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L’énergie dans le développement de la Nouvelle-Calédonie

Yves Le Bars
Elsa Faugère
Philippe Menanteau
et al.

New energy production and storage technology

Non-technological aspects

Texte intégral


1The aim of this section is to assess the economic performances of new energy technologies by reviewing costs (investment and production costs) of state of the art technologies, and the costs incurred by technologies installed in island regions. Economic data is applied mainly to known technologies that would be implemented for industry in the short term. We also indicate the medium-term outlook of lower costs related to technical progress, but given that this data is largely based on predictions, it should be considered with a certain amount of caution. The future performances of immature technology that has not yet been developed for industry are even more uncertain, especially in terms of cost.

Land-based and offshore wind power

International costs

2The land-based wind farms developed today in Europe range from 50 to 100 MW of power, for wind turbines with 2 to 3 MW of power each. Their estimated lifespan is approximately 20 years.

  • 1 Connection costs can vary, based on the distance and current grid. There is even more variability (...)

3According to the DGEC (France’s climate and energy department), the investment cost for a wind farm is approximately €1,300 /kW. 87 % of this cost is for the turbines, the remaining cost is for civil engineering, connection to the grid1 and studies. For offshore wind power, figures are more variable because feedback is more limited. Nevertheless, unit costs are clearly higher (€2,600 /kW) due to the specific technical difficulties in installing the wind turbines and in particular, connecting them to the grid.

4Production costs vary based on the quality of the wind resource. The DGEC estimates the production cost for a good quality (2,400 hour) onshore site at €74 /MWh, and €120 /MWh for an offshore site (providing 3,000 hours). Increasing knowledge and experience suggests that production costs could further decrease to €62 /MWh in 2020 for a good quality onshore site and €98 /MWh for offshore.

Costs in island regions

5Island areas have particular characteristics that significantly change the economics of wind energy. First, transport limitations force the use of wind turbines that are smaller than current technology standards. Next, the risk of cyclones has led to the development of specific technology (basically folding structures), usually smaller in size. Finally, the slim market potential represented by these regions has not generated a wide range of product choices compared with that seen in Europe; consequently, there is little competitive pressure to lower prices. For wind power systems installed in the French overseas departments (DOM) with small, collapsible turbines (1MW), the DGEC shows a benchmark cost of €2,000/kW with production costs of approximately €140 - 150 /MWh (Ibid).

6In addition, based on our information, the current overall cost of a windpower project in New Caledonia would be higher than the average cost suggested by the DGEC, due mainly to its remote location. The total would be closer to €2,300 to 2,500 /kW due to additional costs for sea and land transport, installation, connection to the grid, etc. For a demand factor of 1,400 to 1,600 hours of operation at full capacity, we estimate that the production costs would be nearly €200 /MWh for a depreciable life of 20 years.

7However, in reality, the production cost is lower due to tax exemptions that bring the investment cost down to approximately €1,200 /kW. Based on this new number, the updated production cost of wind power in New Caledonia falls to €116 /MWh.

8Note that the cost indications above do not include any extra costs incurred when integrating intermittent energy sources into the power grid. When the penetration rate remains at a few percent, these costs are marginal; however, they can become significant when they exceed 10-15 %. The need for additional reserve capacity (or means of storage) to ensure supply security and quality incurs additional costs that raise productions costs, particularly for wind power.

Photovoltaic (PV) electricit

International costs

9Currently in Europe there are two basic types of photovoltaic systems: small systems integrated into the roof of individual homes, or larger systems installed on the roof deck of warehouses or on the ground. Where land is not limited, serious consideration should be given to installing large systems, which would yield economies of scale and reduce costs.

10According to the DGEC, investment costs are €5,900/kWc for an individual installation (3 kWc) and €4,000 /kWc for a 300 kWc installation (activated in 2012). For a sunlight level of 1,400 kWh/kW/year, which matches the level in New Caledonia, production costs are approximately €400 /MWh for a 300-kW plant and €570 /MWh for an individual installation…

  • 2 The exchange rate used to convert $2005 to €2008 is 0.86.

11The outlook for a reduction in costs is even better than for wind power, In 2020, costs should be between €3,000 and €4,000 /kW. The IEA (International Energy Agency) estimates that costs should continue to fall below that and reach €1,600 – 2,000 /kW in 2030. Production costs would be reduced in proportion and could reach €60 - 80/MWh2 in 2050.

Figure 6. Costs for photovoltaic electricity generation as a function of hours of sunshine (in 2050)
Source: IEA, 2008.

Costs in island regions

12For island regions in general, and New Caledonia in particular, two very different types of system should be considered with unit costs that are hard to compare: systems connected to the grid, whose power can vary from a few kW to several hundred kW, and single independent systems that produce a few hundred watts, usually designed to supply a family with electricity.

13For systems connected to the grid, the data collected specifically for New Caledonia showed rough cost estimates very similar to those indicated by the DGEC: €5,800 /kWc for a large-scale installation. Thus, there is no major cost discrepancy between the mainland price and the price in New Caledonia, as there is for wind power. Based on this hypothesis, production costs would range between 300 and €400 /MWh.

14PV modules are also used to provide electricity to populations not connected to the grid, with small-scale systems that include storage methods. The costs for these systems vary from country to country (from 8,000 to €30,000 /kW according to the IEA), but are systematically higher than those systems connected to the grid, which are much larger and not equipped with storage capacity. Despite the higher cost, these smaller systems can be economically beneficial when there are no other satisfactory solutions (kerosene lighting, for example), or when these solutions cost more or have supply issues (such as generator units).

