Process used for the Development of the National Energy Policies in Pacific Island Countries
By
Anare Matakiviti, PIEPSAP Energy Adviser Secretariat of Pacific Islands Geoscience Commission (SOPAC) Mead Road, Nabua GPO Private Mail Bag, Suva FIJI ISLANDS
Acknowledgement
This document has been made possible through the efforts of the following people:
(1) Gerhard Zieroth, PIEPSAP Project Manager, for his guidance and valuable advice in the implementation of the PIEPSAP project.
(2) Yogita Chandra Bhikabhai, PIEPSAP Project Officer, for consistently putting up with my inequity with respect to issues pertaining energy and gender.
(3) Thomas Jensen, Sustainable Renewable Energy Adviser, UNDP, Samoa, for providing very useful comments on the draft versions.
(4) Paul Fairbairn, Manager Community Lifelines Programme, for his comments and editing work - providing clarity where ambiguities exist.
I also want to thank Lala Bukarau for the editorial work, without which it might be difficult to capture the intent and meaning of the some of the statements used.
I wish to acknowledge all the PICs that PIEPSAP has had the opportunity to work with and assisted in developing their national energy policies and commend all energy officials and stakeholders who participated in their development. Freely sharing their experiences has been a source of inspiration and I should state here that I have learnt more from them then they from me.
Last but not the least, the government of Denmark for sponsoring the PIEPSAP project, without which this document would not exist.
ii Disclaimer
I take full responsibility for any error, ambiguity or discrepancy found in this document. The views expressed here should not be interpreted as the official view of SOPAC or any institution or agency nor any person mentioned above.
iii
Table of Contents
Acknowledgement ...... i Acronyms ...... v Executive Summary ...... 1 1. Introduction ...... 2 2. National Energy Policy Framework ...... 3 3. Overview of Methodology ...... 5 4. Stakeholder Consultations ...... 7 5. Team Composition ...... 8 6. Consultation Workshops ...... 10 6.1 Situation Analysis ...... 10 6.2 Terms of Reference for (PIEPSAP) Technical Assistance...... 11 6.3 First Workshop – Strategic Areas and Policy Statements ...... 11 6.4 Inception Report ...... 12 6.5 Second Consultation Workshop – Policy Development ...... 12 6.6 Third Consultation Workshop - Strategies and Action Plans ...... 14 6.7 Cabinet Endorsement ...... 14 7. Training ...... 14 7.1 Overview ...... 15 7.2 Objectives of Training ...... 17 7.3 Scope of the Training ...... 17 8. Lessons Learnt ...... 18 9. Conclusion and Recommendations ...... 19 References ...... 23 Annex I: Example of PIEPSAP Country Situation Analysis Report Annex II: Annex II: Example of Terms of Reference for PIEPSAP Technical Assistance
iv Acronyms
NETF National Energy Task Force
NEPF National Energy Policies
NSDS National Sustainable Development Strategies
PIEP Pacific Islands Energy Policy
PICs Pacific Island Countries
PIEPSAP Pacific Islands Energy Policy and Strategic Action Planning
SIDS Small Island Developing States
SOPAC Secretariat of the Pacific Islands Applied Geoscience Commission
SDS Sustainable Development Strategies
SPM Strategic Planning and Management
TA Technical Assistance
ToR Terms of Reference
UNDP United Nations Development Programme
v
Executive Summary
This document describes the methodology adopted by PIEPSAP for the development of National Energy Policies in Pacific Island Countries as well as lessons learnt and recommendations for future assistance. The intent to document the process is to provide some guidance to PIC energy officials in energy policy development and planning. However, the document is not a blue print nor is it a solution to the problem faced by many PICs in formulating appropriate energy policy instruments, it is merely a documentation of the process adopted by PIEPSAP in developing national energy policies in PICs. It is hoped that the document will be of use to PIC energy officials when reviewing or formulating their national energy policies.
PIEPSAP utilized a participatory and consultative process in the development of the National Energy Policies of PICs. To facilitate the above process there were two teams established at national level for the purpose of discussing issues pertaining to energy sector planning and development. These issues are considered critical to energy sector policies and they range from the importation of petroleum products to the efficient use of energy to building capacity in PICs in the area of policy development and strategic energy planning. Although PICs differ in sizes, population, economic development and natural resource endowment, they share many commonalities that can justify a generic energy policy that is relevant to all.
The involvement of all key stakeholders in the development of energy policy ensures wider acceptance and ownership. It is imperative that the energy policy is formulated not in isolation of other sector policies due to the fact that energy is a critical input to other sector development programmes.
To be effective the energy policy requires strong commitment from governments through the allocation of the right level of resources and the establishment of organisatational and institutional mechanisms that support its implementation.
1. Introduction
This document summarizes the process that was employed by the Pacific Islands Energy Policy and Strategic Action Planning (PIEPSAP) project in the support to the development of National Energy Policy Frameworks (NEPFs) in Pacific Island Countries (PICs). In addition key lessons learned and tentative recommendations are summarized.
PIEPSAP is a four (4) year project funded by the Government of Denmark through the United Nations Development Programme (UNDP) and executed by the Secretariat of the Pacific Islands Applied Geoscience Commission (SOPAC). PIEPSAP was established with an aim to improve the capacity of PICs to develop practical national energy policies, and the strategic action plans and mechanisms to implement these policies. At the end of PIEPSAP there is expected to be a framework within most PICs of practical and achievable energy policies and action plans approved at Cabinet level, and changes (e.g. laws, regulations, and incentives), which will contribute towards measurable progress toward the regional Pacific Islands Energy Policy (PIEP) vision of “available, reliable, affordable, and environmentally sound energy for the sustainable development for all Pacific islanders.”
PIEPSAP’s overall strategy contains the following elements:
• A menu of options tailored to individual PIC needs; • Flexibility to adjust to changing needs; • Building upon the work of others; • Addressing poverty, equity and gender issues; • Raising the profile of energy in the region; and, • Building the capacities of PICs in energy policies and planning.
PIEPSAP is now well established as a Pacific regional technical assistance facility with multiple linkages to other energy initiatives and donors. Responding to PIC needs using the ‘Menu of Options’ approach has proven to be very effective. Development of energy policies, regulatory frameworks, strategic plans and project development has been progressing well. Increasingly PIEPSAP has managed to deliver integrated energy
2 sector support covering vertical and horizontal integration of policy development and planning including at project level.
2. National Energy Policy Framework
As a National Energy Policy Framework (NEPF) represents the Government's vision for the development of its national energy sector over a certain time frame, it is important that it specifies briefly and precisely the Government's goals and policies for the planning and management of each of the sub-sectors that make up its national energy sector. Importantly, the NEPF should provide a predictable and explicit framework within which public and private energy sector participants can make informed planning and investment decisions and manage their operations for the long term. This framework should also include government pricing policies for energy services. Box 1 shows the
Box 1
Strengthening National Energy Policy Frameworks
Since the end of 2004 the following key results have been achieved with PIEPSAP concerning strengthened National Energy Policy Frameworks (NEPFs):
• National Energy Policies: Niue, Tuvalu, Fiji, Tokelau, Samoa, Vanuatu & Solomon Islands
• Renewable Energy Policy: Tonga
• National Energy Strategic Action Plan: Cook Islands, Fiji, Republic of the Marshall Islands, Niue, Solomon Islands, Tonga, Tuvalu and Vanuatu
• National Energy Conservation Strategy: Palau
• Electricity Sector Regulatory Review: Fiji Islands
• Electricity Act Review: Solomon Islands
• Outer Island Electrification Strategy (OIES): Republic of the Marshall Islands
• Rural Electrification Framework: Solomon Islands
3 outcomes of PIEPSAP’s activities relating to some policy instruments for guiding energy sector planning in PICs.
The energy policy framework will impact on other sectors of the economy. It is for this reason it must be formulated on an inter-sectoral basis to ensure co-ordination and integration with policy framework of other sectors. This is an important consideration that PIEPSAP always emphasize when working with country officials. Usually the National Sustainable Development Strategy (NSDS) is a key reference document when developing the energy policy. The link to the NSDS and its associated budgetary process is crucial because it ensures that the activities identified in the companion strategic work plan for implementing the policy receive budgetary allocations (Refer to Box 2).
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Box 2
Integrating Energy Planning –Linking Energy Policy to NSDS
Communication
Education
Health
NSDS Sectors Agriculture
Fishery
Transport
Health
Energy
Power Petroleum Renewable Rural Electrification Resources
3. Overview of Methodology
It is important that the formulation of a NEPF should be carried out through a consultative process. This is a very important consideration. The importance of “true ownership” of the energy policy in the PICs cannot be over emphasized. In addition, applying a consultative process and a participatory approach to policy development, will assist lifting the profile of energy in PICs as this an area that de facto is not of high priority in most countries.
PIEPSAP has always endeavoured to work closely and in constant consultation with the staff of the agency responsible for energy policy and planning in the country and a National Task Force when carrying out all the activities related to the development of the policy. The consultation was carried out via different means depending on the situation at hand. The approaches include individual consultations, group consultations and workshops.
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The Strategic Planning and Management (SPM) approach was used where appropriate to develop the energy policy statements and associated strategies and plans. The SPM approach was considered appropriate and useful in undertaking the above tasks due to its inherent principles of:
• Establishing a long-term perspective; • Integrated and comprehensive approach; • Quantified goals (targets); • Stakeholders focus; and, • Monitoring, evalution and adjustments.
