FSM Energy Policy - Vol. I (Draft)

Federated States ofMicronesia

Volume I

2010

Department of Resources and Development

Division of Energy

Energy Policy

The Government of the Federatedacknowledges

the support of the European UnioDevelopment Bank in

the development of this national e

d States of Micronesia

on and the Asian

energy policy.

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

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TABLE OF CONTENTS

LIST OF FIGURES ............................................................................................................................................... 3

LIST OF TABLES................................................................................................................................................. 4

ABBREVIATIONS............................................................................................................................................... 5

PREFACE AND ACKNOWLEDGEMENTS.............................................................................................................. 7

CHAPTER I: INTRODUCTION ............................................................................................................................. 8

1. POLICY STRUCTURE ................................................................................................................................. 8

2. POLICY SUMMARY .................................................................................................................................. 9

2.1 GENERAL ......................................................................................................................................................... 9

2.2 VISION STATEMENT, OBJECTIVES AND GOALS........................................................................................................ 10

2.3 OVERALL ASPIRATION....................................................................................................................................... 10

CHAPTER II: NATIONAL CONTEXT AND ENERGY OVERVIEW ........................................................................... 12

1. COUNTRY OVERVIEW............................................................................................................................ 12

1.1 GEOGRAPHY ................................................................................................................................................... 13

1.2 DEMOGRAPHY ................................................................................................................................................ 13

1.3 CLIMATE ........................................................................................................................................................ 14

1.4 ECONOMY...................................................................................................................................................... 14

2. ENERGY SECTOR.................................................................................................................................... 19

2.1 ENERGY DEMAND ........................................................................................................................................... 19

2.2 PETROLEUM / CONVENTIONAL ENERGY............................................................................................................... 19

2.3. RENEWABLE ENERGY ....................................................................................................................................... 22

2.4 ENERGY COSERVATION & EFFICIENCY ................................................................................................................. 28

CHAPTER III: POLICY FRAMEWORK................................................................................................................. 29

1. INSTITUTIONAL AND SYSTEMIC FRAMEWORK ...................................................................................... 29

2. INSTITUTIONAL ..................................................................................................................................... 30

2.1 ACTORS AND INSTITUTIONS ............................................................................................................................... 30

2.2 COORDINATION AND PROGRAMMANAGEMENT .................................................................................................... 31

2.3 DIVISION OF RESPONSIBILITIES AND ORGANIZATIONAL STRUCTURE ............................................................................. 32

2.4 OVERALL GOALS.............................................................................................................................................. 33

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3. RENEWABLE ENERGY ............................................................................................................................ 34

3.1 GOAL ........................................................................................................................................................ 34

3.2 OBJECTIVES ................................................................................................................................................ 34

4. ENERGY EFFICIENCY & CONSERVATION................................................................................................. 35

4.1 GOAL ........................................................................................................................................................ 35

4.2 OBJECTIVES ............................................................................................................................................. 35

5. CONVENTIONAL ENERGY....................................................................................................................... 36

5.1 GOAL ........................................................................................................................................................ 36

5.2 OBJECTIVES ............................................................................................................................................. 36

OVERVIEW ACTORS AND INSTITUTIONS ..................................................................................................................... 37

TABLES & FIGURES ................................................................................................................................................ 42

WORKS CITED................................................................................................................................................. 51

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LIST OF FIGURES

FIGURE 1: STRUCTURE OF THE POLICY .............................................................................................................................. 8

FIGURE 2: STRUCTURE OF THE POLICY ............................................................................................................................ 12

FIGURE 3:MAP OF THE FEDERATED STATES OFMICRONESIA.............................................................................................. 13

FIGURE 4: REAL GDP GROWTH IN FSM 1997-2007 ....................................................................................................... 16

FIGURE 5:WTI CRUDE OIL PRICE (SOURCE SHORT-TERM ENERGY OUTLOOK, FEBRUARY 2010)................................................ 21

FIGURE 6: GENERATOR OF THE KOSRAE UTILITIES AUTHORITY. (SOURCE: DOI, 2006) ............................................................ 21

FIGURE 7: INSTALLING SOLAR MODULE RACKS IN THE FSM. (SOURCE: AKKER, 2006).............................................................. 22

FIGURE 8: HYDRO GENERATORS (NANPIL DAM, POHNPEI) ................................................................................................. 24

FIGURE 9: HYDRO SYSTEM IN THE NANPIL RIVER, POHNPEI. ............................................................................................... 25

FIGURE 10: AVERAGE WIND SPEED AT 50M .................................................................................................................... 25

FIGURE 11: YSPSC CUSTOMER EDUCATION SOURCE: YSPSC NEWSLETTER JULY ‘08............................................................... 28

FIGURE 12: STRUCTURE OF THE POLICY .......................................................................................................................... 29

FIGURE 13: POLICY STRUCTURE .................................................................................................................................... 29

FIGURE 14: PROPOSED INSTITUTIONAL STRUCTURE FOR IMPLEMENTATION............................................................................ 39

FIGURE 15:MAP OF THE FEDERATED STATES OFMICRONESIA............................................................................................ 40

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LIST OF TABLES

TABLE 1: PERCENTAGE OF POPULATION AND GDP PER STATE, 2007 (SOURCE: SBOC, 2009)................................................. 17

TABLE 2: HOUSEHOLD ELECTRIFICATION FIGURES.............................................................................................................. 19

TABLE 3: CRUDE OIL PRICE SUMMARY (SOURCE: HTTP://WWW.EIA.DOE.GOV/STEO) .............................................................. 20

TABLE 4: ESTIMATED SOLAR RESOURCES HORIZONTAL PLANE IN KWH/M2/DAY (SOURCE: NASA SURFACEMETEOROLOGY AND

SOLAR ENERGY................................................................................................................................................. 22

TABLE 5: PERFORMANCE OF GRID-CONNECTED PV SYSTEMS IN PALAU, NAURU AND KOSRAE ................................................... 23

TABLE 6: INSTALLED PV SYSTEMS UNDER E.U. EDF-9....................................................................................................... 23

TABLE 7: COPRA PRODUCTION (IN TONS) IN POHNPEI STATE (SOURCE: POHNPEI STATE OFFICE OF THE GOVERNOR) .................... 26

TABLE 8: YAP COPRA EXPORTS IN TONS (SOURCE: 2002 ANNUAL STATISTICAL YEARBOOK, YAP) ............................................... 26

TABLE 9: OVERVIEW ACTORS AND INSTITUTIONS .............................................................................................................. 38

TABLE 10: GHG EMISSIONS AND POTENTIAL SAVINGS (SOURCE: FSM SEFP COUNTRY REPORT, IT POWER 2006) ...................... 42

TABLE 11: YAP STATE PUBLIC SERVICE CORPORATION – FINANCIAL AND TECHNICAL DATA (POWER GENERATION AND DISTRIBUTION)43

TABLE 12: KOSRAE UTILITY AUTHORITY – FINANCIAL AND TECHNICAL DATA (POWER GENERATION AND DISTRIBUTION) .................. 44

TABLE 13: POHNPEI UTILITY CORPORATION – FINANCIAL AND TECHNICAL DATA (POWER GENERATION AND DISTRIBUTION) ............ 45

TABLE 14: CHUUK PUBLIC UTILITY CORPORATION – FINANCIAL AND TECHNICAL DATA (POWER GENERATION AND DISTRIBUTION) .... 46

TABLE 15: YAP STATE PUBLIC SERVICE CORPORATION – RESIDENTIAL ELECTRICITY RATES TREND (’99 THRU 2011) ..................... 47

TABLE 16: YAP STATE PUBLIC SERVICE CORPORATION – COMMERCIAL ELECTRICITY RATES TREND (’99 THRU 2011).................... 48

TABLE 17: YAP STATE PUBLIC SERVICE CORPORATION – GOVERNMENT ELECTRICITY RATES TREND (’99 THRU 2011)9 ................. 49

TABLE 18: YAP STATEWIND DATA, JULY 2009 – FEBRUARY 2010..................................................................................... 50

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ABBREVIATIONS

ACF Advocacy Coalition Framework

ADB Asian Development Bank

AMU Association of Micronesian Utilities

BAU Business as Usual

CNMI Commonwealth of the Northern Mariana Islands

CPUC Chuuk Public Utilities Corporation

DSM Demand Side Management

EU European Union

EEM Office of Environment and Emergency Management

FSM Federated States of Micronesia

GDP Gross Domestic Product

GoFSM National Government of the Federated States of Micronesia

IPIC Infrastructure Planning and Implementation Council

KUA Kosrae Utilities Authority

MDG Millennium Development Goals

NEW National Energy Workgroup

NGO Non-Governmental Organization

NSAs NonState Actors

PetroCorp FSM Petroleum Corporation

PIC Pacific Island Countries

PIREP Pacific Island Renewable Energy Programme

PUC Pohnpei Utility Corporation

PPA Pacific Power Association

RMI Republic of the Marshall Islands

RE Renewable Energy

REP-5 Support to the Energy Sector in 5 ACP Pacific Islands (EU funded under EDF 9)

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R&D Department of Resources and Development

SBOC Office of Statistics, Budget & Economic Management, Overseas DevelopmentAssistance & Compact Management

SDP FSM Strategic Development Plan

SEW State Energy Workgroup

SHS Solar Home System

SIDS Small Island Developing States

SOPAC South Pacific Applied Geosciences Commission

SPREP Secretariat of the Pacific Regional Environment Programme

SPC Secretariat of the Pacific Community

SSM Supply Side Management

T&I Department of Transportation and Infrastructure (Pohnpei State)

TC&I Department of Transportation, Communication and Infrastructure (FSM)

UN United Nations

UNDP United Nations Development Programme

US United States of America

US DOE United States Department of Energy

USDOI United States Department of Interior

YSPSC Yap State Public Service Corporation

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PREFACE AND ACKNOWLEDGEMENTS

The 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:� H.E. Emmanuel Mori, President of the Federated States of Micronesia, for his endless support and

personal interest throughout the development of the policy;� Governor Robert Weilbacher, Kosrae State; Governor John Ehsa, Pohnpei State; Governor Wesley

Semina, Chuuk State; Governor Sebastian Anafel, Yap State, for their support;� 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;� Director Andrew Yatilman, Office of Environment and Emergency Management;� 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;� The Asian Development Bank for supporting the development of the energy policy;� 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;

� The National and State Energy Workgroups who actively participated in the overall development ofthe policy and action plans;

� Mr.Maderson Ramon, former Asst. Secretary, Department of R&D, Energy Division for starting andsupporting the development of the energy policy;

� Marieke Kleemans and Peter Konings for their guidance, and professionalism during the developmentof the national energy policy and action plans.

