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Renewable Technologies and Risk Mitigation in Small Island Developing States (SIDS): Fiji's Electricity Sector

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  • Matthew Dornan
  • Frank Jotzo

Abstract

In recent years, renewable energy technologies have been advocated in Small Island Developing States (SIDS) in the Pacific as a risk-mitigation measure against oil price volatility. Despite this, there have been no attempts to measure the impact of renewable technologies on financial risk in these countries. This paper develops and applies a stochastic simulation model in order to assess the effect of renewable technologies on the financial risk and cost of electricity supply in Fiji. The modelling results support investments in some, although not all, renewable technologies. Investments in low-cost, low-risk technologies such as energy efficiency, geothermal, biomass and bagasse technologies are found to lower both portfolio generation costs and financial risk. This suggests the Government of Fiji should be encouraging further investment in these technologies, commensurate with increases in total electricity supply. It also suggests that the FEA should prioritize such investments over its planned expansion of hydro-power generation. Renewable technology investments in other SIDS in the Pacific are likely to involve similar risk mitigation benefits.

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Bibliographic Info

Paper provided by Crawford School of Public Policy, The Australian National University in its series Crawford School Research Papers with number 1201.

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Length: 59 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:een:crwfrp:1201

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Keywords: Pacific island countries; renewable energy technologies; small island developing states; SIDS; risk mitigation; portfolio theory; electricity generation;

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  1. Weisser, Daniel, 2004. "On the economics of electricity consumption in small island developing states: a role for renewable energy technologies?," Energy Policy, Elsevier, vol. 32(1), pages 127-140, January.
  2. Gotham, Douglas & Muthuraman, Kumar & Preckel, Paul & Rardin, Ronald & Ruangpattana, Suriya, 2009. "A load factor based mean-variance analysis for fuel diversification," Energy Economics, Elsevier, vol. 31(2), pages 249-256, March.
  3. Awerbuch, Shimon & Sauter, Raphael, 2006. "Exploiting the oil-GDP effect to support renewables deployment," Energy Policy, Elsevier, vol. 34(17), pages 2805-2819, November.
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  5. Shimon Awerbuch, 2006. "Portfolio-Based Electricity Generation Planning: Policy Implications For Renewables And Energy Security," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 11(3), pages 693-710, May.
  6. Awerbuch, Shimon, 2000. "Investing in photovoltaics: risk, accounting and the value of new technology," Energy Policy, Elsevier, vol. 28(14), pages 1023-1035, November.
  7. Mayer, Peter C., 2000. "Reliability economies of scale for tropical island electric power," Energy Economics, Elsevier, vol. 22(3), pages 319-330, June.
  8. Allan, Grant & Eromenko, Igor & McGregor, Peter & Swales, Kim, 2011. "The regional electricity generation mix in Scotland: A portfolio selection approach incorporating marine technologies," Energy Policy, Elsevier, vol. 39(1), pages 6-22, January.
  9. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
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