Oct 22, 2024
The Maldives has become a model for other small island development states. Through CIF’s early investments, the country has transformed its energy profile by increasing its energy independence and is now scaling its early successes.
With more than a thousand islands spread across 860 kilometers of pristine coral atolls, the Maldives is famed for its natural beauty. But it is now also a model for other small island developing states (SIDS) who could learn from and replicate its success. Through the catalytic change effected by the Government of the Maldives, in partnership with the Climate Investment Funds and the World Bank, the country has demonstrated how it reduced its fossil fuel dependence and expanded access to clean, sustainable and reliable energy at scale.
To understand how the Maldives transformed its energy market, CIF, the Maldives government, its multilateral development bank partners, and other stakeholders came together by holding the first national end-of-investments process, or a “close out” meeting in Male*. The meeting was a stock take of sorts: looking back at how the investment plan under CIF’s Scaling Up Renewable Energy Program in Low Income Countries (SREP) boosted renewable energy capacity, helped create and expand a nationally viable solar market, and replaced 26.8 million liters in diesel combustion annually. But the story doesn’t end there. SREP catalyzed follow-on investments and capitalized on new technologies, through financing under CIF’s Clean Technology Fund, to scale up what Maldives had created.
And this is why the Maldives is a trailblazer to other SIDS as Sreyamsa Bairiganjan, Sr. Renewable Energy Consultant of the World Bank Maldives core team explains:
A country-led process
The close-out process is part of CIF’s hallmark “programmatic approach” which puts countries at the center of designing and delivering their investment projects. Not only do countries take the lead in creating plans that support their national climate objectives, the close out process also ensures that various stakeholders are included, consulted and that their perspectives are also captured. The end-of-investment meeting in Male brought together representatives from relevant government ministries, state utilities, and outer-island communities to provide feedback, draw out shared lessons, and validate the investment results.
The results show how the Government of Maldives delivered on their primary climate objectives, as well as established institutional, economic and social conditions for the exponential uptake of renewable energy technologies. SREP facilitated a groundbreaking proof-of-concept and demonstrated the economic viability of solar PV on a small island state, and crowding-in private sector capital.
Here are some of the key outcomes from our SREP investments in Maldives:
1. A surge in solar capacity
To date, CIF-funded projects have resulted in 19 megawatts (MW) of new solar PV capacity, with 18 MW more on the way. This is helping push the share of renewable energy in the national energy mix from less than 1% in 2012 to almost 24% in 2026, even as energy demand more than doubled over the same period. Nuzuhath Ahmed from the Ministry of Climate Change and Environment in the Maldives explains how significant SREP’s contribution has been.
2. Increased energy independence
Less demand for diesel meant cutting the expensive diesel subsidies and incorporating more inexpensive solar energy. This also led to cutting emissions which is a clear win for the country’s economic and environmental goals. And as CIF’s SREP lead, Jimmy Pannett, explains, the extraordinary achievement in the Maldives is the enormous strides it has made towards energy independence.
3. Catalytic effects of CIF’s investments
By driving down clean energy costs and unlocking additional private sector finance, solar energy not only became commercially viable, but also cheap. Diesel-based electricity currently costs approximately 23 cents per kilowatt hour, whereas solar costs less than half that at 9.88 cents. The falling costs were spurred by innovative financial mechanisms, including multi-tier risk mitigation measures and an internationally attractive tendering architecture. SREP investments amounted to $25.6 million, but ultimately mobilized $238.6 million more in co-financing, half of which came from the private sector.
4. Improving regulatory and institutional capacity
Key to attracting private sector interest was the significant institutional capacity CIF’s investment helped build. International experts trained personnel within the Department of Energy and relevant regulatory bodies in new renewable energy regulations for example, while critical staff took part in learning visits abroad to see state-of-the-art technologies in action. As a result, the investment helped establish fundamental national standards and regulations for renewable energy.
5. Creating wider development impacts
New solar energy capacity, coupled with grid efficiency improvements have enhanced the reliability and quality of electricity in the Maldives and created knock-on benefits for local businesses and communities. The Maldives investments also consciously created gender and social inclusion benefits, including technical training to encourage women to take on roles in the energy sector, and work with women’s development committees. As Nuzuhath Ahmed notes, “We want to ensure that a specific part of [new green] jobs go to women. So, we are focusing on these sorts of activities that would bring about gender inclusion.”
Setting off a solar chain-reaction
These successes are enabling the Government of the Maldives to plan a further scale-up, with exponentially greater renewable energy targets and yet greater technological ambition.
The first tender to include “floating” solar farms is already in the works and the first power-purchase agreement for large-scale battery storage in 20 islands was awarded last year, expected to trigger investments that will add 30 MW of solar energy capacity and cascade further solar developments to over 100 more islands.
Sergio Ugarte, Asian Development Bank notes: “By the end of next year, the outer islands will reach almost 13% of renewable energy share. And that constitutes the backbone for future developments. And it will not be too difficult after having constructed this backbone to make these outer islands to go from 13 % to 25, 30, 40 % in the next years.”
The Maldives continues to build its energy independence, as its solar capacity expands and its fossil fuel dependence wanes, the future looks bright for this small island development state and the examples it has set for other SIDS to follow.
* The Maldives end of investment meeting was held from May 13 – 17, 2024 in the capital, Male.