Marion HenryActing Secretary, Department of Resources and Development

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CHA

Chapter I provides a brief introhighlights background informatoverview. Chapter III contains ththe State Action Plans. ChaptersVolume II.

Figure 1: Structure of the policy

APTER I: INTRODUCTION

1. POLICY STRUCTURE

oduction on the structure and summary of thtion of the FSM such as geography, economhe detailed policy framework. Chapter IV address I to III are presented in Volume I while Chapt

he policy. Chapter IImics and the energysses the National andter IV is presented in

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2. POLICY SUMMARY

2.1 GENERAL

FSM is highly dependent on importedpetroleum fuels to sustain its economy.Petroleum fuels are used for both electricitygeneration and transportation with the formerbeing the major user. In 2008, the FSMPetroleum Corporation (PetroCorp) wasestablished in a combined effort to achievegreater economies of scale and currentlyserves all four FSM states; PetroCorp is awholly government-owned enterprise. Theimpacts of the high fuel prices of 2008 haveresulted in the rise in the costs of goods andservices in FSM.

The Nation currently expends approximately40 million dollars annually on imported fuel.This amount represents more than 50% of theaggregate sectoral grants that the Nationreceives from the US Government under theCompact II Treaty, and nearly 20 percent ofnominal GDP for the country, marking energyas a priority need and the most costly sectorof its fragile economy.

Biomass in the form of wood and coconuthusk products are used for local cooking andin most outer island communities, biomass isthe primary energy source. Renewable energysources are being introduced in the outerislands and in the State Centers. PV solarenergy is being accepted as a sustainable andeconomically viable source of energynationwide, while Pohnpei has hydro energypotentials; Kosrae is looking at wave energy;Yap is looking at wind power, and Chuuk atbio-fuels to broaden the nations’ energy mix.

The Strategic Development Plan (SDP) for FSMprovides a road map for social and economicdevelopment for the next 20 years (2004 –2023). The SDP has four main objectives:

1. Stability and Security—to maintaineconomic assistance at levels thatsupport macroeconomic stability.Achievement of this objective required

levels of funding close to prevailing levelsto avoid the large periodic step-downs infunding that were a characteristic of thefirst 15-year funding package.

2. Improved Enabling Environment forEconomic Growth—to be achievedthrough the FSM commitment toeconomic reform and the provision of anenabling environment to support open,outward-oriented and private sector leddevelopment.

3. Improved Education and Health Status—the third objective concerned the use ofthe annual Compact grants to support theprovision of basic services in educationand health.

4. Assured Self-Reliance and Sustainability—to be achieved through theestablishment of a Trust Fund that would,after a period of time, replace the annuallyappropriated transfers from the US.

Energy is an integral component of the SDPand this is clearly noted in all fourobjectivesmentioned above, particularly when oneconsiders abundantly available renewablesources. To achieve economic stability andsecurity requires a vibrant energy sector, andthe necessary energy infrastructure topromote economic and social development inboth the State Centers and Out-lying Islands isof high priority. Equally, education and healthservices deliveries are contingent on thequality of energy infrastructure and servicesavailable.

The Energy Policy has been developed basedon four primary components.

These are Policy and Planning, ConventionalEnergy (fossil fuel), Energy Efficiency &Conservation, and Renewable Energy.

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Within these main components the policyseeks to achieve these goals:

1. An effective, coordinated, resilientand dynamic joint State and Nationalenergy sector;

2. A safe, reliable, cost-effective andsustainable energy supply;

3. An efficient, responsive andcompetitive energy sector;

4. A diversified energy resource base,creating a balanced energy mix; and

5. The environmentally sound andefficient use of energy.

2.2 VISION STATEMENT,OBJECTIVES AND GOALS

The National Vision statement for Energy is:

To improve the life and livelihood of all FSMcitizens with affordable, reliable andenvironmentally sound energy.

The National Objective for Energy is:

To promote the sustainable social andeconomic development of FSM through theprovision and utilization of cost-effective,safe, reliable and sustainable energy services.

Whereas energy services refer to workrelating to the sale, supply, storage anddistribution of energy.

TheMajor Goal of the Policy is:

To become less dependent on importedsources of energy by having (1) an increasedshare of renewable energy sources andhaving (2) cross-sectoral energy conservationand (3) efficiency standards in place; andtherefore,

By 2020 the share of renewable energysources will be at least 30% of total energyproduction, while energy efficiency willincrease by 50%.

In addition, the following broad goals relate toenergy services in the FSM:

- Provision of affordable and safe electricityto all the households in the main islandcenters by 2015

- Electrification of 80% of rural publicfacilities by 2015

- Electrification of 90% of rural householdsby 2020

- Enhance the supply side energy efficiencyof the FSM utilities by 20% by 2015

2.3 OVERALL ASPIRATION

In line with the above stated objective, visionand major goal, the National Energy Policy hasindentified the following focal areas:

� Disadvantaged and/or GeographicallyRemote Communities

- Encourage the application of appropriatesupport and incentives to enabledisadvantaged and/or geographicallyremote communities to access affordableenergy.

� Capacity Building

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- Improve adequate and institutionalcapacity to plan, manage, and develop theenergy sector by providing appropriateenergy-related training opportunities at alleducational and professional levels.

- Accelerate research and development ofenergy technologies that are appropriatefor adoption within the nation andfacilitate international transfers ofappropriate technologies that the nationis capable of operating and maintaining.

- Assess and promote indigenous resourcepotential and technical capacity for allaspects of energy sector planning anddevelopment.

� Public Awareness

- Increase training and public awareness onrenewable energy and fuels for vehicles,energy efficiency, and conservationthrough publicity campaigns and schoolcurricula.

� Private Sector Involvement

- Enhance public-private partnerships andexpand private sector participation,investment, ownership, and managementfor energy supply including electricitygeneration, transmission and distributionwith job creation in mind.

- Establish an enabling and competitiveenvironment for the introduction ofindependent energy providers wherethese may provide efficient, reliable, andaffordable service to consumers.

� Community Level initiatives

- Promote involvement and input from non-government organizations and localcommunities, including youth and women,

in policy implementation and integratedplanning.

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CHAPTER II: NATI


In 1986 the Federated States of Madministrator, the United StatesNations in 1991 (GoFSM, 1997).1

located in the western Pacific OcWith a total population of 107,00Kosrae. Each State maintains connational government provides anNational Development Plan (GoFwhich is often the largest island,islands, 74 of which are inhabite

1 This section builds heavily on GoFS

IONAL CONTEXT AND ENERGY O

1. COUNTRY OVERVIEW

Micronesia was created and gained independenc. Five years after the birth of the nation, the FSM1 From west to east, it stretches about 2,700 kilocean between the equator and 14 degrees North00, there are four states in the FSM – Yap, Chuuknsiderable autonomy for their own developmentn integrated prospective and vision, which is desFSM, 1997). Except for Kosrae, each state consistand a multitude of outer islands. The FSM has ad.

SM, 1997

VERVIEW

ce from its formerM joined the Unitedometers, and islatitude (Figure 2).k, Pohnpei andt strategy, while thecribed in the FSMts of a State center,a total of 607

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1.1 GEOGRAPHY

The 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 coveredthe islands, are disappearing fast.

Today, sizeable forest areas can only be foundon the islands of Pohnpei and Kosrae (GoFSM,1997).

Inside the Exclusive Economic Zone (EEZ), themarine area of the FSM, which accounts forover 2.6 million square kilometers, hasabundant and diverse resources. While thenation consists of 607 islands, its land areatotals only 701 square kilometers. Besides thenatural environment, cultures also varyconsiderably between islands. Afterthousands of years since the settlement of theislands, there are significant environmentaland cultural differences involved even withinthe four states of FSM. It is thus that thenatural environment and especially themarine and the land resources have aprofound and vital influence in shaping thephysical and cultural life of the inhabitants(GoFSM, 1997).

Figure 3: Map of the Federated States of Micronesia

1.2 DEMOGRAPHY

Between 1989 and 1994, FSM has experiencedan internal migration. With a 10 percentincrease in total population during this period,the population share of Pohnpei, where thecapital is located, increased by 13 percent, aspeople immigrated to seek economicopportunity. On the other hand, Kosrae’sshare of the population only increased slightly,by 4 percent. In spite of the internalmovement, the overall population structure ofFSM remains the same, and the population ofFSM remains one of the youngest in theregion, with almost 24 percent of thepopulation under 24 years of age. Similar toother parts of the world, the median age ofthe population has increased, rising from 16 to18 over the last 30 years. The averagepopulation density in 1994 was 150 personsper square kilometer. However, this overallfigure might be misleading, as the populationdensity varies considerably across the nation,ranging from 418 per square kilometer inChuuk to a low of 63 per square kilometer inKosrae (GoFSM, 1997).

