Dreaming a Carbon-free World
The Maldives recently held its first International Renewable Energy Investors Conference in association with the Environment Ministry and various banks. Attending the conference were official dignitaries from the energy sector, who highlighted how the conference brought together international investors, project developers and energy companies to explore investment opportunities in the country’s renewable energy sector. Moreover, the conference discussed the legal framework and the regulatory process in line with creating a long-term partnership with various stakeholders who could finance and manage renewable energy projects in the Maldives.
The energy crisis continues to loom over the island nation and President Mohammed Waheed Manik is making efforts to implement renewable energy projects across the country to solve this dilemma. Moreover, the Maldivian government is ambitious about developing its renewable energy sector which will eventually facilitate the country’s long-term plan to become a carbon neutral country by 2020.
In November 2012, the country launched the Sustainable Renewable Energy Investment Plan to tackle the energy crisis by finding avenues to generate alternate energy and to conserve the energy that it was producing through conventional means. As one of the components to produce energy was biomass, the project stakeholders didn’t agree to the conditions. After revising the project and replacing the biomass component with solar energy, the country relaunched the project as the Maldives Scaling Up Renewable Energy Program (SREP).
The Maldives intends to use the Investment Plan to transform and upgrade its energy sector by reducing its dependence on costly fossil fuels for power generation and to boost investment from the private sector. Although the country has identified key projects to counter the energy crisis, it seems as if external and internal factors are hindering the Maldives in pursuing its renewable energy projects. Analysts believe that the ongoing political instability has distanced foreign investors from the country. The Maldives’ political crisis, which reached its climax with the resignation of former presi- dent Mohammed Nasheed in 2012, has led the international community to lose confidence in the various sectors of the island country. Although the international community views the Maldives as making efforts to build its renewable energy sector under the current President Mohammed Waheed’s government, the erratic nature of the country’s politics is hindering the Maldives’ longterm goals.
Environment Minister of the Maldives, Dr. Mariyam Shakeela, views that the need of the hour is to become less dependent on fossil fuel because it leads to a climate crisis. Islands comprising the Maldives have ample but underused renewable energy potential, which the government should use to become a fossil fuel independent country. However, present or past governments have not explored the country’s natural resources, which signal the government’s vacillation towards curbing the energy crisis.
The World Bank (WB) and the Asian Development Bank (ADB) have pledged their support to attract investment in the Maldives’ renewable energy sector. In October 2012, the Energy Authority of the Maldives inaugurated the $138 million renewable energy project to generate 26 MW of electricity. The World Bank, the Asian Development Bank and banks from Japan and Germany have funded the project, which is set to be completed in five years. As planned, the project will reach nearly 50 islands of the Maldives. The Maldivian government envisions running ten islands solely on renewable energy in the project’s initial stages. Although the WB has been extending its support, the Maldivian government must realize that any assistance from the WB comes with strict repercussions and failure to meet the WB’s demands might jeopardize the Maldives’ economic security.
A major reason preventing foreign investment from entering into the Maldives is the problem of payment guarantees and the question of returns on investment (ROI). An underdeveloped country, the Maldives is a risky business for foreign investors. According to sources, the government of Maldives has allocated US$5 million from the Inter- national Development Association (IDA), which the WB will finance and the amount will be leveraged up to US$25 million. Moreover, the World Bank will issue a security for this amount to provide guarantees to the investors, guaranteeing finances under the SREP investment plan.
Although the guarantee facilities have reduced the investor’s concerns to some extent, it will take time to completely restore the confidence of international investors. The Maldives needs the help of financial institutions to develop its renewable energy sector and it seems as if the local banks are not willing to render their support. The country can change this attitude by bringing political stability after the September 2013 elections. Furthermore, the recent political chaos between the Maldives and India over the GMR Infrastructure row is probably why international investors are finding it difficult to trust the Maldivian government. President Mohammad Waheed’s government terminated the $500 million contract awarded to India’s GMR Infrastructure to build the Male International Airport. India is now seeking a compensation of $1.4 billion. With the Maldives becoming controversial in the eyes of India, it seems as if the foreign investors will become extra cautious before making any deal with the island nation.
The Director of ADB, Yongping Zhai is expected to follow an extensive investment strategy to transform the Maldives into a renewable energy dependent country and has advised the Maldivian government to prepare a workable business model for the renewable energy sector. However, the Environment Ministry of the Maldives opposes this notion and wants to make the Maldives an oil dependent country. This tussle, to the fear of many, might become a burden over the Maldives’ energy plans and will prolong the crisis.
It is also expected that if President Mohammad Waheed Hassan, from the Gaumee Itthihaad Party is re-elected, then he might implement strategies assisting the growth of the renewable energy sector, as much of the political tussle will also fade away by then. How the country follows a renewable energy plan and creates a favorable environment for international investment is yet to be seen.