Box 3 summarizes the key elements of SPM. In utilizing the above SPM concepts to
Box 3
Key Elements of SPM
Strategic Planning and Management (SPM) is an approach by which Governments and stakeholders take a long-term view of the trends in natural resources use and environmental and social quality (describe as the “vision” ), identify the changes necessary to bring these trends within sustainable limits and to establish a management framework to encourage key groups in society to achieve these goals. It is not a blue print : as national objectives, circumstances, levels of development, degrees of institutionalization, financial possibilities and other conditions vary from country to country, so does the SPM approach need to vary.
A key feature of strategic planning is the development of a comprehensive “strategy” that deals with all challenges, current and future, in an integrated manner. For energy resources such a strategy should look beyond energy- specific issues to economic, social and environmental costs and benefits. The strategy should be based on the integration of these elements of sustainable development. Preferably, decisions are made on a thorough and balanced analysis of costs and benefits.
The strategy is subsequently translated into a manageable “plan” to implement the strategy. This plan is specific in tasks, targets, timing, allocation of responsibility, funds and other resources, in a manner that allows for monitoring and evaluation of progress.
Source: Guidelines on Strategic Planning and Management of the Energy Sector, Economic and Social Commission for Asia and the Pacific (ESCAP), United Nations, NY, 2002.
6 develop the energy policy it is appropriate to look at the energy policy statements first, followed by the strategies and action plans respectively.
The process undertaken by PIEPSAP in providing assistance to PICs in the development of their NEPF is summarized below:
a) Request from country to PIEPSAP for assistance; b) Initial PIEPSAP project team visit to country where the main purpose was to undertake a situational analysis; c) Establishment of a National PIEPSAP Team; d) Preparation and agreement to Terms of Reference (TOR) for PIEPSAP Technical Assistance (TA); e) Establishing a National Energy Task Force (NETF) in countries where PIEPSAP assistance to develop a NEPF had been requested and agreed to; f) First Consultation workshop with NETF including discussions on issues and problems and potential solutions through the identification of strategic areas and development of draft policy statements; g) Second Consultation workshop with NETF including firming up on the strategic areas and policy statements and development of draft strategies; h) Third Consultation workshop with NETF firming up on the strategies and developing the action plan; i) Refinement of draft NEP; and j) Submission of final NEP to Cabinet for endorsement.
4. Stakeholder Consultations
For the NEP is to be effective, it requires strong cooperation and mutual support between the stakeholders, i.e. the government, civil society and non-government organizations, the private sector and overseas development partners. These different groups have different views and aspirations and through consultations and dialogue on policy issues and the course of action (i.e. strategies and plans) to be taken, an amicable and appropriate policy could be developed and adopted along with its companion components.
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A good strategic plan for the implementation of the policy should take into consideration a wide cross section of stakeholder views and this will make it more widely accepted. PIEPSAP when providing assistance endeavoured to hold consultations with the following:
a) Key executives and officials of the following entities:
• Ministry of Finance; • Development Planning and Policy Division; • Aid Management Agency; • Environment Division; • Petroleum Fuel Products Suppliers; • Power Utilities; • Private Sector Companies involving in energy projects (e.g. sale of renewable energy technologies); • Financial Institutions and Development Banks; • Civil Society Groups; and, • Donor Agencies.
b) Minister responsible for energy and senior officials.
5. Team Composition
In the context of PIEPSAP assistance there are usually two teams that are set up to facilitate the policy development process. The first is the NETF, which consists of representatives from the public and private sectors and civil society groups. The NETF is a discussion forum for all issues pertaining to the energy policy framework. The second is the National PIEPSAP Team that basically initiates the planning and carries out most of the groundwork before tabling outcomes to the NETF for further consultation. In selecting the membership of the National PIEPSAP Team, there are certain skill and knowledge levels required of members so as to ensure that the tasks are well executed,
8 i.e. members are selected based on their area of expertise. Generally, the key areas of expertise looked at are: legal, environment, energy and economic.
With regard the NETF and the National PIEPSAP Team, there are certain issues that need to be discussed and The National Energy Task Force (NETF), Solomon Islands with the Minister responsible for energy , clarified before the actual work begins Hon Toswell Kaua sitting in the middle. – Photo: on the development of the policy. A.Matakiviti June 2006 These include:
• Staff requirements to match the tasks laid out; • Division of labour and responsibilities between the PIEPSAP Team and the NETF; • Reporting, lines of communication and overall management; • Number of seminars, workshops, etc to be carried out in the country; and, • What component of the seminars, workshop, etc are to be covered cost wise by each party (PIC Government and PIEPSAP Project).
In addition, there is the need to attune the teams to the specific problems that need to be addressed in the policy development exercise and, more particularly, to the scope and scale of interventions that are supposed to be guided by the framework. By way of example:
a) The provision of reliable and cost effective power in PICs faces many challenges e.g. poor and unsustainable economic policies of past governments; b) Some structural reforms undertaken in the provision of energy services lack legislative support or legal framework; c) The general reluctance of the population to pay for services, e.g. electricity and water, adversely affects the capacity of government, government owned corporations, etc to sustain these services;
9 d) The heavy reliance of PICs on imported petroleum fuels; e) The lack of natural resources putting a caveat on the achievement of the development goals especially in small PICs; f) The absence of a clear government policy on the promotion of renewable energy; g) Mismanagement of resources, lack of transparency and accountability in some PIC government systems contributes to breeding a culture of inefficiency, nepotism and corruption; and, h) Policies will not be achieved, i.e. implemented, if government does not commit itself to providing the necessary resources and institutional support and to identifying and removing the impediments to their successful development.
6. Consultation Workshops
It is crucial that the development of the national energy policy is carried out through wide consultation with relevant stakeholders because of its implications on the wider economy. To stimulate free and open discussions the consultations are best carried out using a workshop style format, where consultations are not only confined to government officials, but also include representatives from the private sector and civil society groups. The timing for the consultation workshops usually being determined after consultation with the key government agencies closely involved in the development of the NEP. Working papers should be prepared to ensure that there is a logical flow in workshop discussions and that all participants are equally informed.
6.1 Situation Analysis
An initial visit to the country should be organized so that the (PIEPSAP) project team has a clearer picture of the energy sector situation in the country. During this initial visit (PIEPSAP) and with the help of the government Energy Office/Department efforts should be made to gather as much information and data as possible on the energy sector. In addition, meetings with as many relevant agencies including government, private sector, women’s groups, youth groups, and civil society groups, etc should be made so as to get as broad a view as possible from the stakeholders seeking their views on what they perceive the NEP should address. The result of the initial consultation provides a
10 broader and more representative situation analysis report of the energy sector that amongst other things highlights issues and problems facing the country’s energy sector. A typical situation analysis report is provided as Annex I.
6.2 Terms of Reference for (PIEPSAP) Technical Assistance
Following the initial consultation, a draft ToR for the TA to be provided to the country in question should be prepared. The ToR specifies the objectives of the TA, its scope, timelines and the responsibilities of the different parties involved in the TA. The ToR must be endorsed by PIC concerned before the TA commences. On the basis of the ToR workshops are then organised. A typical ToR is provided as Annex II.
6.3 First Workshop – Strategic Areas and Policy Statements
Workshops are organised for the NETF and where this is generally only for one day. However, prior to the day of the workshop, the National PIEPSAP Team would meet on a daily basis (for about three days) with the aim to identify and discuss key issues and problems and at the same time identify potential solutions to the problems. These sessions will often lead to detail analysis of the information at hand including data gathered during the initial consultations. The outcome of the first consultation Vanuatu National PIEPSAP Team discussing policy issues. workshop is often a draft set of strategic Photo – A. Matakiviti Nov 2006. areas for the energy policy framework to address and a set of draft policy statements for each strategic area. This initial draft of strategic areas and policy statements are then tabled in the first of a series of workshops convened for NETF for further deliberation. The methodology usually adopted in the NETF workshop is slightly different from that used in the National PIEPSAP Team consultation workshop, where the NETF consultation workshops involve a lot of discussion but little analysis as this normally has been adequately covered in the PIEPSAP National Team consultations.
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It is important to continue to reiterate that the policy to be developed belongs to the PICs. Therefore PIEPSAP’s role only is to facilitate its development including review, provide advice, guide discussions and to draw the different threads into a coherent policy. The consultations are therefore crucial in ensuring that the content accurately reflects the A participant presenting group finding during a particular PIC’s views. consultation workshop on the development of the Fiji National Energy Policy. Photo – A. Matakiviti May 2005
It may be necessary to carry out consultations outside the NETF, especially where donors and financial institutions’ (and other relevant organisations who may not be represented in the NETF) views are needed. Should such consultations take place, the National PIEPSAP Team would usually carry out the consultation on behalf of the NETF.
6.4 Inception Report
An inception report that covers a summary of the consultations and the changes made in the draft strategic areas and policy statements is prepared by the (PIEPSAP) project team and this is usually tabled in the second NETF consultation workshop. The report is circulated to members of the NETF with the approval of local energy office one week prior to the second consultation workshop.