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1.3 CLIMATE

The FSM has a typical tropical climate: stabletemperature, high humidity and high rainfall.The temperature averages between mid 20and 30 degrees Celsius, while the humidity ison average over 80 percent. Rainfall is ingeneral high, but varies geographically, with alow record of 3 meters on drier islands to over10 meters per year in the mountainousinterior of Pohnpei. As with many tropicalislands, there is a wet season (June toOctober) and dry season (November to May)in FSM. Occasionally, the western region ofthe country suffers from typhoons (one in 20years return period), which can cause seriousdamage to the region such as landslides anddevastation of vegetation, buildings andinfrastructure (GoFSM, 1997).

1.4 ECONOMY

The FSM is a small and domestic-basedeconomy with a market of 107,000 people(SBOC, 2009) with modest income (GoFSM,1997). The Nominal Gross Domestic Productof the FSM in 2006 was $236.9 million. Percapita GDP for 2006 was $2,194. The tradebalance has remained highly negative since1997. In 2005, the trade balance wasestimated at negative $117.2 million, anequivalent to 50.5 percent of GDP (DoI, 2006,pp. 198).

The economy of the FSM is mainly determinedby agriculture, including fishing and everyrelated aspect to this (such as the lease offishing rights to FSM waters), governmentemployment and tourism. In the period 1997-2005 the number of visitor arrivals grew withalmost 10 percent. In 2005, 18,958 peoplevisited the FSM. Most of the visitors werefrom the US and Japan, about 40 percent and

17 percent, respectively, in 2005 (DoI, 2006,pp. 198).

The infrastructure is under-developed andcannot meet the demands of the growingpopulation and the condition of theinfrastructure is poorly maintained due tosevere limitations on the availability ofgovernment local revenue funds (GoFSM,1997).

SECTORAL DEVELOPMENT

Except for the offshore fisheries, therelimited resources in the FSM. Except for thewholesale/retail and service industries, theprivate sector is under-developed and theFSM has a large external trade deficit. Thecountry is very dependent on external aid andon the public sector for providing jobs andgovernment expenditure. In the FSM NationalDevelopment Plan (SDP), the governmentacknowledged the distinct dichotomybetween the cash and traditional economies(GoFSM, 1997). The commercial sector ischaracterized primarily by small businesses,with only a few larger public companies, co-operatives and credit unions. Most of thefamily-based businesses focus on commercialimport/export, wholesale and retail business.Alternatively, the families might also engage insmall service enterprises, such as restaurants,taxis, car rentals, repair and maintenance, etc.Only a few have ventured into the industrialsector (GoFSM, 1997).

Thus the FSM economy is dominated by thepublic sector as the primary sector ofeconomic activity. The government providesone third of total employment, while theagriculture and fisheries industries togetheraccount for 28 percent of the jobs.

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14,400 persons are estimated to be involvedin the cash economy, and half of them areengaged in the public sector, mainly operatingpublic facilities, engaging in construction work(through government infrastructure projects)as well as supporting community services. Asthe public wage in general is considered to besignificantly higher than the comparable workin the private sector, this has suffocated theentrepreneurial growth and technical skillsdevelopment which could in fact help toincrease the efficiency of production andexport service sectors of the economy. Thescattered consumer markets and the lack ofadequate transportation infrastructure havecontributed to the minimal trade betweenstates. Agricultural products are the primarygoods traded within FSM, as well as forexport, with sakau (kava), betelnut and citrusbeing some of the primary products (GoFSM,1997).

FINANCIAL TRANSFERS FROM THE US

Economic development in the FSM needs tobe analyzed in the context of the CompactAgreement with the United States, as it isheavily dependent on the financial assistanceprovided under the Compact of FreeAssociation (DoI, 2006, pp. 198). The Compactsince 1986 has provided large externalfinancial 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).

The Compact was designed to assist the FSMwith infrastructure and development of itseconomy. Infrastructure development hadbeen successful but the development of a selfsustaining economy had only very limitedsuccess. Roads, electric utilities, harbors,airports, schools, hospitals and public facilitieswere all constructed during the 15 years ofCompact I. Kosrae, Pohnpei and Yap havemaintained their facilities in a responsiblemanner and have expanded their facilities.Chuuk has not performed as well (DoI, 2006,pp. 198).

In 2003 the United States and FSM enteredinto an Amended Compact II agreement,wherein FSM receives payments of $92.7million per year from the United States with$76.2 million being in the form of grants and$16.0 million to be placed in a trust fund and$500,000 allocated each year for an annualaudit. The trust fund is expected to increaseand become a permanent interest-bearingfund such that after Compact II expires in2023 the trust fund will provide the same levelof income available to FSM as the presentCompact II (DoI, 2006, pp. 198). However,current financial trends indicate that the FSMTrust Fund will not provide such fundingrequired after 2023, when the currentCompact ends.

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Figure 4: Real GDP growth in FSM 1997-2007

(Source:http://www.spc.int/prism/country/fm/stats/Economic/NAacc't/gdp-summary.htm)

Already at the start of Independence in 1987the economy depended strongly on Compactflows, representing 88 percent of thecountry’s gross domestic product (GDP).Because the non-traded goods productiondominated the private sector, the exportvolume was negligible and the tourism sectorwas still in its early stage. From then onwards,GDP grew 1.6 percent annually and the privatesector realized an average rate of growth of2.9 percent annually (Figure 3). Although thisis not very high, it is comparable to theeconomic performance of other Pacific Islandcountries.

ECONOMIC DEVELOPMENT

The FSM is classified as a medium incomecountry by World Bank categorization and bythe UNDP as a country in the medium HumanDevelopment Index category. The FSM scoresmoderately on other development indicators.In 2003, the ADB concluded the following forthe FSM in relation with meeting theMillennium Development Goals (MDG):

“Shows little progress towards meeting theMDGs by 2015. Poverty incidence isestimatedto be high with approximately 40 percent ofthe population falling below the nationalpoverty line in 1998 and there are signs ofincreasing inequalities. One of the key issuesis delivery of basic social services, which oftenfail to reach the poorer strata of society, theouter islands and rural areas. There aresignificant differences in the poverty situationbetween the various states but littledisaggregated data is available. FSM not onlyfaces the challenge of increasing enrollmentrates at all levels but also of improving thequality of education, retention rates andaccess in the outer islands. FSM has poorhealth indicators.

Although maternal mortality rates have fallensignificantly, FSM still has a relatively highmaternal mortality rate and a rapidlyincreasing incidence of non-communicablediseases. Child mortality rates have decreasedslightly. Available data suggest that only 41percent of the population has access to animproved water source and about 45 percentto improved sanitation” (ADB, 2003).

DEVELOPMENT OF STATES

There is considerable autonomy for the Statesin the FSM and there are also largedifferences. As shown in Table 1 Pohnpei,with the national government, accounts foronly 32 percent of FSM’s population but 47percent of GDP. Chuuk, with half of thepopulation has 28 percent of GDP. Economicperformance has varied considerable, partlyreflecting differences in policies and responsesto external developments. Pohnpei and Yapgrew the most rapidly at 0.5 and 1.1 percentrespectively per annum from 1987-2007.

-12

-10

-8

-6

-4

-2

0

2

4

6

8

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007(est)

GDPgrow

th(%)

Fiscal Year

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In Kosrae and Chuuk the GDP declined with0.9 percent per year. (PIREP, 2004)

State GDP Population

Kosrae 8% 7%

Pohnpei 47% 32%

Chuuk 28% 50%

Yap 17% 11%

Table 1: Percentage of Population and GDP per state,2007 (Source: SBOC, 2009)

The economy of Kosrae is limited. In 2005 theaverage income per household in Kosrae was$12,842, which is 4.3 percent below thenational average. However, the averageexpenditure per household was $11,778which is 8.2 percent less than the nationalaverage. Kosrae is the only State in which themedian savings is positive. The 2006 GrossDomestic Product was $15.9 million, a declineof 3.3 percent compared to 2005 wheninflation is considered. The 2007 GDP percapita was $1,963 (DoI, 2006, p. 196).

Pohnpei has the highest amount of averagesavings at $2,658, which is 450 percent of thenational average savings. The median savingsare minus $192, which is more than $2,000more compared to the national average andalmost $4,000 more than in Yap. The averageincome per household is $15,593, the highestof the four states. It is almost 43 percenthigher than the average income in Chuuk,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 per

capita of $2,685, Pohnpei was 47 percentabove the national GDP per capita (DoI, 2006,p. 197).

The average and median income of Chuuk isvery low, respectively 18 and 36 percentbelow the national average. The averagesavings is approximately $1,000 lower thanthe national average. However, the mediansavings is $300 above the national average.This is due to the fact that the medianexpenditure in Chuuk is only 67 percent of thenational median expenditure. The GDP percapita in 2007 was $1,006 which is 55 percentof the national GDP per capita and 67 percentless than Yap, the State with the highest GDPper capita (DoI, 2006, p. 197).

Chuuk has suffered from several financialcrises and has not yet made the adjustmentsnecessary to repay debts, which wereequivalent to 30 percent of state GDP at theheight of the crisis in FY1996. Large inflows offunds to assist Chuuk recover from TyphoonChata’an in 2003 helped stimulate economicgrowth (PIREP, 2004).

The Yap economy has declined slightly inrecent years since Compact II began but isstronger than some other FSM states. Yap hasdeveloped a relatively strong private sectoremployment base with approximately 72percent of employees in the private sector.Yap State’s economy continues to bedominated by government spending, both forwages and the purchase of goods and servicesfrom the private sector.

The closure of a garment factory eliminatedthe manufacturing sector. Tourism is downsignificantly after the reduction of scheduledflights by one-third (DoI, 2006).

18 | P a g e

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).

