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Replacing Diesel with Renewables: Negotiations for a 1-MW Wave Project at Tongatapu

Currently IRENA estimates that small Pacific Island nations are expected to account for 17 percent of all new renewables built globally over the next 5 years. Renewable energy developers are flocking to these island nations with proposals.

One such company is Auckland-based firm ARGOenvironmental which already has a long history of South Pacific environmental assessment and permitting work for South Pacific marine projects including the tidal project in New Zealand’s Kaipara Harbour and a wave project in the Chatham Islands. 

Leveraging that background, which gives them a leg up in identifying potential sites, they are now working on developing their own projects. 

Feasible Resource

ARGOenvironmental is now negotiating a power purchase agreement for a 1 MW wave generation project at Tongatapu with the Kingdom of Tonga, one of the larger of the Pacific Island markets for renewables. 

“We've already done a full pre-feasibility assessment which shows its feasible. Metocean Solutions - who do wave energy modelling routinely - identified there is a resource there in Tonga for Tongatapu on the southern coast,” says Luke Gowing of ARGOenvironmental. “Now we’re in the process of negotiating a PPA with Tonga Power. They’ve identified it as something they want to pursue.” 

The pre-feasibility assessment was an impressive dossier, at least half an inch thick. Relying on the ‘day job’ of ARGOenvironmental's resource assent business to keep them afloat, since they won’t get paid until a project is successfully implemented, Gowing and his partner Gary Venus have stitched together a package based on aid or private investment, using known commercial technologies. 

Technology

For this project for the Kingdom of Tonga, Gowing is proposing the Wavegen Oscillating Water Column (OWC), which uses a large volume of moving water like the piston in a cylinder. Voith, which took it over in 2005, just closed Wavegen’s head office in Scotland and plans to consolidate it within its German operation. Gowing is unfazed.

“Given their track record and given that they’re now hooked up with Voight who are a big German turbine supplier that have been making generating turbines for hydropower damns for a hundred years or so, I have good confidence that they know exactly what they’re doing when it comes to these things,” says Gowing. But if necessary, he would consider alternative wave devices. 

Price Negotiation 

Gowing says that the PPA they are negotiating with Tonga Power will be “somewhere in the 21 cent range. Significantly less than what they’re paying for Diesel.”

In late 2008 Tonga was reportedly paying over a dollar a kilowatt hour for diesel, according to a variety of sources. Prices for diesel fluctuate considerably, but diesel prices remain consistently higher than for renewables in all the Pacific Islands. 

According to Gowing, up to about a megawatt or so of wave energy is included in the mix of renewable generation planned by Tonga, and the wave energy project that they identified for them is “definitely on their radar.”    

Gowing is pretty passionate about it. “The energy is essentially a free resource,” he says. “Like any of these projects, these are quite capital intensive at the front end, because you’ve got construct these things, you’ve got to buy the turbines, or you’ve got to build the collector. But if you’ve got a donor like the UAE that’s willing to grant funds to construct these things, then apart from a bit of operation and maintenance there’s very little running costs: it just makes sense.”

Grants from UAE

We originally spoke at the Pacific Energy Summit in Auckland, where Mohammed Issa Abushahab, head of the UAE foreign ministry's International Climate Change Division unveiled an offer of bountiful funding from the UAE - not in the form of loans, but as outright grants. 

“We believe that renewable energy represents major opportunities for both the UAE and the Pacific region. We are believers that the Pacific can set an example for the world,” he told a large gathering of heads of state from Pacific Island nations and the renewable energy industry. “And that simply is why the UAE is here today. I have great pleasure in announcing that the UAE has converted 45 million dollars of soft loans for renewable projects in Pacific Island countries into grants.”  

“Starting immediately,” said Mohammed Issa Abushahab, “the fund will contribute to the development of fully customised projects, designed and implemented jointly by Pacific governments and the UAE’s renewable energy company Masdar.” 

By providing finance in the form of grants, Masdar hopes to open the door to a wider range of projects in more countries than can be done with loans.

Replacing diesel

Like all the Pacific islands, Tonga is dependent on diesel for electricity. In 2010, it laid out policy in its Tonga Energy Road Map to reduce emissions by swapping diesel for renewables.

“We’re trying to get a lower cost of electricity into our grid,” Tonga Power’s CEO John Van Brink tells Renewable Energy World. “Right now we’re paying about 35 cents per kilowatt hour.” 

“There certainly seems to be perfect case for tidal energy based on the amount of wave activity especially around the south coast of the main island of Tongatapu,” he says.“There’s always good wave movement at Tongatapu.” 

Van Brink confirms that Tonga Power is in negotiations with ARGOenvironmental on a Power Purchase Agreement. But the nature of the funding arrangement and level of grants available means that the PPA is not necessarily final.

“Once ARGO negotiates it, they see if there is some sort of donor funding to help support the project,” he says. “Which could then make the conditional PPA quite different.”

Ownership

ARGO is proposing the BOOT model (Build Own Operate Transfer) whereby the developer would demonstrate that the unit operates and generates revenue over a period of time, and then the ownership would be transferred to the local government.

“Ultimately, the Tonga government should get the revenue,” says Gowing. “It boils down to what we manage to negotiate with Tonga Power.” As Tonga’s state owned electric utility, Tonga Power is essentially a government entity.

“It makes sense for us to own the plant and maintain and operate it, the way it happened for the solar plant,” agrees Van Brink, referring to New Zealand’s Meridian Energy’s PV project just developed on Tonga. Meridian is training local workers in maintenance, handing it over to Tonga Power in 5 years.

“The way I understand it ARGO will own it for 15 or so years; that's a long time," he adds. "But the ownership hasn’t been finalised - it’s something we need to work through. But it comes down to ensuring commercial viability for ARGO.”

Operations 

Van Brink is comfortable with the wave technology proposed; the OWC. “Our guys are pretty experienced with rotating generators,” he says. “They are experienced with hydraulics, for things like the air columns moving around. We would certainly need to have training as we wouldn’t own the plant, and the owners could contract to maintain it. In the end it’s all about spinning machines. Not a huge problem.”

Of course, isolated islands in the far off Pacific have inherent disadvantages; for any energy source. Van Brink has found with their diesel generators that when one fails it’s a lot harder to repair on a small island.  

“You’ve got to send machines back to Auckland. Spare parts have got to come from overseas, there’s a lot of delays. So we would have to have a look at how something would work with something that’s leading edge technology,” he points out.  

Any successful wave energy developer in Tonga would have to meet the requirements he mentions - the need to have the ownership turned over to the government as early as possible once commercial viability is established and the need to ensure that parts access is not too much of a headache. These negotiations are far from final.

But given the the expense of diesel, the wave energy resource, the commitment at the government level to climate policy, and now with the funding from the UAE, it’s looking pretty good for a wave energy project in the Kingdom of Tonga.

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