Other methods for distributed electricity production

15Micro hydro-electric plants differ from the decentralized electricity generation methods mentioned previously because they depend largely on location (low/high head heights, strong or weak flow, accessibility, etc.) Consequently, investment costs vary greatly in proportion from one project to another and “average cost” has less meaning than it does with other technologies. By way of example, investment costs provided by the DGEC for low head plants range from 1,800 to €2,500 /kW, and for high head stations they range from €1,700 to €2,200 (DGEC, 2007). Operating costs of approximately 2 to 3 % of the cost of investment result in total production costs ranging from €62 to €121 /MWh. This price range corresponds closely to the one provided by the European Commission for the current period (€60 -€185 /MWh). With mature technology such as this, costs are not expected to change significantly; the DGEC does not foresee a reduction in costs and the European Commission expects only a small drop leading to a range of €50 -€145 /MWh in 2030.

16Three other electricity production technologies are worth looking into for New Caledonia (however these technologies are still in various stages of research and development, or demonstration; therefore, the following values should be considered with caution):

  • Just like micro hydropower, the investment costs for geothermal energy are closely related to site and resource quality. The IEA puts costs at approximately €1,000 /kW for large-scale facilities on high-quality sites and at €4,700 /kW for small facilities. In these conditions (with available hot water resources), production costs can fall to between €40 and 70 /MWh, according to the IEA, and between €70 and €100 /MWh, according to the DGEC.
  • Industries will begin using ocean energy (here we mean ocean currents and wave-power) within the next few years. The IEA puts production costs between €130 and 260/MWh; the lower cost figures correspond to systems using ocean current energy and the higher figures correspond to wave power. The prospects for a reduction in costs are good (they could fall by half or two thirds by 2040-2050), but still highly uncertain. The rough estimates provided by the DGEC study are more favourable, with generation costs ranging from €60 to €80 /MWh in 2015.
  • Concentrated solar power plants require large amounts of direct sunlight (minimum of 2,000 kWh/m2) – a condition met by New Caledonia. Several new projects and developments have appeared in Europe and the United States over recent years, indicating a renewed interest in this technology. The IEA estimates current costs for plants to be constructed (low economies of scale) to be between €3,400 and €7,700 /kW depending on the resource quality, desired amount of storage, etc., which will result in generation costs ranging from €110 to €190 /MWh. However, significant advances in the technology are expected, and future costs could fall to between 40 and €50 /MWh, and even between 30 and 50 for solar towers.

17To summarize, we have extracted cost and performance data for the primary electricity production technologies from a publication from the European Commission (European Commission, 2008, Energy Sources, Production Costs and Performance of Technologies for Power Generation, Heating and Transport, COM 2008 744) (Table 4). These numbers do not always match the figures included in this text, but provide a coherent base built on a hypothesis of moderate changes in fossil fuel prices

Table 4 – Present and future costs of main electricity generation technologies

Table 4 – Present and future costs of main electricity generation technologies

Source : CE, 2008.

Solar panels for producing domestic hot water

18Low temperature solar energy to produce domestic hot water is a mature technology that is widely used in certain countries (for example, Israel, Cypress and Greece). The cost of these solar panel systems varies greatly from one country to another based on climate and the areas installed. Costs are lower in countries with an abundance of sunshine where less sophisticated technologies can be used, and in developing or emerging countries because of lower installation costs. The lowest costs are found in China, India, Turkey and Israel with €200 to €300 /m2, compared to an average of €600 to €900 /m2 in Europe.

19In New Caledonia, the cost of a 300-litre solar water heater (i.e. 4 m2 of panels) is approximately €800 /m2 on average. The installation price should also be included bringing the cost to approximately €900 /m2, which is higher than the prices seen in French overseas departments (DOM). Despite the relatively high costs, the economic value of solar hot water systems is good compared to traditional systems due to the high price of electricity and gas. There are only two solar panel manufacturers in New Caledonia, one of whom holds an 85 % market share. Taxes on imported water heaters over 250 litres have risen to 62 %.

20A more in-depth analysis would definitely be needed for a better understanding of the solar panel market in New Caledonia; however, comparisons will inevitably be drawn with the situation in Tunisia which, in the 1980s, wanted to support the growth of a national solar panel manufacturing company by taxing competitors’ imported equipment. In the end, the national company went bankrupt due to the poor performance of the equipment sold and prices that were too high. This example underlines how difficult it is to sustainably protect an emerging industry by enforcing strict borders with the international technology sector.

Generating electricity from biomass and biofuels

21Proven technologies for generating electricity from biomass currently show the lowest cost (€1,700 -€2,600 /kW for direct combustion plus a supplementary cost of €100 -€1,000 /kW for biomass/coal co-combustion), as well as the lowest efficiency (between 20 and 40 %). Combined cycle gasification technology (BIGCC - biomass integrated gasification combined cycle), could produce efficiencies of 50 % and more, but the costs are very high (€3,700 -€5,300 /kW) due to immature technology.

22However, the outlook for gasification technology in terms of increased efficiency and lower costs is very promising in the medium term. The IEA anticipates that costs in the future could decrease to €1,100 -€2,100 /kW due mainly to an increase in production capabilities. There may also be a promising outlook in the nearer future from fluidized beds, which is another gasification technology.

23In contrast to other technologies using renewable energy sources, technologies that use biomass have a cost structure in which there are many variable costs such as production, collection, transportation and possible conversion of the resource. Once again according to the IEA, current costs for producing electricity from biomass are between €50 and €160 /MWh; however, these numbers must be treated carefully because the cost of the resource used is not given. They are, however, likely to decrease significantly with increased marginal capacity of production facilities.

