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Pacific Islands Development Program, East-West Center

With Support From Center for Pacific Islands Studies, University of Hawai‘i


Grant Sought For Marshall Islands Solar Power System
1-megawatt system could save up to 100,000 gallons of fuel yearly

By Giff Johnson

HAGTA, GUAM (Marianas Business Journal, Nov. 19, 2012) – The government utility company in the Marshall Islands is aiming to reduce reliance on diesel-powered generators by nearly 20% of current levels by investing in a major solar energy system.

The Marshalls Energy Co. (MEC) is seeking a multi-million dollar grant from donors to develop one megawatt of solar power capacity, David Paul, general manager of MEC said in early November. It will not be the first large, grid-connected solar power system for Majuro - a Japan-funded solar panel array on top of Majuro Hospital is injecting about 200 kilowatts of power into the MEC grid. "The MEC board has approved this in principal," Paul said of the effort to step up solar capacity for the capital city. "Now we're fine-tuning the specifics of the solar plan to seek donor funding."

A crowded and heavily urbanized atoll is a challenging environment for locating a large array of solar panels. The initial proposal was to cover the airport water reservoirs with solar panels. But MEC has since dropped that proposal and is identifying locations for smaller arrays of solar panels in various parts of the atoll, Paul said.

The aim is develop one megawatt of sun-generated electricity, which is a significant portion of MEC's daily load of about seven megawatts.

"A one-megawatt solar system will save MEC about 300 gallons of diesel per day. On an annual basis that amounts to over 100,000 gallons of fuel or, at today's fuel prices, $360,000," Paul said. "Our savings will have a multiplier effect. We save fuel and can re-sell it to the fishing boats."

The solar plan ties in with MEC's business recovery plan implemented in 2010. This includes a range of policies and projects to stabilize the company, which has hemorrhaged financially in recent years. A U.S. government review of the Marshall Islands economy for fiscal 2011 reported MEC averaged an annual loss of about $700,000 from fiscal 2009 through fiscal 2011, compared to the 1999-2001 period, when it netted a modest profit of about $150,000 annually. If its sister utility on Ebeye is included - the Ebeye utility comes under MEC management - MEC's average annual loss is $3.1 million, said the U.S. report released earlier this year.

As part of the recovery plan, over the past two years MEC has gained a $9 million Asian Development Bank low-interest loan to pay off a higher-interest Bank of Guam loan taken out in the late 2000s to pay a fuel bill to Mobil Oil Micronesia, has received approval from the U.S. Rural Utility Service for a two-year deferment on its loan payments of about $1 million a year and a $2.3 million grant to overhaul a power plant six-megawatt engine long overdue for repair, and has funding from the ADB to convert one of the seven diesel-powered engines in Majuro to a coconut oil-diesel biofuel, with the goal of cutting diesel use and boosting the domestic copra industry, which supplies dried coconut meat to the Tobolar Copra Processing Authority, located adjacent to the MEC power plant, for milling into coconut oil.

In August, MEC signed a long-term diesel fuel supply contract with Winson Oil of Taiwan. The deal includes $5 million financing at low-interest to refurbish MEC's major tank farm on Majuro. The eight 750,000 gallon tanks - the largest bulk fuel facility in the Micronesia area outside of Guam and Saipan - were built in 1982.

Paul said MEC management sees opportunities for its tank farm beyond its current power plant operations and diesel sales to fishing fleets that use Majuro's lagoon as a hub for transshipping tuna to Asian canneries. Majuro sees between 300 and 400 fishing vessel visits annually, with MEC fueling many of these vessels.

Beyond this, MEC and Winson view sub-regional supply opportunities, which are motivating renovation of the large tank farm, Paul said. Nearby islands include Kiribati, Nauru, Kosrae and Pohnpei and once the MEC tank farm is overhauled so it can handle large volumes of fuel, the company will look to compete to service neighboring islands, Paul said.

There are also domestic gas and jet fuel sales possibilities that MEC has not been in a position to consider. The tank farm renovation will open options for competition with Mobil Oil Micronesia, which sells diesel and gas to four local service stations and operates a lucrative jet fuel station at Amata Kabua International Airport in Majuro. Majuro is strategically located for refueling trans-Pacific flights, and the airport sees dozens of ferry flights to Asia and the United States annually on top of landings by regular air carriers United, Asia Pacific Airlines and Air Marshall Islands.

Fixing its tank farm is a first step toward expanding commercial fuel opportunities for both jet and gas.

"We are aggressively going after this plan," Paul said of the utility company's recovery plan that includes the solar project. "We cannot continue with the status quo. The price of fuel is going up and we're wasting money. The upfront cost of solar is high, but once it is installed it's free power." If the utility can gain donor funding for the project, costs for solar power will be limited to ongoing operations and maintenance.

Paul said he foresees construction to set up the new solar equipment beginning next year.

Marianas Business Journal
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