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2. ENERGY SECTOR

The energy sector in FSM is overwhelminglydependent on the import of petroleum fuelsfor commercial energy use for transport,electricity, business and households.Hydropower has been a minor contributor asthe Nanpil hydro system (Pohnpei) hasprovided several percent of the totalelectricity supply. Current problems with thedam have reduced this share. Other sources ofrenewable energy, such as solar energy andbio-energy account for a minor percent of theenergy supply (PIREP, 2004, p.14). This sectionwill first give a brief overview of the use ofconventional energy, including the sourcesand its use, after which the largest part of thissection will focus on renewable energy, wherethe greatest potential for expansion exists.

2.1 ENERGY DEMAND

2.1.1 HOUSEHOLDS

Roughly 55% of all households in FSM hadelectrification from some source (2000census) (Table 2).

Chuuk

Yap

Pohnpei

Kosrae

% HH electrified(2000 census)

33% 59% 68% 99%

% HH electrified(main island)

75% 100% 98% 98%

% HH electrified(2009 estimate)

46% 70% 87% 100%

Table 2: Household electrification figures

It shows that some alternative solutions arebeing used in some states that provideelectricity (mainly PV and diesel generators).

The energy demand in the rural areasgenerally corresponds to basic needs such aslighting (often with kerosene, oil lamps,flashlights) and cooking (wood or otherbiomass (coconut-husk) and some kerosene).No specific statistical study has been carriedout on the energy use habits and expenditures

in rural places. However, on the basis of asurvey conducted during the course of theREP-5 implementation in 2009, the averagecan be estimated around $15 to $35 permonth and per household (in the outer islandsaround $15 (depends on availability) while inthe rural areas on the main islands theaverage is $ 35).

Besides lighting, kerosene is also used forcooking, but its consumption at the nationallevel has dropped mostly in rural areas andreplaced by traditional wood and charcoal fuelsources. This can be largely attributed to theincrease in fuel costs and the decrease in ruralhousehold incomes.

2.2 PETROLEUM /CONVENTIONAL ENERGY

Foremost as the primary source of energy forthe FSM is petroleum. The use of energy inthe FSM is comparable to the energy use inother tropical islands in the sense that themajority of petroleum is used for electricitygeneration and for transportation (DoI, 2006,pp. 209). More specifically, gasoline anddiesel fuel are mainly used for transportationpurposes and diesel is used for the generatorsat the utilities.

Furthermore, a small amount of liquidpetroleum gas (LPG) is used for heating waterand cooking (DoI, 2006, pp. 197).

In the transportation sector, mainly gasolineand diesel are used. Because the FSM doesnot have a large land mass, the use of fuel forvehicle transportation is modest.Transportation fuel is therefore mostly usedfor marine services, including commercialfishing boats, patrol boats and the cargo andpassenger ships within the nation. Many usefuel from Pohnpei, which has emerged as the‘fleet headquarters’ of the region and othersuse fuel tenders on the open ocean.

For cooking, kerosene and liquid petroleumgases (LPG) are used, as well as wood andcoconut waste (DoI, 2006, pp. 198).

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In 2009, around $40 million US$, which iscomparable to over 50% of the nationalbudget, was spent on the import of fossil fuel.Since world oil prices and the demand for oilcontinue to rise, this number will onlyincrease. Recent history indicates majornation-wide hardships due to such trends.The average price for a barrel of oil was justabove $50 in January 2007. In October 2007the price reached almost $90 a barrel, causingthe price to increase by 80 percent. Thefollowing year, in April 2008, the priceincreased to $110, causing what amounted toa full-blown fuel crisis in the Summer of 2008in the FSM (GoFSM, 2008a).

Table 3 shows the price summary of fuel andelectricity costs in the US.

Price Summary

Year Percent Change

2008 2009 2010 2011 08-09

09-10

10-11

WTICrudea($/barrel)

99.57 61.66 79.78 83.50 -38.1 29.4 4.7

Gasolineb($/gal)

3.26 2.35 2.84 2.97 -27.9 20.8 4.8

Dieselc($/gal)

3.80 2.46 2.95 3.16 -35.2 19.8 7.0

HeatingOild ($/gal)

3.38 2.52 2.85 3.10 -25.4 13.0 8.9

NaturalGasd($/mcf)

13.67 12.03 12.51 13.49 -12.0 4.0 7.8

Electricityd

(cents/kwh)11.36 11.58 11.47 11.68 2.0 -1.0 1.9

a West Texas Intermediate. b Average regular pump price.c On-highway retail. d 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 runningwas up to 91 percent of total revenuecollections, leaving no financial reserve formaintenance and system improvement.Subsequent steep and sudden fuel and energyprices to consumers created pockets of thepopulation that could no longer afford to havethe convenience of electricy or transport onthe main islands.

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Beyond the traditionally steep iprice for electricity and fuel cover-dependence on fossil fuel,of socio-economic progressproblematic, particularly in reoverall commensurate increConsumer Price Index. All goodbecome more expensive. Thpeople who are not conneelectricity grid will suffer froincrease of fuel (GoFSM, 2hampers development and fostas it disproportionally harmssegments of the society. Becaudevelopment of renewable enerefficiency are key elements in pscenario. Although oil pricesconsiderably from the high in th2008, the latest trends show thaonce again on the upswing,more pressure on the FSM peutility corporations, most of wdealing with the last oil

Figure 5: WTI crude oil price (Source ShOutlook, February 2010)

Electricity use can be divided icategories: residential use (commercial and industrial useuse by the government (17 per

ncrease of thecaused by another aspectsalso becomeegard to theease in theds and serviceserefore, evenected to theom the price008a). Thisters inequalitys the pooreruse of this, thergy and energypreventing thishave cooled

he Summer ofat oil prices arebringing eveneople and thewhich are stillprice spike.

hort-Term Energy

into five main(39 percent),(22 percent),

rcent), use for

utilities (10 percent) and(12 percent). The largestis used for air conditioni2006, pp. 209). The goveuses the bulk of its energyconditioning (DoI, 2006, p

Each state has its own epublic authority responsiof utilities. A boardgovernor and confirmlegislatures (DoI, 2006, pputility companies. Allespecially in Chuuk, facproblems as a result of hig

Figure 6: Generator of the K(Source: DoI, 2006)

For more specific informaTable 11: Yap State Public– financial and technical dKosrae Utility Authoritytechnical data (powedistribution); Table 13Corporation – financial(power generation and diChuuk Public Utility Corand technical data (powdistribution) in the Appethe main operating detaicompanies.

losses of the systemamount of electricityng and lighting (DoI,ernment in particulary consumption for airpp. 198).

lectricity system andble for the provisionappointed by theed by the statep. 199) governs these

utility companies,ce serious economicgh fuel costs.

osrae Utilities Authority.

ation please refer toc Service Corporationdata(YSPSC); Table 12:y – financial andr generation and3: Pohnpei Utilityand technical datastribution); Table 14:rporation – financialwer generation andendix, which sum upils of the four utility

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2.3. RENEWABLE ENERGY

There are several existing and potentialsources of renewable energy in the FSM. Thepotential use is particularly high for solarenergy and hydropower (Pohnpei State) butalso the potential of wind energy, bio-fuel,methane-gas and tidal and wave energy willbe reviewed. For each source of renewableenergy the section will briefly describe bothexisting and potential use.

2.3.1 SOLAR ENERGY

High solar insolation throughout the FSMcreates a rich resource of solar energyalthough the available energy varies fromplace to place because of local cloudformation. This is especially the case on theislands with mountains, such as the mainislands 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 islandswhere electricity networks are available (DoI,2006). In the state of Pohnpei, 400 solarhome systems (SHS) were installed on severalislands in the early ’90s. This program formedthe largest outer island PV system program ofthe North Pacific (DoI, 2006) for a long time.

Month Kosrae Pohnpei Chuuk YapJan 4.72 5.1 5.13 5.4

Feb 5.34 5.8 5.71 6.04Mar 5.34 5.84 5.93 6.5Apr 5.41 6.07 5.79 6.72May 5.01 5.71 5.8 6.55Jun 4.94 5.31 5.3 5.43Jul 5.16 5.59 5.41 5.48Aug 5.53 5.57 5.42 4.96Sep 5.42 5.36 5.55 5.43Oct 5.43 5.23 5.32 5.27Nov 4.82 4.77 5 5.17Dec 4.87 4.91 4.88 5.34Avg. 5.16 5.43 5.44 5.69

Table 4: Estimated Solar Resources Horizontal plane inkWh/m2/day (Source: NASA Surface Meteorology andSolar Energy

Besides the SHS in Pohnpei state 300 SHSwere installed in various outer islands in Yapand 402 households in Chuuk (2000 census).

Figure 7: Installing solar module racks in the FSM.(source: Akker, 2006).

This was done after the 1982 choleraoutbreak, where solar powered pumps toprovide flush water for toilets aimed atreducing the use of water from shallow wellsand the spread of cholera.

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The project was set up by the University ofGuam that provided workshops oninstallation, operation and maintenance.

More recently, under the EuropeanDevelopment Fund (EDF-9 REP5 programme),a major PV electrification was implemented inthe outer islands of Pohnpei, Chuuk and Yap.PV off-grid systems were installed in 11 outerislands with a total capacity of 120.88 kWpand in Kosrae five grid-connected PV systemswere installed, with a total capacity of 52.5kWp. The PV systems in Kosrae are beingmonitored by the utility and a more detailedanalysis of data from the grid-connectedsystems is being an ongoing activity. The datafrom Kosrae is being compared with similar PVgrid-connected systems in Nauru and Palau.

It is obvious that it is much harder to collectperformance data from the outer islandinstallations. FSM has therefore initiated aplan to install VSAT satellite dishes to the REP-5 installations that will enable them to doremote monitoring of the systems. Inaddition, the communities will be connectedto the Worldwide Web for communication,education and emergency purposes.Summarized performance information forPalau, Nauru and Kosrae is given in Table 5below.