24With regard to biofuels, it remains difficult to provide reference costs due to the methodology issues they raise. This is all the more true when producing heat and electricity from agricultural biofuels. In this case, life cycle analyses must be conducted that include soil preparation, the use of fertilizer and pesticides, crop mechanisation, transport, etc. Moreover, co-products (soybean oil meal for example) can also have a significant market value and thus modify the production cost of biofuel.

25Nevertheless, most studies converge on the fact that producing biofuels under current technology conditions is not profitable, even when taking high oil prices into account, because these have immediate repercussions on the production costs of raw agricultural materials. Ethanol produced from sugar cane in Brazil is one notable exception; however, the possibility of replicating Brazilian production conditions in other countries is slight.

26The development of second-generation biofuels would, however, be able to resolve many of the issues raised by the first generation by relying on non-agricultural resources such as residues, waste, and wood. It would greatly improve the economic and energy balance.

Economic and environmental impacts of renewable systems

Creating jobs and economic impacts

27New job creation is often touted as an advantage of developing renewable energy systems; however, this is relatively difficult to prove with any accuracy. Calculating direct jobs, as well as indirect jobs (for example, in the metal industry for wind turbines), counting the number of jobs replaced in traditional sectors, and taking into account the support tools for renewable energy systems, and their possible use in creating other jobs are just some of the issues traditionally encountered when trying to determine job creation. Nevertheless, we can cite several rough estimates from the European Union for rapidly growing systems such as wind and photovoltaic power.

28The wind power sector directly employs some 20,000 people in Europe, mainly in small and medium-size businesses, including a portion (6 people/MW) for building and installing equipment and another portion for operation and maintenance (0.05 – 0.2 pers/MW). For each direct job, there is at least one indirect job in related sectors, such as engineering offices, research, finance, marketing, etc.

29In regards to photovoltaic power, the opening of new production plants created 20 positions per MW of capacity, to which 30 jobs per MW were added for wholesale, retail and equipment installation. Maintenance for PV systems alone represents an average of one job per MW installed. A (significant) number of these new jobs only concern the countries in which production plants are found, but not all of the jobs are created in technology manufacturing alone. Thus, the union for renewable energies estimated that the development of renewable systems would create 75,000 jobs in Metropolitan France between 2004 and 2010, including 22,000 in the wind and photovoltaic power sectors: 90 % of these new jobs were expected in wind power even though France does not produce the technology.

30Similarly, the development of wind and PV power in New Caledonia should lead to the net creation of jobs in sectors downstream from technology production. The audit of the wind power system clearly shows that installing wind farms created permanent jobs and, according to the data gathered during our interviews, the wind power system represents approximately fifty permanent jobs, including construction and maintenance (i.e., approximately 0.5 pers/MW.

31With that said, it is the biomass recycling systems in particular that are expected to create large numbers of jobs because of the labour-intensive work required for working the forests, converting and treating resources, transportation, etc.

32Finally, among the economic benefits of renewable energy systems, we must stress the benefit that the geographical distribution of these systems holds for the development of the region, as well as the opportunities they provide to local communities and populations in terms of jobs and taxation.

Environmental impacts

33Renewable energies benefit the environment by replacing fossil energy sources that emit pollutants and greenhouse gases. In the case of New Caledonia, producing electricity from renewable sources would replace coal plants (Prony, etc.) and the emissions avoided would depend on the quality of the coal used, efficiency of the plant, and antipollution devices installed.

34When wind power production replaces thermal production, the operating rates of traditional production methods can be modified (slowdown or complete stop) and all or some of the CO2 emissions are avoided. If wind power production is combined with thermal production, and if there are no specific storage systems, the power of the programmable thermal process must be adjusted to the addition of intermittent production, and there is less of a reduction in CO2.

35In regards to low-temperature solar panels, the study conducted on New Caledonia shows that there can be major reductions in CO2 emissions if solar energy production replaces electric water heaters, given the production system of the power grid. Replacing gas water heaters with solar panels does not reduce as many emissions, but remains significant.

36The development of hydaulic power often runs into opposition due to its impact on local populations and the environment. Low-power plants obviously have less impact on the environment, particularly in regards to compensation water issues and impact on fish. There are technical solutions today that can limit these impacts, but the issue must not be ignored. Impact studies and good communication with shoreline residents are very important here.

Intermittent production

37To preserve supply quality and security when there is a jump in the proportion of intermittent sources, you must have production processes that can immediately equalize supply and demand. Additional thermal capacities may be needed as the penetration rate of intermittent sources increases to offset malfunction risks during peak periods or to provide additional spinning risks.

38Adding more intermittent production to electrical systems leads to economic consequences, which are externalities not usually taken into account by renewable energy producers (and difficult to assess because they depend on numerous factors). Note that there are also less conventional options that can make this integration easier: weather models for improved injection (wind, solar) forecasting, pooling options aimed at expanding production, large-scale storage systems including pumped storage and renewable thermal (biomass).


39The costs for producing electricity from renewable sources remain higher than production costs for traditional thermal methods, but the gap seems to be closing. In fact, the costs for producing electricity from fossil fuel are strongly correlated to fuel costs, while the costs for using renewable resources (except for biomass fuels) are related exclusively to investment and maintenance expenses because the resource is free.

40The prospects for lower costs in renewable energy technologies due to technical advances, the anticipated increase in fossil fuel prices in the medium and long term, and the introduction of a carbon value, are all going to help improve the economic competition for these production methods compared to traditional thermal methods.

