Energy Storage Roadmap for the Maldives Executive Summary November 2019 © 2019 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW | Washington DC 20433 Telephone: 202-473-1000 | Internet: www.worldbank.org Some rights reserved 1 2 3 4 18 17 16 15 This report was researched and prepared by the World Bank and its consultant and software maker Acelerex Inc., Acelerex Chile SpA, and Acelerex Yazılım Danışmanlık Limited Şirketi with inputs and comments from the Ministry of Environment, Republic of Maldives and the Maldives’ utilities ST ELCO and FENAKA. The work was financially and technically supported by the Energy Sector Management Assistance Program (ESMAP). This work is a product of the staff of the World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the World Bank, its Board of Executive Directors, or the governments they represent. 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Cover photo: © By Food Travel Stockforlife/ Shutterstock.com Library of Congress Cataloging-in-Publication Data 2 FOREWORD FROM THE MINISTRY OF ENVIRONMENT, REPUBLIC OF MALDIVES The Energy Storage Roadmap for the Maldives is an essential study performed to evaluate the potential of implementing renewable energy sources and energy storage on islands of the Maldives. This report will provide guidance in helping Nationally Determined Contribution (NDC) towards low greenhouse gas (GHG) emission and climate-resilient pathways. The Maldives presents a unique energy challenge with its geographical location, geophysical characteristics and limited resources. Diesel has been the main fuel source to supply electricity in all the islands and is the major contributor to the overall Maldives carbon footprint. As the Maldives is determined to reduce emissions, it is inevitable to find alternatives to generate electricity. The study performed on 5 islands of the Maldives, provides a clear analytical methodology for informing energy transition towards solar PV and Energy Storage proving the financial feasibility. It shows the fuel savings with the adoption of PV plus storage to form a hybrid system for each island to achieve reduced emissions and cost of generation. This report will play an essential role to frame policies and plans to implement renewable energy sources and energy storage. It will also help Maldives develop a mechanism to monitor the target of energy source composition towards maintaining a low emission development. This report has been developed through the assistance of the World Bank, a consultant, and consultations with representatives of the Ministry of Environment and the utilities STELCO and FENAKA. The ultimate goal of the Maldives Government is to achieve low GHG emissions and ensure energy security for the Maldives people. The Maldives Government has a clear objective of improving the quality of life of the Maldivian people through the provision of safe, reliable, clean, affordable, accessible, environmentally appropriate and sustainable energy services and ensuring that electricity systems meet Maldivian people’s needs whilst minimizing their undesirable impacts on the society, economy, and environment. Sincerely, Dr. Hussain Rasheed Hassan Minister of Environment Ministry of Environment 3 FOREWORD FROM THE WORLD BANK GROUP It has been a privilege for the World Bank to partner with the Government of Maldives and examine how solar energy and modern battery systems can meet the country’s growing energy needs and environmental objectives. The World Bank through its technical expertise and wide geographic experience is uniquely positioned to research how technological advancements can address difficult energy sector development challenges. The Energy Sector Management Assistance Program has for decades contributed to the Bank’s ability to develop the knowledge that Governments need so that they can adopt more effective policies and take better investment decisions in the energy sector. As renewable energy technologies have expanded exponentially across the world in the last decade, their costs sustained a downward trajectory, creating new possibilities for the provision of sustainable and affordable energy services in developing countries. Nevertheless, the natural variability of renewable energy has always been a major constraint on reliability. Only recently large-scale battery technologies and systems are emerging as the bridge that connects clean and affordable renewable energy with reliable supply. Large-scale battery systems are still a novel technology; their flexibility in near-instantaneous switching from consumption to production presents enormous potential, but also difficulties in estimating their engineering and economic value. At the same time, uncertainties regarding the future costs of fossil fuels make investment choices especially challenging for power systems in smaller, remote, developing countries. This report demonstrates that a robust techno-economic analysis can be carried out successfully. After considering detailed, real-world, data on performance and costs, the report confirms that modern battery systems open up a substantial potential of expanding solar energy in the Maldives, while ensuring reliable supply at lower costs. The reduced risks of local pollution from oil spills and lubricants disposal are an additional –unquantified in this analysis— benefit that is nevertheless of very high value to the Maldivian beautiful, pristine, environment. Looking forward, the World Bank will continue to work with the Government of Maldives to move from theory to practice and realize such clean energy technology projects in several islands. Sincerely, Demetrios Papathanasiou Energy and Extractives Practice Manager for South Asia The World Bank Group 4 EXECUTIVE SUMMARY The Maldives is the smallest Asian country use energy storage to integrate variable by land area and