Federated States ofMicronesia                      2010                      Energy PolicyVolume I                      De...
The Government of the Federated States of Micronesia                              dacknowledgesthe support of the European...
ForewordThe FSM is fully committed to the mandates of sustainability.This is most especially true when we talk about about...
TABLE OF CONTENTSLIST OF FIGURES ............................................................................................
3.       RENEWABLE ENERGY ...................................................................................................
LIST OF FIGURESFIGURE 1: STRUCTURE OF THE POLICY ............................................................................
LIST OF TABLESTABLE 1: PERCENTAGE OF POPULATION AND GDP PER STATE, 2007 (SOURCE: SBOC, 2009).................................
ABBREVIATIONSACF         Advocacy Coalition FrameworkADB         Asian Development BankAMU         Association of Micrones...
R&D         Department of Resources and DevelopmentSBOC        Office of Statistics, Budget & Economic Management, Oversea...
PREFACE AND ACKNOWLEDGEMENTSThe leadership of the Federated States of Micronesia acknowledged the need for the development...
CHA                                      APTER I: INTRODUCTION                                       1. POLICY STRUCTURECh...
2. POLICY SUMMARY                              levels of funding close to prevailing levels                               ...
Within these main components the policy           The Major Goal of the Policy is:seeks to achieve these goals:    1. An e...
-   Improve adequate and institutional             in policy implementation and integrated    capacity to plan, manage, an...
CHAPTER II: NATI                        IONAL CONTEXT AND ENERGY O VERVIEWFigure 2: Structure of the policy               ...
1.1 GEOGRAPHYThe islands in general can be categorized intotwo types of landscape. The state centers ofPohnpei, Chuuk Lago...
1.3 CLIMATE                        17 percent, respectively, in 2005 (DoI, 2006,                                          ...
14,400 persons are estimated to be involved        The Compact was designed to assist the FSMin the cash economy, and half...
8                                 “Shows little progress towards meeting the                                              ...
In Kosrae and Chuuk the GDP declined with               capita of $2,685, Pohnpei was 47 percent0.9 percent per year. (PIR...
As mentioned before, Yap has the highest GDPper capita, $3,034 in 2007. The averageincome per household is also the highes...
2. ENERGY SECTOR                                 in rural places. However, on the basis of a                              ...
In 2009, around $40 million US$, which is         Price Summarycomparable to over 50% of the national                     ...
Beyond the traditionally steep increase of the            utilities (10 percent) and losses of the systemprice for electri...
2.3. RENEWABLE ENERGY                          Month        Kosrae       Pohnpei       Chuuk          Yap                 ...
The project was set up by the University of                people that would otherwise have to liveGuam that provided work...
were bad. Those surveys should be reviewedin light of the fact of higher current fuel pricesand the sites for which it is ...
During its extensive operational life, it can          use of wind energy throughout the FSM. Afterprovide substantial fue...
The country has the opportunity to develop                             1992         1994          1996          1997coconu...
2.3.5 BIOMASS                                        2.3.6 BIOGASBiomass remains the largest source of energy         Ther...
2.4 ENERGY COSERV ATION &         EFFICIENCY                  YA recently completed report h estimated                    ...
CHAP TER III: POLICY FRAMEWORKFigure 12: Structure of the policy                  1. INSTITUT                            T...
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
FSM Energy Policy - Vol. I (Draft)
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FSM Energy Policy - Vol. I (Draft)

  1. 1. Federated States ofMicronesia 2010 Energy PolicyVolume I Department of Resources and Development Division of Energy
  2. 2. The Government of the Federated States of Micronesia dacknowledgesthe support of the European Unio and the Asian onDevelopment Bank inthe development of this national e energy policy.
  3. 3. ForewordThe FSM is fully committed to the mandates of sustainability.This is most especially true when we talk about about energy, both in how it is acquired and how it isused. As a nation and as a people, we must remain focused on the broadening of the energy baseand toward a reduction in our dependence on outside sources of energy. If we are to achieve thelong-term goals laid out in our National Strategic Development Plan, the energy that powers oureconomic and social aspirations of self-reliance must be affordable, reliable and above all, clean.Not only our people and governments, but our utilities – the very foundation of our fledglingeconomies – require that we proactively address the energy issue on a number of levels, especiallyfor electricity and transportation. The rising cost of fuel, combined with the global economicrecession has severely impacted the utilities’ ability to provide reliable electricy. Add to this therising cost of equipment and essential supplies needed by our four state utilities, and we can see theseeds of long-term financial insolvency of most, if not all of them.This has a multiplier effect on the rest of society. Families and businesses all feel the crunch. This iswhy the time is now to improve operational and consumer efficiencies, working toward lowering fuelprices by all means possible, increasing revenues across the board, and perhaps most important,increasing our use of renewable energy when and where possible.The challenges are great, but so too are the possibilities. They are numerous, and this Energy Policy– a first for the nation – is the tool by which we will move forward into an era of enhancedalternative energy use throughout society: in governments, in communities, at our schools andhealth centers, and within the private sector and business community.I remain committed to leading the way; for the FSM to become a leader in the application ofeconomically sound and technically proven alternative means; in the use of renewable energy, in theimplementation of energy efficiency measures and in the promulgation of incentives and regulationsthat support these aims. We can and must make this happen.Let us work together to make it a reality.H.E. Emmanuel MoriPresident
  4. 4. TABLE OF CONTENTSLIST OF FIGURES ............................................................................................................................................... 3LIST OF TABLES ................................................................................................................................................. 4ABBREVIATIONS ............................................................................................................................................... 5PREFACE AND ACKNOWLEDGEMENTS.............................................................................................................. 7CHAPTER I: INTRODUCTION ............................................................................................................................. 81. POLICY STRUCTURE ................................................................................................................................. 82. POLICY SUMMARY .................................................................................................................................. 9 2.1 GENERAL ......................................................................................................................................................... 9 2.2 VISION STATEMENT, OBJECTIVES AND GOALS........................................................................................................ 10 2.3 OVERALL ASPIRATION ....................................................................................................................................... 10CHAPTER II: NATIONAL CONTEXT AND ENERGY OVERVIEW ........................................................................... 121. COUNTRY OVERVIEW ............................................................................................................................ 12 1.1 GEOGRAPHY ................................................................................................................................................... 13 1.2 DEMOGRAPHY ................................................................................................................................................ 