6.5 Second Consultation Workshop – Policy Development
The purpose of the second consultation workshop is to look at additional issues arising from the first consultation in relation to the revised draft policy statements and also to discuss the inception report. The second workshop aim to fine-tune the policy statements to more accurately reflect the issues identified in the first workshop.
12 Box 4 highlights the process undertaken in the development of the Samoa National Energy Policy.
Box 4
Samoa National Energy Policy (SNEP)
The Samoa National Energy Policy (SNEP) was endorsed by the Government of Samoa Cabinet in June 2007. It has the stated vision “To enhance the quality of life for all through access to reliable, affordable and environmentally sound energy services and supply.” In supporting the policy vision, the policy framework emphasises that “reliable, affordable and environmentally sound energy supply and services are critical to meeting the increased demand.” Further the Samoa energy policy framework highlights energy efficiency and conservation and demand side management as key to ensuring that energy is used “wisely and efficiently resulting in energy savings” and more importantly in contributing to maintaining a healthy foreign exchange reserves. The policy framework is viewed by the Government of Samoa as an instrument that supports its Strategy for the Development of Samoa (SDS) and hence will contribute to improving the quality of life for all the people in Samoa.
The development of energy policy framework was carried out in a consultative process involving all key stakeholders. All key agencies within Government were represented in either the PIEPSAP National Team or the National Energy Task Force. Consultations on the energy policy framework were not limited only to these two teams. In Samoa public community consultations were also organized to ensure that the general population has a clear picture of what are being addressed by the policy framework. For this purpose, two community consultations, one in Upolu and the other in Savaii were organized.
Consultations were also carried out with individual agencies on their roles and responsibilities thus ensuring that the activities identified in the work plan of the policy were consistent with that particular agency’s work programme and the allocation of appropriate resources.
A final draft was produced after taking into account comments from individual agencies. The final draft was translated into the Samoan language and both versions (English and Samoan) were submitted to the Samoan Cabinet for endorsement.
13 The process of finalizing the policy statements involves broad input from NETF members and senior government officials. A number of draft and review cycles are generally needed before all parties can reach consensus. The time involved in achieving this milestone is usually greater than anticipated. The policy statements updated after the second consultation workshop usually provide a sound platform for formulating the strategies and action plans. It is therefore important that the feedback received in the review cycles and at the second consultation workshop is comprehensive and pertinent. The drafting of the strategies and action plans is only carried out once an acceptable level of consensus on policy statements has been reached.
6.6 Third Consultation Workshop - Strategies and Action Plans
The final energy policy statements usually provide the basis for the formulation of appropriate strategies for implementing the policy and associated action plans. The NETF is again convened to draw up the strategies and action plans. Usually at the end of the third workshop the NETF is able to reach a consensus and finalise the strategies and action plans. In very rare cases, a fourth workshop is required to be organized to finalise the strategies and action plan.
6.7 Cabinet Endorsement
The task of finalising the NEP rests with the (PIEPSAP) National Team and usually this is completed through e-mail. Once a consensus has been reached on the final draft the National PIEPSAP Coordinator then is required to submit the policy framework to Cabinet for endorsement. Cabinet endorsement of the policy framework is essential as it underscores government’s ownership.
7. Training
14 7.1 Overview
Overall (PIEPSAP is a) capacity building is considered as an important and integral component of the project and the focus of the training provided is on strategic planning and policy development. The capacity to carry out strategic planning and policy formulation in many PICs is weak and therefore the need to be strengthened. The training 1 delivered under PIEPSAP is provided through an interactive process and is based on planned workshops, seminars and working sessions
Box 5 provides the summary of the training carried out for the Fiji Department of Energy staff on the how to use the SWOT Analysis to improve the operational effectiveness of the department.
1 The training provided under PIEPSAP project was “hands-on” and therefore was structured accordingly.
15 Box 5
SWOT Analysis Training
As part of the assistance provided in the development of the Fiji National Energy Policy Framework, PIEPSAP carried out a SWOT analysis training for the Fiji Department of Energy (DoE) staff. The training was carried out upon a request by the Director of Energy after the first consultation workshop where a wide range of issues were raised and the lack of clarity on how these issues were to be addressed. The SWOT analysis was chosen as a tool that would provide clarity on how the DoE would address the above issues.
The SWOT training was well attended by the DoE staff. For most this was their first experience in SWOT analysis. The training offered opportunities for staff to be involved in the assessment of the Department’s internal and external environment to enhance its capacity to plan, develop and manage energy sector programmes. The involvement of most of the staff in the training showed DoE’s commitment to develop its capacity to utilise such a planning tool as SWOT to improve its capability in the delivery of its services.
As a result the following strengths, weaknesses, opportunities and threats (SWOT) faced by the Fiji DOE were identified.
Strengths Weaknesses
1. A well-balanced staffing 1. Lack of strategic direction. compliment. 2. Cumbersome procedures for 2. An established organisation and processing internal issues related recognised by government as lead to projects. agency for energy sector planning. 3. Lack of technical expertise in 3. A good relationship network with certain areas. stakeholders. 4. Inadequate funding to cater for 4. Experienced in managing and resource assessment and research implementing REU Policy programmes and to meet demand from communities. 5. Weak data and information system.
Opportunities Threats
1. Recruit and retained qualified 1. Loosing trained staff. personnel. 2. Government reform process 2. Alternative funding sources might lead to the dissolution of available under bilateral and multi- the department. lateral agreements and under 3. Political instability. international conventions ratified 4. Other organisations such as by the Fiji government. FEA taking over the renewable 3. Improvement on management energy programmes. capabilities. 4. Introduce appropriate policies and regulations governing energy sector development.
16 7.2 Objectives of Training
The training component of PIEPSAP is targeted at increasing the capacity of national energy office in energy policy and strategic planning and as alluded to above this is done through workshops, working sessions, seminars and interactive training provided during consultations and discussions with NETF members.
7.3 Scope of the Training
The activities as part of the TA provided by PIESPAP are interactive and practical as much as possible. As mentioned earlier there are consultation workshops, seminars, group and individual discussions. All these activities are carried out to ensure that those participating in these consultations, seminars and discussions learn as much as possible from participating. To facilitate as much learning as possible usually the following is applied:
• Informal Interactive Working Sessions. Such is conducted during the first mobilization. The format is loosely structured, taking the form of question and answer sessions, “off the cuff” presentations and ad hoc tutorials. This type of training is based on a list of preferred subjects that are solicited from counterparts.
• Consultation Workshops. The principal objective of the Consultation Workshops is to discuss the current status of the sector with the view to developing the national energy policy together with the strategies and action plans. The workshops are interactive and conducted to encourage participation by all participants.
• Informal Interactive Training. Is provided through day-to-day contact with people during meetings and discussions, etc.
Consultations with key agencies on specific training requirements are essential and the training program is always structured accordingly.
17 8. Lessons Learnt
Highlighted below are some of the key lessons learnt during PIEPSAP assistance in developing NEPFs in PICs:
• Development of effective national policies requires strong national institutions and government commitment, which are not always in place. Government energy departments and units in the PICs often are without regulatory powers and weak in comparison with power utilities and oil suppliers;
• Policy development is a genuine sovereign activity where external entities (such as regional intergovernmental organizations) can only assist such as facilitate its development including reviews, provide advice to guide discussions and draw the different threads into a coherent policy. I.e. country ownership of the energy policy development process is of outmost importance. The consultations are therefore crucial in ensuring that the contents accurately reflect the particular PIC’s views;
• Energy markets are changing rapidly. Thus energy policies risk to be outdated quickly;
• PICs are mostly consensual societies where inclusiveness and consultation are highly valued, however time consuming;
• Acquisition of essential data very often is difficult or impossible, Transparency many a times are sacrificed to commercial sensitivity and confidentiality including power corporations (despite the majority being owned by governments) and oil suppliers;
• Interagency competition occurs including between Pacific regional intergovernmental organizations, bilateral and multilateral donors and multilateral development banks. This is manifested in overlapping activities and risk of conflicting or inconsistent advice with regard to what constitute an appropriate enabling environment for sustainable energy including energy policies;
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• The services that a technical assistance project as PIEPSAP provides in the area of energy policy development are not obsolete after a four-year project period;
• National energy policies will not be achieved, i.e. implemented, if government does not commit itself to providing the necessary resources and institutional support and to identifying and removing the impediments to their success;
• Because of its implications on the wider economy, it is crucial that the development of the national energy policy framework is carried out through wider consultation with relevant stakeholders; and,
• PICs have faced a challenge when formulating NEPFs in ensuring that it is consistent with and recognises the critical areas of development targeted by the their National Sustainable Development Strategies (NSDS) and how these areas can effectively be addressed through energy sector development plans.
9. Conclusion and Recommendations
PIEPSAP in employing the above process is mindful of the challenge faced by PICs energy offices and especially officials in formulating an energy policy framework that is consistent with and recognises the critical areas of development targeted by the their NSDS and how these areas can effectively be addressed through energy sector development plans. This challenge is often exacerbated by the lack of capacity in the national energy office to carry out analysis on issues that are critical from a national perspective, e.g. analysis of the impacts of a national bio-fuel program on the economy, analysis of the costs and benefits of an energy efficiency programme targeting buildings, or analysis of the impacts of rising fuel price on the economy, etc. Thus capacity building in the area of energy planning, economic analysis and engineering should be an essential component of the NEPF.
