Nauru : Solar Power Development Project

Sovereign Project | 49450-009

The Solar Power Development Project will finance (i) a grid-connected solar power plant with a capacity of 6 megawatts (MW) of alternating current; and (ii) a 2.5-megawatt-hour, 5 MW battery energy storage system (BESS) to enable smoothing of intermittent solar energy. The system will be fully automated and integrated with the existing diesel generation system (17.9 MW of installed capacity, currently operated manually) to optimize solar energy use, enable optimal BESS charging and discharging, and allow optimal shut-off of the diesel engines. This will reduce Nauru's reliance on diesel for power generation and decrease production costs. The project will also support the institutional strengthening of Nauru Utilities Corporation (NUC). Project preparatory technical assistance was used to carry out project-enabling activities such as a Solar Power Expansion Plan for Nauru, project feasibility study, detailed design, and plant procurement contract bidding documents.

Project Details

Related Projects

Project Name
Solar Power Development Project
Project Number
49450-009
Country / Economy
  • Nauru
Project Status
Active
Project Type / Modality of Assistance
  • Grant
Source of Funding / Amount
Grant 0664-NAU: Solar Power Development Project
Source Amount
Asian Development Fund US$ 22.00 million
Operational Priorities
  • OP1: Addressing remaining poverty and reducing inequalities
  • OP2: Accelerating progress in gender equality
  • OP3: Tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability
  • OP6: Strengthening governance and institutional capacity
Sector / Subsector
  • Energy / Renewable energy generation - solar

Gender
Effective gender mainstreaming
Description

The Solar Power Development Project will finance (i) a grid-connected solar power plant with a capacity of 6 megawatts (MW) of alternating current; and (ii) a 2.5-megawatt-hour, 5 MW battery energy storage system (BESS) to enable smoothing of intermittent solar energy. The system will be fully automated and integrated with the existing diesel generation system (17.9 MW of installed capacity, currently operated manually) to optimize solar energy use, enable optimal BESS charging and discharging, and allow optimal shut-off of the diesel engines. This will reduce Nauru's reliance on diesel for power generation and decrease production costs. The project will also support the institutional strengthening of Nauru Utilities Corporation (NUC). Project preparatory technical assistance was used to carry out project-enabling activities such as a Solar Power Expansion Plan for Nauru, project feasibility study, detailed design, and plant procurement contract bidding documents.

Project Rationale and Linkage to Country/Regional Strategy

Country background. Nauru is a single isolated island in the South Pacific, with a land area of 21 square kilometers and a population of 13,300 in 2017. It is a small island developing state that is classified by ADB as a fragile and conflict-affected situation. Nauru's economy is narrowly based on revenue from the Nauru Regional Processing Centre and the sale of fishing licenses. In the 1970s, Nauru had one of the world's highest national incomes per capita because of its phosphate industry; however, by the late 1990s, the economy had contracted severely as production slowed. Although broad fiscal management reforms helped improve government finances, the country faces the difficult task of ensuring fiscal sustainability in the medium term.

Energy security. Nauru relies heavily on imported diesel for power generation. In 2018, only about 3% of its total electricity came from solar photovoltaic installations; the rest came from diesel generators. All fuel is imported through Nauru's single commercial port, which is highly vulnerable to severe weather events and the effects of climate change. This dependence on imported fossil fuel exposes the nation to price shocks from fluctuating fuel prices and creates the risk of power outages if diesel supply is interrupted. The Government of Nauru is committed to improving energy security and reducing greenhouse gas emissions, and has set ambitious renewable energy targets for power generation by 2020 in the Nauru Energy Road Map, 2018-2020. Electricity demand is generally flat at about 4 MW. That is expected to increase minimally. Uncertainty surrounds future demand because it depends on whether large power consumers such as Australia's processing center, Republic of Nauru Phosphate Corporation, or the new Nauru Port, are connected to the national grid.

Energy sector development. The cost of power generation in Nauru is high - regularly more than $0.40 per kilowatt-hour (kWh), depending on international fuel prices. Historically, tariffs did not cover the cost of supplying power, so the government had to bear annual subsidy costs of $3-$4 million. However, this situation is rapidly improving, in part because of ADB's recent TA support to developing legislation for NUC, preparing a corporate strategy for NUC, preparing tariff and subsidy policy reforms (including a subsidy for disadvantaged residents), preparing an asset management and maintenance plan, improving NUC's accounting systems, and implementing a revised corporate governance structure. In 2017, ADB financed two high-efficiency diesel generators and a new switchgear through the Electricity Supply Security and Sustainability Project, to help supply baseload, reduce power outages, and improve system reliability and efficiency. This improved revenue, operations, and service reliability. But the legal framework to develop renewable energy is limited; and institutional reforms, tariff revisions, and private sector engagement for renewable energy are needed.

Barriers to sector development. The government and NUC have limited borrowing capacity, and available government funds and revenue from electricity customers are insufficient to finance capital costs. NUC operates a 500-kilowatt (kW) solar plant, funded by the United Arab Emirates, and is constructing a 1.0 MW solar plant, funded by the Government of New Zealand and the European Union. Despite this progress, NUC requires (i) further financial assistance for large solar assets; (ii) support to integrate new assets into the grid; (iii) capacity building in the areas of solar power generation and BESS maintenance to ensure grid stability; and (iv) assistance in financial management, gender mainstreaming, and project implementation.

