JCM Feasibility Study (FS) 2014 – Final Report

MOEJ/GEC JCM Feasibility Study (FS) 2014
Summary of the Final Report"Small Scale Solar Power Generation”(Implementing Entity: INTER ACTION Corporation)
1．Overview of the Proposed JCM Project
Supporting the development
JAPAN NUS Co., Ltd

Subcontractor

of JCM and MRV
methodologies and consulting
services
Selecting construction
materials, construction
method analysis, and making

Study partners

BIJ Corporation

Subcontractor

decisions regarding
installation of solar roof
panels on project sitebuildings.
Site survey, participation in

Fortec Consultants

Subcontractor

interviews with relevant
parties, supporting studies ofthe local electricity situation

Project site
Category of
project

Republic of Palau
Renewable energy

This project involves installation of a 160 kW solar power generation
system for the Palau International Coral Reef Center, a non-profit public
Description ofproject

corporation in the State of Koror, Palau. The introduction of solar power
generation systems in areas already electrified by diesel generators will
reduce the use of fossil fuels for power generation and lessen theemission of greenhouse gases.

Expected project
implementer
Initial investment
Annualmaintenance cost

Japan

INTER ACTION Corporation

Host country

Palau International Coral Reef Center: PICRC*1

Date of
128,000,000 Yen groundbreaking
Construction*1,664,000 Yen period

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November 2015
12 months after contract

JCM Feasibility Study (FS) 2014 – Final Report

Willingness toinvestment

Introduction of a solar
power generation

Date of projectcommencement

October 2016

systemAs PICRC is a public corporation, the budget will be allocated and
Financial plan ofproject

executed by the Ministry of Finance (MOF), Palau. If there is a budget
shortage, a loan application will be submitted to NDBP (loan rate: 6%).
PICRC is being asked to finalize the budget before April 2015 when theapplication for the grant-aided JCM facility project is made.
Substitution of the power currently supplied from the grid to the project

GHG emission
reductions

site:
100 tCO2 per year
180 (MWh/y) * 0.698 (tCO2e/MWh) * (1-0.2) = 100 (tCO2e)*1 Reduced due to available funding. In response, the solar power generation system capacity was reduced to 160 kW

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JCM Feasibility Study (FS) 2014 – Final Report

2. Study Contents(1) Project development and implementation
1) Project planningThis project involves installation of a 160 kW solar power generation system for the
Palau International Coral Reef Center (PICRC), a non-profit public corporation in theState of Koror, Palau, to supply electric power. PICRC is currently purchasing electric
power, via the grid, from the Palau Public Utilities Corporation (PPUC) for its
consumption. Because this system is expected to fulfill part of the day and night
demand, lithium-ion batteries are to be included to achieve self-consumption throughsolar power generation. The surplus power generated by solar power generation after
individual use will be sold to PPUC, in accordance with the conditions of PPUC’s
surplus power purchasing system; this will reduce the power supplied to the grid fromdiesel generators in Palau.

Ngerekebesang
NgerekebIslandesang
IslandKoror

MalakalIslandMalak
Site: Palau International Coral Reef Center
Site:
Palau
al
Islan

International

d

Coral

Reef

Figure2 View of the PPUC site

CenterFigure 1 Map of the Republic of Palau

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JCM Feasibility Study (FS) 2014 – Final Report

