OUTLINE OF EXPRESSION OF INTEREST TO PARTICIPATE IN SREP I. COUNTRY AND GOVERNMENT AGENCY SUBMITTING EXPRESSION OF INTEREST Country: The Republic of the Marshall Islands Government Agency: Marshalls Energy Company, Inc. II. DESCRIPTION OF THE COUNTRY AND ENERGY SECTOR CONTEXT The Government and people of the Republic of the Marshall Islands (RMI) have been concerned about the country’s dependency on electricity generated from imported diesel fuel, for which the RMI is spending about 30% of the country’s GDP. The cost of diesel fuel in the RMI has nearly doubled over recent years and is likely to continue rising in the face of increasing global demand and shortage of supply. In order to reduce this vulnerability, the 20% substitution of diesel with renewable energy for the generation of electricity by 2020 is a policy firmly supported by the RMI Government. Currently, electricity in the principal centres of the RMI is totally generated using diesel generators. The applicant, the Marshalls Energy Company, Inc., (MEC) was granted a corporate charter by the Cabinet of the RMI in February 1984. MEC’s principle lines of business are predominantly the generation and distribution of electricity and the buying and selling of petroleum products. MEC’s articles of incorporation have authorized 75% of the company’s shares to the Government of the RMI while MEC retains 25% of the shares. Thus MEC retains close ties with the RMI Government, especially in relation to the funding of capital projects and the setting of the company’s electricity tariff. Since MEC diesel generators are no longer capable of further improvements in their operational efficiencies and as the price of fuel is expected to increase steadily in the future, and while electricity generation continues to be totally reliant on existing diesel generators, then any decrease in the electricity tariffs to an affordable level will not be feasible. MEC is therefore keen to shift from total reliance on diesel generation to a hybrid system of diesel and renewable energy generation. While it is not realistic for diesel generation to be totally replaced by renewable energy generation in the RMI, wind and solar are viable options for supplementing diesel generation and in doing so, significantly reducing the amount of diesel fuel consumed and making real monetary savings in less fuel purchased by the RMI. This in turn can reduce the electricity tariff as well as dispensing with the RMI government’s subsidy to the electricity sector, thus freeing up more funds for other development projects. The RMI National Energy Policy (RMIEP) outlines three principal considerations namely: - i. Supply issues – the provision of adequate, secure and cost-effective energy supplies through the promotion of indigenous energy resources, specifically renewable energy resources, using the least cost options and diversification of supply sources from both within and outside the country, is critical to ensuring security of supply; ii. Utilization issues – efficient utilization of energy and to discourage wasteful and non- productive patterns of energy consumption, is vital for a country that is so dependent on imported energy resources; and iii. Environmental issues – it is important that energy policies are targeted at minimizing the negative impacts of energy production, transportation, conversion, utilization and consumption on the environment. The electricity component of the RMINEP stresses the importance of establishing a reliable electricity supply to support socio-economic development. It also highlights the need for MEC to be nurtured and strengthened to ensure that electricity supplies are reliable and sustainable. Measures such as institutional strengthening, capacity development, asset management and promoting renewable energy technologies are given prominence. The link between energy and environment highlights the importance of having to place more efforts to the development of renewable energy resources available in the RMI. The development of renewable energy resources to diversify the energy mix in the RMI offers some degree of energy security. Renewable energy resources such as solar, wind and biofuel provide a good prospect to broaden the energy supply in the RMI. A 209kW grid-connected solar array on the roof of the National hospital has already been installed and commissioned in Majuro. A 209kW is not a small installation when compared to the size of the Majuro electricity system and represents 2% of the Majuro peak demand of 7.9MW. Monitoring, evaluating and training of MEC personnel in solar technologies is a continuing policy. Furthermore, through EDF9 and ROC Government funding, a centralized 21kW solar PV/battery systems and home solar systems have been installed and