Maldives Pitches Sunshine to Solar Investors: Q&A

By Vandana Gombar, BloombergNEF. This article first appeared on the Bloomberg Terminal.

The tourism-driven economy of Maldives has been hit hard by the pandemic. Yet, it is doubling down on its clean energy transition plan which revolves around solar power.

“We have very little choice,” Hussain Rasheed Hassan, environment minister, said in an interview with BloombergNEF. “Economic savings are a major driver of course, but being a tourist destination, it will be an advantage for us to be environmentally more sustainable.”

The nation spends almost 10% of its GDP importing fossil fuels to generate power and to provide mobility. The cost of power from the most efficient diesel plant is 23 U.S. cents per unit. Power from a solar plant is available at less than half of that: “That is the reason why we have renewable energy as a top priority,” Minister Hassan said.

Investors are responding well: as many as 58 companies sought to pre-qualify for a recent 21MW solar tender, of which 10MW is floating solar. This is supported by the World Bank.

Besides solar, Maldives is setting up an 8MW wasteto-energy plant with assistance from the Asian Development Bank, has a pilot on wave energy, is mulling over project proposals on ocean thermal energy conversion, or OTEC, plans a push for electric vehicles and is seriously looking at the option of green hydrogen.

By 2023, the nation of islands aims to more than triple its renewable energy capacity to 85MW, of which 75MW would be solar.

Maldives is one of the lowest lying countries in the world – not one of its 1,200 islands is more than 1.8 meters above sea level – making it especially vulnerable to sea level rise resulting from climate change.

Q: You hold multiple portfolios: environment, energy, conservation, and water and sanitation. What is the biggest challenge you are grappling with, besides the pandemic?

A: Being an archipelagic nation which is geographically very fragmented – we have 26 natural atolls and almost 1,200 islands – the main challenge for us is to ensure that what we have inherited from our forefathers is delivered to future generations.

Climate change, sea level rise, and rise in temperatures is associated with coral bleaching. Coral is the bedrock of our nation. The islands have formed naturally over thousands of years, with the parrotfish eating the coral and producing sand. When the corals die, there will be nothing to protect our islands from strong waves. Right now, much of the energy of the waves is dissipated by the reef itself. The cost of building rock boulder sea walls is prohibitive for us because we are very large in terms of spread. It is thus a question of survival — and conservation — of the most beautiful coral atoll nation in the world.

Q: You have embarked on an aggressive energy transition path. What is driving this push?

A: If you consider our situation, we have very little choice. We are dependent on fossil fuels, spending about 10% of GDP for fuel imports. In 2019, we spent $465 million on purchasing fossil fuel, of which 78% was diesel. This high dependency on imported fossil fuel forced us to look for alternatives. This is the reason why we have renewable energy as a top priority.

We have peak load of about 270MW, and we produce 21MW or about 8% using solar energy.

We are in the process of setting up another 21MW, and we are committed to install 51MW in next three years. When we do this, we are not only reducing our dependency on fossil fuels, but also saving money for other economic activity. We have lot of sunshine, and we have space: maybe not on land but reef areas are there.

Q: What has been the response to the request for qualification for the 21MW solar tender, of which 10MW is floating solar and 11MW is ground mounted?

A: We are working with the World Bank on this. We have done 1.5MW solar through a similar process earlier, with the World Bank providing payment guarantees to developers through Aspire [Accelerating Sustainable Private Investments in Renewable Energy]. Investors are therefore assured that their investment is secure.

In 2017, we got a price of 21 U.S. cents a kilowatt hour (without battery). This time, for a 5MW project, we have received a proposal for a tariff of 10.9 U.S. cents (without battery) from Ensys Co. of Thailand, which is a significant reduction from what we had before. With the most efficient technology for diesel, power costs nearly 23 U.S. cents (and could go up to 33 U.S. cents).