population. It is also one of renewable energy to the grid and reduce the world’s most geographically dispersed emissions. This study provides a roadmap for countries and consists of 26 coral atolls with adopting energy storage with solar 1,192 islands, where the geography presents photovoltaics (PV) for a population of both challenges and opportunities for ~480,000 people, enabling more renewables innovative energy solutions. The geographic and reducing emissions. and geophysical characteristics such as the The objective of this study is to assess the small size, low elevation, narrow width and value of energy storage for enabling the dispersed nature of its coral islands, make integration of solar PV to displace diesel the Maldives vulnerable to natural hazards, generation. The study is carried out over five which are expected to increase in frequency islands: Greater Male, Addu, Fuvahmulah, and intensity due to climate change. Hulhumeedhoo, and Thimarafushi. The Maldives power sector currently relies on Two cases are compared. First, the Business diesel generation, and this increases the as Usual (BAU) case which is characterized country's economic vulnerability to global oil by the expansion of diesel capacity; and prices. Approximately 80 percent of the land second, the Hybrid case which allows solar area lies within one meter of the sea level, PV and Battery Energy Storage Systems exacerbating the country’s physical (BESS) to displace diesel operation and vulnerability to climate change impacts. The defer diesel generator purchases for Government of Maldives fully recognizes that provision of power. in order to effectively manage climate change risks in the context of sustainable Figure 1: Analyzed Cases development, it is necessary to integrate climate risk planning and climate change adaptation into the country's development policy and planning frameworks. This could be achieved through utilizing natural solutions, adopting innovative and new technologies, and enhancing access to finance. For the Maldives, hybrid systems with renewable energy and energy storage technologies are critical in moving towards For many of the islands studied in this report, low-emission development. In its 2015 NDC, at least 40% renewable generation is the Maldives has committed to reduce forecasted in the first year of the study greenhouse gas emissions by 10 percent by horizon, because there is significant solar 2030. Increasing the diversity of renewable potential that is already economic against energy technologies in the national energy diesel generators. A four-hour lithium-ion mix is the most effective way to reduce battery is assumed as it is commercially emissions through 2030. available today with well-characterized cost This report establishes the Maldives at the estimates. Further cost optimization of forefront of efforts by developing countries to battery systems could be achieved by 5 considering hybrid battery systems with utility. In such a scenario, new technologies shorter duration power batteries and longer like floating solar PV systems could help the duration energy batteries. For both cases Maldives mitigate the scarcity of suitable land analyzed in this study, techno-economic on rooftops. metrics such as the installed capacity mix, For the Maldives, the assumptions included fuel burn, emissions, lube expenses, capital a conservative cost estimate for solar PV cost, and others are calculated. The results installation considering remoteness of of the two cases are compared using the Net islands, lack of supply chain, and Present Value (NPV) and Levelized Cost of implementation of new technologies like Energy (LCOE) for each island over the floating solar PV. The assumed costs are period 2020 to 2040. Additionally, expected to decline over time and with sensitivities with different loan financing increased deployment. Exploration of floating terms were considered. PV potential could further increase The model used in the study calculates the renewable penetration in the Maldives generation plan that satisfies reliability islands. As more PV sites are identified, PV’s requirements at the least cost using the role in the power system would be further Acelerex software. The diesel price used for unlocked as storage costs fall and new the study is US$0.85 per liter. As shown in technologies become commercially available, Figure 2, solar PV and BESS would displace including flow batteries and hydrogen. diesel generators to provide at least 40% of The results suggest that a minimum total electricity in 2020, on all islands except for investment of US$44.5 million in PV and Greater Male. US$35.8 million in BESS together will yield Figure 2: Renewable Energy Generation in positive savings in diesel burn and achieve a Year 2020 for Each Island net positive NPV. 100% Figure 3: Reduction in CO2 Production 90% Over 20 Years for Each Island 80% 43% 38% Percent Generation 52% 12,000 70% 60% 60% 97% 11,500 50% CO2 Production (Kilotonne) 40% 62% 11,000 30% 57% 48% 20% 3% 40% 10,500 10% 0% 10,000 9,500 Solar Diesel 9,000 BAU Hybrid Land availability is a major issue in the Greater Male (-1%) Addu (-19%) Maldives, especially in Greater Male due to Fuvahmulah (-27%) Hulhumeedhoo (-29%) the scarcity of suitable land for large-scale ground-mounted solar PV installations and Thimarafushi (-23%) rooftop PV because of the high population Across the 5 islands, as indicated in Figure 3, density and limited rooftop space, particularly it is found that pursuing solar PV and BESS on public buildings available to the electricity would reduce the total carbon dioxide (CO2) 6 emissions of the Maldives by 445,000 tonnes Table 1 shows the PV and BESS capacity over the period 2020 to 2040. For each of the built in the year 2020 in addition to the islands except Greater Male, a reduction of existing PV capacity under the Hybrid case. 19-29 percent of CO2 emissions would be The PV capacity of Greater Male includes the achieved by adopting a generation mix with 1.5 MW solar PV commissioned and 5 MW solar PV and BESS. In the case of Greater solar PV currently under a bid as part of the Male, since there is limited space for Accelerating Sustainable Private additional land-based solar PV, CO2 Investments in Renewable Energy (ASPIRE) emissions could be further mitigated with the project. addition of floating solar PV projects that Figure 4: Carbon Externalities Cost Savings would unlock additional solar potential. Over 20 Years for Each Island Without additional solar PV, BESS can still provide immediate value to the power system 6 in terms of mitigating outages, providing 5 spinning reserve, and facilitating the integration of Electric Vehicle (EV) charging 4 US$ (Million) loads. 