Recent investments in solar energy have proved to decrease the cost of production, the ADB policy briefs has found. (file image) Photo: 123RF
Pacific Island countries are "increasingly investing in renewable energy" to reduce electricity generation costs, which in turn will lower the energy costs for consumers, a new Asian Development Bank (ADB) briefing paper has found.
The policy paper published on 24 July by the ADB's Pacific Private Sector Development Initiative looks at renewable energy investments in Fiji, Palau, Papua New Guinea, Samoa, Solomon Islands, and Tonga.
The paper found that between 2014-2024, utility companies in the six nations have been slow in adopting renewable sources of energy.
As result, the document says the cost of electricity has been higher.
However, recent investments in solar energy have proved to decrease the cost of production, the policy paper said.
It found that transitioning from fossil fuels to renewable energy will impact the cost of power generation, and tariffs for consumers.
"Pacific island countries are increasingly investing in renewable energy to improve their energy security, increase sustainability,
and reduce energy production costs," it said.
One of the authors of the report, Laure Darcy, said Pacific Islands are still in the early stages of their energy transition.
"As renewable energy becomes a larger part of the energy mix, costs for consumers are expected to decrease, especially as the costs of battery storage systems fall."
The paper said electricity tariffs were below the cost of service in many Pacific countries, while the savings from renewable energy are already factored into tariffs.
The paper said five out of the six sampled countries experienced financial loss across 2021, with the cost of service exceeding the costs passed on to consumers.
Energy Fiji Limited, who had the highest renewable energy share, were the only Pacific utility whose tariff covered the cost of service.
"Bringing down electricity costs and improving supply reliability involves factors beyond just investment in renewable infrastructure," the report's co-author and a renewable energy specialist, Denzel Hankinson, said.
He said utilities also needed to follow commercial principles and improve operational efficiencies to curb high system losses.
"International experience has also shown that increasing competition in the energy sector can also reduce the cost to consumers," he said.
Beyond cost savings, the paper said the transition to renewable energy brings with it a range of benefits.
The full 'Powering the Pacific: The Cost Implications of Renewable Energy' can be found here.