41Hydraulic and land-based wind power technologies currently have the most economic value. Thermodynamic solar energy, and even more so, photovoltaic energy are not yet close to being profitable, but their costs are coming down quickly. There is more uncertainty surrounding other emerging technologies like geothermal or ocean energy, which have not really been mass-produced yet.

42This analysis remains relevant for New Caledonia, even if the investment costs are higher (with the exception of photovoltaic) due to its remote location, specific technologies, and market conditions that do not encourage competition. Likewise, average costs for competing production methods (thermal power plants) are also greater. Their investment costs are higher (although to a lesser extent) because of low economies of scale, fuel costs are up due to transportation costs, and efficiencies are lower than traditional large-scale plants.

43These two effects make up for one another. Finally, supplementary costs for renewable energy production should not be higher than in Europe, especially when there are tax exemptions to benefit local energy resources, which will reduce New Caledonia’s energy dependence, and clean energy production (no greenhouse gas emissions).


Biomass production specifications

44In the absence of specific regulations, decisions on land use are determined by market conditions and comparative economic advantages. However, specific polices can change these decisions based on international context, as well as the importance placed on energy independence, reducing energy vulnerability, local environment and the reduction of greenhouse gas emissions.

45There are several categories of biomasses based on their origin:

  • Already discarded waste (municipal solid waste);
  • System coproducts (wood, sugar cane, grains, livestock) that could be better recycled;
  • Natural resources that already exist, but have not yet been recycled. It should be possible to harvest these resources mechanically (Leucaena leucocephala – trees efficient in nitrogen fixation that grow along roads or marginal land, - coconut trees growing along the coast, etc.)
  • Dedicated crop production (lignocellulosic plants, cereals, and new herbaceous plants such as miscanthus, sugar plants such as sugar cane, oilseed plants such as sunflower and new plantations of coconut trees, starch plants).
  • 3 Small engine manufacturers do not currently guarantee straight vegetable oil engines, but some tra (...)

46Bioenergy production from the first two categories pose no particular problems in regards to land use. However, there must be enough production of these resources for the envisioned uses and conversions such as producing heat from steel factories, producing electricity in plants exceeding 3 MW, and biogas production from straight vegetable oils3.

47Resources for the first three categories should be concretely evaluated to determine which ones can really be harnessed. There should also be an evaluation of which stakeholders are likely to implement the corresponding systems based on needs. Many waste management companies have extensive experience in this sector and would be perfectly suited to study the technical and economic feasibility of such systems.

48Nickel factories that currently use coal, a major greenhouse gas emitter, are potential consumers of heat energy. If there is enough of an increase in the price of CO2 per ton on the fuel markets, the search for solutions to pro-duce lignocellulosic biomasses on currently non-forest land could be justified.

Bioenergy production on cultivated agricultural land

49New Caledonia depends on both local production and imports to meet its food needs; note that they rely on imports for dairy and cereal, and on production for meat and fruits.

50Economically, changes in land use could only be made if the economic benefits of energy productions were higher than agricultural production. In other words, nothing will happen if the farmers do not get their faire share.

51The production of Jatropha oil per hectare is generally mediocre on marginal lands. It could improve on agricultural land that is well fertilized, nonhydromorphic, and irrigated. However, Jatropha oil meal cannot be consumed by animals, which considerably limits its economic benefit. In addition, Jatropha would be considered an invasive species in New Caledonia, just as it is in Australia.

52There are is also a certain area of non-forest, agricultural type land with long fallows; increased cultivation of this fallow could technically produce biomass for energy. Therefore, its economic value compared to other production, its effects on commercial balance and the existence of other potential outlets should be studied.

53Despite everything, developing large-scale biofuel production on agricultural land in New Caledonia does not seem to be a likely option. This is worth having a clear vision for the use of land in New Caledonia.

Bioenergy production on forest land

54New Caledonia currently imports between 50 and 80 % of the wood it uses. Gathering timber first faces a particularly rugged landscape. In addition, only one section of the pine plantations planted in the 1960s can be used, the other part has no economic value. However, timber has a higher value per ton of harvested wood than energy wood used to produce heat: therefore, its use is more advantageous.

55Studies (Enercal and CTFT) were conducted on the possibility of planting trees on less steep land in Lifou, but extracting the timber seemed difficult to do because of the outcrops.

56Added to these problems is the high fire risk, which is another factor to dissuade private investors, as is the need for special equipment. For all of these reasons, the only way to locally produce biomass from trees is to set up systems that take all of these aspects into account. The technical potential for this kind of production is strong enough for an effort to be made in this direction.

Specific features of other energy systems

57Among the promising technologies for electricity production in New Caledonia, we have selected concentrated solar thermal power production and pumped storage hydroelectric plants, technologies that require a certain amount of land. Small-scale methanisation should also be considered, but pilot operations must be launched to determine in which conditions these small units are socially acceptable.

58We can estimate that one concentrated solar thermal power plant needs approximately 1/ha/MW or even 0.4 ha/GWh annually; this is variable based on sunlight conditions and the implemented storage capacities (thermal). A 50-MW plant would thus need 50 ha for an annual productivity of 120 GWh.

59Pumped storage hydroelectric plants, which could play an important role in producing more photovoltaic and wind power energy, requires basins for collecting water. If we consider harnessing ocean water on the shoreline, one upper basin would be sufficient. The amount of stored water (and indirectly the occupied surface area) is directly related to the stored energy. Typically, for an elevation difference of 100 m, and a storage capacity of 1 GWh (50 MW x 20 h), approximately 4 million m3 would be needed; or for example, a surface area of 40 ha with a depth of 10 m.