The initial investment for the introduction of the 160 kW solar power generation system
is approximately 128 million yen. The project plan assumes that 50% of the initial cost
will be financed by a subsidy granted by Japan; the remaining 50% will be borne by
PICRC, the project implementing body. As a non-profit public corporation, the budget
will be executed according to predefined procedures for the project site. PICRC is
responsible for fully financing 50% of the initial investment using its own money but it
may also be necessary to obtain financing from local banks, Japanese banks, and/or
the National Development Bank of Palau (NDBP) depending on the circumstances.
As a guideline, the overall plan forecasts the system specifications and construction
methods to be finalized by November 2015 and the installation to be completed by July
2016, including the period of financing. The system is to be operational in October
2016.
Regarding the MRV system, measurement (M) and reporting (R) will be conducted by
the body that will operate the small-scale solar power generation system, andverification (V) will be conducted by a certified third party entity (TPE). As there are four
such certified TPEs in Palau, just one will be selected. It is assumed that the operator at
the project site will be PICRC. Because no dedicated engineer will be positioned at thesite to maintain the facility, inquiries to the PPUC relevant to financing for amaintenance service contract (to be made after the installation of the solar power
generation system) will be necessary in order to realize a sustainable business.
PICRC is receiving an appropriation from the government. A budget bill will be
submitted to the government every April, and the appropriation will be made after Dietapproval and the signature of the president. The trend has been for the appropriationbudget to continue to decrease annually, gradually increasing the portion of
independent financing. PICRC’s financial situation returned to the black in fiscal 2012
following a continuation of deficits that lasted until 2011. This was due to partiallystopping the operation of the chiller system used in the water tank to reduce the energy
bill, in addition to a subsidy granted specifically in fiscal 2013. This subsidy was granted
for the "Project for Sustainable Management of Coral Reefs and Island Ecosystems: A
Response to the Threat of Climate Change," the fiscal 2012 research topic for the joint
program "Science and Technology Research Partnership for Sustainable Development(SATREPS)" by the Japan Science and Technology Agency (JST) and the Japan
International Cooperation Agency (JICA). For this project, PICRC conducted a joint
study with the University of the Ryukyus. The five-year study lasts from April 2013 toMarch 2018.
It is anticipated that the implementation of this project will contribute to the improvement
in financial management, as electric bills for power from the grid will be reduced
through the use of solar energy.
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JCM Feasibility Study (FS) 2014 – Final Report

According to a cash flow analysis, the internal rate of return (IRR) will be 8.49% for the
20 year investment, when just 160 kW solar panels are installed (without batteries).
When a 140kW solar panel system is used together with 27kWh lithium-ion batteries,
the IRR will be 2.10%, and profitability is apparently reduced. The advantage of thisconfiguration, however, is that the batteries can be used as emergency power when
there are power interruptions. Clean renewable energy is also available during the night.
Since lithium-ion batteries will be used, the impact on the environment can be
minimized when the batteries are discarded.
To cope with implementation risks, it is desirable to buy an international insurance planthat covers natural disasters as well as theft and man-made disasters. If the amount ofenergy generated falls below the expected amount due to insufficient sunshine, asufficient margin has already been assumed during a power generation simulation as
the basis for developing the financing plan. In view of any reduction in output power
due to age or deterioration of the equipment, only solar panels with a guaranteed
output power will be used. To avoid malfunction or fire as much as possible, theequipment to be procured will be in compliance with the relevant IEC and/or otherequivalent standards. The power conditioner has a service life generally assumed to be
10 years; the cost of replacement after 10 years is included in the financing plan. To
provide uninterrupted service, a valid maintenance scheme will also be establishedbased on the maintenance contract with PPUC, which has sufficient technicalknowledge and the human resources appropriate for solar power generation systems.
Because the PICRC project site is located near the coast, the equipment will needanti-rust and anti-corrosion treatments, such as thick hot-dip galvanizing as well as
anti-corrosive aluminum and stainless steel materials. In general, the profitability ofsolar power generation services is heavily dependent on government policy, especiallyat a fixed price and the period for purchasing the energy generated. While any change
in government renewable energy policy can become a risk, it is not considered to be asignificant one because the Republic of Palau has a plan to increase the share of
renewable energy to 20% by 2020.

Table 1

Cash Flow Analysis -- Option Cases and 20 years IRR Calculation

Option Cases

IRR

Case 1 160 kW solar panels

8.49%

Case 2 140 kW solar panels and 27kWh lithium batteries

2.10%

Case 3 140 kW solar panels and 35.8kWh lead-acid batteries

5.10%

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JCM Feasibility Study (FS) 2014 – Final Report2) Permits and License for the project development and implementation
The approval and authorization procedures regarding the installation of the solar power
generation system shall be carried out in accordance with the guidelines published by
the PPOC: "Guidelines, Standards and Regulations for Renewable Energy Generation
Systems Connecting to the Palau Central Grid". The project implementing body must
submit the application documents as specified in the guidelines to PPUC for approval.
Construction can be initiated only after approval has been obtained. After completion of
the installation, the system must be inspected by PPUC before interconnection with thegrid

and the service begins to generate power.