commissioned at several outer island secondary schools and homes throughout the Marshall Islands In its efforts to enhance energy security and to be a lead country in the use of renewable energy, the RMI Government has set a 20% renewable energy target for electricity generation by 2020. The MEC has a memorandum of understanding with the RMI Government through the Ministry of Resources and Development to oversee the management, implementation and maintenance of renewable energy projects within the Marshall Islands. This covers the solar home systems being provided to all outer island homes within the RMI including schools and health centers. MEC operates solar installations on twenty atolls and islands throughout the Marshall Islands. Typical Solar House Installation A typical solar house installation will consist of two solar panels mounted on an aluminium pole structure and connected to a deep-cycle battery, charge controller and circuit breaker, all mounted within a weatherproof box clamped to the support pole. Currently, there are a total of 2,675 houses throughout the Marshall Islands equipped with solar power installations. Installation sites are indicated on the following map of the Marshall Islands. Wotho Atoll Kwajalein Atoll Likiep Atoll Ailuk Atoll Mejit Island Lib Atoll Wotje Atoll Ujae Atoll Namu Atoll Lae Atoll Maloelap Atoll Jabot Island Aur Atoll Ailinglaplap Atoll Arno Atoll Mili Atoll Namdrik Atoll Ebon Atoll Majuro Atoll Jaluit Atoll MEC Solar Installation Locations throughout the Marshall Islands The following table details the locations and the number of households currently equipped with solar power installations installed by MEC throughout the atolls and islands of the Marshall Islands. LOCATION HOUSEHOLDS LOCATION HOUSEHOLDS Ailinglaplap Atoll 450 Likiep Atoll 130 Ailuk Atoll 84 Majuro Atoll 27 Arno Atoll 385 Maloelap Atoll 136 Aur Atoll 80 Mejit Island 80 Ebon Atoll 100 Mili Atoll 110 Jabot Island 23 Namdrik Atoll 121 Jaluit Atoll 270 Namu Atoll 164 Kwajalein Atoll 297 Ujae Atoll 73 Lae Atoll 51 Wotho Atoll 28 Lib Island 23 Wotje Atoll 42 The RMI Government’s overall objective is to reduce the country’s reliance on fossil fuels for electricity generation and to reduce greenhouse gas emissions by integrating photovoltaic electricity generation into the network. This is consistent with the priorities and strategies entailed under RMIEP, which is to promote the use of renewable energy resources through the implementation of cost effective, equitable, reliable, accessible, affordable, secure and environmentally sustainable energy systems. The action plan has been structured to increase the share of renewable energy in the RMI from 20% against the overall available generation capacity and will contribute towards achieving the renewable energy target by 2020. To achieve this and to address the various related issues and concerns, the following are the key intervention areas that would be carried out under the RMI action plan for implementing renewable energy projects. TYPE OF INTERVENTION DETAILS Solar PV grid-connected The installation & commissioning of 800kW of grid-connected 1. power systems. Solar PV systems in Majuro and 200kW system in Ebeye. Support to the Renewable Energy and Energy Efficiency Unit of MEC and KAJUR, which will subsequently strengthen the 2. Institutional Strengthening action management mechanism that will contribute to the successful implementation of activities. Mobilize additional resources to develop the capacity of MEC 3. Capacity Development and KAJUR to maintain and support the operations of Solar PV grid-connected systems. Educational & Awareness Feasible, practical and visible use of renewable energy for 4. Enhancement remote islands. Monitoring & Evaluation To assess the overall performance of the action plan after 12- 5. of the Project months operation following installation and commissioning. III. RATIONALE FOR SELECTED SECTORS FOR SREP FINANCING The Government of the Marshall Islands is fully committed to National Energy Policy (RMIEP) which stresses the importance of establishing a reliable electricity supply to support socio- economic development throughout the country. In its efforts to enhance energy security and be a lead country in the use of renewable energy, the RMI Government has set a 20% renewable energy target for electricity generation by 2020. As such, with the Government’s full commitment to renewable energy projects, which in the Marshall Islands is principally solar, the only barrier preventing the Government from achieving its renewable energy target is finding sufficient funding agencies to finance all of its renewable energy projects. Essentially, the renewable energy program has been operating since 2008 and now only needs additional