World Bank-financed projects ASPIRE and ARISE support Maldives' energy transition by installing more than 53.5 megawatts of solar capacity and 50-megawatt hours of battery storage. This will reduce Maldives' annual import bill by about $30 million, with a project lifetime saving of $756 million over 25 years.
The task team collaborates closely with the South Asia Gender and Energy (SAGE) and Women Practitioners' Network in the Energy Sector (WePOWER) team to ensure gender mainstreaming and female participation in energy projects. Over 170 women will work in technical roles across the utilities through the two projects.
The local utilities, STELCO (State Electric Company) and FENAKA Corporation Ltd, can manage power generation assets independently of global fuel price fluctuations, reducing their reliance on imported and subsidized diesel. In general, the projects will benefit the people of Maldives and the government by lowering electricity prices and providing quasi-budgetary support.
53.5 megawatts of solar capacity
2014 –The first 1.5 megawatt (MW) solar project under ASPIRE had four investors' bids, resulting in a high PPA of 21 US cents per unit of electricity.
2020 – The number of bids for the 5 MW project in Male increased to 25, resulting in a PPA price of 10.2 US cents per unit of electricity.
2022 – 63 investors expressed interest in the third 11 MW solar project in the outer islands, and a record-low price of 9.8 US cents per unit of electricity was received.
2022 – ASPIRE has resulted in the mobilization of about $28.3 million for 17.5 MW PV installations.
Maldives' dependence on tourism and fossil fuel imports makes its economy particularly vulnerable to external shocks. In 2020, when COVID-19 hit, real Gross Domestic Product (GDP) contracted by at least 34 percent. In 2022 high global crude oil prices caused by inflation and Russia’s invasion of Ukraine pushed the import bill to around $500 million. Without a pipeline of bankable solar projects for consideration by the private sector, it was essential to establish a program of risk mitigation to attract private investment. Challenges facing such projects include integrating solar with existing power sources on the grid, off-taker risk, weak procurement, and planning capacity.
The objective of the ASPIRE project is to increase photo voltaic (PV) generation in Maldives through private-sector investment. Approved in 2020, the ARISE Project scaled up this process.
The approach is based on a robust risk mitigation package developed by the World Bank Group to provide investors with confidence in the case of non-performance by a power utility and to ensure that the investor does not incur a loss through guarantees and financing.
First, Multilateral Investment Guarantee Agency/International Development Association (MIGA/IDA) guarantees were offered to cover the risk of termination of purchase power agreements (PPAs). Second, a payment security mechanism was set up through an established escrow account to cover any PPA payment delays. Third, a US dollar denominated PPA and currency convertibility clause was established.
Bank Group Contribution
International Development Association (IDA) financing across the ASPIRE and ARISE projects has managed to achieve significant leverage. While ASPIRE has a leverage of 1:5x from the private sector, US$12.4 million of IDA financing in ARISE has managed to get a 12.4x leverage that includes US$30 million from the Clean Technology Fund (CTF), US$20 million from Asian Infrastructure and Investment Bank, U$45 million from the private sector and a MIGA guarantee in the range of US$40 million for the solar Independent Power Producer (IPP) pipeline.
The Bank has worked with various co-financing partners to leverage IDA funding. The Asian Infrastructure Investment Bank (AIIB) is co-financing the grid upgrade component of ARISE to ensure that the additional renewable capacity can be absorbed into the system. The projects are collaborating with the Sustainable Renewable Risk Mitigation Initiative (SRMI) and the International Solar Alliance (ISA) to replicate the projects on different islands. Similarly, Energy Sector Management Assistance Program (ESMAP) has assisted replicable pilots in Maldives through the Energy Storage Partnership (ESP).
Given its ambitious net-zero targets and the success of the Bank's energy projects in Maldives, the government has requested additional financing under ARISE. The Bank will use the One World Bank Group approach and work with MIGA and IFC to deliver this additional financing. The Bank is replicating Maldives' experience in other Small Island Developing States (SIDS) in partnership with the SRMI and ESMAP.