subsidies will be needed. Mechanisms could include
a) Loans to households for access, purchase of small-scale power systems, purchase of appliances
b) A Rural Electrification Fund which could channel donor support to approved rural electrification projects as transparent subsidies and loan financing
c) Provide capital subsidies, i.e. subsidies that target access to electricity, not consumption
d) Waive import duties and Goods and Service Tax (GST) payments on approved renewable energy equipment

14. Rural Electrification – Enabling Factors (#5)
Institutional Framework
A mix of rural electrification delivery models
Conventional government owned operations
Private sector operations
Public-Private-Partnerships
Community ownership and co-operatives
A dedicate agency to mange and promote rural electrification
Establish electrification targets & prepare master plans for achieving the targets
Establish rural electrification subsidy policies
Issue and administer licenses for rural electrification supplies
Monitor and evaluate the progress
Institutional Framework
Consider a mix of rural electrification delivery models:
Conventional government owned operations including: i) conventional utility model; and ii) government owned isolated grids and generating plants;
Private sector operations including: i) commercial sales model; ii) rural electricity enterprises; and iii) Rural Electricity Supply Companies;
Public-Private-Partnerships including: i) management contracts; ii) leases; iii) concessions; and iv) sale by the Government or Government-owned entities or parts of them to the private sector
Community ownership and co-operatives including: i) community ownership; and ii) consumer co-operatives.
A dedicate agency to mange and promote rural electrification with the following functions could be considered
a) Review and upgrade rural electrification policy, establish electrification targets for approval by the Government and prepare master plans for achieving the targets
b) Establish rural electrification subsidy policies and facilitate their approval by Cabinet/and or Parliament
c) Approve standards for electrical systems and installations, and monitor compliance
d) Maintain rural electrification records and data
e) Liaise with government departments, provincial governments, NGOs, development agencies, etc in selecting, evaluating and preparing projects for implementation, and, where appropriate, coordinating cross-sectoral development to optimise benefits
f) Issue and administer licenses for rural electrification supplies
g) Monitor and evaluate the progress of the rural electrification program

15. Rural Electrification – Enabling Factors (#6)
Electricity Pricing
Problems with a Uniform National Tariff
Effectively prevented/slowed the development of grid systems to areas where the national utility does not maintain a subsidized grid
Flexibility in the Setting of Tariffs is Needed
Such would better stimulate new electrification projects, and improve the sustainability of existing systems
Electricity Pricing
Problems with a Uniform National Tariff
The prevalent policy of maintaining a uniform national tariff that is far below the actual generation and distribution costs in rural areas has effectively prevented or slowed the development of either State or private grid systems for the sale of electricity services to areas where the national utility (or PWD) does not maintain a subsidized grid
Flexibility in the Setting of Tariffs is Needed
Where electricity is supplied e.g. by licensees, flexibility in the setting of tariffs is needed to allow a balance to be found between prices, subsidies, local costs, social structure, wealth, local issues and in the case of private suppliers profit
Such would better stimulate new electrification projects, and improve the sustainability of existing systems
A standardised, transparent approach to tariff determination could involve the issue and periodic updating of
a) Standardised rural electrification tariff calculation guidelines
b) Tariff calculation templates that provide pro-forma methods of calculating tariffs using costs base on generation technology, location and other factors

16. Rural Electrification – Enabling Factors (#7)
Technical Framework
Three Basic Electricity Delivery Configurations
Off-grid, mini-grid and grid
Some of the Available Electrification Technologies
Generating-Types
Off-grid
Mini-grid
Grid-connected
Solar PV +
Wind
PV-wind hybrids
Biomass Steam
Pico/Microhydro
Mini-Hydro
Large Hydro
Geothermal
Diesel/Gasoline Generator

17. Rural Electrification – Enabling Factors (#8)
Findings from WB Assessment (2007)
Renewable energy is more economical than conventional generation for off-grid (less than 5 kW) applications
Several renewable energy technologies are potentially the least-cost mini-grid (5-500 kW) generation technology
Conventional power generation technologies remain more economical for most large grid-connected applications (even with increases in oil price forecasts)
These Findings Suggests
Scale is a critical aspect affecting the economics of different generation configurations
Choosing generation technologies and electrification arrangements are becoming a more complicated process
Findings from WB Assessment (2007)
a) Renewable energy is more economical than conventional generation for off-grid (less than 5 kW) applications
b) Several renewable energy technologies are potentially the least-cost mini-grid (5-500 kW) generation technology
c) Conventional power generation technologies remain more economical for most large grid-connected applications (even with increases in oil price forecasts)
These Findings Suggests
a) Scale is a critical aspect affecting the economics of different generation configurations
b) Choosing generation technologies and electrification arrangements are becoming a more complicated process
i) New technologies are becoming more economical and technologically mature
ii) Uncertainty in fuel and other inputs is creating increasing risk regarding future electricity costs

18. Rural Electrification – Enabling Factors (#9)
Technical Standards
The electricity industry in many countries has, until now, centered on urban electrification and associated technical standards
In rural areas, though, there are a number of situations where application of appropriate technical standards would lead to lower costs without compromising safety
However
Developing the energy technologies needed seem to present less of a challenge than mustering the political will and developing the human capacity to employ them effectively
Technical Standards
The electricity industry in many countries has, until now, centered on urban electrification and associated technical standards
In rural areas, though, there are a number of situations where application of appropriate technical standards would lead to lower costs without compromising safety
However it should be noted that
Developing the energy technologies needed seem to present less of a challenge than mustering the political will and developing the human capacity to employ them effectively

19. Role of Policy Makers Role of Policy Makers in the Energy Sector
It is vital that policy-makers recognize the contribution that modern energy services could make to sustainable development
And fund it accordingly
The role of government is an important one
As only they can create the right policy environment
Success depends on developing the right mix of frameworks and mechanisms
Role of Policy Makers in the Energy Sector
a) It is vital that policy-makers recognize the contribution that modern energy services could make to sustainable development
And fund it accordingly
b) The role of government is an important one, as only they can create the right policy environment
Create a framework of laws, standards, etc in which a market is encouraged to thrive but the social development and environmental goals are not neglected
c) Success depends on developing the right mix of regulatory, legal, and institutional frameworks; energy and related policies; private and public sector involvement; and financing mechanisms
i) Many models are possible and there is no one package that can be universally applied
ii) However political will and long term commitment seem to be key factors

20. References
ADB, Republic of the Fiji Islands: Rural Electrification Project, April 2005
EC & UNDP, Energy as Tool for Sustainable Development for African, Caribbean and Pacific Countries, 1999
ESMAP, Technical and Economic Assessment of Off-grid, Mini-grid and Grid Electrification Technologies, Technical Paper, 121/07, December 2007
Jensen, Thomas L., Energy and Poverty in the Pacific Island Countries – Challenges and the Way Forward, Pacific Regional Energy Officials Meeting, Tonga, April 2009
Jensen, Thomas L., A Comparative Analysis of Experiences with Expanding Energy Services for the Poor in Asia-Pacific - Case Study of the Fiji Rural Electrification Programme, 2 Draft Version, Nov 2009
SOPAC, Review of Solomon Islands Electricity Act and Rural Electrification Framework, 2006
UNDP, Energy for Sustainable Development – A Policy Agenda, 2002
UNDP, World Bank & ESMAP, Energy Services for the Millennium Development Goals, UN Millennium Project, 2005
UNDP, Energy and Poverty in the Pacific Island Countries – Challenges and the Way Forward, 2007
UNESCO, Solar Photovoltaic Project Development, 2003

21. Thank you