19 The development of the NEPF through a consultative and participatory approach helps raise the level of awareness amongst stakeholders and government on the importance of energy in the achievement of sustainable development goals. An energy policy framework therefore should be looked at as an instrument that will facilitate social and economic development in PICs.
Below recommendations have been listed under two categories - the first concerning generic energy policy prescriptions and the second concerning the process of developing an energy policy framework.
With regard to recommendations on energy policy prescriptions these are recommendations that can be considered relevant for all PICs. In making these specific recommendations PIEPSAP is cognizant of the fact that each PIC is unique and that countries differ considerably in terms of size, economic development, natural resource endowment, geographical location and their capacity to absorb new challenges. However, there are commonalities that can justify a generic energy policy framework that is relevant for all. Such commonalities include: the majority of the population live in the rural areas, access to modern energy services mainly is restricted to urban areas, high dependence on imported fossil fuels, power utilities and oil companies dominate the energy sector, energy sector planning is not a national priority, high risks from impacts of global warming and sea level rise and limited capacities at national and local level in key areas pertaining to energy sector planning. Generic energy policy prescriptions that can be considered relevant for all PICs included the following:
• Diversification of energy sources through the use of alternatives and renewable energy sources; • Energy efficiency programmes, including efficiency standards and technology transfer; • Efficient and effective utilization of imported fossil fuels through a transparent and equitable pricing mechanism, including smart subsidies and incentives; • Reform of the energy sector to promote the involvement of the private sector, including service providers and financiers; • Environmental considerations in all energy projects; • Setting up of Small and Medium Enterprises (SME) in rural areas to promote the provision of modern energy services in the areas; and
20 • Capacity building through human and institutional strengthening.
Recommendations concerning the process of developing an energy policy framework includes:
• NEPF should specify briefly and precisely the Government's goals and policies for the planning and management of each of the sub-sectors that make up the national energy sector;
• NEPF should provide a predictable and explicit framework within which public and private energy sector participants can make informed planning and investment decisions and manage their operations for the long term;
• If a national policy framework for energy sector development is to be effective, it requires strong cooperation and mutual support between the stakeholders, i.e. the government, civil society and non-government organizations, the private sector and the overseas development partners. Thus the formulation of a NEPF should be carried out through a highly consultative process;
• The NEPF should be formulated on an inter-sectoral basis to ensure co-ordination and integration with policy framework of other sectors;
• When external assistance is being provided in the development of a NEPF such should work closely and be in constant consultation with the staff of the agency responsible for energy policy and planning in the country as well as the NETF when carrying out all the tasks related to the development of the policy;
• The SPM approach should be used where appropriate to develop specific energy policy statements and associated strategies and plans;
• When developing a NEPF it is useful to focus at the energy policy statements first then followed by the strategies and action plans respectively. Thus drafting of the strategies and action plans should only be carried out once an acceptable level of consensus on policy statements has been reached;
• To stimulate free and open discussions consultations should be carried out using the workshop format; and,
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• Capacity building e.g. in the area of energy planning, economic analysis and engineering should be an essential component of the NEPF.
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References
1. Strategy for the Development of Samoa (SDS), 2005-2007
2. Fiji - Strategic Development Plan (2007 -2011)
3. Tuvalu National Sustainable Development Strategies
4. Nauru National Sustainable Development Strategy (2005 – 2025)
5. Solomon Islands National Economic Recovery, Reform and Development Plan, 2003–2006; Government of Solomon Islands. 2006. Grand Coalition for Change, Policy Framework Document. Honiara.
6. Vanuatu – Comprehensive Reform Programme and Prioritised Action Agenda
7. Tonga - Strategic Development Plan Eight (2006 – 2009)
8. Papua New Guinea National Sustainable Development Strategies
9. Guidelines for Strategic Planning and Management of the Energy Sector, Economic and Social Commission for Asia and the Pacific, United Nations, NY, 2002
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Annex I:
Example of PIEPSAP Country Situation Analysis Report
Introduction
The Government of Nauru (GoV) requested the Secretariat of the Pacific Islands Applied Geoscience Commission (SOPAC) through its Pacific Islands Energy Policy and Strategic Planning (PIEPSAP) project to provide assistance in the development of a National Energy Policy Framework (NEPF) for Nauru. The NEPF will be the blue print that provides direction to Government in the development of its energy sector. A Terms of Reference (ToR) for PIEPSAP technical assistance has been developed and this will guide the activities pertaining to the development of the NEPF.
Consultations
PIEPSAP in consultation with the Aid Management Unit (AMU) and the Department of Environment (DoE) in the Ministry of Commerce, Industry and Resource (MCIR) planned and scheduled a mission to Nauru to carry out consultations with stakeholders on the energy policy framework. The mission was carried out between 12 to 14 June, 2007. The mission is inline with the schedule in the ToR. The main purpose of the mission was to brief stakeholders on government’s initiative to develop a National NEPF for Nauru and at the same time gather issues raised by the different stakeholders for consideration in the NEPF.
Consultations were held with government officials representing the key Government agencies responsible for policy development, finances, environment and energy planning. These consultations were held on a one-on-one basis with the view to better understand how the different programmes implemented by the different agencies could influence the energy policy framework and vice versa. It was noted that a number of energy related programmes were being planned and officials highlighted that it would be useful when developing the NEPF to be mindful of these programmes. Two of which are:
(a) EU REP5 which is targeting energy efficiency and conservation measures and the use of renewable energies, especially solar; and (b) ADB/AusAID funded programme “Nauru’s Utilities Sector – A strategy for Reform” that focuses on improving and strengthening the service deliveries in the power sector, water and imported fuels. The exercise will also look at building the appropriate institutional and legal framework to ensure the effective delivery of the functional roles of the entity entrusted with the responsibilities.
1 In addition to the above there are other sector programmes within the National Sustainable Development Strategy (NSDS) that will require an energy input. There was a consensus that the NEPF should help in strengthening and facilitating sector programmes.
The one-on-one consultations with government officials were wrapped up with a combined workshop on Wednesday 13 June. The purpose of the workshop was to deliberate on the issues raised during the consultations and identify areas that are critical to be addressed in the NEPF. During the workshop, participants had the opportunity to look at issues raised in a draft NEPF that was developed by the Nauru Permanent Mission to the United Nations in New York. While the draft policy has been circulated, its circulation has been restricted mostly Some Participants in Official to government officials. The draft policy has restricted its Workshop. Photo- A.Matakiviti focus on energy efficiency and conservation and the 2007 promotion of renewable energy. Participants agreed that the NEPF should be broad enough to cover all aspects of the energy sector and as a result the following areas were identified as strategic to Nauru:
1. Power; 2. Petroleum; 3. Renewable; 4. Consumers; 5. Finance; 6. Institutional Capacity; and 7. Energy Efficiency and Conservation.
The participants also took the opportunity to revisit the goals and strategies of the National Sustainable Development Strategy (NSDS – 2005 to 2025). The NSDS has clearly highlighted the importance of developing the energy infrastructure as critical to promoting socio- economic development in Nauru.
A second workshop was organized on Thursday 14 June for major stakeholders, including the private sector and non-governmental organizations. As for the government officials, the purpose was to brief stakeholders of
NIANGO representatives Government’s intention to put in place a NEPF and at the during the Major same time elicit their views on the subject. In their Stakeholder Workshop. deliberation the major stakeholders highlighted a number Photo- A.Matakiviti 2007 of issues that they felt are vital to the NEPF and these include:
1. The NEPF should facilitate the provision of affordable energy services; 2. The need for a reliable 24/7 power supply; 3. Electricity is too expensive; 4. The power lines network needs immediate maintenance and upgrading; 5. The need for a national electrical wiring standard;
2 6. The heavy reliance of Nauru on imported petroleum fuels; Australia and Japan’s continued assistance in this area is required; 7. The importance of energy efficiency and energy conservation; government assistance in providing incentives for the use of efficient appliances and equipment is crucial; 8. The promotion of renewable energy, especially, solar and wind energy; 9. Appropriate technologies only should be promoted; 10. The need to adopt a national building design standard to make use of the natural ventilation; and 11. The involvement of NGOs such as the Nauru Association of Non-governmental Organisations in the public awareness campaign on energy policy issues.
The major stakeholders reached a consensus that the above issues could easily be incorporated into the strategic areas identified during the official workshop.
The PIEPSAP Energy Adviser together with advisers from the Ministry of Finance and Aid Management Unit briefed the Minister of Finance on the work being carried out on the NEPF and the process involved in the development of the NEPF. The Minister expressed his hope that the policy would help improve the provision of reliable and affordable energy services to all the people in Nauru and would also play an effective role in the improvement of the economic situation in Nauru. He would be reporting to Cabinet on the work being carried out on the NEPF.
PIEPSAP Team
A PIEPSAP Team comprising of key specialists has been established. The Team will be responsible for all preparatory work related to the formulation of the NEPF. The responsibilities include but not limited to the following:
• Collecting of energy related information; • Collecting of economic data; • Analyzing the information collected for the purpose of developing appropriate policy statements; • Verifying information and data; • Developing economic and financial models for electricity tariffs and energy efficiency programmes; • Designing and dissemination of information for purpose of public awareness; • Drafting of the NEPF; and • Ensure that the NEPF is consistent and not contradicting any existing Nauru laws and regulations.
