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Energy Master Plans for the Federated States of Micronesia

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Energy Master Plans for the Federated States of Micronesia Confidential Energy Master Plans for the Federated States of Micronesia Final Report to the Department of Resources and Development April 2018 Copyright Castalia Limited. All rights reserved. Castalia is not liable for any loss caused by reliance on this document. Castalia is a part of the worldwide Castalia Advisory Group. Confidential Table of Contents Executive Summary iii 1 Introduction 10 2 Approach 11 2.1 Technical Plan 11 2.2 Financing Plan 12 2.3 Implementation Plan 14 2.4 Outcomes 15 3 National Energy Master Plan 16 3.1 Outcomes 16 3.2 Implementation Plan 21 3.2.1 Capital Expenditure Requirement 21 3.2.2 Institutional responsibilities and coordination 22 3.2.3 Policy support 23 4 Chuuk State Energy Master Plan 25 4.1 Technical Plan 25 4.1.1 Chuuk main grid 26 4.1.2 Chuuk lagoon and outer islands 30 4.2 Financing Plan 32 4.3 Implementation Plan 35 4.3.1 Rollout of physical capital projects 36 4.3.2 Implementation capacity 40 4.3.3 Implementation risks 42 4.4 Outcomes 43 5 Kosrae State Energy Master Plan 46 5.1 Technical Plan 46 5.1.1 Kosrae main grid 47 5.1.2 Walung mini-grid 50 5.2 Financing Plan 51 5.3 Implementation Plan 54 5.3.1 Rollout of physical capital projects 54 Confidential 5.3.2 Implementation capacity 56 5.3.3 Implementation risks 56 5.4 Outcomes 58 6 Pohnpei State Energy Master Plan 60 6.1 Technical Plan 60 6.1.1 Pohnpei main grid 61 6.1.2 Other islands 65 6.2 Financing Plan 66 6.3 Implementation Plan 70 6.3.1 Rollout of physical capital projects 70 6.3.2 Implementation capacity 73 6.3.3 Implementation risks 73 6.4 Outcomes 74 7 Yap State Energy Master Plan 76 7.1 Technical Plan 76 7.1.1 Yap Proper main grid 77 7.1.2 Other islands 81 7.2 Financing Plan 84 7.3 Implementation Plan 88 7.3.1 Rollout of physical capital projects 88 7.3.2 Implementation capacity 92 7.3.3 Implementation risks 93 7.4 Outcomes 93 Appendices Appendix A: List of Stakeholders Consulted Appendix B: Technical Plans – Inputs and Approach Appendix C: Financing Plans – Inputs and Approach Appendix D: Financing Plans – Historical Performance of FSM’s Utilities Appendix E: Implementation Plans – Risk Assessment Appendix F: Implementation Plan – Social Assessment Appendix G: Implementation Plans – Environmental Assessment Confidential Appendix H: Implementation Plans – Outsourcing Options Appendix I: Demand-Side Management Tables Table 3.1: Average Diesel Use, Gallons per Year 18 Table 3.2: CO2 Emissions, Annual Average Tonnes 19 Table 3.3: National Capital Expenditure Requirement (US$ million 2016) 22 Table 4.1: Chuuk New Generation and Storage Capacity for Main Grid 27 Table 4.2: Average Annual New Connections 29 Table 4.3: Distribution Network Asset Replacement (average annual figures, US$) 30 Table 4.4: Chuuk Mini-grid Generation Capacity 2018–2037 31 Table 4.5: Number of Stand-alone Solar Systems by Customer Type 32 Table 4.6: Capital Expenditure Requirements (US$ million 2016) 32 Table 4.7: Average Tariff Required to Cover Cashflows by 5-year Period and Customer Segment, US$ per kWh 35 Table 4.8: Rollout Plan for Chuuk 37 Table 4.9: Capacity Requirements for CPUC 41 Table 4.10: Chuuk Emissions and Diesel Use 45 Table 5.1: Kosrae New Generation and Storage Capacity for Main Grid 48 Table 5.2: Average Annual New Connections 50 Table 5.3: Distribution Network Asset Replacement (average annual figures, US$) 50 Table 5.4: Walung Mini-grid Capacity 2018–2037 51 Table 5.5: Capital Expenditure Requirements (US$ million 2016) 51 Table 5.6: Average Tariff Required to Cover Cashflows by 5-year Period and Customer Segment, US$ per kWh 53 Table 5.7: Rollout Plan for Kosrae 55 Table 5.8: Capacity Requirements for KUA 56 Table 5.9: Kosrae Emissions and Diesel Use 59 Confidential Table 6.1: Pohnpei New Generation and Storage Capacity for Main Grid 62 Table 6.2: Average Annual New Connections 64 Table 6.3: Distribution Network Asset Replacement (average annual figures, US$) 65 Table 6.4: Kapingamarangi Mini-grid Capacity 2018–2037 65 Table 6.5: Pingelap and Sapwuahfic Mini-grid Capacity 2018–2037 65 Table 6.6: Number of Stand-alone Solar Systems by Customer Type 66 Table 6.7: Capital Expenditure Requirements (US$ million 2016) 67 Table 6.8: Average Tariff Required to Cover Cashflows by 5-year Period and Customer Segment, US$ per kWh 69 Table 6.10: Capacity Requirements for PUC 73 Table 6.11: Pohnpei Emissions and Diesel Use 75 Table 7.1: Yap New Generation and Storage Capacity for Main Grid 78 Table 7.2: Average Annual New Connections 80 Table 7.3: Distribution Network Asset Replacement (average annual figures) 80 Table 7.4: Falalop, Ulithi Mini-grid Capacity 82 Table 7.5: Falalop, Woleai Mini-grid Capacity 82 Table 7.6: Mogmog