60These rough estimates show that the area required by these systems does not pose major problems in terms of land.


61Before they can become competitive and widely distributed on the market, new technologies must follow a development process that includes several steps: R&D and demonstration (first large-scale production), emergence (technical feasibility demonstrated), and finally, marketing (the technology is competitive in niche or general markets).

62In the case of new energy technologies, there are many barriers, both technical and non-technical, that slow this distribution process down; many of these barriers come from government interventions. The government has different methods for supporting the distribution of new energy technology. They strongly intervene to protect an emergent technology from direct competition with established technologies and enable it to improve its performances through a cumulative learning process.

63Remember that there are other indirect methods that can also help promote the development of renewable energy sources such as taxes on fossil fuels or even the introduction of a carbon value (emission or quota tax); increasing their cost boosts economic competition and the growth of renewable energies.

64However, these efforts, although positive, are not enough. This is why the European Union introduced greenhouse gas reduction and renewable energy development objectives in its “energy-climate” packet.

Support instruments for renewable electricity production

Investment support

65Investment support can include subsidies granted to investors as a contribution or reduced rate loan, cost exemptions, or tax credits aimed at reducing the cost of purchasing or installing technology.

66Support for the development of wind power in the early 1980s was based primarily on this type of instrument, particularly in the United States. Today, these support instruments are not considered to be effective when used alone because instead of encouraging ways to improve productivity, they promote the installation of additional production capacities.

67The tax credit is widely used in France to encourage households to install solar water heaters, wood-fired boilers, and PV systems, and to make energy saving investments. For these special cases, investment support is effective because the technologies that they promote are costly, yet cost-effective (biomass, domestic hot water – solar water heater –, insulation) or because they receive additional incentives (purchase price for PV).

Production support

68The IEA feels that support for production methods that encourage kiloWatthours produced and not just production capacities are more effective than investment support.

69■ The concept of guaranteed purchase price requires suppliers to pur-chase electricity produced by renewable electricity producers located in their service area, at a determined rate decided by the government and guaranteed for a certain period of time (generally around 15 years). The rate is generally set at a higher price than the price of the wholesale electricity market and at a level that authorizes a certain profit margin for investors. The advantage of this instrument is that it can be adjusted to the maturity of the technology: thus, a purchase price close to the market price can be set for a mature technology, while offering a higher rate for an emerging technology.

70Germany, Denmark, Spain, and more recently, France, chose to support the development of wind power through guaranteed price systems, with very positive results in regards to installed capacities as well as industry.

Table 5 – Guaranteed purchase prices for distributed production in France

Table 5 – Guaranteed purchase prices for distributed production in France

Source : (2009)

71Competitive auctions invite competitive bids from specialized producers for the production of a given quality of renewable electricity, or more often, for a given production capacity to be installed. They differ from guaranteed price systems because they depend on quantities and not prices, and especially because they create competition between operators.

72Competitive auctions used in England and France (Éole program 2005) are no longer used today as an additional instrument to target a system or specific technology such as offshore wind power or biomass electricity production.

73Exchangeable quotas and green certificates: In a green certificate scheme, the government imposes objectives (quotas) for renewable electricity production on electric companies. The certificates are used to verify that the objectives were met; however it is a flexible system that allows distributors to meet their objectives at a lower cost.

74Renewable electricity producers receive green certificates corresponding to their production; they then sell their electricity at market price, along with their certificates, to distributors at a price determined by supply and demand. To reach their quota, distributors can produce renewable electricity, by acquiring or buying certificates from producers. If the quota is not reached, penalties proportional to the number of missing green certificates can be applied. The United Kingdom, Italy, Belgium, Poland, and Sweden adopted green certificates to support the development of renewable energies.

Support instruments for promoting solar water heaters

Direct subsidies

75Direct subsidies are used to reduce the purchase price of solar systems and improve payback, which remain the primary obstacles to distributing these heaters. They can also provide differential support based on the quality of equipment or the installers. Finally, they demonstrate the value that authorities place on these technologies that, with the announcement of ambitious development objectives, can help mobilize manufacturers and sellers and provide assurance to buyers about the system’s reliability.

Tax credits and tax incentives

76There are different types of tax incentives: tax reductions (VAT, for example) applied to equipment, installation, or importing (if needed), tax credits, accelerated depreciation, etc. Their objectives are exactly the same as direct subsidies, but incentives benefit public finances by resulting in an absence of revenue rather than an additional expense. In contrast, tax credits do not lower the investment barrier like direct subsidies; thus they can protect lowrevenue households.

Reduced rate loan

77Access to credit is another way to lower the investment barrier by providing better rates than the normal rates for consumer credit. Credit measures are often set up with direct subsidies to reduce the cost remaining to investors.

Regulation approaches

78Even though the market has reached a certain maturity, solar water heater systems are not used in all of the situations where it would be economically justified. This is why regulation that imposes the use of renewable energies is a solution to expand its distribution and benefit from the improved efficiencies that come with adopting it.

79The city of Barcelona adopted a regulation of this type in 1999 stipulating that 60 % of the heat needed to produce hot water must be provided by solar energy in all of the buildings under the regulation. Result: the average surface area installed with solar panels each year has grown from 1,650 m2 before the regulation to 19,600 m2 in 2004!

How effective are the current instruments?

Instruments for promoting renewable electricity

80Recent studies conducted notably by the European Commission show a clear comparative advantage for guaranteed price schemes, particularly for wind power and photovoltaic, and the majority of European countries have now adopted them.

