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Republic of Palau (2012)

Source: REEEP Policy Database (contributed by SERN for REEEP)

This policy & regulatory overview is not updated anymore since 2015. We decided to keep it online due to high demand but would like to make you aware of the fact that it might be outdated.

Energy sources

Total installed electricity capacity (2011, Source: Palau Public Utilities Corporation): 28 MW

Diesel power plants in the country are located at Malakal, Aimeliik, Peleliu, Angaur, and Kayangel. Malakal and Aimeliik provide power to the central grid supplying Koror, Melekeok—the capital city, and the rest of Babeldaob. Palau has a small amount of solar capacity, as well as small hydroelectric installations, accounting for 2.2% of total demand in 2008.

Palau’s energy economy relies almost completely on fossil fuels and consists of an annual supply of approximately 55Ml of diesel fuel, and 60Ml of petrol.

Total Primary Energy Supply (2008, source: IRENA): 71.65 ktoe

Approx 50% of diesel consumption is used to generate electricity. Consumption of electric energy for cooking is popular, with over 52% of Palauan homes using electricity for their primary means of cooking. LPG is steadily increasing in market share, exclusively for cooking, and is slowly replacing electricity in that regard. In 2008, residential customers used on average 542 kWh of electricity per month, substantially higher than the average usage for other small Pacific nations.

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Reliance

Palau relies almost entirely on imported petroleum fuel for energy generation, principally diesel. Approximately 2.2% of Palauan energy use comes from local renewable energy sources.

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Extend network

The Palau Public Utilities Corporation (PPUC) has extended electrical power distribution lines to approximately 97% of the population in the primary islands. The transmission and distribution network on the islands now covers around 47 linear miles of 34.5KV transmission lines, and 114 linear miles of 13.8KV distribution lines.

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Capacity concerns

The electricity generating units have maintenance problems due to the lack of funding for preventive maintenance and required inspections. This is particularly noticeable in the solar home systems, installed in the southern archipelago of the country in the early 2000s. Due to inappropriate technological choices, and a lack of maintenance, many of these systems are now defunct.
Lack of funding has also decreased utility employee training, resulting in higher internal costs from equipment failure and extended equipment outages.

Due to reliability problems with the electricity system in Koror and the lack of reserve energy available, many large businesses have installed their own generators.  It is estimated that customer-generated power is 10 to 25MW. Technical and non-technical distribution losses have traditionally been high in the country also, although PPUC programs, in partnership with the ADB, are seeking to rectify this.

The opposite problem is to be found on the islands of Kayangel, Angaur, and Peleliu. Low consumption on the islands has led to generation surpluses of up to 300%.

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Renewable energy

Solar energy
Satellite measurements and estimates based on sunshine hours place the resource at more than 5.5kWh/m2/day, signifying a high potential for solar energy development. Solar water heating is used on houses and tourist facilities. A 100 kW grid-connected PV system has been installed on top of car park shading at the Capitol Complex, the main government centre in the country. It is expected to produce 120,000 kWh per annum.

Biomass/biogas energy
About 60% of the islands are densely forested. However, harvesting of biomass or planting of large fuel plantations is not likely to occur for environmental, economic and land tenure issues. Biogas resources have limited potential. The Bureau of Agriculture commenced a biogas pilot project for small pig farms in 2009, although results have been limited so far.

Hydropower / Wave energy
The wave energy resource is modest, estimated at about 10-15kW/m, which is not sufficient for efficient power generation. The Ocean Thermal Energy Conversion technology is still a long way from commercial use, although there would be potential on Palau. Hydroelectric dams are feasible for exploitation, however, limited information is available on the potential hydroelectric resource, with the most recent assessment having been conducted in 1984.

Wind energy
There have been no wind resource measurements in Palau. The International Renewable Energy Agency categorizes the potential for wind energy uptake as “Medium”, indicating a lesser potential than solar power, but still a notable potential.

Geothermal Energy
Potential for the development of geothermal energy in Palau has been categorized as “extremely low”. No geothermal resources are present in the country.

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Energy efficiency

Encouraging the use of solar energy for water heating, and LPG for cooking would lead to large energy savings in the residential sector.

The use of incandescent light bulbs is known to remain high, and a program to replace high usage incandescent fixtures with CFL bulbs could provide substantial savings in fuel for generation. Moreover, high efficiency refrigerators and other energy efficiency improvements for households can be promoted. Both of these potentials have been recognised in the country's 2008 Energy Efficiency Action Plan.

The total cost of moving public water and sewage is the highest single component of the government electricity bill. Using solar energy and energy efficient power sources for water pumping can reduce imported fuel for power generation. Fishing and marine tourism are both major sources of income for the population, and a reduction in the use of two-stroke marine engines, in favour of more efficient engines, could provide large energy savings.

