A Brighter Future for Maldives Powered by Renewables

Road Map for the Energy Sector 2020–2030

• Publisher: Asian Development Bank
• Year: 2020
• ISBN:
  9789292625146
• Topic: Technology & Engineering
• Subtopic: Renewable Power Resources
• Index: Technology & Engineering

Maldives has no proven fossil fuel reserves, but it has abundant renewable energy sources such as solar, wind, and ocean (tidal, wave, and ocean thermal), and has the potential to produce green hydrogen fuel using renewable energy. The coronavirus pandemic has impaired Maldives' economy, severely affecting its tourism industry, which is one the country's main economic drivers. The country's recovery will largely depend on the rapid transformation and diversification of its economic activities. Renewable energy offers a promising alternative to fossil fuels as the country embarks on a transformation challenge. This Road Map serves as a guide for Maldives' energy transition—from being powered by costly and polluting fossil fuels to being powered by affordable and efficient renewable and cleaner energy sources.

1   INTRODUCTION

Maldives, with its 1,192 islands in the central Indian Ocean, is one of the world’s most geographically dispersed countries. It has an estimated population of 533,941 in 2019.¹ Out of its 1,192 islands, 188 are permanently inhabited, 79 are leased for long-term development (mostly for agricultural and industrial purposes), and 293 are allocated for tourism development (145 operate as self-contained tourist resorts and marinas) (footnote 1).

The geographical peculiarity of the country makes it exceptionally vulnerable to climate change, weather severity, and external economic shocks. The development challenges of Maldives stem from these vulnerabilities. The most populated islands of Maldives are Male’ (227,000 people)² and Addu City (35,000 people). The rest of inhabited islands are small islands with dispersed population; 27% of the inhabited islands have a population of less than 500 (footnote 2). The poverty headcount rate is 8.2%.³ These characteristics make service delivery, job creation, and economic diversification very difficult.

Despite all these challenges, Maldives’ development has become a success. The country has experienced robust economic growth coupled with considerable improvement of its infrastructure and connectivity. Consequently, energy demand has grown exponentially over the past 4 decades due to the extraordinary economic growth in tourism, fishery industry, sea transport, and construction. However, Maldives does not possess any domestic fossil fuel reserves. It depends almost entirely on imported liquid fossil fuels for electricity production, industrial uses, transport, and cooking. This situation imposes a significant fiscal burden on the government budget and makes it vulnerable to fuel price fluctuations. The Ministry of Environment is in charge of designing the national energy policy and planning and developing the energy sector. The Strategic Action Plan 2019–2023 establishes that, in 2021, the Utility Regulatory Authority (URA) for integrated utility services will be functional. This regulatory agency will have a mandate to revise electricity tariffs and set targets to utilities on losses and power quality indexes.

This Road Map establishes the guidelines for transitioning from a fossil-fuel-based sector to a cost-effective, business-competitive, affordable, and sustainable renewable energy. It has been formulated to serve Maldives’ vision for the energy sector, and it is built upon the country’s broader policy objectives: economic growth, end of poverty, creation of employment, reduction of regional disparities in living standards, and resilience to weather severity and effects of climate change. It aims to provide direction to policy makers, financing institutions, and other stakeholders, and help them effectively coordinate their efforts in creating an enabling environment for the needed investments.

Considerations Made in the Road Map due to COVID-19 Pandemic

The massive and unexpected economic shock caused by the coronavirus disease (COVID-19) pandemic has exposed the weaknesses of the economic model implemented in Maldives over the recent decades. Prior to the COVID-19 pandemic, tourism revenues had driven the impressive development of Maldives’ economy. Compared to the same period in 2019, tourist arrivals in February 2020 fell by 11.1% and by 63.4% in March 2020. Large volumes of foreign direct investment and sizable external borrowings were frozen with the sudden halt of tourism. These direct investments and borrowings have been crucial for the country to embark on large-scale infrastructure projects. Economic growth in 2020 is projected to contract 20.5%. While tourism is expected to remain as the main source of revenue for Maldives, it will be a challenge to reach the revised tourism target of the country. The external borders of Maldives were closed from 27 March 2020 until 15 July 2020.⁴

The recovery of Maldives’ economy largely depends on its capacity to become more resilient and reduce its dependence on tourism. Until 2019, 25% of the national GDP was from the tourism sector, followed by the construction industry at around 7%. In the previous years, the fishing industry contributed 3% to 5% of the GDP, employing around 20% of the workforce.

Strengthening the fishing industry and other primary sectors such as agriculture will reduce the expense on imports and improve food security. A rapid economic transformation will require the incorporation of modern climate-smart practices and technical precision. It should be based on the economic empowerment of small and medium-sized enterprises (SMEs) through entrepreneurship and innovation. A reliable, sustainable, and affordable energy supply for citizens and businesses across the country is key to achieving this transformation.

Investments in renewable energy are an opportunity to lower electricity production costs and reduce the imports of diesel fuel, consequently reducing the burden on government finances.