Location Size(kWp)

Yield permonth (kWh)

Specific yield(kWh/kWp/yr)

Palau 98.3 10,000 1,220

Nauru 40.2 4,600 1,370

Kosrae 52.5 5,600 1,280

Table 5: Performance of grid-connected PV systems inPalau, Nauru and Kosrae

It is clear then that despite some limitations,solar energy has a large potential in the FSM.There remain many outer islands where solarenergy can provide affordable energy to

people that would otherwise have to livewithout. On islands in the state centers whereelectricity systems are available, PV systemscan provide energy to the grid in order tosignificantly reduce the need for fossil fuelsand create a more sustainable energy mix, aswell as reduce overall costs to both utilitiesand families.

State Island Site Systemsize

Yap Asor PV mini-grid 19.5 kWpFadrai PV mini-grid 28.08 kWp

Chuuk Satawan High school 6.6 kWpMoch Public facilities -

PV mini-grid6.7 kWp

Udot High school 3.4 kWpOnoun Public facilities -

PV mini-grid10.5 kWp

Pohnpei Kapingamarangi

School 5.8 kWp

Dispensary andmunicipal office

4 kWp

Nukuoro Dispensary 3 kWpSchool 4.6 kWp

Sapwaufik School andmunicipal office

8.4 kWp

Dispensary 3 kWpMwaokillao Dispensary 2.5 kWp

School 6.1 kWpPingelap School 6.2 kWp

Dispensary 2.5 kWpTable 6: Installed PV systems under E.U. EDF-9

2.3.2 HYDRO ENERGY

The hydro sites on Kosrae have limitedpotential and are unlikely to be cost effectivefor development. However further study couldshow that Kosrae might have a potential ofPICO Hydro installations that can act as stand-alone systems and power some houseslocated close to the rivers. Yap and Chuukhave no hydro sites. On Pohnpei there is ahydro power installation on the Nanpil River.There have been surveys that indicate otherdevelopable sites in Pohnpei are present;however at the time of the survey theeconomics for the development of the sites

24 | P a g e

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 developmenton numerous of its approximately 35 streams.The stream flows however, vary a lot due therapid runoff and small catchments. Due tothis, the streams are generally not practical forbase load hydropower without usingexpensive and environmentally problematicstorage ponds. Despite this, hydropower hasan acceptable tradeoff between reliability ofpower delivery and cost of installation. Insome cases, drinking water reservoirs havebeen used as storage ponds to secure moreconstant water supply (DoI, 2006).

The Nanpil hydro facility was originallydeveloped by the Japanese in the 1930s. In1988, the United States Army Corps ofEngineers came to develop a hydro plant nextto the old, non-operating one, using adifferent water intake and a new building forthe installation, see Figures 10 and 11. Thetotal amount of power that can potentially beproduced is 2.06 MW. This is a substantialamount of energy as it exceeds one-third ofthe peak load on the whole island. However,this amount of energy has never beenproduced due to water intake limitations,which reduces the maximum output to 1.8MW. The average is reduced even more dueto cyclical dry and wet periods on the islandand the lack of an appropriate water storagefacility to spread the production more evenly.

Figure 8: Hydro generators (Nanpil dam, Pohnpei)

In the beginning of the 1990s, there was anidea for increasing the catchment area atNanpil at a cost of $6 million. This idea wasscrapped however, because the additionaloutput was uncertain due to the limitedhydrological data.

In 1981, a United States Army Corps ofEngineers study identified numerous potentialhydro sites, one on the Senipehn River andthree on the Lehnmasi River. Due to lack ofaccess roads, the relatively high cost per kWfor the site development and the distancefrom the existing grid, they were notdeveloped. The total peak potential power ofthe sites is approximately 4 to 5 MW, with anaverage of 2 to 3 MW. Obviously, during thetwo dry months less power would beproduced. The production site with thehighest potential was on the Lehnmasi River.

The hydro sites that were labeledeconomically unviable in the 1980s and 1990sshould again be reviewed due to the increasedenergy costs, and if feasible, steps taken tobeing developed. Despite the smallcatchments and the variable stream flows sothat there is not enough water flow to securea continuous base load, the harm to theenvironment of systems that make use ofexisting streams (so-called run-of-the-riverdevelopment) is minimized and the systemsare relatively cheap.

25 | P a g e

During its extensive operational life, it canprovide substantial fuel savings. The greatestrenewable energy opportunity for fuel savingis offered by the small hydro development,especially for the state Center of Pohnpei, andpossibly Kosrae, and therefore a thoroughreview of the hydro potential seemsappropriate.

Figure 9: Hydro system in the Nanpil River, Pohnpei.

2.3.3 WIND ENERGY

The resource for wind energy is not very wellknown in the FSM. Experts believe that it isborderline regarding the economic feasibilityof energy production from wind.Meteorological measurements and lowlatitude location indicate moderate resourceavailability. Furthermore, typhoons form arisk for wind power systems. Figure 12 givesan overview of the average wind speedthroughout the year in the four states.

Due to the mountainous nature of some of theislands, however, there may be locallybeneficial conditions for wind energy. Themain recommendation that also came out ofearlier studies on potential renewable energyuse is to carry out a feasibility study on the

use of wind energy throughout the FSM. Afterbroadly defining locations where wind energycould potentially be implemented, detailedwind assessments and wind maps should becreated to more precisely identify the mainwind energy sites. Appendex A shows thewind speed data from Yap.

Figure 10: Average wind speed at 50m

2.3.4 BIOFUEL

A very interesting source of biofuel is coconutoil. The outer islands have a large andunderutilized resource that could be furtherdeveloped. Using coconut trees is not new tothe country. There has been an activeindustry for copra, the dry meat of coconuts,after the Second World War until the 1970s.Although the price of copra remained stableafter this period, the costs of living hadincreased and so had the labor costs. Thisreduced the incentive to commercially exploitcopra. As a result, there were few newcoconut plantings to replace an increasingshare of senile trees (DoI, 2006).

0

2

4

6

8

10

Jan

Mar

May Jul

Sep

Nov

Windspeed(m

/s)

Month

Average wind speed at 50m, 10 year average

Kosrae

Pohnpei

Chuuk

Yap

26 | P a g e

The country has the opportunity to developcoconut production on outer islands andthereby increase income for the outer islands.At current prices and production levels,coconut oil could be shipped to the statecenters where large diesel fuel users,especially the utility companies and certainbusinesses that might have back-upgenerators, could add coconut oil to create afuel mix and reduce their use of diesel fuel.This would boast the coconut oil industry andprepare it for production on a larger scalewhen diesel prices increase further. Revenuesto rural communities and reduction in costs tothe private sector in the centers wouldcertainly benefit the macroeconomic fabric ofthe nation.

Until recently, there was an active coconutfactory on the main island of Pohnpei thatproduced biofuel from coconuts. Thecompany 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 individualand corporate customers on the island. Withlittle effort, an engine can be adjusted to runon a mix of diesel and biofuel. The owners ofthe coconut factory were making plans forincreased production and to start selling fuelfor boats. However, in July 2008, a firedestroyed the whole factory. The owners hadno insurance and there were no readilyavailable funds to rebuild the factory. In 2001a copra warehouse in Yap was devastated by afire (DoI, 2006), and in Chuuk a copra oilproduction facility was also consumed by afire. Neither has been rebuilt.

This impacted the total amount of copraproduced and exported within the nation.Tables 7 and 8 below give some numbers onthe historical amount of copra production forPohnpei and Yap.

1992 1994 1996 1997

Pohnpei 18.63 9.32 6.68 13.2

Mwoakilloa 27.53 56.05 49.06 37.83

Pingelap 14.75 3 20.13 32.86

Pakin 33.9 15.11 18.27 20.13

Sapwahfik 2.95 43.26 63.34 25.25

Nukuoro 55.79 42.49 19.3 56.15

Kapinga 19.61 11.49 14.08 0.88

Oroluk 4.66 2.12 8.69 11.33

Total 177.81 182.83 199.55 197.63

Table 7: Copra production (in tons) in Pohnpei State(Source: Pohnpei State Office of the Governor)

Table 8: Yap copra exports in tons2 (Source: 2002 AnnualStatistical Yearbook, Yap)

Biofuel from coconut oil remains a socially andeconomically viable source of renewableenergy and efforts should be strongly pursuedto once again integrate it into the overallenergy mix.

2 The low value for 2001 was due to the loss ofmuch of the copra in a warehouse fire.

1999 2000 2001 2002 2003

Tons 292 210 35 130 80

27 | P a g e

2.3.5 BIOMASS

Biomass remains the largest source of energyfor cooking. For the mountainous islands ofthe state centers of Pohnpei, Kosrae andChuuk, and some of the outer islands, biomassin the form of wood is sufficiently availablewithout danger of deforestation. Also in low-lying atolls biomass is used for cooking but indifferent forms, such as coconut shells, frontsand husks, mangrove wood or plants (PIREP,2004).

As in other Pacific Island countries,commercial use of biomass for electricityproduction by means of combustion orgasification is limited to facilities that processagricultural or forest products. There are noindustries in the FSM that processes suchproducts as agricultural processing tends to bedone in small scale, often family-owned,decentralized facilities. There is currently noindustry that produces biomass waste. Ifbiofuel from coconut oil would become alarge-scale industry, enough biomass wastecould be generated to justify commercialbiomass combustion or gasification toproduce heat or electricity (DoI, 2006). In thatcase, a feasibility study should be carried outto give insight in the potential use.

Waste to Energy is another development thatis being carefully followed by the FSMgovernment and plans are being made to starta (solid) waste composition study in 2010.