The specialists include:
i. Legal Adviser – Mr. Fred Amoa, Secretary for Justice ii. Economist - Ms Carla Adami, Budget Adviser, Ministry of Finance iii. Environmentalist – Mr. Tyrone Deiye, Environmental Officer
In addition to the above, the following key personnel have been co-opted into the Team as advisers:
3 i. Secretary for the Development Policy and Planning Division; ii. Director Sector Planning; iii. Director of Multilateral Aid; and iv. Utilities Superintendent.
Situation Analysis
A situation analysis in Nauru is summarized below under two major headings, economy and energy sector.
Economy
• Nauru consists of a single island with a total land area of only 21 sq. km. But the country has an Exclusive Economic Zone (EEZ) of some 310,000 sq. km. The population is estimated at approximately 9,000 of which about 60 % are indigenous Nauruans with other Pacific Islanders and foreign employees making up the balance.
• Cultivation is restricted to a narrow fertile belt of 50 to 300 m wide which encircles the whole island. The lack of fresh water and the highly porous nature of the soil mean that there are limited means of producing surplus crops. The EEZ is known to be rich in commercial tuna fish species but there is only very small-scale fishing for domestic use.
• The economy of Nauru used to revolve around the Nauru Phosphate Corporation (NPC) and the Phosphate Trust Fund (PTF) investment. However, phosphate production began to decline dramatically in the 1980s (from 1.67 million tonnes in 1985-86 to Phosphate Loading Cantilever. 162,000 tonnes in 2001-02) and eventually Photo - A. Matakiviti 2007 NPC ceased operation in 2003. The mining infrastructure is in a dilapidated state – from the processing plant and the storage facilities to the loading cantilevers – all would require a considerable amount of money to refurbish them and get them back to operational status. As part of a structural reform spear headed by development partners with Australia taking a lead role, phosphate mining has been revived, but to a much lesser degree. Secondary Mining Photo - A.Matakiviti 2007
• In August 1993 the Governments of Australia and Nauru signed a Compact of Settlement which ended litigation by Nauru against Australia in the International Court of Justice over rehabilitation of phosphate land mined before independence. As part of the settlement Australia paid Nauru AUD57 million in cash and agreed to provide AUD50 million over a
4 period of twenty years (paid in annual instalments of AUD2.5 million indexed at 1993 values) for projects to be undertaken under a Rehabilitation and Development Cooperation Agreement.
• The issuance of fishing licenses for its economic exclusive zone to countries such as China, Japan, South Korea, Taiwan and the United States of America provides an additional source of revenue to the Government of Nauru (GoN).
• Nauru is dependent on shipping and air services for the provision of food and other supplies, mostly from Australia. It has no natural harbour and ships moor at deep-water anchorage buoys and use floating pipes to discharge fuel and lighters to unload other cargo.
• Nauru is also highly dependent upon air services. The once thriving Air Nauru, the national airline is now renamed Our Airline and operates a single 737-300 jet which provides twice weekly flights between Brisbane and Nauru via Honiara (Solomon Islands), Majuro (Marshall Islands), Tarawa (Kiribati) and Nadi (Fiji).
• Nauru is highly dependent on a massive injection of donor grants and development funds, principally from Australia, New Zealand, Japan, China and more recently Taiwan. In addition, Australia is providing extra financial assistance to Nauru for hosting two Australian refugee processing camps.
• The GoN has put in place a National Sustainable Development Strategy (NSDS) as a blue print to drive social and economic development for the next 20 years. The goals of the NSDS include:
- Stable, trustworthy, fiscally responsible government; - Provision of an enhanced social, infrastructure and utilities services; - Development of an economy based on multiple sources of revenue; - Rehabilitation of mined out lands for livelihood sustainability; - Development of domestic food production;
• The above goals are in encapsulated in its vision “A future where individual, community, business and government partnerships contribute to a sustainable quality of life for all Nauruans.”
Energy Sector
• The responsibility for energy sector planning in Nauru is dispersed amongst a number of agencies. The absence of a Government’s energy sector policy appears to add to the complexity and challenges of energy sector planning and development. Policy issues appear to be shared between the MoF the MCIR.
5 • Utilities is responsible for power supply and importation and distribution of fuels inheriting the responsibility from the Nauru Phosphate Company (NPC). Utilities come under the MoF and the ministry in turn regulates the price of electricity and imported fuels.
• Utilities has a total of 15 MW installed capacity but all the units are out of service for various reasons ranging from lack of spare parts to expiry of service life. The peak load is estimated to be about 7 MW. Currently power is supplied by four temporary containerised diesel generators, each 1MW capacity, rented from the Australian government.
• Nauru is experiencing power supply problems. Power shedding on a six- hour basis is being put in place. There is an urgent need to improve the power supply in Nauru. The provision of reliable and affordable electricity to all is crucial for sustaining economic development and raising the standard of living of Nauruans. Several development initiatives, including, that of the NSDS, regional and international initiatives in Nauru are likely to be affected in the absence of a reliable and affordable electricity service.
• Government has put priority to the reform in the power sector. With assistance from the Australian Agency for International Development (AusAID) and the Asian Development Bank (ADB), the government has put in place a reform strategy to improve electricity services in the country. The strategy include amongst other things the recruitment of a Utilities Manager, the review of the electricity tariff, the review of the electricity subsidy mechanism, the introduction of pre-payment meters and the re-scheduling of power supply to ensure that minimum interruption and inconvenience to the customers is created.
• There is little private sector involvement in the energy sector in Nauru. It is noted that the Australian Government, ADB, the European Union and other donors are providing assistance to the Government of Nauru in the development of its energy sector.
• Renewable energy resources are limited. The most notable renewable energy resource is solar energy which according to the PIREP 2 study averages about 5.8 kWh/m 2/day. Wind resource is not known but given the geographical location of Nauru may not be promising. There are insufficient biomass resources to be considered as a viable alternative energy source. Biomass in the form of shrubs are concentrated on the bottom side of the island. Ocean based energy resources such as wave, tide and ocean thermal conversion are highly dependent upon untested or yet-to-be commercialised technologies.
• Imported petroleum fuels are the main primary energy source. They are used for power production, transportation and for light commercial
2 Pacific Islands Renewable Energy Project (PIREP) is a renewable energy assessment project in 15 Pacific Island Countries coordinated by the Secretariat of the Pacific Community (SPC) in 2004.
6 purposes. According to figures obtained from the PIREP report, the annual import of the three main components of petroleum fuels namely, petrol, diesel and jet fuel are: 3.5 million litres, 9.5 million litres and 1.6 million litres respectively.
Conclusion
The development of a NEPF for Nauru could not have come at a better time. With its economy in tatters, it is important that appropriate policy instruments are put in place to facilitate the achievement of programme initiatives put up by development partners to prop the ailing economy. The NEPF is therefore seen as an important policy instrument that will contribute to improving the economic situation in Nauru. It follows that the NEPF should as a matter of urgency target to address the pressing issues of electricity supply, imported petroleum fuels, energy efficiency and conservation and the promotion of renewable energy sources to lessen Nauru’s dependence on the costly imported petroleum fuels.
I would like to thank the staff of the Ministry of Finance and the Ministry of Commerce, Industry and Resource who in spite of their busy schedule endeavoured to be involved in the consultations and more so organizing consultations with key stakeholders both within Government and the private sector and civil society groups. Finally, my appreciation goes to Principal Immigration Officer, Earnest for his assistance in facilitating my entry to Nauru. My trip to Nauru would have ended in Brisbane (transit port) without the intervention of Earnest.
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Annex II: Example of Terms of Reference for PIEPSAP Technical Assistance
Republic of Nauru
Preparation of a National Energy Policy and Strategic Action Plan
Work Plan Proposal – Terms of Reference for PIEPSAP Technical Assistance
June 2007
Quality Record Sheet
National Energy Policy and Strategic Action Plan – Document Nauru S:\CL\ENG\PIEPSAP\Country Ref Correspondence\NA\OUT\Proposal Energy Policy Development.doc
Date May 2007
Revision Revision: 1
Document Purpose
This document contains the Terms of Reference for Technical Assistance provided by PIEPSAP to the Nauru Government for the Development of a National Energy Policy and Strategic Action Plan
Description Technical Proposal, Terms of Reference
Originator Author: Anare Matakiviti
Checked Reviewer: Gerhard Zieroth and Yogita Bhikabhai
Approved Name: Gerhard Zieroth Position: PIEPSAP Project Manager
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Table of Contents
1.0 Introduction 1 1.1 Background 1 1.2 Request for PIEPSAP Support 2 1.3 Objectives 2 1.4 Scope of Work 2 2.0 Comments on Request for Support ...... 3 2.1 General Comments 3 2.2 Team Composition 8 2.3 Consultation Workshops 10 2.4 Data, Services, Deliverables and Facilities 5 3.0 General Approach and Methodology ...... 6 3.1 Background and Setting 6 3.2 Problem Analysis 6 3.3 Overview of Methodology 2 3.4 Stakeholder Consultation 7 4.0 Execution of Tasks 9 4.1 Draft National Energy Policy Paper 9 4.2 Financing Energy Projects 11 5.0 Training 14 5.1 Overview 15 5.2 Objectives and Training 16 5.3 Scope of Training 12 6.0 Time Schedule and Deliverables ...... 13 6.1 Program 13 6.2 Reporting 14 7.0 Personnel 14 7.1 Team Composition and Task Assignments 14 7.2 Staff Schedule 15
Preparation of the Energy Policy Framework – Nauru Government Acronyms
AMU Aid Management Unit AUD Australian Dollar CDM Clean Development Mechanism DPPD Development Planning and Policy Division EEZ Exclusive Economic Zone FSED Forum Secretariat Energy Division GEF Global Environment Facility GoN Government of Nauru MCRI Ministry of Commerce, Resource and Industry MoF Ministry of Finance NEPF National Energy Policy Framework NETF National Energy Task Force NPC Nauru Phosphate Corporation NSDS National Sustainable Development Strategy PIGGAREP Pacific Islands Greenhouse Gas Abatement through Renewable Energy Programme PTF Phosphate Trust Fund SGP GEF – Small Grant Programme SPM Strategic Planning and Management SPREP Secretariat of the Pacific Regional Environment Programme TA Technical Assistance ToR Terms of Reference UNDP United Nations Development Programme WB World Bank
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1.0 Introduction
1.1 Background
Nauru is one of only two countries in the South Pacific that consists of a single island. The total land area is only 21 sq. km, but the country has an Exclusive Economic Zone (EEZ) of some 310,000 sq. km. The population is estimated at approximately 9,000 of which about 60 % are indigenous Nauruans with other Pacific Islanders and foreign employees making up the balance.