81The effectiveness of guaranteed price schemes is due to the good out-look on investment profitability and the low risks incurred by project developers. With guaranteed prices, there is no market risk because the obligation to buy and the projects’ cost benefit depend mainly on the level of guaranteed prices and the capability of investors to control their costs. Another important advantage is that prices can be differentiated to take into account the difference in technology maturity. Therefore, it is very easy to buy the kWh produced by offshore wind power at a higher price than onshore kWh so that the economic value of both investments is the same and the incentive to invest in both systems is similar. Likewise, it is possible to define a specific purchasing rate for photovoltaic power that is much higher than the rate for wind power without creating an economic rent in favour of the first.

82With auction systems, different invitations to tender can be organized for each technology system, but the administrative costs are higher than with guaranteed prices. Moreover, the experience of the UK in particular demonstrated the limits of instruments in regards to industrial development (stop and go effect), as well as the counterproductive effect of strong pressure to lower prices.

83With exchangeable quotas, differentiation simply becomes impossible because there is only one certificate price and only the most mature technologies benefit from it. This quota system is only useful in a broad economic area like the European Union, for example. The cost differences between member states can therefore justify the implementation of a flexible system such as green certificates. However, it remains extremely complex to implement both administratively and politically.

84At the same time, guaranteed prices were criticized for not being compatible with the liberalization of the electricity market (distributors obligation to purchase), not creating competition between renewable energy producers, and as a consequence, costing taxpayers too much. However, the German experience demonstrated that a well-planned guaranteed price scheme can limit economic rents between producers and foster technical progress despite the lack of direct competition.

85Finally, guaranteed price systems are recognized as being effective in promoting the development of new energy technologies and economic efficiency that is equal, if not better, than auctions or exchangeable quotas. They are recommended for emerging systems, even if there are other instruments that can also be used (investment subsidies, competitive auctions, etc).

Instruments for supporting the development of solar water heating

86It can be tempting to develop a local solar panel production system and protect it, at least temporarily, from outside competition by setting higher taxes on imported materials. In New Caledonia, two companies manufacture solar panels without any direct competition from international competition. This legitimate policy to protect local jobs can be counter-productive to technological progress. In the 1990s Tunisia wished to support the development of a national solar panel manufacturer by taxing materials imported from competitors. However, the national company went bankrupt due to the poor performance of the materials sold and prices that were too high. This example underlines how difficult it is to sustainably protect an emerging industrial sector (to which technical progress is still important) by establishing strict boundaries with an international technology movement.

87Direct subsidies are effective in fostering the development of solar water heater production, but they alone cannot lower the financing barrier. For lowrevenue households in particular, the availability of credits at prime rates is vital. Loan repayments can even be defined based on savings from solar hot water systems so that the purchasing power of the poorest families is not restricted.

88The Prosol program implemented in Tunisia, for example, offers credit financing for solar water heaters and monthly loan payments through electric bills. The program began in April 2005 and helped install 7,200 solar water heaters; i.e. the equivalent of 23,000 m2 annually (compared to 14,000 m2/year in previous years).

89However, there are several disadvantages to subsidies, the primary one being the cost to public finances when subsidies focus on large volume and long terms. They can also have negative effects on the markets (negative impact on demand and possible price repercussions).

90Regulation can also expand the solar water heater market as demonstrated by the situation in Barcelona. However, minimum performance standards should be imposed (standards or quality labels) so that requiring the use of solar energy does not result in low-cost, yet inefficient, systems. In addition, putting economic incentives into place may be needed so that initial supplementary costs imposed by regulation (at least in the beginning) do not lead to an increase in construction cost or make it difficult for lower income households to purchase a home.


91Based on relevant international feedback, we feel that adopting a guaranteed price scheme along with a distributor purchase obligation is the best option for renewable electricity production systems.

92Mature technologies, such as wind, hydraulic, and photovoltaic, should be the focus of this measure. This means that it is still too early to envision this scheme for technologies such as ocean, thermodynamic, or thermodynamic solar energy, which must count on the more traditional R&D and demonstration programs. Demonstration projects for offshore wind power and biomass electricity production may be needed before it can be provided with guaranteed prices allowing it to be more widely distributed.

93On what basis are guaranteed price levels defined?

94Two strategies were used to draw up purchase prices for kWh from renewable sources:

  • Avoided cost strategy: this strategy offers a price that matches the cost for producing the production methods that will be replaced by renewable production, to which the environmental by-products avoided by the use of renewable production should be added. This is the strategy followed by the Energy Regulation Commission (CRE) in its opinion on purchasing rates for wind power electricity in France.
  • A cost coverage strategy for renewable kWh production: this strategy guarantees minimum profitability for producers and fosters the development of new production capabilities; expanding distribution results in learning processes that promote lower costs and improve performances, which in turn, speeds up distribution.

95The second strategy leads to higher rates than the first strategy, but it is justified for emerging technologies that have a positive behavioural model of cost reduction. In the case of New Caledonia, the rate should include the existence of double tax exemptions and its impact on investment costs to avoid creating economic rents that favour producers.

96One important element of guaranteed price schemes, besides differentiation between systems, is dynamic pricing, which results in a steady decrease in purchasing rates for new entries and imposes a parallel reduction in production costs to maintain margins. Negotiated with wind turbine manufacturers, this type of scheme could produce expected cost reductions for wind power production in New Caledonia and simultaneously reduce government assistance to this sector.

97For solar domestic hot water production, international experience shows that subsidies in the form of direct aid were needed almost everywhere when the system was first introduced. However, these were only effective when the market is sufficiently diverse (is the case in New Caledonia?). Measures in addition to direct aid, such as reduced rate loans and third-party investors are also effective in some situations, particularly for promoting distribution to low-revenue households.