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Ownership

Electricity
The Palau Public Utilities Corporation (PPUC, www.ppuc.com) is a semi-private corporation that operates and maintains the national electricity grid (split over four systems, Koror-Babeldaob, Peleliu, Angaur and Kayangel) and manages power generation and distribution for all islands, except for the distant Southwest Islands that have solar power, and small diesel networks.

Oil and gas market
Three private companies provide Liquid Petroleum Gas (LPG), which is highly used for domestic cooking.

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Competition

Although legislation does not limit power generation to the PPUC only, the opportunity for private development of renewable energy seems currently limited to solar water heating, as this technology is obviously cost-effective.

The electricity market is highly vertically integrated, as all activities are carried out by the Palau Public Utilities Corporation (PPUC).
 

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Energy framework

A Draft National Energy Policy was submitted for approval in October 2009 to the Government of Palau, through the Palau Energy Office. Areas addressed in the policy included:

  • the improvement of institutional arrangements for energy sector management and the creation of an Energy Administration to implement measures in the NEP and it's related strategic action plan, 
  • a reduction in national energy consumption through energy efficiency measures, with a target of reducing total final consumption by 30% by 2020, and
  • a 20% target for renewable energy contribution to the energy mix by 2020, as well as a reduction in the use of imported hydrocarbons.


Under the Pacific Islands Energy Policy and Strategic Action Planning (PIEPSAP) project, an Energy Conservation Strategy is being developed. The main aim is to implement and enforce existing government regulations related to energy efficiency.

The European Union's REP-5 Programme funds demand-side energy efficiency activities, with a project that subsidises over 20,000 Compact Fluorescent Lights (CFLs) for households. As part of this program, a National Energy Efficiency Action Plan was developed in 2008, detailing 14 energy efficiency activities that could benefit the country, including public and private building refits, subsidies for domestic biogas digesters, and home energy auditing.

The European Commission has proposed €2.47m for the development of renewable energy in the period of 2009-2013 through the EDF-10 program. An additional €0.43m has been proposed to fund Technical Assistance studies.

The UNDP will provide US$4.4m over the period 2009-2013 to widen the scope of the EU-funded solar energy development project, by addressing all potential renewable energy (RE) resources in Palau in meeting the energy demands in the various energy-consuming sectors of the Palauan economy.

The International Union for Conservation of Nature’s (IUCN) Palau energy project targets energy efficiency for households and is being implemented by the National Development Bank of Palau (Ndbp). Through this project it is expected that electricity consumption will be lowered by an estimated 15% in new homes, and that a local market for energy efficient products and services will be developed.

In 2009, the Japan International Co-operation Agency (JICA) announced it would be financing the “Project for Introduction of Clean Energy by Solar Electricity Generation Systems” of the Government of Palau. JICA provided approximately US$5 million for the project, which aimed to install 180 kW of PV arrays at Palau International Airport, by June 2011.

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Energy debates

The UNDP, in association with the Government of Palau and the GEF, implemented the Sustainable Economic Development through Renewable Energy Applications (SEDREA) project from September 2009 to February 2011. This preparatory phase aided in the creation of a Renewable Energy Fund Window (REFW) at the National Development Bank of Palau (NDBP). The REFW finances off-grid/grid-connected solar PV and SWH systems (for having been identified as the most cost-effective RES for the country), for both households and businesses. Through a mix of subsidies and loans (and equity for commercial projects), REFW financing improves the economics and the affordability of the RE systems, facilitating the widespread application of renewable energy technologies in Palau. The project intends that the subsidy percentage be gradually reduced on an annual basis with the subsidy completely dropped by 2016, in an effort to encourage fast uptake of the technologies, and the emergence of an unsubsidised, market-based system.

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Energy studies

The report of the Pacific Power Association (PPA) for the United States Ministry of Interior covers energy in general, including renewables. The PPA is also active in the country directly, having organised a DSM workshop for PPUC staff in 2010.

The Pacific Islands Energy Policy and Strategic Action Planning (PIEPSAP) project provides good insight into the development of energy conservation strategies and energy policy.

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Role of government

The Energy Department falls formally under the Public Works Department of the Ministry of Resources and Energy, however, the Director of Energy reports directly to the Minister.

Palau has an Energy Office, within the Public Works Department, consisting of one full-time position to deal with energy policy, renewable energy development and government energy use as well as other matters relating to the use and production of energy in Palau.

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Government agencies

The inaugural meeting of the Palau National Energy Committee took place on June 23rd, 2011. The NEC is charged with overseeing the implementation of the Strategic Action Plan, and consists of representatives from the Office of the President, the House, the Senate and the Chamber of Commerce, as well as from the PPUC, the Palau Energy Office, and the Palau Community College.