3 Following the guidelines of the World Bank, the economic merit of the project considers 2 the carbon externality associated with GHG emissions. A shadow price of carbon, starting 1 at US$40 per metric ton of CO2 equivalent in 2020, is multiplied by annual GHG emissions 0 over the economic life of the project. 1 This assessment for carbon externalities results in US$14.7 million of cost savings, as shown in Figure 4. Table 1 Summary of Study Results for Each Island Greater Male Addu Fuvahmulah Hulhumeedhoo Thimarafushi PV Capacity* (MW) 10.0 11.6 5.0 2.0 1.0 BESS Capacity* (MW) 10.0 8.4 5.0 2.0 1.0 BESS Energy Capacity* (MWh) 40.0 33.6 20.0 8.0 4.0 Diesel Capacity* (MW) 191.3 24.0 7.6 1.6 1.2 Total Capacity* (MW) 211.3 44.0 17.8 5.6 3.2 PV Investment** (US$ million) 14.3 16.8 8.4 3.4 1.7 Battery Investment** (US$ million) 12.8 12.8 6.4 2.6 1.3 Total Diesel and 32.2 34.0 18.8 8.0 3.4 Lube Oil Savings** (US$ million) CO2 Reduction** (kilotonnes) 140.2 163.5 89.5 37.3 14.8 PV+BESS LCOE (US$/kWh) 0.140 0.097 0.111 0.111 0.111 1 * Values are by year 2040 with the Hybrid case The shadow price used is in line with the High-Level Commission on Carbon Prices ** Values are over the period 2020 to 2040 7 With a total capital investment of US$80.4 Solar PV and BESS still have positive NPV million in solar PV and BESS, the Maldives under financial sensitivities with a 10% would save US$96.4 million on diesel and interest rate and loan tenure of 20 years. lube oil expenses over 20 years, would defer Although annual capital costs would be US$17.5 million in capital expenses of diesel higher and total savings would be reduced, generator purchases, and reduce carbon all NPVs of the investments would remain externalities by US$13 million. positive. Figure 5: Investment Costs and Savings In the case of Greater Male, if we consider an for Each Island Over 20 Years opportunity cost of unserved energy of 40 US$1000/MWh, serving one instance of 5 MW for 4 hours would be valued at 35 US$20,000. This is an added benefit of 30 energy storage for an island grid system which provides an estimated savings of US$ (Million) 25 US$2.4 million in the general economy over 20 10 years. 15 Looking at the Hybrid case, with penetration 10 of PV and BESS, the LCOE of each island 5 would reduce as shown in Figure 6. The island of Hulhumeedhoo would observe a 0 reduction of 26 percent, and Thimarafushi of 24 percent. Figure 6: Reduction in System LCOE for Each Island Delta Capital Cost Total Savings 0.35 Figure 5 shows the investment costs involved 0.30 in solar PV and BESS, and estimated savings in diesel and lube oil costs obtained 0.25 LCOE (US$/kWh) by comparing BAU and Hybrid cases. Here, 0.20 the total savings are the present value of the savings over 20 years, and the delta capital 0.15 cost is the difference in the present value of 0.10 annual payments over 20 years. In the case of Greater Male, the savings also include the 0.05 deferral of distribution capital investments 0 with the installation of BESS. As a result, the availability of solar PV and BESS provides net positive value (measured by NPV) for all the islands. The results in Figure 5 have assumed that concessional resources are BAU Hybrid available for financing the solar PV and BESS systems. These values are based on For each of the five islands in the study, the a standard loan of World Bank Climate capacity expansion scenario results shown in Technology Funds (CTF), with an interest Figure 7 indicated there are positive rate of 0.25% and a loan tenure of 40 years. economic benefits to invest in solar PV to its 8 maximum extent as soon as possible (in the a techno-economic dispatch of diesel first year of the analysis). The availability of generators can be facilitated by reducing the batteries for energy storage provides firming usage of less efficient generators. of PV generation and the ability to shift the PV energy to periods when it is needed most, displacing the role of diesel. Figure 7: Installed Capacity Ratio in Year 2040 for Each Island 100% 5% 90% 19% 5% 28% 31% 36% 80% Share of Power Capacity 70% 26% 60% 28% 31% 50% 91% 36% 40% 30% 55% 20% 44% 38% 29% 10% 0% Diesel PV BESS Over the study horizon of the year 2020 to 2040, solar PV investments are justified by the offset of ongoing diesel fuel purchases and a reduction in CO2 emissions. BESS paired with solar PV has the potential to substantially reduce power costs for consumers and utilities in the Maldives across islands, but the value proposition is highest where BESS can enable integration of additional solar PV which is already highly competitive against diesel generators. Given the space constraints on land-based solar PV, a future for the Maldives that further replaces diesel will require floating solar PV or other renewable alternatives. With the demand growth scenarios considered, diesel-based generation is still required unless or until alternatives are available. To achieve a further reduction in CO2 emissions, 9