Cultivation is restricted to a narrow fertile belt of 50 to 300 m wide which encircles the whole island. The lack of fresh water and the highly porous nature of the soil mean that there are limited means of producing surplus crops. The EEZ is known to be rich in commercial tuna fish species but there is only very small-scale fishing for domestic use.
The economy of Nauru revolves around the Nauru Phosphate Corporation (NPC) and the Phosphate Trust Fund (PTF) investment. However, phosphate production began to decline dramatically in the 1980s (from 1.67 million tonnes in 1985-86 to 162,000 tonnes in 2001-02) and eventually NPC ceased operation in 2003. An Australian phosphate company, Incitex Pivot is doing some auxiliary mining using the existing infrastructure.
The phosphate mining in the central plateau has left a barren terrain and has stripped and devastated four-fifths of the total land area. Efforts to rehabilitate the mined-out areas over the years have been unsuccessful. The island's only fertile areas are within the narrow coastal belt, where there are coconut palms, pandanus trees, and indigenous hardwoods.
In August 1993 the Governments of Australia and Nauru signed a Compact of Settlement which ended litigation by Nauru against Australia in the International Court of Justice over rehabilitation of phosphate land mined before independence. As part of the settlement Australia paid Nauru AUD57 million in cash and agreed to provide AUD50 million over a period of twenty years (paid in annual instalments of AUD2.5 million indexed at 1993 values) for projects to be undertaken under a Rehabilitation and Development Cooperation Agreement.
The issuance of fishing licenses for its economic exclusive zone to countries such as China, Japan, South Korea, Taiwan and the United States of America provides an additional source of revenue to the Government of Nauru (GoN).
Nauru is dependent on shipping and air services for the provision of food and other supplies, mostly from Australia. It has no natural harbour and ships moor at deep-water anchorage buoys and use floating pipes to discharge fuel and lighters to unload other cargo.
Nauru is also highly dependent upon air services. The once thriving Air Nauru, the national airline is now renamed Our Airline and operates a single 737-300 jet which
Preparation of the Energy Policy Framework – Nauru Government provides twice weekly flights between Brisbane and Nauru via Honiara (Solomon Islands), Majuro (Marshall Islands), Tarawa (Kiribati) and Nadi (Fiji).
Nauru is highly dependent on a massive injection of donor grants and development funds, principally from Australia, New Zealand, Japan, China and more recently Taiwan. In addition, Australia is providing extra financial assistance to Nauru for hosting two Australian refugee processing camps.
The GoN has put in place a National Sustainable Development Strategy (NSDS) as a blue print to drive social and economic development for the next 20 years. The goals of the NSDS include:
• Stable, trustworthy, fiscally responsible government; • Provision of an enhanced social, infrastructure and utilities services; • Development of an economy based on multiple sources of revenue; • Rehabilitation of mined out lands for livelihood sustainability; • Development of domestic food production;
The above goals are in encapsulated in its vision “A future where individual, community, business and government partnerships contribute to a sustainable quality of life for all Nauruans.” 1.2 Request for PIEPSAP Support
Against the above background Secretary for Foreign Affairs, requested PIEPSAP’s support in developing a National Energy Policy Framework (NEPF) to provide guidance and direction to the development of the energy sector in Nauru. The development of the NEPF is part of the strategy to fulfil the second NSDS goal of “provision of an enhanced social, infrastructure and utilities services.” A draft energy policy developed by the Nauru Mission in New York shall be used a basis for the development of the energy policy framework.
1.3 Objectives
In light of the above request, the primary objectives of the assignment will be the revision of the current NEPF In revising the NEPF the PIEPSAP Technical Assistance (TA) will also cover the development of appropriate strategies and action plans for implementing the policy. In parallel with the above objectives PIEPSAP will also assist in establishing consultation with all relevant stakeholders in public and private sectors and civil society groups; provide assistance to the GoN in accessing additional funding such as CDM for the implementation of the energy policy and the work programs; and provide training to personnel responsible for energy planning in GoN in energy planning and policy formulation.
1.4 Scope of Work
This document provides the scope of PIEPSAP’s services and this will be finalised after consultations with the GoN and serves as TOR for PIEPSAP’s intervention.
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• Section 2 comments on the Terms of Reference and includes inputs to be provided by the client. • Section 3 describes our general approach and methodology in implementing the PIEPSAP project. • Section 4 describes work plan in detail and outlines approaches to be taken in undertaking the policy framework • Section 5 describes the proposed training programmes provided under the PIEPSAP project. • Section 6 outlines the indicative schedules for the delivery of the deliverables. • Section 7 shows the composition of the PIEPSAP Team
2.0 Comments on Request for Support
2.1 General Comments
The development of a NEPF is in line with the terms and condition of the TA provided under the PIEPSAP project. In providing assistance, PIEPSAP will follow a logical sequence based on the following:
• Assist the GoN in reviewing the current policy statements to direct future development of Nauru’s energy sector; • Finalise policy statements and develop strategies and practical action plans; • Prepare procedures and documentation for stakeholder consultations at various levels; • Draft project proposals and implementation guidelines for energy projects; and • Assist in holding workshops, seminar and working sessions to facilitate consultation and provide a platform to introduce, explain and seek feedback on the documents produced.
2.2 Team Composition
There are two teams that will be set up to facilitate the implementation of the PIEPSAP work in Nauru. First there will be a National Energy Task Force (NETF) which will comprise of representatives of public and private sectors and civil society groups. The NETF will be a discussion forum for all issues pertaining to the the energy policy
Preparation of the Energy Policy Framework – Nauru Government 3 framework. Second there will be a PIEPSAP Team that will basically initiate the planning and carry out most of the groundwork before tabling these to the NETF for further consultation. It is important that the team members fully understand their roles and responsibilities to ensure that the tasks are well executed. With respect to this NETF and the PIEPSAP Team some issues have to be clarified and discussed with the GoN. These issues include:
• Staff requirements to match the tasks laid out, • Division of labour and responsibilities between the PIEPSAP Team and the NETF, • Reporting lines and overall management • Number of seminars, workshops, etc to be carried out in the SI. • What component of the seminars, workshop, etc are to be borne by each party (GoN and PIEPSAP)
In addition we are conscious of the need to attune the team to the specific problems that need to be addressed in the policy development exercise and, more particularly, to the scope and scale of interventions that are supposed to be guided by the framework. By way of example:
(a) The provision of reliable and cost effective power in Nauru faces many challenges linking to poor and unsustainable economic policies of past governments; (b) Some structural reforms undertaken in the provision of energy services lack legislative support or legal framework. Example, the transfer of the responsibility of operating and managing the power utility from NPC to “Utilities” - a new entity created recently as part of the overall government restructure programme – has been carried out without a proper legal framework; (c) The general reluctance of the population to pay for services e.g. electricity and water has adversely affected the capacity of government to sustain these services; (d) The heavy reliance of Nauru on imported petroleum fuels; (e) The lack of natural resources is putting a caveat on the achievement of the development goals in Nauru; (f) The absence of a clear government policy on the promotion of renewable energy; (g) Mismanagement of resources, lack of transparency and accountability in the government system contributes to breeding a culture reek with inefficiency, nepotism and corruption; and (h) Experience shows that the policies will not be achieved if government does not commit itself to providing the necessary resources and institutional support and to identifying and removing the impediments to their success.
2.3 Consultation Workshops
Because of its implications on the wider economy, it is crucial that the development of the national energy policy framework is carried out through wider consultation with relevant stakeholders. To stimulate free and open discussions the consultations will be carried out using the workshop format. Consultations will not only be confined to government officials, it will also include representatives from the private sector and civil
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society groups. The timing for these consultation workshops will be determined after consultation with the Ministry of Commerce, Resource and Industry (MCRI), the Ministry of Finance (MoF), the Development Planning and Policy Division (DPPD) and the Aid Management Unit (AMU). Working papers will be prepared to ensure that there is a logical flow in workshop discussions.