13 1.3 CLIMATE ........................................................................................................................................................ 14 1.4 ECONOMY ...................................................................................................................................................... 142. ENERGY SECTOR.................................................................................................................................... 19 2.1 ENERGY DEMAND ........................................................................................................................................... 19 2.2 PETROLEUM / CONVENTIONAL ENERGY ............................................................................................................... 19 2.3. RENEWABLE ENERGY ....................................................................................................................................... 22 2.4 ENERGY COSERVATION & EFFICIENCY ................................................................................................................. 28CHAPTER III: POLICY FRAMEWORK................................................................................................................. 291. INSTITUTIONAL AND SYSTEMIC FRAMEWORK ...................................................................................... 292. INSTITUTIONAL ..................................................................................................................................... 30 2.1 ACTORS AND INSTITUTIONS ............................................................................................................................... 30 2.2 COORDINATION AND PROGRAM MANAGEMENT .................................................................................................... 31 2.3 DIVISION OF RESPONSIBILITIES AND ORGANIZATIONAL STRUCTURE ............................................................................. 32 2.4 OVERALL GOALS .............................................................................................................................................. 331|P a g e
  5. 5. 3. RENEWABLE ENERGY ............................................................................................................................ 34 3.1 GOAL ........................................................................................................................................................ 34 3.2 OBJECTIVES ................................................................................................................................................ 344. ENERGY EFFICIENCY & CONSERVATION................................................................................................. 35 4.1 GOAL ........................................................................................................................................................ 35 4.2 OBJECTIVES ............................................................................................................................................. 355. CONVENTIONAL ENERGY....................................................................................................................... 36 5.1 GOAL ........................................................................................................................................................ 36 5.2 OBJECTIVES ............................................................................................................................................. 36 OVERVIEW ACTORS AND INSTITUTIONS ..................................................................................................................... 37 TABLES & FIGURES ................................................................................................................................................ 42WORKS CITED................................................................................................................................................. 512|P a g e
  6. 6. LIST OF FIGURESFIGURE 1: STRUCTURE OF THE POLICY .............................................................................................................................. 8FIGURE 2: STRUCTURE OF THE POLICY ............................................................................................................................ 12FIGURE 3: MAP OF THE FEDERATED STATES OF MICRONESIA .............................................................................................. 13FIGURE 4: REAL GDP GROWTH IN FSM 1997-2007 ....................................................................................................... 16FIGURE 5: WTI CRUDE OIL PRICE (SOURCE SHORT-TERM ENERGY OUTLOOK, FEBRUARY 2010)................................................ 21FIGURE 6: GENERATOR OF THE KOSRAE UTILITIES AUTHORITY. (SOURCE: DOI, 2006) ............................................................ 21FIGURE 7: INSTALLING SOLAR MODULE RACKS IN THE FSM. (SOURCE: AKKER, 2006).............................................................. 22FIGURE 8: HYDRO GENERATORS (NANPIL DAM, POHNPEI) ................................................................................................. 24FIGURE 9: HYDRO SYSTEM IN THE NANPIL RIVER, POHNPEI. ............................................................................................... 25FIGURE 10: AVERAGE WIND SPEED AT 50M .................................................................................................................... 25FIGURE 11: YSPSC CUSTOMER EDUCATION SOURCE: YSPSC NEWSLETTER JULY ‘08............................................................... 28FIGURE 12: STRUCTURE OF THE POLICY .......................................................................................................................... 29FIGURE 13: POLICY STRUCTURE .................................................................................................................................... 29FIGURE 14: PROPOSED INSTITUTIONAL STRUCTURE FOR IMPLEMENTATION ............................................................................ 39FIGURE 15: MAP OF THE FEDERATED STATES OF MICRONESIA ............................................................................................ 403|P a g e
  7. 7. LIST OF TABLESTABLE 1: PERCENTAGE OF POPULATION AND GDP PER STATE, 2007 (SOURCE: SBOC, 2009)................................................. 17TABLE 2: HOUSEHOLD ELECTRIFICATION FIGURES.............................................................................................................. 19TABLE 3: CRUDE OIL PRICE SUMMARY (SOURCE: HTTP://WWW.EIA.DOE.GOV/STEO) .............................................................. 20TABLE 4: ESTIMATED SOLAR RESOURCES HORIZONTAL PLANE IN KWH/M2/DAY (SOURCE: NASA SURFACE METEOROLOGY AND SOLAR ENERGY................................................................................................................................................. 22TABLE 5: PERFORMANCE OF GRID-CONNECTED PV SYSTEMS IN PALAU, NAURU AND KOSRAE ................................................... 23TABLE 6: INSTALLED PV SYSTEMS UNDER E.U. EDF-9....................................................................................................... 23TABLE 7: COPRA PRODUCTION (IN TONS) IN POHNPEI STATE (SOURCE: POHNPEI STATE OFFICE OF THE GOVERNOR) .................... 26TABLE 8: YAP COPRA EXPORTS IN TONS (SOURCE: 2002 ANNUAL STATISTICAL YEARBOOK, YAP) ............................................... 26TABLE 9: OVERVIEW ACTORS AND INSTITUTIONS .............................................................................................................. 38TABLE 10: GHG EMISSIONS AND POTENTIAL SAVINGS (SOURCE: FSM SEFP COUNTRY REPORT, IT POWER 2006) ...................... 42TABLE 11: YAP STATE PUBLIC SERVICE CORPORATION – FINANCIAL AND TECHNICAL DATA (POWER GENERATION AND DISTRIBUTION)43TABLE 12: KOSRAE UTILITY AUTHORITY – FINANCIAL AND TECHNICAL DATA (POWER GENERATION AND DISTRIBUTION) .................. 44TABLE 13: POHNPEI UTILITY CORPORATION – FINANCIAL AND TECHNICAL DATA (POWER GENERATION AND DISTRIBUTION) ............ 45TABLE 14: CHUUK PUBLIC UTILITY CORPORATION – FINANCIAL AND TECHNICAL DATA (POWER GENERATION AND DISTRIBUTION) .... 46TABLE 15: YAP STATE PUBLIC SERVICE CORPORATION – RESIDENTIAL ELECTRICITY RATES TREND (’99 THRU 2011) ..................... 47TABLE 16: YAP STATE PUBLIC SERVICE CORPORATION – COMMERCIAL ELECTRICITY RATES TREND (’99 THRU 2011).................... 48 9TABLE 17: YAP STATE PUBLIC SERVICE CORPORATION – GOVERNMENT ELECTRICITY RATES TREND (’99 THRU 2011) ................. 49TABLE 18: YAP STATE WIND DATA, JULY 2009 – FEBRUARY 2010..................................................................................... 504|P a g e