2.3.6 BIOGAS

There are some animal farms in the FSM thatproduce enough waste to generate biogas inan economically viable way. This way, animalwaste is disposed in an environmentallyfriendly way with biogas as a byproduct.Some small pilot biogas installations are beinginstalled in Pohnpei, with the assistance of theChinese government in 2008, and these arebeing monitored by the Pohnpei Stategovernment. There is also independent biogasproducer on the main island of Pohnpei thattries to create a closed, environmentallysustainable cycle in its household energy use.Animal waste produced by a pig serves asinput for the biogas digestion tank, whichprovides gas for daily cooking. There has beensome interest noted by the Kosrae StateGovernment to replicate such low-scalehousehold digester systems as well.

Currently no facilities for sewer or landfilltreatment are used to generate biogas. Whenthese facilities are upgraded, a feasibilitystudy should be carried out to investigate theeconomic and environmental sustainability ofan add-on facility to extract biogas.

2.3.7 OCEAN ENERGY

Although the country is surrounded by ocean,there is at the moment no sufficiently matureocean energy technology that can be used inthe FSM. Available resources for tidal energyare present in the FSM. The tidal range is notvery large, but through certain reef passagesand some man-made causeway and bridgeinfrastructures, high speeds and high volumesof water flows are observed locally. The FSMenergy sector is following the development inocean and tidal technologies and it is plannedto have pre-studies done between 2010 and2012.

28 | P a g e

2.4 ENERGY COSERVEFFICIENCY

A recently completed report hthe potential of renewable enerefficiency to reduce greenhouemissions in a number ofcountries (See: Table 10: Gand Potential Savings (Sourcecountry report, IT Power 2006)).emission estimates are dcorresponding estimates of rfossil fuels in all sectors of tincluding power generationhousehold use, etc.

The table shows that in FSM by tit is, in principle, possible to redfossil fuel use only by 14%, withthe savings coming from reneand 30% from energy efficiency m

As shown in the table energy eimportant part of the enparticularly in supply side managutilities. The Pacific Power Assocan energy efficiciency assistancin 2009 for the utilities but presescale measures have beenHowever, the average estimatconsumption in electrified housthat high and decreasing overyears, revealing that thatmanagement (DSM) are startingfruitage. High electricity cointroduction of cash power memeters) have significantly devenergy saving behavior at the c(Figure 11 below).

ATION &Y

has estimatedrgy and energyse gas (GHG)Pacific IslandGHG Emissionse: FSM SEFPThe total GHGderived fromreductions ofthe economy,n, transport,

the year 2011,duce projectedh about 70% ofewable energymeasures.

efficiency is annergy sector,gement for theciation startedce programmeently no large-undertaken.

ted electricityseholds is notthe last fourdemand-side

g to bear someost and theeters (pre-paidveloped somecustomer level

Figure 11: YSPSC customer enewsletter July ‘08

It shows that EE andsignificant impact in caselarge scale, and that brneed to be implementeawareness amongst consu

Some of the utilities havadvise the public on DSMbeing held to start prochanging light bulbsefficiency appliances. Inframeworks and incentivstates can help spur privaand consumption

education Source: YSPSC

DSM could have aof consideration at aroad-scale programsed to create moreumers.

ve actively started toand discussions areogrammes such asand other energyaddition, regulatoryve programs at theate sector investmentin this area.

29 | P a g e

CHAP


1. INSTITUT

Figure 13: Policy Structure

TER III: POLICY FRAMEWORK

TIONAL AND SYSTEMIC FRAMEWOORK

30 | P a g e

2. INSTITUTIONAL

In any national policy, providing a good andclear institutional structure is a top priority.This counts especially for an energy policywhere the sector is still under developmentand defractured under the four States. In theinstitutional and systemic structure, formallinkages between actors and clear definitionsof their responsibilities are being addressed.The main actors and institutions active in theenergy sector should be involved, includingthe government at various levels, the utilitycompanies, the private sector and non-stateactors (NSAs), including NGOs and communitygroups. Due to the current lack ofcoordination in the energy sector, betweennational and state, there is a need for anorganization in charge of overseeing andcoordinating activities in the country and inthe respective states. This organizationshould interact with various stakeholders atthe national and state level and with thegovernment, the utilities, the private sectorand NGOs.

2.1 ACTORS AND INSTITUTIONS

A National Energy Workgroup (NEW) has beenestablished and consists of members from thekey Departments in the NationalGovernment3, a State Representative comingout of each State Energy Workgroup, aRepresentative from the Association ofMicronesian Utilities (AMU), a Representativefrom the College of Micronesia (COM-FSM)and the Government Energy Advisor(s). NEWhas as its main task to oversee and coordinate

3Energy Division, Department of Resources &Development; OEEM; SBOC (ODA); Department ofTransportation, Communication and Infrastructure

the activities in the energy sector especially inrelationship to the implementation of thenational energy policy. Since the NEWconsists of the main stakeholders involved inthe energy sector, this provides a forum todiscuss development in the energy sectors,especially as it pertains to renewable energy,and to help steer these stated prioritydevelopments in the direction as indentified inthe energy policy/action plans.

As can be seen in Figure 15 (page 39) the NEWinteracts closely with the national governmentand with the Regional Energy Committee(REC) and Association of Micronesian Utilities(AMU). REC is the body under the MicronesianChief Executives Council (MCEC) consisting ofenergy sector representatives fromMicronesia. Besides members from the FSM,this body includes members from the Republicof the Marshalls Islands, Palau, Guam and theCommonwealth of the Northern MarianaIslands. It meets regularly and is set up todiscuss developments in the energy sector ofrespective countries, learn from each other’sexperiences and advices the Governments intheir energy planning.

The NEW should be strongly connected to thefour State Energy Workgroups (SEW). Theseconsist of three or four people: one from thestate government, one representative fromthe utility company, the state energy officer(this position only exists in Pohnpei) or anenergy expert and a private sector or NGOrepresentative. The SEWs are responsible fordeveloping and updating the state actionplans, which are detailed in Volume II.

These plans are in line with the nationalenergy policy and put forward specificobjectives and implementable actions at thestate level. Furthermore, the main task of theSEWs is overseeing, coordinating and

31 | P a g e

implementing activities in the energy sector ofthe state.

2.2 COORDINATION ANDPROGRAM MANAGEMENT

This part of the energy policy is focused on theresponsibilities of the actors (NEW and SEWs)related to the implementation of the policy onnational level and the coordination role inimplementing the various state action plans.

2.2.1 IMPLEMENTATION OF THE ENERGYPOLICY

� Implement all State Action Plans and theNational Action Plan aimed at reducingoverall fossil fuel imports andgreenhouse gas emissions and strive tomeet national and state renewableenergy targets.

� Develop timely a reliable nationwideenergy statistic database for effectiveand fact-finding planning, monitoring andevaluation.

� Revise the National Energy Policy asneeded to ensure it is up-to-date andmaintains aggressive but achievableoutcomes.

� Ensure every State has an EnergyCoordinator, who is part of the StateEnergy Workgroup and keeps closecontact with the National EnergyWorkgroup (see next section ‘Division ofResponsibilities and OrganizationalStructure’).

� Promote the development of a NationalEnergy Bill that addresses the reductionof fossil fuel import and green house gasemissions in line with this Energy Policy.

2.2.2 ALIGNMENT WITH LEGISLATION ANDOTHER POLICIES

� In line with the FSM Trade Policy and theSDP, support opportunities for localmanufacturers to supply equipment andhuman resources for project design,implementation, management andmaintenance.

� Integrate environmental concerns andregulations into all energy-related plansand projects, including transportation,power supply, and building codes.

� Promote proper alignment with policiesthat are and will be developed in thefuture, including policies in the field ofenvironment and climate change; Reviewthis Energy Policy in light of thesepolicies.

� Assist in the development andimplementation of public awarenesscampaigns supporting renewable energyexpansion geared toward keystakeholders within the FSM, includingNGOs, business sector, governments andutilities, state and national legislaturesand the general public.

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2.3 DIVISION OFRESPONSIBILITIES AND

ORGANIZATIONAL STRUCTURE

The responsibilities of the stakeholders aredefined under this section. It needs to be notedthat the composition of the National and StateEnergy Workgroups can change, however theoverall objective will remain the same.

2.3.1 NATIONAL ENERGY WORKGROUP

The National Energy Workgroup, coordinatedby the Energy Division in the Department ofR&D, is responsible for:

� overseeing all national efforts in theenergy sector

� coordinating overseas developmentassistance that will be used forimplementing the Action Plans

� developing timely a nationwide energystatistic database for effective and fact-finding planning, monitoring andevaluation.

� assisting in implementing the actionplans by the State Energy Workgroups(SEW)

� providing technical assistance to theState Energy Workgroups as requested

� annually review the Energy Policy andrevising this Energy Policy as needed inconsultation with the SEW

Members:

- Department of R & D (energy division)- Department of TC&I- Office of EEM- Office of SBOC (ODA)- Representative from the SEWs- Association of Micronesian Utilities- College of Micronesia (COM-FSM)

In order to carry out these responsibilities, theNational Energy Workgroup keeps closecontact with:

- State Energy Workgroups- National Government- Association of Micronesian Utilities- Regional Energy Committee- Secretariat of Pacifc Community- other relevant organisations

2.3.2 STATE ENERGY WORKGROUPS

The four State Energy Workgroups, includingan Energy Coordinator in each State EnergyWorkgroup, are responsible for:

� Overseeing and coordinating all Stateefforts in the energy sector.