98The case of solar domestic hot water illustrates the benefit of additional measures such as subsidies for quality labels or direct aid paired with easy access to credit. Besides these traditional courses of action, the regulatory approach could be studied for New Caledonia. It assumes a strong political will, but offers the advantage of certain efficiency. Given the energy payback time of solar water heater systems in New Caledonia, instituting regulatory requirements would not impose any major additional costs on households and would provide significant advantages, particularly in regards to the environment. Setting up this type of effort however, requires action to be taken at different levels to educate the population, expand the available offer, improve the quality, train installers, modify urban planning rules to include the solar option, and on a broader scale, motivate and involve all of the stakeholders in the system.

The case of biofuels

99Before deciding on which instruments to implement, we must first find out if it is just the use of biofuels that will be promoted, or if their production is going to be developed as well. The objective of just using biofuels is to fight the greenhouse effect. The second case, biofuel production, can help reduce the energy dependence of New Caledonia or preserve rural populations by developing agricultural activity.

100In the case of New Caledonia, the most economical way to reach the first objective is to require petroleum product importers to have a minimum bio-fuel content in the fuels they distribute. They get their supplies on the international market where prices are much lower than prices from local production, which does not have the same comparative advantages (cheap labour, large, exploitable land areas near processing factories, etc.).

101If the biofuel content is below a certain percentage (10 % or 30 % depending on the case), then these mixes can be used without engine modifications. The cost of these biofuel mixes may remain higher than fuel prices for a short time, but this price difference (like a carbon tax) would be an incentive to reduce consumption.

102If the only objective is to subsidize the maintenance of rural populations by marginally reducing New Caledonia’s energy dependence, then promoting the production of straight vegetable oils is conceivable. After extensive filtering (1 µm to 5 µm) and neutralization, the oil can be injected directly into a diesel engine that is not sensitive to the fuel used, but cannot be injected into recent diesel cars under just any conditions.

103Projects should be evaluated on a case by case basis to decide on their economic and environmental viability, as well as the level of subsidy required. One initial subsidy is to exempt biofuels from all the taxes imposed on petroleum products.


104Data concerning solar radiation and wind is relatively well known. If concentrated solar power production proves to be promising, it would certainly be necessary to better determine the share of direct radiation because the share of diffuse radiation cannot be effectively used in this process. The entire area would also need to be searched for potential sites.

105There seem to be few geothermal resources, but they were not really identified. If there are good sites, geothermal energy provides basic electricity production at a relatively low cost, which could be very beneficial, particularly for the nickel industry.

  • 4 Information collected by Guillaume Dréau, new energy engineer at SRP.

106In regards to ocean resources, global ocean currents have been relatively well identified, but not local currents. However, large concentrations are highly unlikely, and there are probably very few, if any, locations where the currents could be strong enough (values higher than 2 or 3 m/s) to harness for other uses, particularly navigation (particularly in the coral reef passes). This leaves wave power, which the Pacific Research Society (SRP) began to evaluate with its own resources4 : the incomplete series of collected data leaves hope for a potential that, although not exceptional, is not negligible either. If wave power was to be selected to produce electricity, more wide-scale measurements would need to be taken on more sites; they would definitely need to be taken in the southeast part of Grande Terre (main island), and even the entire south, because the dominant waves come from the southeast and become smaller when they reach the islands.

107Finally, to use the ocean’s thermal energy, a process that is also very promising for basic, steady production, it would be useful to learn more about the breakdown in water depth and water temperature.


108For details of the recommendations set out below, please refer to the recommendation sheets which are collated at the end of the report following the “Conclusion and recommendations”.

What systems should be tried in New Caledonia?

109Wind power is already widely used to produce electricity, particularly on Grande Terre; however, it seems as if it is less productive than might be expected (probably because of problems with maintenance or grid management. In the short and medium terms, production costs should decrease again to be comparable with thermal electricity prices, especially as fuel costs increase significantly.

110Photovoltaic generation is just beginning to be developed for grid power. It also has major potential that can, for example, support and offset electric air-conditioning consumption. Prices remain high, but should drop significantly and provide substantial gains in fossil fuel savings in ten years or so. Photovoltaic generation can be mounted on roofs, without taking up additional space and matching production with consumption or it can also take place on centralised solar farms. Though both these developments are mainly reliant on price incentives, the two situations can benefit from very different incentives.

111In the short and medium term, we recommend a more ambitious deployment of wind and photovoltaic technologies, which are mature enough to avoid undue risks. This will require better optimised grid management; in other words, the implementation of appropriate rate incentives (get rid of peak periods and peak/off-peak rates), planning using advanced meteorology forecasts and ensuring that all productivity and production information is sent in a completely transparent way to the grid manager. Finally, this deployment must be combined with storage methods in order to increase the penetration rate of intermittent production (theoretically above 30 %, in reality, below).

112We recommend studying pumped storage electricity more closely because the landscape of New Caledonia seems to lend itself well to this type of system. The possibility of harnessing ocean water in systems located on the coast could provide a substantial saving on investment, as long as the upper storage basin is guaranteed to be completely leak-proof to avoid polluting fresh water and ecosystems. We feel that a technical and economic analysis taking into account the need to minimize environmental and seismic risks is essential. It is also possible to test other storage solutions (for example sodium sulphur), following the example of Reunion Island.

113Recovering energy from biomass requires two main, though different, resources: wet waste for producing biogas and woody biomass for producing heat and/or electricity.