  8. 8. ABBREVIATIONSACF Advocacy Coalition FrameworkADB Asian Development BankAMU Association of Micronesian UtilitiesBAU Business as UsualCNMI Commonwealth of the Northern Mariana IslandsCPUC Chuuk Public Utilities CorporationDSM Demand Side ManagementEU European UnionEEM Office of Environment and Emergency ManagementFSM Federated States of MicronesiaGDP Gross Domestic ProductGoFSM National Government of the Federated States of MicronesiaIPIC Infrastructure Planning and Implementation CouncilKUA Kosrae Utilities AuthorityMDG Millennium Development GoalsNEW National Energy WorkgroupNGO Non-Governmental OrganizationNSAs NonState ActorsPetroCorp FSM Petroleum CorporationPIC Pacific Island CountriesPIREP Pacific Island Renewable Energy ProgrammePUC Pohnpei Utility CorporationPPA Pacific Power AssociationRMI Republic of the Marshall IslandsRE Renewable EnergyREP-5 Support to the Energy Sector in 5 ACP Pacific Islands (EU funded under EDF 9)5|P a g e
  9. 9. R&D Department of Resources and DevelopmentSBOC Office of Statistics, Budget & Economic Management, Overseas Development Assistance & Compact ManagementSDP FSM Strategic Development PlanSEW State Energy WorkgroupSHS Solar Home SystemSIDS Small Island Developing StatesSOPAC South Pacific Applied Geosciences CommissionSPREP Secretariat of the Pacific Regional Environment ProgrammeSPC Secretariat of the Pacific CommunitySSM Supply Side ManagementT&I Department of Transportation and Infrastructure (Pohnpei State)TC&I Department of Transportation, Communication and Infrastructure (FSM)UN United NationsUNDP United Nations Development ProgrammeUS United States of AmericaUS DOE United States Department of EnergyUSDOI United States Department of InteriorYSPSC Yap State Public Service Corporation6|P a g e
  10. 10. PREFACE AND ACKNOWLEDGEMENTSThe leadership of the Federated States of Micronesia acknowledged the need for the development of aNational Energy Policy and Action Plans that would assist the Nation in becoming less dependent on fossil fueland more prepared to withstand the heavily fluctuating energy prices that nearly lead the FSM into a nationalemergency in 2008. The development of this national policy started in July 2008 when the nation’s leadersendorsed a resolution during the Chief Executive Council meeting held in Kosrae State to develop a nationalenergy policy and have national and state actions plans included. After this initial meeting, the State Governorsselected the members of the respective State Energy Workgroups and the National Government establishedthe National Energy Workgroup. During the first few weeks of the development of the energy policy, severalworkshops and consultations were held and a rough draft policy was presented to the President in July 2009.After the draft was considered by the National Government and the four State Governors, the Energy Divisionof the Department of Resources and Development started a new round of consultations to the four FSM states.The final development of the policy with the various action plans started in January 2010 with as objective tohave a policy ready for endorsement by May 2010, with workable and realistic goals and objectives for theNational Government as well as for the FSM States. The policy contains two Volumes; Volume I covers theoverarching policy, while Volume II contains the energy action plans. The development and finalization of thepolicy and action plans was completed with considerable effort by many people from the national governmentas well as from the four FSM states.The efforts of the following individuals and groups are greatly appreciated: ƒ H.E. Emmanuel Mori, President of the Federated States of Micronesia, for his endless support and personal interest throughout the development of the policy; ƒ Governor Robert Weilbacher, Kosrae State; Governor John Ehsa, Pohnpei State; Governor Wesley Semina, Chuuk State; Governor Sebastian Anafel, Yap State, for their support; ƒ FSM Congressman Peter Christian, Former Secretary of the Department of Resources and Development for his wisdom, patience and strong support during the development of the policy; ƒ Director Andrew Yatilman, Office of Environment and Emergency Management; ƒ The European Union for assisting the initial development of this policy and the action plan through the 9th European Development Funds’ REP-5 Pacific energy program; ƒ The Asian Development Bank for supporting the development of the energy policy; ƒ The private sector, state and national governments, College of Micronesia and NGO participants at a July 2008 workshop who actively and enthusiastically considered a wide range of strengths, weaknesses, opportunities and threats regarding energy issues in the FSM; ƒ The National and State Energy Workgroups who actively participated in the overall development of the policy and action plans; ƒ Mr.Maderson Ramon, former Asst. Secretary, Department of R&D, Energy Division for starting and supporting the development of the energy policy; ƒ Marieke Kleemans and Peter Konings for their guidance, and professionalism during the development of the national energy policy and action plans.Marion HenryActing Secretary, Department of Resources and Development7|P a g e
  11. 11. CHA APTER I: INTRODUCTION 1. POLICY STRUCTUREChapter I provides a brief introoduction on the structure and summary of th policy. Chapter II hehighlights background informat tion of the FSM such as geography, econom mics and the energyoverview. Chapter III contains th detailed policy framework. Chapter IV addres he sses the National andthe State Action Plans. Chapters I to III are presented in Volume I while Chapt IV is presented in s terVolume II.Figure 1: Structure of the policy8|P a g e
  12. 12. 2. POLICY SUMMARY levels of funding close to prevailing levels to avoid the large periodic step-downs in 2.1 GENERAL funding that were a characteristic of the first 15-year funding package.FSM is highly dependent on importedpetroleum fuels to sustain its economy. 2. Improved Enabling Environment forPetroleum fuels are used for both electricity Economic Growth—to be achievedgeneration and transportation with the former through the FSM commitment tobeing the major user. In 2008, the FSM economic reform and the provision of anPetroleum Corporation (PetroCorp) was enabling environment to support open,established in a combined effort to achieve outward-oriented and private sector ledgreater economies of scale and currently development.serves all four FSM states; PetroCorp is awholly government-owned enterprise. The 3. Improved Education and Health Status—impacts of the high fuel prices of 2008 have the third objective concerned the use ofresulted in the rise in the costs of goods andservices in FSM. the annual Compact grants to support the provision of basic services in educationThe Nation currently expends approximately and health.40 million dollars annually on imported fuel.This amount represents more than 50% of the 4. Assured Self-Reliance and Sustainabilityaggregate sectoral grants that the Nation —to be achieved through thereceives from the US Government under the establishment of a Trust Fund that would,Compact II Treaty, and nearly 20 percent of after a period of time, replace the annuallynominal GDP for the country, marking energyas a priority need and the most costly sector appropriated transfers from the US.of its fragile economy. Energy is an integral component of the SDPBiomass in the form of wood and coconut and this is clearly noted in all fourobjectiveshusk products are used for local cooking and mentioned above, particularly when onein most outer island communities, biomass is considers abundantly available renewablethe primary energy source. Renewable energy sources. To achieve economic stability andsources are being introduced in the outer security requires a vibrant energy sector, andislands and in the State Centers. PV solar the necessary energy infrastructure toenergy is being accepted as a sustainable and promote economic and social development ineconomically viable source of energy both the State Centers and Out-lying Islands isnationwide, while Pohnpei has hydro energy of high priority. Equally, education and healthpotentials; Kosrae is looking at wave energy; services deliveries are contingent on theYap is looking at wind power, and Chuuk at quality of energy infrastructure and servicesbio-fuels to broaden the nations’ energy mix. available.The Strategic Development Plan (SDP) for FSM The Energy Policy has been developed basedprovides a road map for social and economic on four primary components.development for the next 20 years (2004 –2023). The SDP has four main objectives: These are Policy and Planning, Conventional Energy (fossil fuel), Energy Efficiency &1. Stability and Security—to maintain Conservation, and Renewable Energy. economic assistance at levels that support macroeconomic stability. Achievement of this objective required9|P a g e