We have had a really good response to the 21MW project, I am told, and we expect to get good tariffs too. Addu will have much of the ground-mounted solar. In the south atoll, and the center, there will be 2MW each that will be provided with batteries, so that solar energy produced during day time can be stored, and used later, since the demand during the daytime is limited. Male region will have 5MW. The demand is higher, at 65-80MW, so it can be fed directly to the grid also. With batteries, we will be able to stabilize the system. Diesel is currently providing the baseload power.

Q: How many investors have shown interest? Which countries are they from?

A: For the 21MW tender, I have been informed that a total of 58 applications were received for prequalification. Out of this, 24 were received for floating PV and 34 for ground-mounted PV.

Q: Will land be provided by the Maldives government to bidders for these projects?

A: Yes. However, efficient use of land will be required, such as use of canopy style solar PV installation that will allow usage of space underneath. These can be in the form of walkway shades, car parks, waiting areas, etc.

Q: Do the coral reefs present a special design challenge for floating solar in Maldives?

A: The first floating solar system of Maldives went into operation in 2014. These systems are located in lagoon areas where there are no coral patches.

Q: Are you still working with the 20% renewables share target, as outlined in the Strategic Action Plan 2019-2023?

A: Yes, and we are quite confident of meeting the target. We have 51MW of solar PV in the pipeline. Our long-term goal is to have 75 MW of [solar] capacity installed by 2023. One of the challenges is existing electricity networks in the islands. We don’t have a national grid. We are geographically very fragmented, so each island has a (separate) power generation and distribution system. These systems are not properly designed and are very old. They require upgrades and replacements to connect solar systems. That is also something for which we need assistance from the World Bank.

Q: Is cost the most compelling argument for renewables in Maldives – from 23 U.S. cents to 10.9 cents per kilowatt-hour?

A: Economic savings are a major driver of course, but being a tourist destination, it will be an advantage for us to be environmentally more sustainable because that can be a driving factor for tourism as well. People like to come to a resort which is run by solar energy or other renewable energy. We can be producing our own energy. All these years, we have been looking for energy elsewhere, not harnessing the energy we have got. It is a matter of finance and technology. There is not much wind near the equator area but in the upper north, and in the central area, there may be some opportunities for wind energy. We are also already thinking about taking advantage of the deep sea we have. There is no continental shelf. A few meters from the reef edge, we have thousand meters depth. We can harness the cold water underneath to produce electricity via ocean thermal energy conversion or OTEC.

Q: The OTEC proposal is interesting. Is a pilot project planned or under construction?

A: We have been approached by a lot of investors, but everyone wants a special exclusivity. We are here to allow competition and fair business, so we are very mindful of giving exclusivity to anybody.

Q: Are you also looking at wave energy? Or tidal energy?

A: The Okinawa Institute of Science and Technology Graduate University (OIST) has signed a memorandum of understanding with the Ministry of Environment and Kokyo Tatemono of Japan, to embark on a wave energy project in the Maldives. The project involves testing prototype wave energy converter units (WEC-units) in the Maldives.

Q: Are you aspiring to be a 100% renewables powered nation?

A: Yes. Currently we are entirely depending on imported fossil fuel. Our target is to transform the entire power sector to clean energy. In this regard we are thinking seriously about hydrogen – it can really be the future fuel for us. During daytime, we can use the sunlight to produce the energy to make hydrogen, that can be stored and used to generate electricity or for transportation. I really believe in the hydrogen future.

Q: Maldives also has a plan to expand the use of electric mobility?

A: We have some electric vehicles, but they are being charged with diesel power. We need renewable sources that actually can take advantage of batteries: either we use fuel cell technology with hydrogen, or solar energy for charging.

Q: When do you see tourism, and the economy, bouncing back?

A: Maldives has a history of rebounding. We were devastated by the 2004 tsunami, and we were able to develop our livelihood following that, with help from the World Bank, the Asian Development Bank, our debt partners and friendly nations. Covid-19 is not much worse than a tsunami: our tourism is badly affected but our infrastructure is not damaged. Once a vaccine is found, I see people traveling here. The largest number of tourists to Maldives are from China, and we get a lot of visitors from Europe too.

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