The Environmental Quality Protection Board (EQPB) was asked about complianceregulations for constructing a car park type pedestal for mounting solar panels. It wasdetermined that permission for civil engineering and construction would be necessary.
As of December 2014, there were no major regulations regarding installation oflithium-ion batteries.

3) Advantage of Japanese technology
As of October 2014, solar power generation was not popular in Palau because of therelatively small number of solar power generation companies in operation. Most of theexisting solar power generation facilities have been built using subsidies granted bydeveloped countries; no solar power generation facility has been developed forbusiness purposes only.
According to data provided by PPUC, the status of solar power generation in Palau is
as follows: The government of Palau has a target to achieve a renewable energy shareof 20% by 2020 and has already achieved a share of 5% in August 2014. Aggressive
introduction of solar power generation is considered advantageous from the viewpointof higher cost-performance when compared to wind, geothermal, biomass, and otherpower generation systems, as well as the shorter time and lower costs for installation,
operation, and maintenance. There are no wind farms in Palau, but actual windconditions have been studied at Melekeok, Ngaraard, and Ngardmau since January
2013. Data on wind has been collected for about one year, meaning that it will takelonger before wind power generation systems can actually be implemented; solar
power generation can be quickly implemented based on successful past results.
The solar power generation system for this project will use lithium-ion batteries that are
made in Japan; lithium-ion batteries have a lower environmental load, better storage
characteristics, a longer cycle life, and are designed to charge quickly. With experienceas the world's first mass producer of electric vehicles, Japanese manufacturers have ai-16

JCM Feasibility Study (FS) 2014 – Final Reporthigh 79% market share. Note that the market size in 2011 was about 110 billion yen. It
is expected that large-sized lithium-ion batteries will increasingly be used for stabilizing
the output power of solar power generation systems. Once realized, the use oflithium-ion batteries in solar power generation systems will serve as a model todemonstrate the superiority of Japanese technologies.

4) MRV structure

INTER ACTION:
インターアクション：
Project
プロジェクト- Distribution of solar panels and・太陽光パネル販売、施工管理
construction
management
MRV
MRV- ・モニタリング集計結果の管理
Management of monitoring results

第三者検証機関：
Third Party Validation
Entity:Palau International
MRV Coral Reef Center- Validation work
・バリデーションの実施- Verification ・ベリフィケーションの実施
work

Solar panel
パネル設置
installation

モニタリング結果
Monitoring
results(monthly)（毎月）

パラオ国際サンゴ礁センター：
Palau
International Coral Reef Center:
Project
プロジェクト- Panelinstallation and operation
・パネル設置、運転
MRV
MRV work- Monitoring
・モニタリング実施

Figure 3

MRV System

It is assumed that PICRC will be responsible for Measurement (M) and Reporting (R)as the project implementing body and that a third party verification entity will be
responsible for Verification (V). The measuring equipment to be used in MRV is listed in
the following table. The watt-hour meter, Mitsubishi Electric model EMU4-HD1-MB, willmeasure the electric energy (kWh) generated by the solar power system.
The measurements are recorded in an SD memory card in real time, and the recorded
data is imported monthly to a PC at PICRC so that the data can be organized using
spreadsheet software such as Microsoft Excel. When actually implementing the MRV
framework, the measuring equipment will be further studied and selected inconsultation with the third party verification entity to finalize the devices to be used.

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JCM Feasibility Study (FS) 2014 – Final Report

Table 2

1

Specification for major devices used for measuring the electricity consumed

Device Name

Manufacturer

ModelSpecifications

Watt-hourmeter

Mitsubishi
Electric
Corporation

EMU4-HD1-MB

Phase/Wires Single phase, two-wire/Single
phase three-wire system/
Three phase, three-wire/four-wire systems,common use
Voltage rating: 63.5VAC/110VAC to
277VAC/480VAC, common use
Current rating: AC 50A, 100A, 250A, 400A,
and 600A(Dedicated clamp current sensors are used.
Each figure indicates the current in the sensors
primary coil.)
Frequency: 50/60Hz