Impact

Reliable, affordable, secure, and sustainable energy supply to meet the socioeconomic development needs of Nauru.

The project is aligned with 50% of grid electricity supplied from renewable energy sources.

Viable power-generating capacity, including alternative (renewable) energy sources.

Project Outcome

Description of Outcome

The use of renewable energy within the grid will have increased and the cost of electricity generation will have decreased.

Progress Toward Outcome
The contract NUC/SPDP1 for Solar Farm/BESS/Substation/SCADA was awarded in July 2020. Effective date of contract commencement was 15 January 2021. Personnel mobilization started on 7 December 2021 when chartered flight arrived in Nauru.

Implementation Progress

Description of Project Outputs

Solar power plant installed

Battery energy storage system installed

Institutional capacity of NUC strengthened

Status of Implementation Progress (Outputs, Activities, and Issues)
In progress.
Geographical Location
Nation-wide

Safeguard Categories

Environment
B
Involuntary Resettlement
C
Indigenous Peoples
C

Summary of Environmental and Social Aspects

Environmental Aspects
Involuntary Resettlement
Indigenous Peoples

Stakeholder Communication, Participation, and Consultation

During Project Design
During Project Implementation

Business Opportunities

Consulting Services
All consultants will be recruited in accordance with ADB's Guidelines on the Use of Consultants (2013, as amended from time to time). Consulting services will be recruited through firms using the quality- and cost-based selection method (QCBS) with a quality to cost ratio of 90:10. Consulting services will include a Project Implementation Consultant (PIC) to review designs prepared by the contractor and provide supervision services/advice to NUC during the PPC.
Procurement

Procurement of goods and works for the Plant Procurement Contract (PPC) will follow ADB's Procurement Guidelines (2015, as amended from time to time) and will be based on ADB SBD (ICB Plant Procurement Method, and the Stage 1 Envelope Bidding Procedure) for the Procurement of Plant, Design, Supply and Installation. The contract will include final design and engineering, supply and installation of equipment, construction works and commissioning, and an O&M knowledge transfer program.

Advance contracting and retroactive financing will apply for the procurement of civil works and consultancy contracts. The amount to be retroactively financed will not exceed 20% of the ADB grant and can be done prior to grant effectiveness but not later than 12 months before the signing date of the grant agreement.

Contact

Responsible ADB Officer
Abbasov, Rafayil
Responsible ADB Department
Sectors Group
Responsible ADB Division
Energy Sector Office (SG-ENE)
Executing Agencies
Department of Finance

Timetable

Concept Clearance
29 Nov 2017
Fact Finding
29 May 2019 to 05 Jun 2019
MRM
12 Aug 2019
Approval
18 Sep 2019
Last Review Mission
-
Last PDS Update
28 Sep 2022

Funding

Grant 0664-NAU

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
18 Sep 2019 27 Sep 2019 30 Mar 2020 28 Feb 2024 30 Apr 2027 -
Financing Plan
  Total (Amount in US$ million)
Project Cost 26.98
ADB 22.00
Counterpart 4.98
Cofinancing 0.00
Grant Utilization
  Date ADB Others Net Percentage
Cumulative Contract Awards 20 May 2024 17.52 0.00 80%
Cumulative Disbursements 20 May 2024 11.49 0.00 52%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating - Satisfactory Satisfactory Satisfactory Satisfactory Satisfactory

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

The Access to Information Policy (AIP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.

The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.

In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.


Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.


Evaluation Documents See also: Independent Evaluation

None currently available.


Related Publications

None currently available.


The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.

Tenders

Tender Title Type Status Posting Date Deadline
Tariff and Regulation Expert Individual - Consulting Closed
49450-NAU: Solar Power Development Project [NUC/SPDP1] Invitation for Bids Closed
SPDP2-Project Implementation Consultants Firm - Consulting Closed
49450-NAU: Solar Power Development Project Advance Notice Active
49450-NAU: Solar Power Development Project Advance Notice Active

Contracts Awarded

Contract Title Approval Number Contract Date Contractor | Address Executing Agency Total Contract Amount (US$) Contract Amount Financed by ADB (US$)
PROJECT IMPLEMENTATION CONSULTANTS Grant 0664 12 Nov 2020 GHD LIMITED (NEW ZEALAND) | MANUKAU AUCKLAND 2105 NEW ZEALAND Department of Finance 1,612,721.83
6.0 MW SOLAR FARM BATTERY ENERGY STORAGE SYSTEM WITH A CAPACITY OF 2.5 MWH/5.0 MW AND AN 11KV Grant 0664 15 Jul 2020 CHEC-HNAC-RISEN JV | NO. 9 CHUN XIU ROAD DONGCHENG DISTRICT BEIJING CHINA PEOPLE'SREP.OF Department of Finance 14,311,732.68

Procurement Plan

Title Document Type Document Date
Solar Power Development Project: Procurement Plan Procurement Plans Dec 2020