  13. 13. Within these main components the policy The Major Goal of the Policy is:seeks to achieve these goals: 1. An effective, coordinated, resilient and dynamic joint State and National To become less dependent on imported energy sector; sources of energy by having (1) an increased 2. A safe, reliable, cost-effective and share of renewable energy sources and sustainable energy supply; having (2) cross-sectoral energy conservation 3. An efficient, responsive and and (3) efficiency standards in place; and competitive energy sector; therefore, 4. A diversified energy resource base, creating a balanced energy mix; and By 2020 the share of renewable energy 5. The environmentally sound and sources will be at least 30% of total energy efficient use of energy. production, while energy efficiency will increase by 50%. 2.2 VISION STATEMENT, OBJECTIVES AND GOALS In addition, the following broad goals relate to energy services in the FSM:The National Vision statement for Energy is: - Provision of affordable and safe electricity to all the households in the main island centers by 2015To improve the life and livelihood of all FSM - Electrification of 80% of rural publiccitizens with affordable, reliable and facilities by 2015environmentally sound energy. - Electrification of 90% of rural householdsThe National Objective for Energy is: by 2020 - Enhance the supply side energy efficiency of the FSM utilities by 20% by 2015 To promote the sustainable social andeconomic development of FSM through theprovision and utilization of cost-effective, 2.3 OVERALL ASPIRATIONsafe, reliable and sustainable energy services. In line with the above stated objective, vision and major goal, the National Energy Policy hasWhereas energy services refer to work indentified the following focal areas:relating to the sale, supply, storage and ¾ Disadvantaged and/or Geographicallydistribution of energy. Remote Communities - Encourage the application of appropriate support and incentives to enable disadvantaged and/or geographically remote communities to access affordable energy. ¾ Capacity Building10 | P a g e
  14. 14. - Improve adequate and institutional in policy implementation and integrated capacity to plan, manage, and develop the planning. energy sector by providing appropriate energy-related training opportunities at all educational and professional levels.- Accelerate research and development of energy technologies that are appropriate for adoption within the nation and facilitate international transfers of appropriate technologies that the nation is capable of operating and maintaining.- Assess and promote indigenous resource potential and technical capacity for all aspects of energy sector planning and development. ¾ Public Awareness- Increase training and public awareness on renewable energy and fuels for vehicles, energy efficiency, and conservation through publicity campaigns and school curricula. ¾ Private Sector Involvement- Enhance public-private partnerships and expand private sector participation, investment, ownership, and management for energy supply including electricity generation, transmission and distribution with job creation in mind.- Establish an enabling and competitive environment for the introduction of independent energy providers where these may provide efficient, reliable, and affordable service to consumers. ¾ Community Level initiatives- Promote involvement and input from non- government organizations and local communities, including youth and women,11 | P a g e
  15. 15. CHAPTER II: NATI IONAL CONTEXT AND ENERGY O VERVIEWFigure 2: Structure of the policy 1. COUNTRY OVERVIEWIn 1986 the Federated States of M Micronesia was created and gained independenc from its former ceadministrator, the United States. Five years after the birth of the nation, the FSM joined the United M 1Nations in 1991 (GoFSM, 1997). From west to east, it stretches about 2,700 kilo ometers, and islocated in the western Pacific Occean between the equator and 14 degrees North latitude (Figure 2).With a total population of 107,00 there are four states in the FSM – Yap, Chuuk Pohnpei and 00, k,Kosrae. Each State maintains con nsiderable autonomy for their own development strategy, while the tnational government provides an integrated prospective and vision, which is described in the FSM nNational Development Plan (GoF FSM, 1997). Except for Kosrae, each state consist of a State center, tswhich is often the largest island, and a multitude of outer islands. The FSM has a total of 607islands, 74 of which are inhabited.1 This section builds heavily on GoFS 1997 SM,12 | P a g e
  16. 16. 1.1 GEOGRAPHYThe islands in general can be categorized intotwo types of landscape. The state centers ofPohnpei, Chuuk Lagoon and Kosrae are highvolcanic islands with steep and ruggeduplands. Most outer islands and the Statecenter of Yap are low coral atolls andcharacterized by gently sloping uplandssurrounded by swampy lowlands. Due toagro-forestry or secondary vegetation, thenatural upland forests, which once covered Figure 3: Map of the Federated States of Micronesiathe islands, are disappearing fast.Today, sizeable forest areas can only be foundon the islands of Pohnpei and Kosrae (GoFSM, 1.2 DEMOGRAPHY1997). Between 1989 and 1994, FSM has experiencedInside the Exclusive Economic Zone (EEZ), the an internal migration. With a 10 percentmarine area of the FSM, which accounts for increase in total population during this period,over 2.6 million square kilometers, has the population share of Pohnpei, where theabundant and diverse resources. While the capital is located, increased by 13 percent, asnation consists of 607 islands, its land area people immigrated to seek economictotals only 701 square kilometers. Besides the opportunity. On the other hand, Kosrae’snatural environment, cultures also vary share of the population only increased slightly,considerably between islands. After by 4 percent. In spite of the internalthousands of years since the settlement of the movement, the overall population structure ofislands, there are significant environmental FSM remains the same, and the population ofand cultural differences involved even within FSM remains one of the youngest in thethe four states of FSM. It is thus that the region, with almost 24 percent of thenatural environment and especially the population under 24 years of age. Similar tomarine and the land resources have a other parts of the world, the median age ofprofound and vital influence in shaping the the population has increased, rising from 16 tophysical and cultural life of the inhabitants 18 over the last 30 years. The average(GoFSM, 1997). population density in 1994 was 150 persons per square kilometer. However, this overall figure might be misleading, as the population density varies considerably across the nation, ranging from 418 per square kilometer in Chuuk to a low of 63 per square kilometer in Kosrae (GoFSM, 1997).13 | P a g e
  17. 17. 1.3 CLIMATE 17 percent, respectively, in 2005 (DoI, 2006, pp. 198).The FSM has a typical tropical climate: stable The infrastructure is under-developed andtemperature, high humidity and high rainfall. cannot meet the demands of the growingThe temperature averages between mid 20 population and the condition of theand 30 degrees Celsius, while the humidity is infrastructure is poorly maintained due toon average over 80 percent. Rainfall is in severe limitations on the availability ofgeneral high, but varies geographically, with a government local revenue funds (GoFSM,low record of 3 meters on drier islands to over 1997).10 meters per year in the mountainousinterior of Pohnpei. As with many tropical SECTORAL DEVELOPMENTislands, there is a wet season (June toOctober) and dry season (November to May) Except for the offshore fisheries, therein FSM. Occasionally, the western region of limited resources in the FSM. Except for thethe country suffers from typhoons (one in 20 wholesale/retail and service industries, theyears return period), which can cause serious private sector is under-developed and thedamage to the region such as landslides and FSM has a large external trade deficit. Thedevastation of vegetation, buildings and country is very dependent on external aid andinfrastructure (GoFSM, 1997). on the public sector for providing jobs and government expenditure. In the FSM National 1.4 ECONOMY Development Plan (SDP), the government acknowledged the distinct dichotomyThe FSM is a small and domestic-based between the cash and traditional economieseconomy with a market of 107,000 people (GoFSM, 1997). The commercial sector is(SBOC, 2009) with modest income (GoFSM, characterized primarily by small businesses,1997). The Nominal Gross Domestic Product with only a few larger public companies, co-of the FSM in 2006 was $236.9 million. Per operatives and credit unions. Most of thecapita GDP for 2006 was $2,194. The trade family-based businesses focus on commercialbalance has remained highly negative since import/export, wholesale and retail business.1997. In 2005, the trade balance was Alternatively, the families might also engage inestimated at negative $117.2 million, an small service enterprises, such as restaurants,equivalent to 50.5 percent of GDP (DoI, 2006, taxis, car rentals, repair and maintenance, etc.pp. 198). Only a few have ventured into the industrialThe economy of the FSM is mainly determined sector (GoFSM, 1997).by agriculture, including fishing and every Thus the FSM economy is dominated by therelated aspect to this (such as the lease of public sector as the primary sector offishing rights to FSM waters), government economic activity. The government providesemployment and tourism. In the period 1997- one third of total employment, while the2005 the number of visitor arrivals grew with agriculture and fisheries industries togetheralmost 10 percent. In 2005, 18,958 people account for 28 percent of the jobs.visited the FSM. Most of the visitors werefrom the US and Japan, about 40 percent and14 | P a g e