2 Current sensor

Mitsubishi
Electric
Corporation

CW-5SL 800/5A

Rated primary current

800A

Secondary current: 5A
Maximum voltage/withstand voltage:
0.46kV/3kV
Over-current strength 40 times5) Environmental integrity and Sustainable development in host country
When implemented, this project will reduce the power supplied from the grid andconsumed at the project site and will result in a reduction of GHG emissions from thediesel power plant and will have a positive effect on the environment.
Because this study recommends the use of lithium-ion batteries instead of the lead-acid
type, any adverse impact on the environment due to the use of lead-acid batteries canbe eliminated. The lithium will be recycled by handing over old or depleted batteries to
Palau Waste Collection, a local company in Palau, following 10 years of use (lifeexpiration), for export and recycling in China.
The project supports and contributes to the realization of Palau’s renewable energy
policy, i.e., to achieve a 20% share of renewable energy. When installing the solar
power generation system, local construction companies will be employed and this will
create local jobs. By outsourcing maintenance services to PPUC (the public utility), it isexpected that new jobs will be created and that the technical skills of engineers will
improve through on-job training. Promoting electrification in Palau will stimulate thedevelopment of hotels and other commercial facilities and indirectly contribute toemployment creation and activation of the local community.
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JCM Feasibility Study (FS) 2014 – Final Report6) Toward project realization (planned schedule and possible obstacles to be
overcome)
The project will continue according to the future plans described in Table 3. The firstissue to be looked at is how to secure funding. While PICRC is working on possibleloans from the Ministry of Finance and NDBP as the primary sources of funding, it isbeing asked to finalize the budged before April 2015, when the application for the
grant-aided JCM facility project is to be made.
The second issue is the necessity of following the bidding process if equipment is to be
procured using PICRC funds. Because PICRC partially operates under a Ministry of
Finance budget, it is necessary, in principle, to have open and public bidding, which
involves a complicated process. At present, PICRC is looking for an alternative methodthat will not require bidding, such as signing an MOU, jointly submitting a proposal, etc.
The third issue is the finalization of the equipment specifications. Two option cases
have been presented to PICRC: (1) 140 kW solar power and 27 kWh lithium-ion
batteries or (2) 160 kW solar power only. PICRC has been asked to review the costeffectiveness to determine a final solution.

Table 3 Project Schedule (Draft)Time

ActionAfter June 2015

Selection as a grant-aided JCM
facility project by the Ministry of theEnvironment

November 2015 Finalization of the specifications
December 2015

Collection of quotations and starting
the equipment procurement

April 2016

International transport

June 2016

Customs clearance and local
transport in Palau

July 2016

Completion of construction work

August 2016

July 2021

Commencement of commercial
operation
Commencement of JCM monitoring
services
Completion of JCM monitoring
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JCM Feasibility Study (FS) 2014 – Final Report(2) JCM methodology development
1) Eligibility criteria
The following six eligibility requirements have been established for the development of
the draft JCM methodology:
Eligibility
requirement 1
Eligibility
requirement 2
Eligibility
requirement 3
Eligibility
requirement 4
Eligibility
requirement 5
Eligibility
requirement 6

The power generation service shall use solar power generation.
The project site shall be in an area where electricity is supplied by the
Palau Public Utilities Corporation (PPUC).
Electric meters shall be installed to measure the electricity consumption.
The modules used shall have certification for relevant IEC standards for
performance and safety.
The solar conversion efficiency of the modules used shall be 15% orhigher.
The maximum power temperature coefficient for any module used shallbe greater than -0.45%.

