U.S. Department of the Interior Office of Insular Affairs
Remarks of David B. Cohen,
Deputy Assistant Secretary of the Interior for Insular Affairs
before the
Annual Meeting of the Pacific Power Association
Majuro, Republic of the Marshall Islands
August 7, 2007
Yokwe, ladies and gentlemen. It’s an honor to be invited to speak
at this year’s meeting of the Pacific Power Association. Thank
you for inviting me to be here with you today. It’s great to be
back here in Majuro. We were here about eight weeks ago with Secretary
of the Interior Dirk Kempthorne, and we very much appreciate President Note,
the Marshall Islands government and the people of the Marshall Islands for
having provided us with a very productive and educational visit.
I believe that most of you are familiar with the U.S. Department of the Interior’s
role in the Pacific and with our other island communities. For those
of you who don’t know, the Secretary of the Interior generally administers
the U.S. Government’s relationship with its territories, specifically
Guam, American Samoa, the U.S. Virgin Islands and the Commonwealth of the Northern
Mariana Islands. He also administers the financial assistance we provide
to the nations in free association with the U.S., namely the Marshall Islands,
the Federated States of Micronesia and Palau, under the Compacts of Free Association. Those
duties are delegated to me and the office that I run, the Office of Insular
Affairs. OIA has an annual budget of $430 million, most of which is provided
to the Pacific in the form of grants. Much of those grants go to support
infrastructure projects, including power.
Secretary Kempthorne had quite a trip throughout the Pacific. We stopped
in Midway, Saipan, Guam, Palau, Pohnpei, Kwajalein, Ebeye, Majuro and American
Samoa. We listened to the concerns of local leaders everywhere we went,
and everywhere we went, the high cost of energy was near the top of the agenda.
With some analysts predicting that the price of oil may reach $100 per barrel
in the not-to-distant future, energy costs are a worldwide concern. I
can’t think of anywhere, however, where the impact of energy prices is
greater than it is in the islands. Because the islands depend on the
ability to have relatively small quantities of fuel transported great distances,
it is almost impossible for the islands to purchase fuel on favorable terms. This
is compounded by the fact that the generating equipment that the fuel is used
for is, in the islands, typically out of date and inefficient. The islands
therefore have to pay more for fuel and have to buy more of it to produce a
given amount of electricity than is the case, say, in almost every stateside
community. That is why some island utilities have to charge more than
30 cents per kilowatt hour. The cost of electricity in the islands is
a significant competitive disadvantage when it comes to trying to attract and
retain business investment, which makes it even harder for the islands to develop
the economies of scale necessary to avoid astronomically high energy costs. The
economies of most of our island communities are depressed as it is, and the
economics of energy are a massive burden that weighs them down as they try
to improve their standards of living and quality of life.
None of this is news to anyone here. Many of you have already had to
face your governor, your president, and your legislature and explain why you
had to double—or more—power rates to customers. And why
that would just barely allow you to buy enough fuel to keep your generators
turning—and not enable you to buy the new equipment you desperately need,
or perform the preventative maintenance and conduct the training that Tony
is always harassing you about. Rising energy prices have sparked public
protests in some island communities.
Throughout the world, people are talking about the need to reduce dependence
on oil. Nowhere is this a greater imperative than in the Pacific. There
are, of course, both environmental and economic reasons for the need to reduce
dependence on oil. If oil and other carbon-based fuels indeed contribute
to global warming, then the low-lying islands of the Pacific will be the first
casualties of the world’s failure to reduce its collective carbon footprint. It
is fitting that we are holding this conference in Majuro, a place that some
scientists have predicted could one day be underwater. We all hope and
pray that those predictions will not come true, but the people who live here
have no choice but to take them seriously. I’ve been to Majuro
many times, but never cease to be amazed at the view of this atoll from the
airplane as you fly in. Majuro, and the other low-lying atolls of the
Marshall Islands, are such thin, fragile necklaces of land in the middle of
a world’s largest ocean. From the airplane, you wonder how people
can live on what looks like such an isolated, precarious sliver of land. That
feeling is in no way abated as you drive in from the airport. Throughout
your entire ride, the lagoon is immediately to your left and the mighty Pacific
Ocean is immediately to your right. And as many of you know, that tiny
little bridge that you cross on the way in from the airport—the one that
rises maybe about seven feet off the ground—when you’re at the
top of that bridge, you’re at the highest point in Majuro.
That is why island communities have to lead the way to a future of alternative
energy. In addition to the environmental concern, there is, as I noted
earlier, a compelling economic incentive for the islands to reduce their dependence
on oil.
It would be a great boon for the islands if they could produce energy from
the elements that they have in abundance—sun, water, wind…and
even coconuts. For many years, we’ve heard talk about the ability
to Ocean Thermal Energy Conversion, or OTEC, technology to produce electricity
and fresh water for many island communities. We should all be following
with great interest the projects that are moving forward in Diego Garcia and
right here in the Marshall Islands, in Kwajalein. If it can work there,
it can hopefully work in other island communities where the ocean depth grows
steeply from the shore. Solar power and wind power have been in commercial
operation for a longer period of time, and we need to aggressively find ways
to harness these technologies in ways that make economical and technological
sense for small island communities.
I’ve heard of other possibilities as well. Some have suggested,
for example, that the geothermal resource in places like the Northern Mariana
Islands can be harnessed for cost-effective energy production. I’ve
also read promising literature on wave energy technology, although the feasibility
of this technology for many of the tropical island communities represented
here has not yet been established.
We need to find out which alternative energy solutions are right for the islands. Some
of these technologies may not work in the islands or may not work period, but
they should be thoroughly explored.