  18. 18. 14,400 persons are estimated to be involved The Compact was designed to assist the FSMin the cash economy, and half of them are with infrastructure and development of itsengaged in the public sector, mainly operating economy. Infrastructure development hadpublic facilities, engaging in construction work been successful but the development of a self(through government infrastructure projects) sustaining economy had only very limitedas well as supporting community services. As success. Roads, electric utilities, harbors,the public wage in general is considered to be airports, schools, hospitals and public facilitiessignificantly higher than the comparable work were all constructed during the 15 years ofin the private sector, this has suffocated the Compact I. Kosrae, Pohnpei and Yap haveentrepreneurial growth and technical skills maintained their facilities in a responsibledevelopment which could in fact help to manner and have expanded their facilities.increase the efficiency of production and Chuuk has not performed as well (DoI, 2006,export service sectors of the economy. The pp. 198).scattered consumer markets and the lack ofadequate transportation infrastructure have In 2003 the United States and FSM entered into an Amended Compact II agreement,contributed to the minimal trade betweenstates. Agricultural products are the primary wherein FSM receives payments of $92.7goods traded within FSM, as well as for million per year from the United States with $76.2 million being in the form of grants andexport, with sakau (kava), betelnut and citrusbeing some of the primary products (GoFSM, $16.0 million to be placed in a trust fund and $500,000 allocated each year for an annual1997). audit. The trust fund is expected to increaseFINANCIAL TRANSFERS FROM THE US and become a permanent interest-bearing fund such that after Compact II expires inEconomic development in the FSM needs to 2023 the trust fund will provide the same levelbe analyzed in the context of the Compact of income available to FSM as the presentAgreement with the United States, as it is Compact II (DoI, 2006, pp. 198). However,heavily dependent on the financial assistance current financial trends indicate that the FSMprovided under the Compact of Free Trust Fund will not provide such fundingAssociation (DoI, 2006, pp. 198). The Compact required after 2023, when the currentsince 1986 has provided large external Compact ends.financial transfers to support the operationsof the Government of the FSM and substantialpublic sector investment at the State level.Compact economic assistance, initially meantto last 15 years until 2001, was characterizedby reductions in grant funding of 15 percentafter 5 years and 22 percent after 10 years.Transfers were partly indexed to UnitedStates’ inflation, resulting in an overallaverage real decline in resource flows of 4percent per year. The Compact was extendedfor a further two years through fiscal year2003 during renegotiations (DoI, 2006).15 | P a g e
  19. 19. 8 “Shows little progress towards meeting the MDGs by 2015. Poverty incidence isestimated 6 to be high with approximately 40 percent of 4 the population falling below the national 2 poverty line in 1998 and there are signs of GDP growth (%) 0 increasing inequalities. One of the key issues 2007(est) 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 -2 is delivery of basic social services, which often -4 fail to reach the poorer strata of society, the outer islands and rural areas. There are -6 significant differences in the poverty situation -8 between the various states but little -10 disaggregated data is available. FSM not only -12 faces the challenge of increasing enrollment Fiscal Year rates at all levels but also of improving the quality of education, retention rates andFigure 4: Real GDP growth in FSM 1997-2007 access in the outer islands. FSM has poor(Source:http://www.spc.int/prism/country/fm/stats/Eco health indicators.nomic/NAacct/gdp-summary.htm) Although maternal mortality rates have fallenAlready at the start of Independence in 1987 significantly, FSM still has a relatively highthe economy depended strongly on Compact maternal mortality rate and a rapidlyflows, representing 88 percent of the increasing incidence of non-communicablecountry’s gross domestic product (GDP). diseases. Child mortality rates have decreasedBecause the non-traded goods production slightly. Available data suggest that only 41dominated the private sector, the export percent of the population has access to anvolume was negligible and the tourism sector improved water source and about 45 percentwas still in its early stage. From then onwards, to improved sanitation” (ADB, 2003).GDP grew 1.6 percent annually and the privatesector realized an average rate of growth of DEVELOPMENT OF STATES2.9 percent annually (Figure 3). Although thisis not very high, it is comparable to the There is considerable autonomy for the Stateseconomic performance of other Pacific Island in the FSM and there are also largecountries. differences. As shown in Table 1 Pohnpei, with the national government, accounts forECONOMIC DEVELOPMENT only 32 percent of FSM’s population but 47 percent of GDP. Chuuk, with half of theThe FSM is classified as a medium income population has 28 percent of GDP. Economiccountry by World Bank categorization and by performance has varied considerable, partlythe UNDP as a country in the medium Human reflecting differences in policies and responsesDevelopment Index category. The FSM scores to external developments. Pohnpei and Yapmoderately on other development indicators. grew the most rapidly at 0.5 and 1.1 percentIn 2003, the ADB concluded the following for respectively per annum from 1987-2007.the FSM in relation with meeting theMillennium Development Goals (MDG):16 | P a g e
  20. 20. In Kosrae and Chuuk the GDP declined with capita of $2,685, Pohnpei was 47 percent0.9 percent per year. (PIREP, 2004) above the national GDP per capita (DoI, 2006, p. 197). The average and median income of Chuuk is State GDP Population very low, respectively 18 and 36 percent below the national average. The average savings is approximately $1,000 lower than Kosrae 8% 7% the national average. However, the median savings is $300 above the national average. Pohnpei 47% 32% This is due to the fact that the median expenditure in Chuuk is only 67 percent of the Chuuk 28% 50% national median expenditure. The GDP per capita in 2007 was $1,006 which is 55 percent Yap 17% 11% of the national GDP per capita and 67 percent less than Yap, the State with the highest GDP per capita (DoI, 2006, p. 197). Table 1: Percentage of Population and GDP per state, 2007 (Source: SBOC, 2009) Chuuk has suffered from several financialThe economy of Kosrae is limited. In 2005 the crises and has not yet made the adjustmentsaverage income per household in Kosrae was necessary to repay debts, which were$12,842, which is 4.3 percent below the equivalent to 30 percent of state GDP at thenational average. However, the average height of the crisis in FY1996. Large inflows ofexpenditure per household was $11,778 funds to assist Chuuk recover from Typhoonwhich is 8.2 percent less than the national Chata’an in 2003 helped stimulate economicaverage. Kosrae is the only State in which the growth (PIREP, 2004).median savings is positive. The 2006 Gross The Yap economy has declined slightly inDomestic Product was $15.9 million, a decline recent years since Compact II began but isof 3.3 percent compared to 2005 when stronger than some other FSM states. Yap hasinflation is considered. The 2007 GDP per developed a relatively strong private sectorcapita was $1,963 (DoI, 2006, p. 196). employment base with approximately 72Pohnpei has the highest amount of average percent of employees in the private sector.savings at $2,658, which is 450 percent of the Yap State’s economy continues to benational average savings. The median savings dominated by government spending, both forare minus $192, which is more than $2,000 wages and the purchase of goods and servicesmore compared to the national average and from the private sector.almost $4,000 more than in Yap. The average The closure of a garment factory eliminatedincome per household is $15,593, the highest the manufacturing sector. Tourism is downof the four states. It is almost 43 percent significantly after the reduction of scheduledhigher than the average income in Chuuk, flights by one-third (DoI, 2006).which has the lowest of the country. The2006 GDP was $94.3 million, a decline of 0.2percent related to 2005. With a 2007 GDP per17 | P a g e