(1) Eligibility requirement 1: The power generation service shall use solar power
generation.
The introduction of solar power generation has been established as one of theeligibility requirements for application to JCM as solar power generation and is themost feasible for Palau and thus emission reductions can be effectively realized.
(2) Eligibility requirement 2: The project site shall be in an area where the electricity issupplied by the Palau Public Utilities Corporation (PPUC).
In Palau, PPUC is supplying electric power to most of the inhabited areas including
isolated islands such as Peleliu. On the isolated islands, power generation
dependent on fossil fuels is not so efficient because the capacity of the generators
tends to be small due to the relatively small number of people who use electricity andthe additional fuel transport costs. The introduction of solar power generation would
be an advantage for these isolated islands. In order to be applicable to isolatedislands such as Peleliu, all the areas where electric power is supplied by PPUC areconsidered to be eligible, including off-grid areas, in addition to those areas supplied
from the main grid.
(3) Eligibility requirement 3: Electric meters shall be installed to measure electricity
consumption.
In order to accurately and objectively measure the reduced amount of GHG
emissions, installation of electric meters that can be used to check the consumed
amount of solar generated electric power is established as one of the requirements.
By requiring the installation of electric meters, the reduction of GHG emissions can
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JCM Feasibility Study (FS) 2014 – Final Reportbe accurately and reliably monitored for verification by a third party entity (TPE).
(4) Eligibility requirement 4: The modules used shall have certification for relevant IEC
standards for performance and safety.
To ensure that high quality solar panels that reliably reduce emissions throughout the
project period are chosen, certification for relevant performance and safety standardsof the IEC (International Electro-technical Commission) has been set as one of therequirements.
(5) The solar conversion efficiency of the modules used shall be 15% or higher.
This draft methodology sets the performance requirement for the solar panels
installed to have a certain conversion efficiency to generate power as one of theeligibility requirements.
(6) The maximum power temperature coefficient, or nominal operating cell temperature(NOCT) of any module used shall be greater than -0.45%.
The nominal operating cell temperature (NOCT) is an indication of the percentage
increase of the maximum output power when the panel temperature is increased by
1º C. As the annual average temperature is high in Palau, i.e., 27º C, the nominal
operating cell temperature of the solar panels used is an important indicator.
Accordingly, this draft methodology specifies the nominal operating cell temperatureof the solar panels as one of the eligibility requirements.
2) Calculation of GHG emissions (including reference and project emissions)
After studying the reference and project scenarios according to the JCM guidelines, thefollowing formula that calculates the amount of GHG emission was obtained:
𝑅𝐸𝑦 = 𝐸𝐺𝑃𝐽,𝑦 × 𝐸𝐹𝐶𝑂2,𝑑𝑒𝑓,𝑦 × (1 − 𝐶𝐹)
𝑅𝐸𝑦

Reference amount of annual emissions in year Y（tCO2e/y）

𝐸𝐺𝑃𝐽,𝑦Electric energy consumption substituted by the project
activities in year Y (MWh/y)

𝐸𝐹𝐶𝑂2,𝑑𝑒𝑓,𝑦Default emission factor of the electric energy substitutedby the project activities (tCO2e/MWh)

𝐶𝐹

Conservativeness factor (20%)

In this methodology, as the project will not produce emission, PEy = 0.
According to the above specified formula to calculate the reference emission, theestimated reference emission of this project is calculated here. The electric energy
consumption substituted by the project activities in year Y (EGPJ, y) is expected to beabout 180 MWh per year, when a system capacity of 160 kW is assumed. The default
emission factor of the electric energy substituted by the project activities (EF CO2, def, y)i-21

JCM Feasibility Study (FS) 2014 – Final Report

is 0.698 (tCO2/MWh) and the conservativeness factor (CF) is 20%. Therefore, it iscalculated as follows:
REy (tCO2e/y) = 180 (MWh) x 0.698 (tCO2/MWh) x (1-0.2)= 100 (100.512) (tCO2e/y)
As the project emission PE = 0,
ER = 100 (RE) - 0(PE)= 100
Therefore, the reduction of GHG emission is estimated to be 100t CO 2e per year.
3) Data and parameters fixed ex ante
For the proposed draft JCM methodology, the following parameters are required for
calculating the amount of GHG reduction:
 Electric energy consumption substituted by project activities (EGpj,y) The CO2 emission factor for power generation of the grid to which the substituted poweris supplied (EFCO2,def,y) The conservativeness factor (CF) for the calculated reference emission to be less thanBaU
The electric energy consumption substituted by the project activities (EGpj,y) ismeasured by electric meters specified in eligibility requirement 3 "Electric meters shallbe installed to measure electricity consumption". In addition, as generated electricenergy is sold to PPUC, PPUC also needs to measure the amount of electricity bought.
Although electric meters installed could be shared with PPUC, even if they are not, it isstill possible to cross check the amount of consumed energy as substituted by the solar
power generation using the related documents on the energy purchase, as agreed withPPUC.
The CO2 emission factor for power generation of the grid to which the substituted
power is supplied (EFCO2,def,y) is specified based on PPUC’s 2013 default value
because there is no officially approved and published emission factor in Palau. The
resulting default CO2 emission factor is 0.698 tCO2/MWh.
The conservativeness factor (CF) is set to be 20% assuming that the targeted policy of
Palau to increase the share of renewable energy to 20% by 2020 can be realized.

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