The economic advantage of all of these renewable energy technologies is that
their operating costs are not affected by the price of oil. The economic
disadvantage is that they tend to have higher capital costs than more conventional
technologies. These higher capital costs can be made up over a lifecycle
of lower operating costs, but the challenge then is to amass the capital needed
to build these renewal energy facilities in the first place. This strains
a resource that is even scarcer in the islands than oil: cash.
I have to believe, however, that where there’s a will, there’s
a way. For one thing, multilateral institutions have shown a willingness
to provide financial support for alternative energy projects in the region. These
initiatives are promising, and perhaps those of us in the donor community could
do a better job of coordinating our efforts to help the islands fund alternative
energy projects. We also have to find ways to involve the private sector
and private investors. Many of you may not know this, but I haven’t
always been a government bureaucrat. Until five years ago, I actually
had to work for a living and be a contributing member of society. I was
an attorney—OK, I realize that it may be a stretch to call an attorney
a “contributing member of society.” But when I was a private
sector attorney my main specialty was project finance, primarily financing
energy projects through bank loans, other private investment, bonds and public-private
partnerships. I believe that there is an opportunity to finance alternative
energy projects in the islands through these means as well, although some projects
may need some support from the donor community in order to make them financeable. But
if we rely on government and the donor community alone, we’re never going
to make sufficient progress.
I understand that many island communities have some degree of wariness about
public-private partnerships, which in some contexts is synonymous with privatization. Some
island communities, such as the CNMI and Guam, have been willing to involve
the private sector in energy functions that the islands have traditionally
handled through the public sector. Public-private partnerships can be
attractive ways to access capital for energy systems and improve their management. I
have a theory about why public-private partnerships, which have been successful
around the world, have traditionally been a harder sell in the islands. It’s
true that collective ownership is engrained in Pacific cultures. But
also, local government employees tend to be the group that is most suspicious
of public-private partnerships, because they see it as a threat to their jobs
or an indictment of their performance. I believe that the concerns of
public employees can be assuaged on both counts, but these perceptions persist. In
the islands, at least in the U.S.-affiliated insular areas, local government
employees tend to make up a vastly disproportionate percentage of the electorate. That
in itself, I believe, is a serious structural problem for the economies of
the U.S.-affiliated insular areas, and one of the many negative effects of
this structural imbalance is that it makes it politically more difficult to
consider public-private partnership solutions that could benefit the community.
We should continue to explore the feasibility of larger scale power generation
facilities that use alternative energy technologies. However, there is
much that can be done on a smaller, more localized scale to enable the islands
to harness the benefits of alternative energy.
Many of you here are already working on establishing alternatives in photovoltaic
or solar energy in your communities. I commend these efforts, especially
right here in the Marshall Islands. This is a promising source of energy
for many island communities, especially those that aren’t competing to
set the world’s record for the most rainfall.
Another interesting development has been the use of biofuel from coconuts
which can be used to fuel lamps and even diesel vehicles. I know some
vehicles in the North Pacific are already using coconut oil diesel fuel, including
right here in the Marshall Islands. I was quite pleased to learn that
all of the U.S. Peace Corps vehicles driving around the island of Pohnpei are
fueled by coconut oil, and leave in their wake the pleasant smell of coconut
as they drive by.
The way to get these projects moving is for innovative private sector companies
to see them as business opportunities in your island communities. Once
again, the Department of the Interior will provide an excellent forum for these
opportunities to be explored. Our fourth Conference on Business Opportunities
in the Islands will be held on Guam on October 8 and 9. As in past years,
alternative energy and other infrastructure will be among the topics addressed. The
major headline will be the Guam military buildup, which will entail a government
investment of approximately $16 billion. That public sector investment
will spur a great deal of commercial opportunity for many businesses, not just
those companies that are fortunate enough to get direct contracts with the
Department of Defense. Consider that the Guam buildup will result in
Guam’s population increasing by 35,000-40,000 people, or over 20 percent. Those
people will need places to live, places to shop, places to eat. They
will need products and services to buy. And they will most certainly
need energy.
There are plenty of opportunities in the other island communities as well. Almost
all of the island communities are looking for ways to address their energy
needs. Some business opportunities can be supported by financial assistance
from the Office of Insular Affairs, the U.S. Department of Agriculture, multilateral
institutions and others to support infrastructure development, engineering,
consulting, feasibility studies and other activities. Other opportunities
will be viable without public financial support.
The Conference on Business Opportunities in the Islands is one-stop shopping
for opportunities in all of the U.S.-affiliated island communities. Last
year’s conference in Honolulu was hosted by Secretary of the Interior
Dirk Kempthorne, and was attended by President Note of the Marshall Islands,
President Remengesau of Palau, then-President Urusemal of the FSM, the Governors
of the territories, high-ranking U.S. government officials, officials of multilateral
institutions such as the Asian Development Bank, high ranking officials from
all of the island communities, potential local business partners from all of
the island communities, and businesses from all over the U.S. and the world. It’s
the one venue where you learn about opportunities in the islands and actually
meet the government officials and potential local partners that you’ll
need to meet to pursue these opportunities. I encourage all of you to
attend, especially the private sector representatives that are here today. You
can register online at www.businessopportunitiesconference.com. Space
is limited, and we always fill up quickly.
I thank you all for listening to my infomercial, and to my musings on the
great need in the islands to develop alternative energy. We all know
the saying that the definition of insanity is doing the same thing over and
over again and expecting a different result. Continuing to rely on the
same old energy solutions will yield the same old result: Excessively
high electricity prices, arrested economic development, living standards that
don’t improve. We’re going to have to find a better way. I
look forward to working with all of you to help find that better way, so that
all of our island communities can enjoy a strong and prosperous future.
Thank you and Kommol Tata.
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