Mini-grid Capacity 82 Table 7.7: Ifalik and Lamotrek Mini-grid Capacity 83 Table 7.8: Number of Stand-alone Solar Systems by Customer Type 84 Table 7.9: Capital Expenditure Requirements (US$ million 2016) 85 Table 7.10: Average Tariff Required to Cover Cashflows by 5-year Period and Customer Segment, US$ per kWh 87 Table 7.11: Rollout Plan for Yap 89 Table 7.12: Capacity Requirements for YSPSC 92 Table 7.13: Yap Emissions and Diesel Use 95 Figures Figure 3.1: Summary of National-level Outcomes of State Energy Master Plans 16 Figure 3.2: Electricity Access - Households 17 Figure 3.3: RE Percentage of Total Generation 18 Confidential Figure 4.1: Summary of the Chuuk State Energy Master Plan 25 Figure 4.2: Summary of New Infrastructure in Chuuk Technical Investment Plan 26 Figure 4.3: Weno Load Duration Curve and Contribution of Generation Sources, 2023 28 Figure 4.4: Estimated State-wide Operating Expenses, US$ million 33 Figure 4.5: Cash Requirements in the Three Financing Scenarios, US$ million 34 Figure 4.6: Summary of Outcomes of the Chuuk State Energy Master Plan 44 Figure 4.7: RE Percentage of Generation for Chuuk 44 Figure 5.1: Summary of the Kosrae State Energy Master Plan 46 Figure 5.2: Summary of New Infrastructure in Kosrae Technical Investment Plan 47 Figure 5.3: Kosrae Load Duration Curve and Contribution of Generation Sources, 2023 48 Figure 5.4: Estimated State-wide Operating Expenses, US$ million 52 Figure 5.5: Cash Requirements in the Three Financing Scenarios, US$ million 53 Figure 5.6: Government Land in Kosrae 57 Figure 5.7: Summary of the Outcomes of the Kosrae State Energy Master Plan 58 Figure 5.8: RE Percentage of Generation for Kosrae 59 Figure 6.1: Summary of the Pohnpei State Energy Master Plan 60 Figure 6.2: Summary of New Infrastructure in Pohnpei Technical Investment Plan 61 Figure 6.3: Pohnpei Load Duration Curve and Contribution of Generation Sources, 2033 63 Figure 6.4: Estimated State-wide Operating Expenses, US$ million 68 Figure 6.5: Cash Requirements in the Three Financing Scenarios, US$ million 69 Figure 6.6: Summary of Outcomes of the Pohnpei State Energy Master Plan 74 Figure 6.7: RE Percentage of Generation for Pohnpei 75 Figure 7.1: Summary of Outcomes of the Yap State Energy Master Plan 76 Confidential Figure 7.2: Summary of New Infrastructure in Yap Technical Investment Plan 77 Figure 7.3: Yap Load Duration Curve and Contribution of Generation Sources, 2023 79 Figure 7.4: Estimated State-wide Operating Expenses, US$ million 86 Figure 7.5: Cash Requirements in the Three Financing Scenarios, US$ million 87 Figure 7.6: Summary of Outcomes of the Yap State Energy Master Plan 94 Figure 7.7: RE Percentage of Generation for Yap 95 Confidential Acronyms and Abbreviations ADB Asian Development Bank BESS Battery Energy Storage Systems COL Concessional OCR loans CO2 Carbon dioxide CPUC Chuuk Public Utility Corporation DSM Demand-side management EE Energy Efficiency EPA Environmental Protection Agency ESS Energy storage systems FSM Federated States of Micronesia GCF Global Climate Fund GHG Greenhouse gas IBRD In ternational Bank for Reconstruction and Development IDA International Development Association IMF International Monetary Fund INDC Intended Nationally-Determined Contribution IPP Independent power producer JICA Japanese International Cooperation Agency KUA Kosrae Utilities Authority LRMC Long-run marginal cost LV Low-voltage MD Maximum Demand MDB Multilateral Development Bank MFD Maximising Funds for Development MFAT New Zealand Ministry of Foreign Affairs and Trade MV Medium-voltage i Confidential NEP National Energy Policy NEW National Energy Workgroup NGO Non-government organisation NPV Net Present Value O&M Operations and maintenance ODA Overseas Development Assistance OCR Ordinary Capital Resources PPA Power Purchase Agreement PSC Public section comparator PUC Pohnpei Utilities Corporation PV Photovoltaics R&D Research & development RE Renewable energy SEW State Energy Workgroup SHS Solar home system tCO2-e Tonnes of CO2 equivalent TOR Terms of reference US$ United States dollars VfM Value for money YSPSC Yap State Public Service Corporation ii Confidential Executive Summary This report presents the Energy Master Plans for each of the Federated States of Micronesia (FSM), and for the nation. The Master Plans have been developed during the period of unprecedented technological change. The last few years have seen remarkable and disruptive improvements in renewable energy (RE) technologies and battery storage. Further expected reductions in the costs of these technologies provide FSM with an opportunity to combine achievement of its environmental targets with ensuring that electricity production remains affordable. At the same time, FSM faces a significant challenge of delivering electricity to people living on outer islands.
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