� Implementation of State Energy ActionPlan

� Advising the state government on energyissues

� Assist in developing and designingspecific and technically-sound EnergyEfficiency and Renewable Energy projectsfor donor consideration, funding andimplementation

Members:

- State Utility (can be the energyofficer/coordinator, if the energyofficer is staff of the state utility)

- State government (can be the energyofficer/coordinator, if the energyofficer is staff of the stategovernment)

- State Planner (Infrastructure - IPIC)- Private sector or NGO representative

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In order to carry out these responsibilities, theState Energy Workgroups keeps close contactwith:

- National Energy Workgroup- State Utility- State Government- State Chamber of Commerce- State community sector, including

Non-Governmental Organizations

2.4 OVERALL GOALS

The overall goals apply to all the segments of thepolicy (renewable energy, energy efficiency &conservation and conventional energy). Morespecific goals and objectives will follow in thesections for renewable energy, energy efficiencyand conventional energy separately.

2.4.1 DISADVANTAGED AND/ORGEOGRAPHICALLY REMOTE COMMUNITIES

� Encourage the application ofappropriate support and incentives toenable disadvantaged and/orgeographically remote communities toaccess affordable energy

2.4.2 CAPACITY BUILDING

� Improve adequate human andinstitutional capacity to plan, manage,and develop the energy sector byproviding appropriate energy-relatedtraining opportunities at alleducational and professional levels.

� Accelerate research and developmentof energy technologies that areappropriate for adoption within thenation and facilitate internationaltransfers of appropriate technologiesthat the nation is capable of operatingand maintaining.

� Assess and promote indigenousresource potential and technicalcapacity for all aspects of energysector planning and development.

2.4.3 PUBLIC AWARENESS

� Increase training and publicawareness on renewable energy andfuels for vehicles, energy efficiency,and conservation through publicitycampaigns and school curricula.

2.4.4 PRIVATE SECTOR INVOLVEMENT

� Enhance public-private partnershipsand expand private sectorparticipation, investment, ownership,and management for energy supplyincluding electricity generation,transmission and distribution.

� Establish an enabling and competitiveenvironment for the introduction ofindependent energy providers wherethese may provide efficient, reliable,and affordable service to consumers,in light of existing state laws.

2.4.5 COMMUNITY LEVEL INITIATIVES

� Promote involvement and input fromnon-government organizations andlocal communities, including youthand women, in policy implementationand integrated planning.

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3. RENEWABLE ENERGY

The application of Renewable Energy is relativelynew inthe FSM. The definition that we have used inthis policy is:

Renewable energy is energy generated fromnatural resources such as sunlight, wind, rain, tides,geothermal heat, biomass, biofuel, waves andwaste that are locally available and sustainable(naturally replenished).

In other words: Energy obtained from sources thatare essentially inexhaustible, unlike fossil fuels, ofwhich there is a finite supply.

3.1 GOAL

AN INCREASED SHARE OFRENEWABLE ENERGY IN THE

NATIONS’ OVERALLENERGY SUPPLY

30 % OF THE ENERGY SUPPLYSHOULD COME FOR

RENEWABLE ENERGY BY 2020

3.2 OBJECTIVES

� Promote the increased use ofrenewable energy technologies in allsectors of society and strive to meetnational and state-level renewableenergy targets.

� Promote the effective management ofboth grid-connected and stand-alonerenewable-based power systems.

� Promote partnerships between theprivate sector (including localcommunities and NGOs) and publicsector, and mobilize external financingto develop renewable energyinitiatives.

� Promote equitable availability ofrenewable energy in remote islands,rural areas on the main islands, and inthe state centers, with social-economic development in mind.

� Encourage implementation andmarkets for environmentally cleantechnologies and alternative fuels fortransportation by using non-fossilfuels and other power sources in bothnew and existing vehicles.

� Establish opportunities for betteraccess to renewable energytechnologies through the provision ofincentives and the removal of barriersand constraints to sustainable energysector development.

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4. ENERGY EFFICIENCY &CONSERVATION

Energy Efficiency and Energy Conservation areclosely related terms. However, during the NEWmeetings it was clear that people have differentunderstandings when we talk about efficiency andconservation. The following definitions are used forthis policy:ENERGY EFFICIENCY (EE) encompasses all changesthat result in a reduction in the energy used for agiven energy service (heating, lighting...) or level ofactivity. This reduction in the energy consumptionis not necessarily associated to technical changes,since it can also result from a better organizationand management or improved economic efficiencyin the sector (e.g. overall gains in productivity).

Energy Conservation (EC): is achieved throughefficient energy use, in which case energy use isdecreased while achieving a similar outcome, or byreduced consumption of energy servicesSimply said: reducing energy use is called energyconservation and efficiency is the percentage ofenergy that is actually used to perform work therest of energy that is '' lost '' to the surroundings

4.1 GOAL

IMPROVE ENERGYCONSERVATION AND

EFFICIENCY IN ALL SECTORS OFTHE ECONOMY AND SOCIETY

ENHANCE THE SUPPLY SIDEENERGY EFFICIENCY BY 20% BY2015 AND INCREASE THEOVERALL ENERGY EFFICIENCYBY 50% BY 2020

4.2 OBJECTIVES

� Improve the efficiency of energyproduction, transmission, anddistribution through supply sidemanagement.

� Introduce demand side managementprograms for enhancing energyefficiency and conservation so as toreduce the energy consumption ingovernment facilities, residential andcommercial buildings, industry,agriculture and forestry.

� Introduce and adopt building energycodes.

� Promote appropriate incentives(including taxes, subsidies and tariffs)to encourage efficient energy use andminimization of waste.

� Encourage co-operation in energyefficiency and conservation programsamongst the private sector,consumers and governments, byincreasing public awareness andimproving access to information.

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5. CONVENTIONAL ENERGY

The importing of fossil fuels takes up more than50% of the FSM aggregate sector grants. Thishighlights the reliance of this type of energy sourcein FSM and the urgent need for finding solutions forbeing less dependent on fossil fuels. The term“conventional energy” is widely used for fossil-based energy, nuclear energy, and large-scalehydro and geothermal (whereas hydro andgeothermal also are renewable energy sources). Inthis policy, the focus is only on fossil-based energylike diesel, petrol, kerosene and natural gas.

5.1 GOAL

SAFE, RELIABLE, ANDAFFORDABLE SUPPLY OFCONVENTIONAL ENERGY

REGIONAL BULK PURCHASE,CENTRALIZED STORAGE ANDCOORDINATION TO SECUREAND OBTAIN EFFICIENCY BY2015

5.2 OBJECTIVES

� Improve the competitiveness ofpetroleum supply and support anational approach to negotiationswith suppliers.

� Promote the collection,transportation, and environmentallyresponsible re-use, disposal, orremoval of waste oil and otherpetroleum by-products to minimizeadverse impacts on soil, ground water,and near shore fisheries.

� Encourage suppliers to maintain thequality of petroleum products andpromote the use of appropriatetechnologies to reduce the emissionsof green house gas and otherpollutants from conventional energyat the supply and demand side.

� Phase out government subsidies onthe purchase of fossil fuel for energyproduction.

� Work closely together with otherPacific island countries to collect anddisseminate information on fueldemand, regional fuel prices, andrelated issues.

� Work with the other North PacificIsland States toward regional fuelpurchasing, thereby enhancingeconomies of scale and reduced coststo governments and consumers.

37|Page

OVERVIEWACTORSANDINSTITUTIONS

Actor/

Instutition

Advocacy

Coalition

Resources

Regulators

Departmen

tofR

esou

rces

&De

velopm

ent

Conven

ience

Financialand

human

resourcesa

vailableto

useforthe

energy

sector.Th

eyho

sttheEn

ergy

Divisio

nandareinthemiddleof

netw

orkof

energy

sector.

Office

ofthePresiden

tCo

nven

ience

Respon

sibility

toallocate

finan

cialresourcesa

ndde

term

inestrategicde

velopm

entp

lan.

Networkto

acqu

ireinternationalfun

ds.

Departmen

tofT

ranspo

rtation,

Commun

icationandInfrastructure

Conven

ience

Financialand

human

resourcesinthefie

ldof

infrastructure.

Office

ofStatistics,Bu

dget

&Econ

omic

Managem

ent,OverseasD

evelop

men

tAssistance&Co

mpactManagem

ent

Conven

ience

HosttheOverseasD

evelop

men

tAssistance

office.Financialand

human

resourcestode

velopand

maintaincontactw

ithinternationaldon

orsincluding

theEurope

anUnion

.

Office

oftheEn

vironm

enta

ndEm

egen

cyManagem

ent

Progressive

Financialand

human

resourcesd

edicated

totheen

vironm

enta

ndclim

atechange.

Departmen

tofFinance

and

Administratio

nCo

nven

ience

Authoriza

tionof

each

paym

entw

illbe

decide

dby

them

.

Stategovernmen

tsCo

nven

ience

Financialand

human

resourcesd

edicated

energy

mattersintheirstate.By

maintaining

contactw

iththenatio

nalgovernm

enta

nd/o

rdire

ctlywith

internationaldon

orsthe

ycanacqu

irefund

sfor

energy

projects.

Supp

lySide

Stateutility

companies

(KUA,

PUC,

CPUC,

YSPSC)

Conven

ience

Financialand

human

resourcestomaintaintheire

nergysystem

s.They

also

have

andusetheir

expe

rtise

toadvise

thegovernmen

tonen

ergy

matters.

FSM

Petroleu

mCo

rporation

Conservativ

eBy

determ

iningtheen

ergy

prices,the

yhave

alargeinflu

ence

ontheen

ergy

sector

andmoregene

rally

onthecoun

try.

One

impo

rtantresou

rceisacontractwith

thegovernmen

tthatstatesa

minim

umam

ount

ofen

ergy

that

willbe

bought

(see

intext).

Europe

anUnion

Rene

wableEn

ergy

Programme

Progressive

Financialresou

rces

tobu

ildprojectsandexpe

rtise

toadvise

thegovernmen

tonen

ergy

matters.

