|Project Rationale and Linkage to Country/Regional Strategy
1. Fossil fuel reliance poses a major constraint to the provision of sustainable and reliable electricity services at affordable prices, necessary to promote economic growth. Developing indigenous and renewable energy sources is a viable solution for achieving energy sector priorities, as it will deliver socially acceptable, technically feasible, and affordable electricity services. Although renewable energy resources for power generation are limited in Samoa, there are opportunities.
2. The energy sector in Samoa is highly vulnerable to rising international oil prices, characterized by a heavy reliance on imported petroleum rather than on renewable energy sources for power generation. Samoa's total fossil fuel consumption accounts for about 15% of the total import expenditure every year. In 2011 the total fuel imports accounted for approximately 95 million liters, of which 67% were consumed by the transport sector, 21% used for electricity generation, and the remaining 12% consumed by the commercial, agriculture, forestry, and residential sectors. Fuel imports represent about 10% of the total gross domestic product of $565 million. This fossil fuel reliance is also reflected within the Samoan electricity generation matrix , comprising 60% of electricity generated by diesel generators, 38.9% by hydropower plants, 1% by biofuel (coconut oil) plants, and 0.1% by solar generators. For the power utility, the Electric Power Corporation (EPC), fossil fuel is by far the single largest expense item representing 74% of total generation costs and 51% of overall costs. The utilities power asset management is still under development, hence power distribution system has about 20% losses, and the average tariff of electricity fluctuates between $0.40 - $0.55 per kilowatt hour (kWh).
3. Samoa comprises two main islands, Savai'i and Upolu, where the capital city Apia is situated, and two isolated outer islands. EPC's power system in Savai'i and Upolu, each have independent grids, while small stand-alone solar and diesel generation schemes operate on the two isolated outer islands. The total installed power generation capacity mix of EPC in 2011 was 42 megawatt (MW), composed of 30 MW diesel generators, 11 MW run of river hydropower plants, 1 MW biofuel power plants, and small distributed solar generators in the few kilowatt (kW) range, generating about 121.4 gigawatt hour (GWh) of electricity . About 95% of the population has access to grid electricity, while the remaining 5% is connected to small diesel generators or solar systems.
4. EPC is a wholly government owned corporation vested with all operating responsibilities for solely managing the power sector with the main objective of operating as a commercial business. It was established on 19 December 1972 under the EPC Act 1972. After many amendments the Electricity Act 2010 provides for a new legislative framework for regulating the electricity sector, including the establishment of the post of the Electricity Regulator and the Office of the Regulator.
5. The Samoa National Energy Policy (2007) identifies development of renewable energy resources and the promotion of energy efficiency and conservation for end users as one of the main driving forces for achieving a sustainable energy sector. The Government's Strategy for the Development of Samoa 2012-2016 reiterates that developing indigenous and renewable energy resources to reduce the economy's risk exposure to foreign exchange fluctuations and fuel price increases is a high development priority for the country. EPC's Corporate Plan 2013-2015 and Energy Sector Plan 2013-2016 identifies also diversification through development of indigenous and renewable energy resources as a key priority to reduce current reliance on diesel. In 2007 and 2008 with ADB's support the Government prepared the Power Sector Expansion Program . The technical assistance prepared a least-cost power sector investment plan to diversify energy resources, meet future load growth, and reduce the burden of diesel imports. EPC prepared feasibility studies for developing a small hydropower scheme.
6. The proposed project will assist the government's efforts to reduce the country's heavy reliance on imported fossil fuels for power generation. By providing a secure, sustainable and environmentally-sound source of electricity for consumers, it will implement a package of small hydropower equipment and works in Upolu and Savai'i Islands consisting of an indicative grid connected new power capacity of about 2.5 MW, generating an additional estimated 10,047 megawatt hour (MWh) of electricity per year.
7. The proposed project is in line with ADB's Energy Policy 2009 which promotes deployment of clean energy in its developing member countries as a key activity and is included in Samoa's Country Partnership Strategy (2008-2012) and Country Operation Business Plan 2012-2014.