2.4 Data, Services, Deliverables and Facilities
We note the provisions and requirements of the assignment and make the following comments and qualifications that apply to our proposal:
• We assume that the MCRI provides the project team with all relevant data, information, reports and texts that are related to energy policy development. Confidential material will be kept confidential by PIEPSAP. • Deliverables and Reporting: We have made no allowances in our proposal for the cost of translating documents into the Nauran language. • Seminars and Workshops: All costs of seminars, workshops and working sessions will be jointly borne by the MCRI and PIEPSAP. We have assumed that the MCRI will send out all invitations to participants and that we would receive assistance in organizing other aspects of the events. • We expect that deliverables developed under the project will be available to other governments in the region as examples for energy policy development. • It is important to the success of the project that our team works closely with the GoN, MoF and MCRI to ensure effective knowledge transfer and exchange of information. This is very important during the policy preparation phase. For this reason we have assumed that members of the project team (PIEPSAP staff and MCRI staff) and the NETF will agree to gather for dedicated work sessions as required and that the MCRI will provide serviced facilities (photocopying, etc) during work periods in Nauru.
The MCRI will provide the secretariat for the Project Team and will take all notes on the discussions made during the workshops. The notes will be useful references when making recommendations for updating the policy statements and strategies and in drawing up the plan.
The MCRI shall make available as many staff as practicable to participate in the Project Team activities and also in the consultation workshops.
With regard to implementation and associated costs, we wish to emphasise that PIEPSAP is bound by the rules of UNDP, who are the lead implementing agency for the programme. Therefore based upon the rules, expenditure will be specifically for the
Preparation of the Energy Policy Framework – Nauru Government 5 implementation of tasks and activities only and will not cover allowances or salaries of any civil servant[s] delegated to undertake a PIEPSAP related task in the Nauru.
3.0 General Approach and Methodology
3.1 Background and Setting
Nauru is one of the smallest independent, democratic states in the world. It is a republic with a Westminster parliamentary system of government but with a slight variance as the President is both head of government and head of state.
Nauru is faced with serious economic challenges. Its once thriving phosphate industry has ceased operation thus depriving Nauru of its major lifeline revenue source. The local infrastructure, including power generation, drinking water and health services, has been adversely affected in recent years by the decline in income from phosphate mining. However, further explorations of the residual phosphate deposits have raised hopes that there may be potential to keep the phosphate mining for yet sometime. With less prospects in the phosphate industry, Nauru has to look at other alternative revenue sources to support its economic development. Unfortunately, for a country of the size of Nauru (21 km 2) with its limited natural resources, the options are not many. Some measures taken by the GoN to improve its revenue earning power have been considered unusual. For example following the decline in phosphate revenue in the early 1990s the GoN declared itself a tax haven and become susceptible to money laundering activities. And since 2001, it has played host to an Australian offshore detention centre that holds and processes asylum seekers trying to enter Australia. Nauru now is highly dependent on donor support especially from Australia, Japan, New Zealand and Taiwan (ROC). It is important that Nauru develops and strengthens its partnerships arrangements with the above countries to be able to meet the goals of its NSDS which has identified key areas to be targeted in order to achieve some degree of economic stability. The NSDS comprises of short term, mid-term and long-terms goals.
The NSDS has set a goal of reducing Nauru’s dependence on imported petroleum fuels through a number of strategies. One of these is meeting 50% of its energy needs through renewable energy. Achieving such a goal is essential to achieving economic stability and political sovereignty.
The reliability of the power supply in Nauru is highly essential to the achievement of other sector programme goals. For example the goal of supplying reliable water to all household cannot be achieved without a reliable power supply. Equally, an improved telecommunication and information system can only be facilitated by a reliable power supply system.
3.2 Problem Analysis
The lack of energy resources and high dependence on imported petroleum fuels combined with escalating prices and high per capita use in Nauru are some of the
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challenges facing the GoN in developing a plan for the provision of reliable and sustainable energy services. In addition to Nauru’s remoteness, poor financial management capacity, absence of a practical policy on the use of renewable energy technologies contribute to Nauru’s vulnerability to energy supply security.
Energy sector planning in Nauru is being affected by the absence of a proper national energy sector framework. Although, the GoN was one of those countries assisted by the then Forum Secretariat Energy Division (FSED) in the early nineties the lack of government support to facilitate its implementation has been a major draw back for energy sector planning over the years. It is clear that without a national energy policy framework and an overall strategic plan, interventions can easily become arbitrary, inconsistent, haphazard, counter productive and focused on the short term.
Further, we note that in Nauru the following general problems contribute to the lack of energy sector development:
• Nauru has over the years suffered from poor economic management and low quality governance; • The country now relies heavily on external assistance to support its economic development programmmes; • Electricity is heavily subsidized down to a level that is clearly not sustainable. Customers historically have been getting free electricity and imposing a user–pay policy requires not only strong political will but also a general change in public attitude towards paying for services provided; • Energy programmes and policies have been organized on an ad hoc basis and without any centralized administration and governance and this has resulted in an inefficient implementation and ultimately to less sustainable practices; • The general absence of appropriate regulations and legislations inhibit the implementation of highly beneficial energy programmes e.g. energy efficiency programmes; and • The lack of capacity to perform complex tasks such as documentation needed for accessing international funding for project development.
It should be noted that the above problems are often interlinked and in Nauru these problems can be grouped into three categories of core problems a) poor management and governance; b) the inadequate allocation of resources (human and material) to energy sector development and c) the lack of an institutional and regulatory framework that ensures an efficient management of the energy sector.
Preparation of the Energy Policy Framework – Nauru Government 7 The development of an appropriate national energy policy framework is seen as a first step to addressing the problems highlighted above.
3.3 Overview of Methodology
As alluded to above the formulation of a NEPF will be carried out through a consultative process. This consultation will be carried out via different means depending on the situation at hand. There will be individual consultations and also group consultations and workshops.
Further we intend to use the Strategic Planning and Management (SPM) approach where appropriate to develop the energy policy statements and associated strategies and plans. The SPM approach is considered appropriate and useful in undertaking the above tasks due to its inherent principles of:
• Long-term perspective; • Integrated and comprehensive approach; • Quantified goals (targets); • Stakeholders in focus; and • Monitoring and adjustments.
Utilizing the above concepts it will be appropriate in developing the energy policy framework to look at the energy policy statements first then followed by the strategies and action plans. In working on the plan it will be necessary to also look at additional sources of funding to compliment government budgetary allocation for energy sector development. This activity will be done in parallel with the formulation of the plan.
We endeavour to work closely and in constant consultation with the staff of the MCRI and the Task Force when carrying out all the above tasks.
3.4 Stakeholder Consultation
If a national policy framework for energy sector development is to be effective, it requires strong cooperation and mutual support between the stakeholders i.e. the government, civil society and non-government organizations, the private sector and the overseas development partners. Partnership is critical in Nauru at this stage as the government tries to improve and strengthen its economic performance after a down turn in performance as a result of mismanagement and poor governance. These different groups have different views and aspirations and through consultations and dialogue on policy issues and the course of action (strategies and plans) to be taken an amicable and appropriate policy framework could be developed and adopted.
A good plan takes into considerations a wide cross section of stakeholder views and this will make it more widely accepted. We endeavour to hold consultations with the following:
c) Key executives and officials of the following organizations:
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• Ministry of Finance; • Development Planning and Policy Division; • Aid Management Unit; • Petroleum Fuel supplier; • Environment Division; • Private sector companies involving in energy projects (e.g. renewable energy technologies); • Financial institutions and development banks • Civil society groups; and • Donor Agencies.
d) Minister responsible for energy programmes and his senior officials.
4.0 Execution of Tasks
4.1 Draft National Energy Policy Paper
As referenced earlier there is an existing draft policy document that needs to be looked at critically in light of the goals and strategic outputs of the NSDS. The draft policy focuses on three areas namely, energy conservation and efficiency, renewable energy and capacity building. While these areas are considered strategic, the restriction of the policy to address issues relating only to the “demand side” exposes the gaps in the draft policy document. A critical area that is not sufficiently addressed in the draft policy is imported petroleum fuels. Nauru is heavily dependent on imported petroleum fuels and it will be critical for the energy policy to address such issues as: supply contract arrangement, bulk procurement arrangement, fuel standard, storage facilities and subsidies, etc. Another critical point is energy pricing. At present heavily subsidized electricity tariff provide no incentives to consumers to conserve energy. Moreover the provision of electricity at extremely low cost is only manageable with external donor support. This is not sustainable and provides a poor framework for energy security.
As the national energy policy framework represents the Government's vision for the development of its national energy sector over a certain time frame, it is important that it sets down briefly and precisely the Government's policies or goals for the planning and management of each of the sub-sectors that make up its national energy sector. Importantly, the NEPF should provide a predictable and explicit framework within which public and private energy sector participants can make informed planning and investment decisions and manage their operations for the long term. This framework will include government pricing policies for energy services.
Preparation of the Energy Policy Framework – Nauru Government 9 The energy policy framework will impact on other sectors of the economy. It is for this reason it must be formulated on an inter-sectoral basis to ensure co-ordination with policy framework of other sectors.
