|Project Rationale and Linkage to Country/Regional Strategy
The proposed Outer Island Renewable Energy Project (Project) will support development of renewable energy in the Solomon Islands. It focuses on the outer islands where it will decrease the cost of power supply and increase access to power. This will be achieved through the development of low cost hydropower generation in provincial centers and through expansion of existing distribution grids .
Electricity is generated and supplied by the Solomon Islands Electricity Authority (SIEA), which is a state-owned electricity utility that has the sole mandate to provide power across the country, including the national capital (Honiara) and eight outstations (Auki, Buala, Gizo, Kirakira, Lata, Malu'u, Noro-Munda, and Tulagi). Installed capacity in Honiara is 26 MW (peak load 14.3 MW) and combined installed generation capacity in the outer islands is 4MW. Provision of electricity services is concentrated on Honiara in Guadalcanal. While 87% of the installed power generation is located in Honiara, Guadalcanal accounts for only 12% of the population (total population 553,000). Electricity in the outstations is 100% diesel generated with the exception of mini-hydropower operated in Malu'u (0.04 MW) and Buala (0.15 MW). There is currently no private sector participation in power generation.
Due to the reliance on diesel generation, power tariffs in Solomon Islands are high. SIEA charges a national uniform tariff, which in 2010 was $0.59 c/kWh to residential customers and $0.63/kWh to commercial customers. Due to the high cost of transporting diesel to the outstations, generation costs in the outer islands are considerably higher than Honiara. Generation costs in the outer islands are significantly higher than in Honiara ($0.53 in Honiara compared to $0.94 in Lata). The high cost of power generation in the outer islands has a negative financial impact to SIEA's operations and provides a disincentive to the corporatized SIEA to expand the distribution network. Nationwide electricity is supplied to approximately 14% of the population . With few exceptions, electrification is confined to Honiara and eight provincial centers. Outside of these urban centers, less than 5% of the rural population has access to electricity through a small number of off grid and individual household solar systems. Access rates in Guadalcanal (Honiara) is 20% and Western Province is 17%, however access rates in the remaining provinces is extremely low, for example Malaita 3%, Temotu 3%, Choiseul 2%. The current electricity tariff does not allow full cost recovery for SIEA. As a result investment in maintenance and expansion of core power infrastructure has been lacking. Revenue collection is relatively low (estimated 80-90%), however SIEA is undertaking an ambitious effort to install prepayment meters on all consumers in parallel with an overhaul of the billing, accounting, and data management systems.
Existing off-grid renewable energy projects in Solomon Islands include a range of household solar system programs and a small number of community based pico-hydropower schemes operating located in remote villages. Wind monitoring is also proposed at target sites. Grid connected renewable energy is limited to mini-hydropower at Buala and Malu'u and a SIEA trial to replace diesel with coconut oil in the second largest outstation (Auki, Malaita). The Tina River Hydropower Project (14 MW) is currently being assessed to supply the Honiara grid. Previous technical analysis has identified excellent hydropower resources in the outer islands near demand load centers. It is estimated that hydropower could deliver levelized cost of energy generation of 6-12 c/kWh to a number of outstations.
The proposed project will not only contribute to SIEA's financial restructuring through reducing financial losses in the outstations, but also significantly increase access to electricity in the outer islands. The proposed project is also in line with the ADB's country partnership strategy (CPS) 2012-2016 for Solomon Islands, which prioritizes energy as a key area of support. The CPS supports the Solomon Islands National Development Strategy 2011-2020, which prioritizes development of reliable and affordable power supply in urban centers through renewable energy and prioritizes increasing electricity access. The proposed project supports the Solomon Islands National Energy Policy Framework, 2007 which prioritizes development of renewable energy for urban areas.