National Energy Policy

This policy has been developed by a working group with representatives from the Office of the President; the Office of Environmental Response and Coordination (OERC); the Ministry of Finance; the Ministry of Natural Resources, Environment, and Tourism; a member of the Senate and a member of the House of the 8th OEK; The Ministry of Public Infrastructure, Industry and Commerce; Ministry of State; Palau Public Utilities Corporation (PPUC); members of the Oil and Gas Taskforce; The Bureau of Public Works; Palau Chamber of Commerce; the Palau Community Action Agency (PCAA); the National Development Bank of Palau (NDBP); Shell Palau; the European Union (EU); the United Nations Development Program (UNDP); the Palau Automated Land and Resource Information Systems Office (PALARIS); the Japan International Cooperative Agency (JICA); Palau Community College (PCC); and the Chamber of Commerce (CoC).

This process began in April 2009 and was guided by an executive committee composed of members from Palau Energy Administration (PEA), PPUC, OERC, the Senate, the House of Delegates of the 8th OEK and the Office of the President. This document has been refined in a series of consensus building workshops. Additionally, consecutive drafts have been circulated amongst the working group members for review and input.

An energy sector review that was undertaken as an initial step in this project has shown that energy is a vital resource underpinning all aspects of our society and fundamentally influencing Palau’s environmental sustainability. Being almost 100% dependent on imported energy, Palau is highly vulnerable to international energy market movements and price volatility. Palau’s energy security is not guaranteed and energy supply interruptions undermine economic growth and social development. Palau is a small country lacking significant economies of scale and has dispersed outer islands’ populations that are difficult to serve.

In addition, environmental vulnerability through climate change is significant. Extreme weather events and sea level rise pose serious threats, particularly for the low-lying atolls. Environmental damage, habitat loss and pollution resulting from transport and use of petroleum products can have long-term negative effects on the country’s fragile island ecosystems, which at the same time provide the basis for economic development and prosperity of Palau’s citizens.

The development of renewable energy resources and energy efficiency has been limited by the availability of appropriate technology and insufficient institutional capacity. In addition there has been a lack of appropriate and innovative financing that supports a market driven development of local, renewable energy resources.

Addressing energy sector issues requires collaborative leadership, adequate institutional arrangements, common goals, political will, and a shared national vision. This vision has been outlined in the Medium Term Development Strategy which provides a general economic development framework for the Republic of Palau. This Energy policy is linked to government policies on economic development, sustainability, climate change; infrastructure, transport, resource management, and education, science and technology.

Around the world, there is a growing sense of urgency about the need to address the serious challenges of climate change. For Palau, there are four main climate change challenges. Palau needs to:

Prepare for, and adapt to, the impacts of changes in our physical environment, by responding to the risks and taking advantage of the opportunities they present
Control and reduce our own greenhouse gas emissions
Support international initiatives on greenhouse gas emissions, through implementation of the Kyoto Protocol and other climate change conventions
Achieve the objectives above at the lowest possible long-term cost

Another challenge is security of energy supply. Security has two key dimensions – reliability and resilience. Reliability means users are able to access the energy services they require, when they require them. Resilience is the ability of the system to cope with shocks and change. Diversifying energy sources, energy efficiency and demand-side management can help ensure both reliability and resilience.

For a small economy such as Palau, some circumstances, however, are too costly to insure against. A trade-off has to be made between different price levels and different levels of security and reliability. Finding the right balance is an ongoing task involving government, producers and users of energy. The government believes a combination of competitive markets with backstop measures and effective regulation of suppliers is the best means of protecting the security of Palau’s energy supplies. The government believes the principles and initiatives set out in this document for the five key policy areas will lead Palau to a sustainable, low emissions energy system for generations to come. Making the right choices today will enable Palau to provide a sustainable energy supply for its future.