We propose the following methodology in preparing the Policy Paper:
(i) Review of Existing Draft – First Workshop
The PIEPSAP and the NETF will convene to review the existing draft policy statements and associated strategies. It is important to point out that the policy document to be developed belongs to GoN and the PIEPSAP’s role is to facilitate its review, provide advice to guide contributions and to draw the different threads into a coherent policy. The consultations are therefore crucial in ensuring that the contents accurately reflect the GoN’s views.
It may be necessary to carry out consultations outside the NETF, especially where donors and financial institutions’ (and other relevant organisations who may not be represented in the NETF) views are needed. Should this consultation take place, the PIEPSAP Team will carry out the consultation on behalf of the NETF.
Based on our understanding of the Nauru energy sector in our view the draft policy statements should effectively try to address the following areas.
• Institutional structure for planning, implementation and managing energy sector development in Nauru. This should take into account the staff and the skill level required and adequate financial resources to support the effective delivery of the services expected; • A supportive and consistent legal and regulatory framework where applicable; • A system of energy pricing (including tariffs, import duties, taxes and where appropriate subsidies) which is consistent and transparent and does not favour fossil fuels over renewable energy alternatives; • Enabling environment to encourage private sector involvement and investment in energy services, including prioritising projects for public and private development; • Practical measures of mitigating the impacts of high fuel price on the economy through fuel substitution, promoting the use of renewable energy; and developing appropriate legislations to promote the use of energy efficiency and conservation measures. • Building the local capacity in the areas of energy project management and technical skills to commensurate with the technology transfer and usage in Nauru. • Adequate information for the Government and the public to make informed choices regarding energy use; • Environmental and social standards for energy projects/technologies; and • Allocation of resources to energy sector development.
An inception report that will cover a summary of the consultations and the changes made in the existing policy will be prepared by the PIEPSAP Team and this will be tabled in the second consultation workshop. This report will be circulated to members of
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the NETF with the approval of MCRI one week prior to the second consultation workshop.
(ii) Second Consultation Workshop – Policy Development
The purpose of the second consultation workshop is to look at additional issues arising from the first consultation in relation to the revised draft policy statements and also to discuss the inception report. The workshop will endeavour to fine-tune the policy statements to more accurately reflect the issues listed above.
The process of finalizing the policy statements involves broad input from task force members and senior government officials and our experience of such work is that a number of draft and review cycles may be needed before all parties can sign off on it. The time involved in achieving this could be greater than anticipated in the GoN’s request. We cannot plan on the basis of an open-ended review process and we will therefore assume that the Policy Statements updated after the second consultation workshop will provide a sound platform for formulating the strategies and action plans. It is therefore important that the feedback received in the review cycles and at the second consultation workshop is comprehensive and pertinent.
We emphasize the point that reasonable progress must be made with the Policy Paper in the early stages of the assignment. The drafting of the strategies and action plans will only be carried out once an acceptable level of consensus on policy statements has been reached.
(iii) Third Consultation Workshop - Strategies and Action Plans
The final policy statements will provide the basis for the formulation of appropriate strategies for implementing the policy and associated action plans. The NETF will convene to draw up the strategies and action plans. It is anticipated that at the end of the workshop the NETF will be able to reach consensus and finalise the strategies and action plans.
4.2 Financing Energy Projects
Additional finance is required to supplement what is provided under the government budgetary allocation. As experience tells us we cannot depend entirely on government budgetary allocation as this may not be sufficient to implement all the plans in the policy. Therefore, we will examine all potential sources of energy project finance including the options provided under Kyoto Protocol (CDM, Carbon trading). There are also opportunities available promoted by international and regional development banks such as the World Bank (WB), Asian Development Bank (ADB), etc. The UNDP-GEF Small
Preparation of the Energy Policy Framework – Nauru Government 11 Grants Programme (SGP) is also a potential source of funding, especially for “Removing Barriers to Energy Conservation and Energy Efficiency” and “Promoting the Adoption of Renewable Energy by Removing Barriers and Implementation Costs” under its “Operational Programme” 5 and 6 respectively. There are also potential resources available under some current regional energy programmes. For instance PIEPSAP will explore funding benefits under the Pacific Islands Greenhouse Gas Abatement through the promotion of Renewable Energy Programme (PIGGAREP) being implemented by the Secretariat of the Pacific Regional Environment Programme (SPREP) and is due to commence in July this year. PIEPSAP will provide assistance in developing project proposals to assist the GoN in accessing these potential funding sources.
5.0 Training
5.1 Overview
PIEPSAP is a capacity building project and in Nauru the focus of the training will be on strategic planning and policy development. Presently, the capacity to carry out strategic planning and policy formulation in Nauru is weak and therefore needs to be strengthened. The training delivered under PIEPSAP will be carried out through an interactive process and will be based on planned workshops, seminar and working sessions. It is important to note that training under the PIEPSAP project is “hands-on” and therefore will be structured accordingly.
5.2 Objectives and Training
The training component of PIEPSAP is targeted at increasing the capacity of the MCRI in energy policy and strategic planning and as alluded to above this will be done through workshops, working sessions, seminar and interactive training provided during our consultations and discussions with task force members. However, in the process of undertaking the TA and there are specific skill areas identified that need further strengthening through specialized training, PIEPSAP will try to highlight these areas and seek external assistance to address these training needs. It is to be noted that these types of specialised training are beyond the scope of the PIEPSAP TA, thus the need to seek further assistance.
5.3 Scope of Training
The activities for this TA will be interactive and practical as much as possible. As alluded to earlier there will be consultation workshops, seminars, group and individual discussions. All these activities will be carried out to ensure that those participating in these consultations, seminars and discussions learn as much as possible from participating. To facilitate as mush learning as possible we propose the following components: :
• Informal Interactive Working Sessions to be conducted during our first mobilization. The format would be loosely structured, taking the form of
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question and answer sessions, “off the cuff” presentations and ad hoc tutorials. We will base this type of training on a list of preferred subjects that we will solicit from our counterparts.
• Consultation Workshops: The principal objective of the Consultation Workshops is to discuss the current status of the sector with the view to developing the national energy policy together with the strategies and action plans. The workshops will be interactive and conducted to encourage participation by all Team members.
• Informal Interactive Training will be provided through day-to-day contact with people – in meetings and discussions. The nature of the assignment does not lend itself well to this form of training as there are no specific skills to acquire (such as mastering software, learning investigation and testing techniques or acquiring particular design skills).
We will consult with the MCRI, DPPD, AMU and other key agencies on specific training requirements and structure our program accordingly.
6.0 Time Schedule and Deliverables
6.1 Program
Our indicative program for delivery of deliverables is outlined below. The program is subject to discussion with staff of the MCRI and DPPD and AMU and will be transformed in a detailed Schedule.
Milestone: Timing:
First Consultation Workshop – Review of 3 weeks after agreement of the existing policy statements TOR.
Second consultation Workshop – 6 weeks after first discussion of Inception report and finalise consultation meeting. policy statements.
Third Consultation Workshop – Discussion 6 weeks after second on Strategies and action plans. consultation workshop.
Submit Final Outputs (Policy statements, 3 weeks after the third
Preparation of the Energy Policy Framework – Nauru Government 13 strategies and action plans to MCRI). consultation workshop.
6.2 Reporting
The reporting requirements during the assignment will also be discussed with the MCRI, DPPD and AMU. We suggest the following as a basis for discussions:
• Final Agreement (ToR) PIEPSAP for support, before commencement of the assignment • Inception Report • Report on Consultation workshops • Final Draft Corporate Plan • Final Draft National Energy Policy • Final Report.
7.0 Personnel
7.1 Team Composition and Task Assignments
The PIEPSAP Team comprises of the following expertise a:
i. Team Leader; ii. National Coordinator; iii. Policy and Strategic planning; iv. Regulatory Specialist; v. Legal Specialist; vi. Economic and Financial Specialist; and vii. Environment Specialist.
Each team member is expected to provide inputs necessary for the formulation of the energy policies, strategies and action plans. As such we have very briefly stated a definition of the tasks expected of the team members in the table below.
Name Position Tasks (Main Responsibilities) Anare Team Leader To oversee that the PIEPSAP activities relating to the Matakiviti _ formulation of the energy policy framework and as PIEPSAP agreed in the TOR are executed thoroughly and Energy successfully. Adviser Bryan Star National Coordinator Coordination of all activities implemented at country level. Anare Policy and Regulatory Provide advice on the drafting of policy statements, Matakiviti – Specialist strategies and appropriate regulations. PIEPSAP Energy Adviser Carla Adami Economic/Financial Specialist Provide advice on financial and economic issues and energy pricing related to the formulation of
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appropriate policies to facilitate implementation.
Fred Amoa Legal Specialist Provide advice on the legal issues related to policy formulation and its implementation. To also ensure that the energy policy is consistent and operable with the existing legal framework in which it is going to operate. Tyrone Environmental Specialist Provide advise on environmental issues most critical Deiye to Nauru
7.2 Staff Schedule
Staff Jun Jul Aug Sep Oct Nov Commitment A. Matakiviti
B. Star
Fred Amoa
Carla Adami Tyrone Deiye Consultations First – Energy Policy Framework Second – Energy Policy Framework
Third – Energy Policy Framework
Final Report
Preparation of the Energy Policy Framework – Nauru Government 15
Key
Continuous Engagement
Permanent Engagement
Link
Consultation – Energy Policy Framework
Final report
Preparatory Period
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