Statement from Palau Solar Clarifying Palau’s energy transition challenges

On May 16^th, PPUC made a claim in the Island Times (https://islandtimes.org/solar-users-are-saving-money-while-utility-loses-revenue-ppuc-calls-for-law-change/) suggesting that non-solar energy users are subsidizing the electricity costs of domestic solar users in Palau.

Here at Palau Solar, we refute that assertion, but welcome the opportunity for ongoing discussion about Palau’s energy future. As the organization that has worked alongside the Asian Development Bank since 2022 to implement solar solutions under Palau’s Net Zero 2045 framework, we’d like to provide important context.

Since beginning our domestic solar projects in 2022, we’ve been in dialogue with both PPUC and the Palau Government administration about the need for grid improvements and modernization to support renewable energy integration. The core challenges are:

1. Foreseen infrastructure needs: Technical recommendations for necessary grid upgrades were made as early as 2022 when we began working in Palau. Timely action on these would have prevented current limitations. This challenge is not unique to Palau: grids around the world are all needing to upgrade their infrastructures to successfully optimize and integrate renewable energy.
2. System constraints: While Palau Solar wasn’t involved in building the 14MW Ngatpang solar farm (which was planned to be fully operational in 2023), we’re aware that its output has been curtailed since launch. PPUC faces penalties for unused power, because the grid infrastructure can’t handle large-scale renewables effectively. These curtailment costs ultimately affect all ratepayers. As grid engineering experts, we’ve provided advice and guidance to help stabilize Palau’ grid and attempt to make this project operational.
3. Untapped revenue streams: We are aware that some major hotels and other commercial energy users are only connected to the grid on a standby basis. Most of their power comes from standalone systems. This means that a huge revenue opportunity is being missed, along with the opportunity to use the generated revenue to stabilize the grid and fund infrastructure investments.

Understanding net metering’s actual impact

Palau’s Net Metering Act was designed to encourage engagement with renewable energy.

• Homes using renewable energy can export surplus daytime energy (compensated at half the retail rate)
• All users pay for any grid energy consumed
• The program inherently favors PPUC by providing discounted daytime power

With a few hundred domestic solar installations under the program, we question how much of the $4 million losses can really be attributed to domestic solar users and we would welcome clarity on this from PPUC.

Government constraints are also at play

Under its governmental remit, PPUC manage both the power and water utilities of Palau. It is not allowed to make a profit, nor can it enter into debt arrangements.

This hampers PPUC’s ability to make long-term investment decisions, and keeps it dependent upon NGO programs and foreign investments to bridge the gap.

However, as a monopoly operator, it could be doing far more to monetize all its potential revenue streams. A major step would be prioritizing and procuring the funding needed to upgrade the grid to be able to manage multiple generators. Doing so would enable the solar farm to power the tourist hotels and large businesses, and generate the revenues that are needed for ongoing grid development.

Lessons from abroad

This isn’t to say that Palau can’t learn lessons from overseas and make amendments to the Net Metering Act. There are several models which could be used to ensure fair cost recovery while supporting renewable energy:

1. UK
   1. All electricity users pay a fixed daily fee (a ‘standing charge’ of £0.50–£0.70/day) for grid access, plus variable energy rates. This ensures stable revenue for grid maintenance, even as solar adoption grows.
2. Hawaii
   1. Replaced net metering with grid access fees and lower solar export rates to manage high rooftop solar penetration.
3. Australia
   1. Uses daily fixed charges, plus time-varying export pricing to reduce grid strain during peak solar hours.
4. Philippines
   1. Large commercial users pay capacity-based fees, ensuring they contribute to grid costs even if they rely on solar.
5. California (USA)
   1. Is currently adopting an income-based fixed charge to cover grid costs more equitably, while lowering per-kWh rates to encourage electrification.
6. Germany
   1. Imposed a renewable energy surcharge for a limited period for all consumers, to fund grid upgrades and renewable subsidies.

• A modest standing charge (like the UK’s) could stabilize PPUC’s finances.
• Adjusted export rates (e.g., lower daytime feed-in tariffs) could further align incentives.
• Transparency in billing would build public trust in any changes.

We’d welcome the opportunity to support PPUC with exploring these options and the positive impact it can potentially have for Palau.

A collaborative way forward

Rather than viewing distributed solar and other renewable energy projects as a challenge, we believe Palau can:

1. Accelerate planned grid upgrades using available funding mechanisms.
2. Fully integrate the Ngatpang solar farm to maximize its economic and environmental benefits.
3. Continue to connect major commercial users to create a more balanced and financially sustainable system.
4. Modernize billing systems to provide transparency and build public trust.

Our commitment to Palau

Palau Solar stands ready to support PPUC in implementing grid improvements, drawing on our decades of experience in engineering and optimizing distributed generation systems. Palau’s clean energy transition is achievable – but only if we address the real infrastructure needs, rather than misplaced concerns about residential solar adoption.

We welcome further discussion with all stakeholders to advance Palau’s Net Zero 2045 goals in a way that ensures reliable, affordable power for all residents and ensures a more stable and futureproof national grid.

Note: Palau Solar’s perspective is based on technical expertise and firsthand experience with Palau’s energy infrastructure and is intended to spark constructive dialogue. We would like to make clear that we have no financial stake in policy outcomes related to net metering or grid upgrades and our sole interest is in supporting a stable, sustainable energy future for Palau.

*ENDS*

About Palau Solar:

Palau Solar is a subsidiary of Utilligence, created to design, supply and install domestic solar power throughout the archipelago of the islands of Palau and beyond.

In tandem with the Asian Development Bank, Palau Solar is transforming the islands with renewable energy. Using solar energy, the country is taking its first steps towards net zero and fighting climate change.

Working alongside the islands’ grid operator, PPUC, Palau Solar is helping to implement the next generation of grid forming hybrid solar and battery energy systems to mitigate the negative impact of high frequency reverse power flows and support the grid as it transitions to a low carbon future. We have trained and built a local team to ensure that engineering expertise remains on the island for the future.

The company is headquartered in Airai State, Palau.

About Utilligence:

Utilligence is a decarbonization and net zero power consultancy and construction company: providing infrastructure, products and design solutions for energy projects worldwide.

We are transforming how large-scale energy connectivity for power networks is delivered, through our team of highly skilled engineers in the UK, Ireland and beyond.

Designing, developing, implementing and maintaining net zero power connectivity enables clean energy and goes beyond today’s best practices to provide effective and renewable future ready solutions.

The company is headquartered in Haywards Heath, UK.

For more information, please contact:

Jo McLean, Head of Media, Utilligence: Jo.mclean@utilligence.co