To mobilize private investment in island off-grid energy systems requires guarantees for electricity demand.

Henrich, Christoph and De Ramon N'Yeurt, Antoine and Waqa-Sakiti, Hilda F.V. (2026) To mobilize private investment in island off-grid energy systems requires guarantees for electricity demand. Energy for Sustainable Development, 91 (101904). pp. 1-13. ISSN 0973-0826

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Abstract

Energy access remains a challenge in Pacific Island Countries and Territories (PICTs) and has so far shown limited private sector engagement to address this challenge, particularly in small and remote islands. Using as a case study in Fiji beyond its 3 largest islands, this paper reports a survey of relevant potential private suppliers of rural electrification in small island contexts. This study identifies and quantifies risk drivers perceived by such suppliers. As a specific example, we consider the possibility of a (hypothetical) village to take up a village photovoltaic system of 50 to 150 kW. The study identifies the largest driver of financing costs of such a potential commercial supplier is the risks arising from limitations of customers paying for electricity. This requires an average equity return requirement ranging between 15 and 25 %. Nevertheless, even after derisking, generation costs remain high, and access to debt financing is uncertain due to persistent revenue risks. In response, this study models a demand guarantee mechanism which allows developers receiving a minimum revenue stream regardless of fluctuations in electricity demand or payment defaults. The private sector is not currently willing to invest in rural electrification under any conditions, particularly in small islands as they are characterized by limited size, isolation, small markets, uncertain population trends, and limited ability to shift or grow demand. This study shows that a minimum demand guarantee can be essential to mobilize private capital for rural electrification in small islands as it secures future revenue streams, by various mechanisms to simplify the tender process, enhance bankability and contribute to service continuity.

Item Type:	Journal Article
Uncontrolled Keywords:	Energy access; Off-grid; Small island development states; Mini-grids; Guarantee; Fiji
Subjects:	G Geography. Anthropology. Recreation > GE Environmental Sciences H Social Sciences > HB Economic Theory Q Science > QC Physics > QC501-(721) Electricity Q Science > QC Physics > QC980-999 Climatology and weather
Divisions:	Pacific Centre for Environment and Sustainable Development (PACE-SD)
Depositing User:	Antoine N'Yeurt
Date Deposited:	14 Dec 2025 23:17
Last Modified:	14 Dec 2025 23:17
URI:	https://repository.usp.ac.fj/id/eprint/15225

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