114In the short term, we recommend an evaluation of the potential of recovering waste to produce biogas (methane), particularly in heavily populated areas where it is possible to use it as fuel for buses or other heavy vehicles. In principle, small-scale methanisation seems less relevant because livestock are raised on ranches, and there is not a sufficient concentration of organic waste to methanise.

115In the short and medium terms, converting lignocellulosic biomass into a fuel that can be used to produce heat, and then electricity in thermal power plants, could be very beneficial. It is extremely simple and consumes little energy, unlike biofuel conversion. From a purely technical point of view, approximately 1 % of the New Caledonia’s surface area (i.e. 18,000 ha) could provide approximately 300 GWh annually, provided that there is available land that can be harvested mechanically, and that, of course, the creation of such systems is promoted.

116We recommend assessing this potential, which could prove to be very useful. Because circulating fluidised-bed power plant technology can substitute a current portion of coal for lignocellulosic biomass, it would provide an important method for reducing New Caledonia’s energy dependence. Note that SLN has already studied this option and estimated that the stocks in New Caledonia were insufficient and/or poorly organized; however, the EEC report has led us to stress the benefit of taking a new look at this subject. In a recent note (SLN, Plant C project – reply, October 2008, pp.15-16), SLN indicated that the equipment installed in these new fluidized bed coal plants would be able to burn up to 10 % biomass (i.e. 60,000 tonnes), which would require the establishment of an adequate supply system. Moreover, SLN is considering the possibility of offsetting part of the CO2 emissions related to coal fuel by developing carbon sinks (new plantations).

117For remote sites, photovoltaic energy remains the most effective solution (in terms of reliability and costs), in a PV configuration with storage for small-scale installations (Enercel’s operating results are very positive). For micro-grids on the islands, hybrid configurations (PV and/or wind power with a generator powered by - for example - copra-oil, plus storage) clearly offer the best solution from an economic point of view. Based on current feedback, we recommend studying such solutions in island weather conditions.

118However, the outlook for recovering biomass into biofuels seems more uncertain to us, even though we believe the current copra recovery experiment should be continued. On the islands, the production of copra oil and its combustion in diesel generator units were demonstrated. Unfortunately, new diesel engines can no longer burn these oils directly: a transesterification step must be added to produce a fuel compatible with modern engines and their emissions standards, which is technically possible on the scale of a small island. Moreover, there is a possibility that some manufacturers will produce engines designed specifically to run on vegetable oils.

119In the medium term, concentrated solar power plants seem to be a very attractive way to generate electricity. This technology, which is already relatively mature, only uses direct solar radiation; therefore, it needs sites with plenty of sunlight exposure. First we suggest seeking available sites in the area that meet this condition (approximately 1 ha per MW of surface area is needed to generate between 3 and 5 GWh/ha). One of the major advantages of these electrical power plants is that they can be equipped with temporary heat storage. This allows for a certain separation between electrical generation and solar radiation, which makes it possible to generate electricity at night. Finally, the size of the units currently being built throughout the world is compatible with the grid requirements of Grande Terre, which as a result could welcome such a plant. We recommend active monitoring of plants being built worldwide, and a more in-depth study to assess the technical and economic aspects as applied to New Caledonia when there is enough feedback.

120Overall, better use of local renewable resources requires more knowledge of them; this is why we recommend establishing, starting now, an atlas of energy resources, either in addition to or updating an existing version.

121In the medium term, and in a much more marginal way, we can consider recovering by-product heat from thermal power plants to produce first-generation biofuels. This heat could improve the energy audit for bioethanol production and significantly lower its cost. This could then be mixed in with the petrol used in motor vehicles within the limits for current engines (15 % ethanol without modification). Note that this system would require the development of energy crops, so care must be taken to prevent them from competing with food crops.

122In the long term, algae production and ester hydrolysis could be a useful source of liquid fuels. However, the chain of technologies needed is still immature and numerous issues still exist. Given the favourable maritime situation on the Islands, we recommend monitoring technology in this field.

123Also in the long term, using ocean thermal energy (OTE) could be useful for basic generation and replacement of coal plants, particularly for the nickel industry. To properly assess the potential of this system, we recommend an evaluation of water temperature gradient (up to approximately 1,000 m) over several years in order to get a complete picture of the likely climate fluctuations in this region, as well as a technology watch on OTE plants. A better understanding of the resources and technologies examined could pave the way to possible OTE generation experiments, similar to that in Polynesia using the 5-MW pilot factory project in Tahiti. Also note that the DCNS naval shipyard is currently involved (2009) in building a 1.5 MW demonstration model on Reunion Island (the first design includes a 7,000-ton offshore platform, 30 metres in diameter and 15 meters below the surface.


1 Connection costs can vary, based on the distance and current grid. There is even more variability for off-shore, based on the distance to shore and nature of the seabed.

2 The exchange rate used to convert $2005 to €2008 is 0.86.

3 Small engine manufacturers do not currently guarantee straight vegetable oil engines, but some tractor manufacturers are currently conducting research to fix this.

4 Information collected by Guillaume Dréau, new energy engineer at SRP.

Table des illustrations

Légende Figure 6. Costs for photovoltaic electricity generation as a function of hours of sunshine (in 2050)Source: IEA, 2008.
Fichier image/jpeg, 247k
Titre Table 4 – Present and future costs of main electricity generation technologies
Légende Source : CE, 2008.
Fichier image/jpeg, 757k
Titre Table 5 – Guaranteed purchase prices for distributed production in France
Légende Source : (2009)
Fichier image/jpeg, 242k

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