  21. 21. As mentioned before, Yap has the highest GDPper capita, $3,034 in 2007. The averageincome per household is also the highest ofthe four States, with $15,616. It is 16 percentabove the national average and a massive 43percent above the average in Chuuk. Despitethe high average income, the average andmedian savings are the lowest in the country.This is due to the high Consumer Price Index inYap. The average expenditure is 38 percentabove the national average. The GDP droppedby 6.5 percent in the period 2005-2006 to$36.2 million (PIREP, 2004). Employment inYap State dropped from 3,680 in 2001 to3,023 in 2004. Average mean income in 2004was $6,605. In 2006, the real GDP wasestimated to be $36.2 million (DoI, 2006, p.197).18 | P a g e
  22. 22. 2. ENERGY SECTOR in rural places. However, on the basis of a survey conducted during the course of the The energy sector in FSM is overwhelmingly REP-5 implementation in 2009, the average dependent on the import of petroleum fuels can be estimated around $15 to $35 per for commercial energy use for transport, month and per household (in the outer islands electricity, business and households. around $15 (depends on availability) while in Hydropower has been a minor contributor as the rural areas on the main islands the the Nanpil hydro system (Pohnpei) has average is $ 35). provided several percent of the total Besides lighting, kerosene is also used for electricity supply. Current problems with the cooking, but its consumption at the national dam have reduced this share. Other sources of level has dropped mostly in rural areas and renewable energy, such as solar energy and replaced by traditional wood and charcoal fuel bio-energy account for a minor percent of the sources. This can be largely attributed to the energy supply (PIREP, 2004, p.14). This section increase in fuel costs and the decrease in rural will first give a brief overview of the use of household incomes. conventional energy, including the sources and its use, after which the largest part of this 2.2 PETROLEUM / section will focus on renewable energy, where the greatest potential for expansion exists. CONVENTIONAL ENERGY 2.1 ENERGY DEMAND Foremost as the primary source of energy for the FSM is petroleum. The use of energy in the FSM is comparable to the energy use in 2.1.1 HOUSEHOLDS other tropical islands in the sense that the majority of petroleum is used for electricity Roughly 55% of all households in FSM had generation and for transportation (DoI, 2006, electrification from some source (2000 pp. 209). More specifically, gasoline and census) (Table 2). diesel fuel are mainly used for transportation purposes and diesel is used for the generators at the utilities. Chuuk Yap Pohnpei Kosrae Furthermore, a small amount of liquid petroleum gas (LPG) is used for heating water% HH electrified 33% 59% 68% 99% and cooking (DoI, 2006, pp. 197).(2000 census)% HH electrified 75% 100% 98% 98% In the transportation sector, mainly gasoline(main island) and diesel are used. Because the FSM does% HH electrified 46% 70% 87% 100%(2009 estimate) not have a large land mass, the use of fuel for Table 2: Household electrification figures vehicle transportation is modest. Transportation fuel is therefore mostly used It shows that some alternative solutions are for marine services, including commercial being used in some states that provide fishing boats, patrol boats and the cargo and electricity (mainly PV and diesel generators). passenger ships within the nation. Many use fuel from Pohnpei, which has emerged as the The energy demand in the rural areas ‘fleet headquarters’ of the region and others generally corresponds to basic needs such as use fuel tenders on the open ocean. lighting (often with kerosene, oil lamps, flashlights) and cooking (wood or other For cooking, kerosene and liquid petroleum biomass (coconut-husk) and some kerosene). gases (LPG) are used, as well as wood and No specific statistical study has been carried coconut waste (DoI, 2006, pp. 198). out on the energy use habits and expenditures 19 | P a g e
  23. 23. In 2009, around $40 million US$, which is Price Summarycomparable to over 50% of the national Year Percent Changebudget, was spent on the import of fossil fuel.Since world oil prices and the demand for oilcontinue to rise, this number will only 2008 2009 2010 2011 08- 09- 10- 09 10 11increase. Recent history indicates majornation-wide hardships due to such trends. WTIThe average price for a barrel of oil was just Crudea 99.57 61.66 79.78 83.50 -38.1 29.4 4.7above $50 in January 2007. In October 2007 ($/barrel)the price reached almost $90 a barrel, causingthe price to increase by 80 percent. The Gasolineb 3.26 2.35 2.84 2.97 -27.9 20.8 4.8 ($/gal)following year, in April 2008, the priceincreased to $110, causing what amounted toa full-blown fuel crisis in the Summer of 2008 Dieselc 3.80 2.46 2.95 3.16 -35.2 19.8 7.0 ($/gal)in the FSM (GoFSM, 2008a).Table 3 shows the price summary of fuel and Heating 3.38 2.52 2.85 3.10 -25.4 13.0 8.9 Oild ($/gal)electricity costs in the US. Natural Gasd 13.67 12.03 12.51 13.49 -12.0 4.0 7.8 ($/mcf) Electricity d 11.36 11.58 11.47 11.68 2.0 -1.0 1.9 (cents/kwh) a b West Texas Intermediate. Average regular pump price. c d On-highway retail. U.S. Residential average Table 3: Crude oil price summary (Source: http://www.eia.doe.gov/steo) At that time, the cost for fuel for the nations’ four Utilities to keep the generators running was up to 91 percent of total revenue collections, leaving no financial reserve for maintenance and system improvement. Subsequent steep and sudden fuel and energy prices to consumers created pockets of the population that could no longer afford to have the convenience of electricy or transport on the main islands.20 | P a g e
  24. 24. Beyond the traditionally steep increase of the utilities (10 percent) and losses of the systemprice for electricity and fuel ccaused by an (12 percent). The largest amount of electricityover-dependence on fossil fuel, other aspects is used for air conditioning and lighting (DoI,of socio-economic progress also become 2006, pp. 209). The gove ernment in particularproblematic, particularly in re egard to the uses the bulk of its energy consumption for air yoverall commensurate incre ease in the conditioning (DoI, 2006, p 198). pp.Consumer Price Index. All good and services ds Each state has its own electricity system andbecome more expensive. Therefore, evenpeople who are not conne ected to the public authority responsible for the provisionelectricity grid will suffer fro om the price of utilities. A board appointed by the governor and confirmed by the stateincrease of fuel (GoFSM, 2008a). Thishampers development and fost ters inequality legislatures (DoI, 2006, pp 199) governs these p.as it disproportionally harms the poorer s utility companies. All utility companies, especially in Chuuk, fac serious economic cesegments of the society. Becau of this, the usedevelopment of renewable ener and energy rgy problems as a result of hig fuel costs. ghefficiency are key elements in p preventing thisscenario. Although oil prices have cooledconsiderably from the high in th Summer of he2008, the latest trends show tha oil prices are atonce again on the upswing, bringing evenmore pressure on the FSM pe eople and theutility corporations, most of wwhich are stilldealing with the last oil price spike. Figure 6: Generator of the Kosrae Utilities Authority. (Source: DoI, 2006) For more specific informa ation please refer to Table 11: Yap State Public Service Corporation c – financial and technical d (YSPSC); Table 12: data Kosrae Utility Authority – financial and y technical data (power generation and distribution); Table 13 Pohnpei Utility 3: Corporation – financial and technical data (power generation and distribution); Table 14: Chuuk Public Utility Cor rporation – financial and technical data (pow generation and wer distribution) in the Appe endix, which sum up the main operating detai of the four utility ils companies.Figure 5: WTI crude oil price (Source Sh hort-Term EnergyOutlook, February 2010)Electricity use can be divided i into five maincategories: residential use ( (39 percent),commercial and industrial use (22 percent),use by the government (17 per rcent), use for21 | P a g e