The Road Map has taken into account the effects of the COVID-19 pandemic with the following considerations:

•  The potential decline in energy demand of resorts during 2020 is balanced with the demand growth in industrial and agricultural islands. The Government of Maldives is actively supporting the SMEs and the farmers as part of its strategy for economic recovery.

•  Around 80% normalcy in tourism arrivals is expected by the end of 2022, provided that effective vaccination or treatment against COVID-19 is found in 2021. A humble growth of energy demand in resort islands is expected thereafter.

•  Road Map scenarios also aim to facilitate the energy sector in fulfilling the government’s intentions to increase agricultural production and explore the potential of aquaculture and reef fishing.

•  There is no increase in the consumption of diesel and petrol by sea and road transport in 2020 compared to 2019, and lower consumption is projected from 2021 to 2030 compared to what was forecasted in pre-COVID-19 times.

•  There is no increase in the consumption of LPG for cooking in 2020 compared to 2019, and lower consumption is projected from 2021 to 2030 compared to what was forecasted in pre-COVID-19 times.

2 ROAD MAP AMBITION

2.1 Sector Vision

Achieving a dignified life for all the Maldivians is the greatest priority of the government. Reversing the country’s dependence on imported fuel and realizing a better future powered by renewables is possible for Maldives. With this aim, Maldives has defined the vision for its energy sector as the “provision of sufficient, reliable, sustainable, secure and affordable energy for a prosperous Maldives.” This vision has three pillars: energy efficiency first, investments in renewable energy, and integration of technology innovation (Figure 1).

Figure 1: Vision of Maldives’ Energy Sector

Source: Government of Maldives. Energy Policy and Strategy 2016. Male’.

Energy Efficiency First

Carrying out energy efficiency interventions to radically reduce energy intensity and consumption without compromising comfort and better living conditions is the first pillar of Maldives’ vision.

Investments in Renewable Energy

Achieving a brighter future powered by renewables requires accelerating investments on cleaner and less expensive renewable energy sources. Renewable energy has entered a virtuous cycle of falling costs. Solar photovoltaic (PV) module prices have fallen by around 80% since the end of 2009, which will result in 50% to 75% reduction in the production cost of electricity in Maldives.

Integration of Technology Innovation

Identifying technology challenges and supporting the integration of evidence-based innovative technology solutions will help Maldives achieve more ambitious targets toward a low-carbon future. This Road Map adopts ADB’s “3D approach” for a rapid rollout of cutting-edge technologies. This approach emphasizes piloting new technologies and sharing lessons with other countries (Figure 2).

Figure 2: ADB’s 3D Approach to Addressing Energy Issues

Source: K. Nam. 2019. Financing the 2030 Energy Transition: ADB’s Approach in Supporting Low Carbon Development. Presentation. Bangkok. 19 March.

Realizing the energy sector’s vision requires a realistic and consensus-based road map that addresses multiple barriers—regulatory, infrastructural, technical, financial, and human resource barriers. After a thorough consultative process with all relevant stakeholders in the country, international and national experts, and other government agencies, the Ministry of Environment has developed this Road Map to open new development and business opportunities for the country, and facilitate the alignment of external assistance with the national policy. This Road Map will contribute to reducing dependency on fossil fuels and improve national accounts. The country will have the opportunity to capitalize on a low-carbon economy, create new jobs and skills, and cut energy bills. A low-carbon energy sector will, therefore, contribute to the economic growth of Maldives and the well-being of its population.

2.2 Renewable Energy Resources

Maldives does not have any proven reserves of fossil fuels. However, it has abundant renewable energy resources, including solar, wind, and ocean, and the possibility to produce green hydrogen fuel with the surplus of renewable energy produced in the islands.

Solar Energy

Solar PV energy is an indigenous resource with the most immediate exploitation possibilities in Maldives. Solar radiation is in the order of 1,200 kWh/m²/year⁵, which is considered good for any solar PV project. The solar PV project is being successfully implemented in hybrid systems in several inhabited islands through the Preparing Outer Islands for Sustainable Energy Development (POISED) project. PV panels are installed on the roofs of diesel power plants, schools, water desalination plants, sewage plants, and public buildings. PV panels are connected to the diesel power plants through an energy management system (EMS) that enhances the regulation of power supply. This hybrid configuration can offer short pay back times when compared to current prices of electricity produced by diesel generation sets. Rooftop solar PV is also being installed in the country, under net metering.

POISED = Preparing Outer Islands for Sustainable Energy Development Project. Solar photovoltaic panels on the roofs of schools and public buildings are connected to diesel power plan...

Table of contents

• Front Cover
• Title Page
• Copyright Page
• Contents
• Tables and Figures
• Foreword by his Excellency Hussain Rasheed Hassan, Minister of Environment
• Foreword by Kenichi Yokoyama, Director General, South Asia Department, ADB
• Acknowledgments
• Abbreviations
• Weights and Measures
• Executive Summary
• 1. Introduction
• 2. Road Map Ambition
• 3. Sector Assessment
• 4. Strategy for the Electricity Subsector
• 5. Strategy for Other Subsectors
• 6. Enabling the Transition
• Appendixes
• References
• Footnotes
• Back Cover