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Energy procedure

The Strategic Action Plan for the Energy Sector was created in 2009, and consists of a framework for the implementation of the National Energy Policy. A number of programs and strategies are described in the paper, including measures to increase private-sector participation in the energy sector in fuel imports, as well as ensuring the constant improvement of energy efficiency in all sectors of the economy. The creation of an enabling legal and institutional framework for renewable energy development is also described, targeting such areas as IPP development and subsidies for the creation of new renewable energy generation by 2015, as well as the development of standard power purchase agreements for renewable energy producers.

Electrification is at nearly 100% in the country. The PPUC is in the process of extending the transmission network through the remaining unconnected population centres, mostly in Babeldoab.

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Energy regulator

There is no independent energy regulator. The only energy utility in Palau is the government owned Palau Public Utility Corporation (PPUC, http://www.ppuc.com), which is self-regulatory.

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Degree of independence

The Palau Public Utilities Corporation (PPUC) is a governmental entity created by the Palau Legislature, governed by a Board appointed by the President with the advice of the legislature. Day-to-day operations are the responsibility of a general manager, appointed by the governing Board.

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Regulatory framework

The Palau Public Utilities Corporation (PPUC) has been established under a legislation which mandates it to carry out power production and distribution in the country. However, there is no comprehensive regulatory framework for power sector operations, fuel imports, investments and pricing of energy commodities and services.

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Regulatory roles

As a self-regulating agency, the PPUC has no dedicated regulatory role.

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Energy regulation role

The Palau Public Utilities Corporation (PPUC) is owned by the government, but operated as a private enterprise and is required to operate without losses in regard to operating and maintenance costs. Capital costs are not included in the profit figures.

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Regulatory barriers

Whilst the NEP and SAP of Palau are in the process of being implemented, there is still limited capacity within the government to create the necessary legal and regulatory framework for the promotion of renewable energy, and progress in the uptake of RES in the country has been slow. Legislative and technical assistance, through capacity-building programs, could alleviate this.

Though the legislation forming the PPUC states that renewable energy should be considered by the PPUC, to date there has been no renewable energy installations made by the PPUC. The lack of an independent regulator, and the vertically-integrated monopoly nature of the PPUC, currently exist as barriers to the broadening of private-sector participation in the energy sector.

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References

Palau Public Utilities Corporation (c2010) Statement from CEO. Available at: http://ppuc.com/statementfromceo.html [Accessed 14th September 2013]

IRENA (2010) Renewable Energy Country Profile - Palau. Available at: www.irena.org/REmaps/countryprofiles/palau.pdf [Accessed 14th September 2013]

REP-5 (2010) Palau Energy Efficiency Action Plan. Available at: http://www.rep5.eu/files/pages/file/Palau/Palau%20Energy%20Efficiency%20Action%20Plan.pdf [Accessed 14th September 2013]

REP-5 (2010) Support to the Energy Sector in Five ACP Pacific Island Countries: Palau, available from: http://www.rep5.eu/node/47 [Accessed 14th September 2013]

Energy Development in Island Nations (n.d.) Palau Energy Efficiency Action Plan. Available at: http://www.edinenergy.org/palau.html [Accessed 14th September 2013]

ADB (2007) Republic of Palau: Facility for Economic and Infrastructure Management. Available at: http://www.palaugov.net/stats/PalauStats/BBP/FEIM/FINAL%20TA%20Paper.pdf [Accessed 14th September 2013]

McCoy-West, A.J. et al (2009) Geothermal Energy Potential of Selected Pacific Nations.. Available at: http://www.edinenergy.org/pdfs/geothermal_potential.pdf [Accessed 14th September 2013]

REP-5 (2009) Republic of Palau Draft National Energy Policy. Available at: http://www.rep5.eu/files/pages/file/Palau/Energy%20Policy%20Final%20Draft.pdf [Accessed 14th September 2013]

REP-5 (2009) Republic of Palau Strategic Action Plan: Energy Sector; A Framework for the Implementation of Palau's National Energy Policy. Available at: http://www.rep5.eu/files/pages/file/Palau/ESSAP%20Final%20Draft.pdf [Accessed 14th September 2013]

Climate, Environment and Energy (2011) Pacific Brief, May 2011, Volume 6. Available at: http://regionalcentrebangkok.undp.or.th/practices/energy_env/ESD-News_2011.6_Pacific.html [Accessed 14th September 2013]

Oceania Television Network (2011) News Stories for Friday June 24, 2011. Available at: http://www.oceaniatv.net/on_otv/palaunews110623.html [Accessed 14th September 2013]

Palau Public Utilities Corporation. http://ppuc.com/aboutus.html
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