The Republic of Maldives, located in the central Indian Ocean, is renowned for its thriving tourism industry, which contributes to roughly 25 per cent of its national gross domestic product (GDP). However, Covid-19 has definitely outlined the limitations in the economic model of this island country, which has been majorly dependent on tourism and fishing. Thus, rapid transformation and diversification of the country’s economic activities will be critical to its recovery. To address this transformation, a reliable and affordable energy supply is required, as the nation has no fossil fuel reserves of its own. The country has been relying on imports to obtain these fossil fuels for many decades, and as highlighted by the Asian Development Bank (ADB), imported fossil fuels are the primary source of energy in the country. Further, fuel imports account for approximately 10 per cent of the country’s GDP, as diesel is primarily used in power generation, industrial processes, and to facilitate sea transport, while gasoline is used for road transportation and liquefied petroleum gas for cooking. Hence, it is important for the country to focus on green energy transition not only for its economic well-being, but also to support the global decarbonisation goals.
Maldives has been naturally endowed with abundant renewable energy resources including solar, wind and ocean. Utilisation of these sources will offer the chance to reduce electricity generation costs, fuel imports and the fiscal burden on the government.
According to data gathered by the International Renewable Energy Agency (IRENA), the share of renewable energy in the total energy mix of Maldives is just 6 per cent. As per 2021 statistics, out of the total renewable energy generated all over the country, 95 per cent comes from solar energy, 1 per cent from bioenergy and 4 per cent from wind energy. The country generated 402 MUs of electricity in 2020. According to IRENA, the country’s per capita renewable electricity capacity is 31.1 per cent. Moreover, the per capita electricity consumption in the country was 717.03 kWh in 2020.
The POISED project
The Preparing Outer Islands for Sustainable Energy Development (POISED) project was launched in January 2015 to assist Maldives in transitioning towards self-sufficient, cost-effective and clean energy by transforming existing minigrids, including through physical investments in the form of solar-battery-diesel hybrid systems. The goal was to reduce the country’s reliance on fossil fuels for power generation, lower electricity prices, and improve people’s livelihoods.
POISED emerged as a successful project and helped in saving up to 28 per cent more fuel than diesel-only generator sets. As reported by Climate Investment Funds, the progress made due to the POISED project as of December 31, 2020 has helped in achieving significant results with respect to improving energy access and reducing emissions. POISED added 1,794 businesses with improved access to electricity between 2020 and 2021. Furthermore, the number of people with improved energy access increased from 39,939 in 2020 to 117,692 in 2021. Similarly, annual electricity production exceeded its target of 9,723 MW per year by over 17,500 MW. Annual greenhouse gas emissions were reduced by 34,166 tonnes. After POISED’s successful completion, the country has been actively exploring opportunities in the renewable energy space.
Other projects and initiatives
In August 2022, the Republic of Maldives reopened a tender process seeking to procure 40 MWh of battery energy storage systems (BESSs) in an energy transition project supported by World Bank funding. Financing support for the project was approved by the World Bank through its Accelerating Renewable Energy Integration and Sustainable Energy project. The Maldives government will channel part of that funding towards the cost of making payments to the contracted BESS providers. The process of tendering was done in two lots. The first will be for 23 MW/23 MWh of BESS in seven different regions of the country, the second for 13.5 MW/17 MWh of BESS at eight locations on the Laamu Atoll islands and four other sites. The contracts will cover the design, supply, installation and commissioning of BESSs and energy management systems, which will, in turn, enable optimised operation of solar photovoltaic-plus-diesel generator power plants around the islands.
Further, in October 2022, the Maldives’ Ministry of Environment, Climate Change and Technology announced that the government is assessing community insights and feedback for a 20 MW solar power project. This capacity will be established under the ADB-supported outer islands solar public-private partnership project. The ministry thereby plans to design the final tender and launch requests for proposal later, based on the feedback and insights received from the participants.
Additionally, the country has been collaborating strategically with its neighbouring countries to establish the necessary infrastructure for renewable energy generation. India’s Ministry of Power notified that India and the Maldives had planned to set up a transmission interconnection to facilitate the transport of renewable energy between the two countries. This collaboration intends to work through two MoUs, one on energy cooperation and the other on transmission interconnection under the One Sun, One World, One Grid (OSOWOG) initiative. As part of OSOWOG, India and Maldives have proposed to establish transmission interconnections for renewable power transfer to help Maldives with its energy transition. A draft agreement on the transmission interconnection is being prepared, under which an Indian technical team will visit the Maldives to assess its technical feasibility. Following this, a detailed project report will be prepared in collaboration with agencies from India and the Maldives, which will include an undersea cable route survey as well as network augmentation in Male.
Very recently, in January 2023, the World Bank Group’s board of executive directors briefly discussed the new Country Partnership Framework 2023-2027 for Maldives. It aims to support the country in achieving a green, resilient and inclusive high-growth future. The new five-year strategy covers key areas where work is to be done by the World Bank Group’s member organisations. These include the International Finance Corporation, which can help focus on the private sector in developing countries; and the Multilateral Investment Guarantee Agency, which offers political risk insurance and credit enhancement guarantees.
Key challenges and outlook
Clean energy transition has become an essential strategic component of bilateral equations. This is because clean energy deployment is not just an international commitment – it is tied to a nation’s larger security concerns. However, transitioning from a primarily diesel-based energy mix to renewables-led power systems is a costly investment for an island nation such as Maldives. This can be attributed to the geographical challenges in terms of land availability, as well as transmission constraints. Human resource development is another issue that needs to be addressed in the country. Most islands lack trained electrical engineers with the technical expertise required to deal with new technologies. Thus, skilled manpower must be increased through continuous training for long-term energy security. Further, to promote green energy transition, the country’s high public debt must be addressed through economic reforms. Maldives faces numerous challenges in structuring the financing of development projects, including climate change mitigation projects. The main constraint is the country’s limited public sector financing capacity. Sustained support from multilateral development banks, bilateral cooperation with donor countries, private sector participation and, especially, alliances with foreign investors interested in introducing innovative renewable energy technologies are critical to promote renewables. Streamlined guidelines, transparent bidding processes and clear regulatory provisions will help enable investments in the country’s nascent renewable energy sector.
Going forward, in order to accelerate the deployment of renewables in the island country, it is essential that the government learns from experiences in other countries and creates a favourable ecosystem for long-term renewable energy development.