  25. 25. 2.3. RENEWABLE ENERGY Month Kosrae Pohnpei Chuuk Yap Jan 4.72 5.1 5.13 5.4There are several existing and potential Feb 5.34 5.8 5.71 6.04sources of renewable energy in the FSM. The Mar 5.34 5.84 5.93 6.5potential use is particularly high for solar Apr 5.41 6.07 5.79 6.72energy and hydropower (Pohnpei State) but May 5.01 5.71 5.8 6.55also the potential of wind energy, bio-fuel, Jun 4.94 5.31 5.3 5.43methane-gas and tidal and wave energy will Jul 5.16 5.59 5.41 5.48be reviewed. For each source of renewable Aug 5.53 5.57 5.42 4.96energy the section will briefly describe both Sep 5.42 5.36 5.55 5.43existing and potential use. Oct 5.43 5.23 5.32 5.27 Nov 4.82 4.77 5 5.172.3.1 SOLAR ENERGY Dec 4.87 4.91 4.88 5.34 Avg. 5.16 5.43 5.44 5.69High solar insolation throughout the FSM Table 4: Estimated Solar Resources Horizontal plane increates a rich resource of solar energy kWh/m2/day (Source: NASA Surface Meteorology and Solar Energyalthough the available energy varies fromplace to place because of local cloud Besides the SHS in Pohnpei state 300 SHSformation. This is especially the case on the were installed in various outer islands in Yapislands with mountains, such as the main and 402 households in Chuuk (2000 census).islands of Pohnpei and Kosrae and the LagoonIslands of Chuuk. Table 4 gives an overview ofthe average estimated insolation on the fourstates using data from NASA SurfaceMeteorology and Solar Energy (2009).Like other Pacific Island countries, solarenergy provides a particularly good source ofenergy for outer islands that are further awayfrom the state centers and often have lowpopulation sizes. Stand-alone systems canprovide a solution for the energy needs inthese places. There remain manyopportunities both to expand the use of off-grid installations on the outer islands and forgrid-connected systems on the main islands Figure 7: Installing solar module racks in the FSM.where electricity networks are available (DoI, (source: Akker, 2006).2006). In the state of Pohnpei, 400 solar This was done after the 1982 cholerahome systems (SHS) were installed on several outbreak, where solar powered pumps toislands in the early ’90s. This program formed provide flush water for toilets aimed atthe largest outer island PV system program of reducing the use of water from shallow wellsthe North Pacific (DoI, 2006) for a long time. and the spread of cholera.22 | P a g e
  26. 26. The project was set up by the University of people that would otherwise have to liveGuam that provided workshops on without. On islands in the state centers whereinstallation, operation and maintenance. electricity systems are available, PV systems can provide energy to the grid in order toMore recently, under the European significantly reduce the need for fossil fuelsDevelopment Fund (EDF-9 REP5 programme), and create a more sustainable energy mix, asa major PV electrification was implemented in well as reduce overall costs to both utilitiesthe outer islands of Pohnpei, Chuuk and Yap. and families.PV off-grid systems were installed in 11 outerislands with a total capacity of 120.88 kWp State Island Site Systemand in Kosrae five grid-connected PV systems sizewere installed, with a total capacity of 52.5 Yap Asor PV mini-grid 19.5 kWpkWp. The PV systems in Kosrae are being Fadrai PV mini-grid 28.08 kWpmonitored by the utility and a more detailed Chuuk Satawan High school 6.6 kWp Moch Public facilities - 6.7 kWpanalysis of data from the grid-connected PV mini-gridsystems is being an ongoing activity. The data Udot High school 3.4 kWpfrom Kosrae is being compared with similar PV Onoun Public facilities - 10.5 kWp PV mini-gridgrid-connected systems in Nauru and Palau. Pohnpei Kapingamar School 5.8 kWp angiIt is obvious that it is much harder to collect Dispensary and 4 kWpperformance data from the outer island municipal office Nukuoro Dispensary 3 kWpinstallations. FSM has therefore initiated a School 4.6 kWpplan to install VSAT satellite dishes to the REP- Sapwaufik School and 8.4 kWp municipal office5 installations that will enable them to do Dispensary 3 kWpremote monitoring of the systems. In Mwaokillao Dispensary 2.5 kWpaddition, the communities will be connected School 6.1 kWpto the Worldwide Web for communication, Pingelap School 6.2 kWp Dispensary 2.5 kWpeducation and emergency purposes. Table 6: Installed PV systems under E.U. EDF-9Summarized performance information forPalau, Nauru and Kosrae is given in Table 5 2.3.2 HYDRO ENERGYbelow. The hydro sites on Kosrae have limitedLocation Size Yield per Specific yield (kWp) month (kWh) (kWh/kWp/yr) potential and are unlikely to be cost effectivePalau 98.3 10,000 1,220 for development. However further study could show that Kosrae might have a potential ofNauru 40.2 4,600 1,370 PICO Hydro installations that can act as stand-Kosrae 52.5 5,600 1,280 alone systems and power some houses located close to the rivers. Yap and ChuukTable 5: Performance of grid-connected PV systems inPalau, Nauru and Kosrae have no hydro sites. On Pohnpei there is a hydro power installation on the Nanpil River.It is clear then that despite some limitations, There have been surveys that indicate othersolar energy has a large potential in the FSM. developable sites in Pohnpei are present;There remain many outer islands where solar however at the time of the survey theenergy can provide affordable energy to economics for the development of the sites23 | P a g e
  27. 27. were bad. Those surveys should be reviewedin light of the fact of higher current fuel pricesand the sites for which it is economicallyreasonable to be seriously considered forpotential hydro development.Due to the uplift of moist air by themountains, the rainfall on both Pohnpei andKosrae is high. The interior rainfall on bothislands is 200-300 inches per year, whichoffers opportunities for hydro development Figure 8: Hydro generators (Nanpil dam, Pohnpei)on numerous of its approximately 35 streams. In the beginning of the 1990s, there was anThe stream flows however, vary a lot due the idea for increasing the catchment area atrapid runoff and small catchments. Due to Nanpil at a cost of $6 million. This idea wasthis, the streams are generally not practical for scrapped however, because the additionalbase load hydropower without using output was uncertain due to the limitedexpensive and environmentally problematic hydrological data.storage ponds. Despite this, hydropower hasan acceptable tradeoff between reliability of In 1981, a United States Army Corps ofpower delivery and cost of installation. In Engineers study identified numerous potentialsome cases, drinking water reservoirs have hydro sites, one on the Senipehn River andbeen used as storage ponds to secure more three on the Lehnmasi River. Due to lack ofconstant water supply (DoI, 2006). access roads, the relatively high cost per kW for the site development and the distanceThe Nanpil hydro facility was originally from the existing grid, they were notdeveloped by the Japanese in the 1930s. In developed. The total peak potential power of1988, the United States Army Corps of the sites is approximately 4 to 5 MW, with anEngineers came to develop a hydro plant next average of 2 to 3 MW. Obviously, during theto the old, non-operating one, using a two dry months less power would bedifferent water intake and a new building for produced. The production site with thethe installation, see Figures 10 and 11. The highest potential was on the Lehnmasi River.total amount of power that can potentially beproduced is 2.06 MW. This is a substantial The hydro sites that were labeledamount of energy as it exceeds one-third of economically unviable in the 1980s and 1990sthe peak load on the whole island. However, should again be reviewed due to the increasedthis amount of energy has never been energy costs, and if feasible, steps taken toproduced due to water intake limitations, being developed. Despite the smallwhich reduces the maximum output to 1.8 catchments and the variable stream flows soMW. The average is reduced even more due that there is not enough water flow to secureto cyclical dry and wet periods on the island a continuous base load, the harm to theand the lack of an appropriate water storage environment of systems that make use offacility to spread the production more evenly. existing streams (so-called run-of-the-river development) is minimized and the systems are relatively cheap.24 | P a g e
