Can Off-grid Islands Powered by Renewable Energy Microgrids be Operated Sustainably without Subsidies? A Techno-economic Case Study in the Philippines

Abstract

The Philippines is home to thousands of off grid islands that are too distant from the mainland and consequently expensive to connect to the main grid. These islands are typically powered by diesel generators, which will require more subsidies as fuel costs continue to increase. Hybrid renewable energy systems (HRES) are an alternative energy source with lower reliance on fuel and generation costs. In this work, the financial sustainability of deploying HRES in Philippine off grid islands of various sizes was evaluated. Patongong Island, Lapinigan Island, Balabac Island, and Sibuyan Island were selected as case studies as their peak electrical demand varies from 4.4 kW in Patongong Island to 3.2 MW in Sibuyan Island, representing a large fraction of off-grid islands in the country. HRES consisting of solar photovoltaics, wind turbines, lithium ion batteries, and diesel generators in these islands were modeled in Island Systems LCOEmin Algorithm (ISLA), an in house energy systems modeling tool. Profitability metrics, such as the net present value, internal rate of return (IRR), and payback period (PBP), were then calculated at varying electricity prices. The large Sibuyan island was already profitable at 0.2 USD/kWh, comparable to the mainland rate, which suggests that subsidies in large islands can be removed. The low 11 % IRR and 13 year PBP may not be attractive to private investors, but this may be alleviated by raising electricity prices. Other islands, however, will still require subsidies as the small Patongong Island becomes profitable only at 1.5 times the mainland rate. This work encourages private sector participation by providing financial insights absent in many techno economic studies. Moreover, this study enlightens the public sector about the necessity of subsidies for providing energy access in small off grid islands.