Following the Paris Agreement (COP21), Palau committed to producing 45% of its energy from renewable sources by 2025 and to a 22% reduction of our energy sector emissions below 2005 levels by the same year. Long reliant on imported diesel fuel, which has recently accounted for more than 95% of its energy generation, Palau organized the 2017 Palau Energy Summit in partnership with its national and state governments, ministries, the PPUC, JICA, GridMarket, EarthX, EarthJustice, IRENA, NREL, New Zealand, the U.S. Department of Energy, and other international partners.

The Republic of Palau then enacted milestone legislation RPPL 10-23 to ensure that the Republic would be able to meet its Paris Agreement commitments. After numerous studies and years of research, it was determined that, with the availability and abundance of sunlight year round, renewable solar energy was the best option for producing power in the Republic and achieving its Paris Agreement commitments.

Based on discussions of the national and state leadership, the public, private, and non-government sectors, the Pacific Power Association, and partners from the 2017 Energy Summit, the Republic began meeting with various global Independent Power Producers (IPPs) in order to determine its options.

On October 11, the Republic of Palau, the Palau Public Utilities Corporation, and ENGIE, an industry leader in the renewable energy arena, entered into an agreement where in ENGIE will help Palau meet its renewable energy commitment and produce 45% of its energy from renewable, efficient, and affordable solar panels well before 2025.

“The price of diesel fuel is volatile. In fact, the cost of diesel fuel went up by approximately 10 cents just last week. To have a fixed cost of environmentally friendly, renewable power production at rates that include no inflation for thirty years is a win–win situation, especially when you consider that over the course of thirty years overall inflation on global commodity prices will continue to increase. In addition, neither the Republic nor PPUC is putting any money towards the overall cost of setting up the renewable energy system – a cost of nearly $80 million. This is not a loan– ENGIE is agreeing to put up that cost.  Furthermore, Palau’s decision to allow ENGIE certain tax exemptions on this project is a means of reducing the tariff and eliminate any opportunity for tax costs to be passed on to the consumers. Adding the tax would only hurt Palauans who would pay high tax-added electricity costs. And, lastly, over the past seven years, the National Government has been subsidizing the PPUC with millions of dollars to cover the cost of fuel–this agreement will put an end to this practice, allowing the Republic to save tens of millions of dollars over thirty years with ENGIE.”

Even if diesel fuel stays at the current price with no increase in power demand, Palauans will still save money. But Palau is growing and will continue to grow, just like the oil market will continue to be influenced by forces outside of Palau’s control.  As Palau’s power needs increase, so will the savings.  By entering into an agreement with ENGIE, Palau will automatically secure 45% of its power from renewable sources, while simultaneously avoiding the volatility of the oil market and providing Palauans with instant savings,” says President Tommy Remengesau, Jr.

Calculation models show that for every $0.25 increase in the cost of diesel, as a result of the agreement, the actual savings to PPUC customers would go up 3%. Given that the current rate of fuel comes in at $2.50 per gallon, under this agreement, the typical residential customer can expect to immediately save 5% off of their bill. If the price of diesel fuel increases to $2.75, those savings would increase to 8%.

“As the price of diesel fuel increases, PPUC customers will be able to breathe easy under this agreement.” Says PPUC Board Member, Brian Melairei. (PR)