  28. 28. During its extensive operational life, it can use of wind energy throughout the FSM. Afterprovide substantial fuel savings. The greatest broadly defining locations where wind energyrenewable energy opportunity for fuel saving could potentially be implemented, detailedis offered by the small hydro development, wind assessments and wind maps should beespecially for the state Center of Pohnpei, and created to more precisely identify the mainpossibly Kosrae, and therefore a thorough wind energy sites. Appendex A shows thereview of the hydro potential seems wind speed data from Yap.appropriate. Average wind speed at 50 m, 10 year average 10 Wind speed (m/s) 8 6 Kosrae 4 Pohnpei 2 Chuuk 0 Yap Mar Jan Nov Jul May Sep Month Figure 10: Average wind speed at 50mFigure 9: Hydro system in the Nanpil River, Pohnpei. 2.3.4 BIOFUEL2.3.3 WIND ENERGY A very interesting source of biofuel is coconutThe resource for wind energy is not very well oil. The outer islands have a large andknown in the FSM. Experts believe that it is underutilized resource that could be furtherborderline regarding the economic feasibility developed. Using coconut trees is not new toof energy production from wind. the country. There has been an activeMeteorological measurements and low industry for copra, the dry meat of coconuts,latitude location indicate moderate resource after the Second World War until the 1970s.availability. Furthermore, typhoons form a Although the price of copra remained stablerisk for wind power systems. Figure 12 gives after this period, the costs of living hadan overview of the average wind speed increased and so had the labor costs. Thisthroughout the year in the four states. reduced the incentive to commercially exploit copra. As a result, there were few newDue to the mountainous nature of some of the coconut plantings to replace an increasingislands, however, there may be locally share of senile trees (DoI, 2006).beneficial conditions for wind energy. Themain recommendation that also came out ofearlier studies on potential renewable energyuse is to carry out a feasibility study on the25 | P a g e
  29. 29. The country has the opportunity to develop 1992 1994 1996 1997coconut production on outer islands and Pohnpei 18.63 9.32 6.68 13.2thereby increase income for the outer islands.At current prices and production levels, Mwoakilloa 27.53 56.05 49.06 37.83coconut oil could be shipped to the statecenters where large diesel fuel users, Pingelap 14.75 3 20.13 32.86especially the utility companies and certainbusinesses that might have back-up Pakin 33.9 15.11 18.27 20.13generators, could add coconut oil to create afuel mix and reduce their use of diesel fuel. Sapwahfik 2.95 43.26 63.34 25.25This would boast the coconut oil industry andprepare it for production on a larger scale Nukuoro 55.79 42.49 19.3 56.15when diesel prices increase further. Revenuesto rural communities and reduction in costs to Kapinga 19.61 11.49 14.08 0.88the private sector in the centers wouldcertainly benefit the macroeconomic fabric of Oroluk 4.66 2.12 8.69 11.33the nation.Until recently, there was an active coconut Total 177.81 182.83 199.55 197.63factory on the main island of Pohnpei thatproduced biofuel from coconuts. The Table 7: Copra production (in tons) in Pohnpei State (Source: Pohnpei State Office of the Governor)company could produce 150 gallons ofcoconut oil, more than 550 liters, in an eight-hour day. Besides using this for their ownvehicles, they sold coconut oil to individual 1999 2000 2001 2002 2003and corporate customers on the island. Withlittle effort, an engine can be adjusted to run Tons 292 210 35 130 80on a mix of diesel and biofuel. The owners ofthe coconut factory were making plans forincreased production and to start selling fuel Table 8: Yap copra exports in tons2 (Source: 2002 Annualfor boats. However, in July 2008, a fire Statistical Yearbook, Yap)destroyed the whole factory. The owners hadno insurance and there were no readily Biofuel from coconut oil remains a socially andavailable funds to rebuild the factory. In 2001 economically viable source of renewablea copra warehouse in Yap was devastated by a energy and efforts should be strongly pursuedfire (DoI, 2006), and in Chuuk a copra oil to once again integrate it into the overallproduction facility was also consumed by a energy mix.fire. Neither has been rebuilt.This impacted the total amount of copraproduced and exported within the nation.Tables 7 and 8 below give some numbers on 2the historical amount of copra production for The low value for 2001 was due to the loss ofPohnpei and Yap. much of the copra in a warehouse fire.26 | P a g e
  30. 30. 2.3.5 BIOMASS 2.3.6 BIOGASBiomass remains the largest source of energy There are some animal farms in the FSM thatfor cooking. For the mountainous islands of produce enough waste to generate biogas inthe state centers of Pohnpei, Kosrae and an economically viable way. This way, animalChuuk, and some of the outer islands, biomass waste is disposed in an environmentallyin the form of wood is sufficiently available friendly way with biogas as a byproduct.without danger of deforestation. Also in low- Some small pilot biogas installations are beinglying atolls biomass is used for cooking but in installed in Pohnpei, with the assistance of thedifferent forms, such as coconut shells, fronts Chinese government in 2008, and these areand husks, mangrove wood or plants (PIREP, being monitored by the Pohnpei State2004). government. There is also independent biogas producer on the main island of Pohnpei thatAs in other Pacific Island countries, tries to create a closed, environmentallycommercial use of biomass for electricity sustainable cycle in its household energy use.production by means of combustion or Animal waste produced by a pig serves asgasification is limited to facilities that process input for the biogas digestion tank, whichagricultural or forest products. There are no provides gas for daily cooking. There has beenindustries in the FSM that processes such some interest noted by the Kosrae Stateproducts as agricultural processing tends to be Government to replicate such low-scaledone in small scale, often family-owned, household digester systems as well.decentralized facilities. There is currently noindustry that produces biomass waste. If Currently no facilities for sewer or landfillbiofuel from coconut oil would become a treatment are used to generate biogas. Whenlarge-scale industry, enough biomass waste these facilities are upgraded, a feasibilitycould be generated to justify commercial study should be carried out to investigate thebiomass combustion or gasification to economic and environmental sustainability ofproduce heat or electricity (DoI, 2006). In that an add-on facility to extract biogas.case, a feasibility study should be carried outto give insight in the potential use. 2.3.7 OCEAN ENERGYWaste to Energy is another development that Although the country is surrounded by ocean,is being carefully followed by the FSM there is at the moment no sufficiently maturegovernment and plans are being made to start ocean energy technology that can be used ina (solid) waste composition study in 2010. the FSM. Available resources for tidal energy are present in the FSM. The tidal range is not very large, but through certain reef passages and some man-made causeway and bridge infrastructures, high speeds and high volumes of water flows are observed locally. The FSM energy sector is following the development in ocean and tidal technologies and it is planned to have pre-studies done between 2010 and 2012.27 | P a g e
  31. 31. 2.4 ENERGY COSERV ATION & EFFICIENCY YA recently completed report h estimated hasthe potential of renewable ener and energy rgyefficiency to reduce greenhouse gas (GHG)emissions in a number of Pacific Islandcountries (See: Table 10: G GHG Emissionsand Potential Savings (Source FSM SEFP e:country report, IT Power 2006)). The total GHGemission estimates are d derived fromcorresponding estimates of r reductions offossil fuels in all sectors of t the economy,including power generation n, transport,household use, etc. Figure 11: YSPSC customer e education Source: YSPSCThe table shows that in FSM by t year 2011, the newsletter July ‘08it is, in principle, possible to red duce projected It shows that EE and DSM could have afossil fuel use only by 14%, with about 70% of h significant impact in case of consideration at athe savings coming from rene ewable energy large scale, and that br road-scale programsand 30% from energy efficiency m measures. need to be implemente to create more edAs shown in the table energy e efficiency is an awareness amongst consu umers.important part of the en nergy sector, Some of the utilities hav actively started to veparticularly in supply side manag gement for the advise the public on DSM and discussions areutilities. The Pacific Power Assoc ciation started being held to start pro ogrammes such asan energy efficiciency assistanc programme ce changing light bulbs and other energyin 2009 for the utilities but preseently no large- efficiency appliances. In addition, regulatoryscale measures have been undertaken. frameworks and incentiv programs at the veHowever, the average estimat ted electricity states can help spur priva sector investment ateconsumption in electrified hous seholds is not and consumption in this area.that high and decreasing over the last fouryears, revealing that that demand-sidemanagement (DSM) are starting to bear some gfruitage. High electricity co ost and theintroduction of cash power me eters (pre-paidmeters) have significantly dev veloped someenergy saving behavior at the c customer level(Figure 11 below).28 | P a g e
  32. 32. CHAP TER III: POLICY FRAMEWORKFigure 12: Structure of the policy 1. INSTITUT TIONAL AND SYSTEMIC FRAMEWO RK OFigure 13: Policy Structure29 | P a g e

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