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

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.