Privatesector

rene

wableen

ergy

initiatives

Progressive

Resourcestobu

ildprojects,and

expe

rtise

totryto

convince

policymakers.

Coconu

tDevelop

men

tAutho

rity

Progressive

Financialand

human

resourcestode

velopcoconu

toilprod

uctio

n.

38|Page

Deman

dSide

InhabitantsF

SMCo

nven

ience

Tryto

influ

ence

thestateandnatio

nalgovernm

enttoprovideaffordable,reliableandsustainable

energy

byvotin

g,pu

rchasin

gpo

wer

andform

ingof

advocacy

grou

ps.

Tourism

sector

(and

represen

tatives

inNationaland

stateGo

vernmen

t)Co

nven

ience

Putp

ressureon

thestateandnatio

nalgovernm

enttoprovidereliable,rene

wableandaffordable

energy.

Departmen

tofH

ealth

Conven

ience

Allocatio

nof

resourceso

fthe

health

sector

with

which

they

cantryto

influ

ence

policymakingforthe

energy

sector.

Departmen

tofE

ducatio

nCo

nven

ience

Allocatio

nof

resourceso

fthe

health

sector

with

which

they

cantryto

influ

ence

policymakingforthe

energy

sector.

Privatesector

Conven

ience

Putp

ressureon

thestateandnatio

nalgovernm

enttoprovidereliableandaffordableen

ergy.

Localcivilsociety

Progressive

Tryto

influ

ence

thestateandnatio

nalgovernm


energy

byvotin

gandform

ingof

advocacy

grou

ps.

Continen

talA

irlines

Conservativ

eSincethey

aretheon

lyairline

company

servingthecoun

trythey

have

amon

opolypo

sitioninwhich

they

canpu

tpressureon

thegovernmen

t.Fina

nciers

Europe

anUnion

,and

othe

rdon

ors

Progressive

Besid

esde

veloping

rene

wableen

ergy

projectsthey

canalso

entera

greemen

twith

thegovernmen

tand

localsup

pliersandprovidefund

sand

expe

rtise

.UnitedStates

CompactFund

Progressive

Providingfund

sand

expe

rtise

fore

nergyprojects.

Governmen

tswith

bilateralcon

tacts,

such

aswith

Italy

Progressive

Providingfund

sand

expe

rtise

fore

nergyprojects.

NationalG

overnm

ent

Progressive

Providingfund

sand

expe

rtise

fore

nergyprojects.

StateGo

vernmen

tProgressive

Providingfund

sand

expe

rtise

fore

nergyprojects.

CivilSociety

Localcivilsocietyinclud

ingNGO

sProgressive

Tryto

influ

ence

thestateandnatio

nalgovernm


energy

byvotin

gandform

ingof

advocacy

grou

ps.

InternationalN

GO(in

clud

ingUN

organizatio

ns)

Progressive

Providefund

s,expe

rtise

anduseinform

ationcampaigninan

attempt

toinflu

ence

policymaking.

College

ofMicrone

siaProgressive

Developandprovideexpe

rtiserelatedto

energy.

Table9:Overviewactorsandinstitu

tions

39|Page

Figure

14:P

ropo

sedinstitu

tionalstructure

forimplem

entatio

n

40|Page

Figure

15:M

apof

theFede

ratedStates

ofMicrone

sia

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APPENDIX A

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TABLES & FIGURES

Table 10: GHG Emissions and Potential Savings (Source: FSM SEFP country report, IT Power 2006)

Country

Projectedbaseline

emissions in 10years, BAU

Potential Annual GHG SavingsRelative Savings from

Renewable Energy and

Energy Efficiency

CO2(Gg)

Year Gross(Gg)

Adjusted(Gg)

Adjustedas% of

baseline

RE

(Gg)

% of

total

EE

(Gg)

% of

total

FSM ~ 168 2012 23.9 23.9 14% 16.8 70% 7.1 30%

Kiribati 72.2 2013 26.5 26.5 37% 24.5 92% 2.0 8%

RMI 400 2013 22.3 22.3 6% 8.0 36% 14.3 64%

Palau 441 2013 49 49 11% 12 24% 37 76%

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Yap State Public Service Corporation (YSPSC)

2164 customers

Financial data Technical data

KWhr sales revenues: $4,618,148 Peak load: 2.3 MW

Operating profit withoutdepreciation (2007):

$761,774 Annual generated power: 13,117 MWh

Depreciation (2007): $757,028 Annual sales: 11,413 MWh

Price of electricity (2008):

Price of electricity (2010):

26 cents per kWh

45 cents per kWh

Number of runninggenerators:

3

Fuel cost (2004):

Fuel cost (2006):

$0.90 per gallon

$1.94 per gallon

Combined capacity: 6.6 MW

Fuel cost (2010): $3.68 per gallon Number of distributioncircuits:

4

Fuel cost for electricity (2004):



7.5 cents per kWh

16 cents per kWh

31 cents per kWh

Efficiency generation plant: 95 percent

Fuel purchased from: FSM PC Losses distribution system

(Including non technical losses– 2.4% - meters inaccuracy ):

8 percent

Reduction with Cash Powermeter:

N/A Percentage of Cash Powermeters installed:

5 percent

Table 11: Yap State Public Service Corporation – financial and technical data (power generation and distribution)

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The Kosrae Utilities Authority (KUA)

1,800 customers


KWhr sales revenues: $1,864,866 Peak load : 1.40 MW (2005)

1.01 MW (2009)

Operating expense: $1,650,000 (2005)

$2,547,365 (2009)

Annual sales : 6,132 MWh(2005)

5,169 MWh(2009)

Operating loss withoutdepreciation:

$190,000 (2005)

$ 171,571 (2009)

Number of generators: 5

Depreciation : $470,000 (2005)

$ 510,828 (2009)

Combined capacity: 4,580 kW

Price of electricity : 27 cents /kWh (2005)

36 cents / kWh (2009)

Portable emergencygenerator

650 kW

Fuel cost: $2.15 / gallon (2005)

$2.85 / gallon (2006)

$ 4.40 / gallon (2008)

$ 3.42 / gallon (2009)

Number of distributioncircuits:

3

Efficiency generation plant: 32 percent

Fuel cost for electricty: 24.3 cents/ kWh (2005)

28 cents/ kWh (2009)

Losses distribution system: 9 percent

Fuel purchased from: FSM PC Efficiency of fuel in to kWh: 29.4 percent14 kWh/Gal


5 percent Percentage of Cash Powermeters installed:

70 % (2005)80% (2009)

Table 12: Kosrae Utility Authority – financial and technical data (power generation and distribution)

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The Pohnpei Utility Corporation (PUC)

6,399 customers


KWhr sales revenues: $6,950,000 Peak load: 6.5 MW


$616,840 Annual generated power: 40,465 MWh

Depreciation (2004): $1,976,598 Annual sales: 34,053 MWh

Price of electricity (2004): 20.4 cents per kWh Number of generators: 8

Fuel cost (2004): $1.33 per gallon Combined capacity: 15.46 MW


4

Fuel cost for electricty (2004): 12.1 cents per kWh Efficiency generation plant: 32.9 percent

Fuel purchased from: Mobil Oil Corp. Losses distribution system: 12.5 percent


3 percent Percentage of Cash Powermeters installed:

85

Table 13: Pohnpei Utility Corporation – financial and technical data (power generation and distribution)

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The Chuuk Public Utilities Corporation (CPUC)

XXX customers


KWhr sales revenues: $2,837,260 Peak load: 4 MW

Operating expense (2006): $2,822,126 Annual generated power: 21,520 MWh


$15,134 Annual sales: 12,200 MWh

Depreciation (2006): $1,157,080 Number of generators: 3

Price of electricity (residentialcustomers):

32.26 cents per kWh Combined capacity: 3.4 MW


3

Fuel purchased from: FSM PC. Percentage of Cash Powermeters installed:

small

Table 14: Chuuk Public Utility Corporation – financial and technical data (power generation and distribution)

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Table 15: Yap State Public Service Corporation – Residential Electricity Rates Trend (’99 thru 2011)4

4 Note: in November 2004 YSPSC included flexible fuel (adjustment) charges in their fee structure. From November2004 until February 2006, the fuel adjustment stayed stable but starting from March 2006 YSPSC adjusted the fuelcharge monthly. In March 2008, Yap State Legislature reversed the 2006 adjustments and the fuel charge was putback to 3.5 ct/kWh. Acklowledging the financial problems the Yap State Government advised YSPSC to change thetariff structure again and from December 27, 2008 untill March 2010 the tariffs are without fuel charge adjustmentsbut with the Government subsidizing the tariff by paying 73.7 ct per kWh while residents pay 31.8 ct per kWh.

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Table 16: Yap State Public Service Corporation – Commercial Electricity Rates Trend (’99 thru 2011)5

5 See Note on Residential Tarifs footnoot 8

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Table 17: Yap State Public Service Corporation – Government Electricity Rates Trend (’99 thru 2011)9

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Table 18: Yap State Wind Data, July 2009 – February 2010

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WORKS CITED

FSM Strategic Development Plan 2004-2023, Volume I- Policies and Strategies for Development

FSM Strategic Development Plan 2004-2023, Volume II – Strategic Planning, Matrices andAppendices

Department of Interior (DoI). ‘United States of America Insular Areas Energy Assessment Report: AnUpdate of the 1982 Territorial Energy Assessment.’ Prepared by the Pacific Power Association, Fiji(2006).

SBOC. ‘Federated State of Micronesia, Division of Statistics.’http://www.spc.int/prism/country/fm/stats/index.htm (accessed July, 2009).

FSM Energy Policy - Vol. I (Draft)

News & Politics

Transcript of FSM Energy Policy - Vol. I (Draft)