Illuminating Vanuatu’s Solar Tax Debate: Addressing Chronic Underinvestment and Its Consequences
The recent proposal by the Utilities Regulatory Authority (URA) to introduce a fixed charge for self-generated electricity using solar power systems has sparked an intense debate among Vanuatu’s citizens. The decision, targeting customers of VUI in Santo and outer islands who use the power grid as a backup, has raised numerous concerns that demand attention.
It is crucial to recognise that the Minister of Trade and Commerce recently apologised for the lack of consultation when implementing new policies that dramatically affect the economic environment and businesses in Vanuatu. The public outcry in response to the solar charge proposal clearly indicates that the consultation and communication surrounding the changes have been inadequate.
Moreover, it is essential to highlight that the chronic underinvestment in the grid has now led to the introduction of a policy that once again places the burden on the business sector and the drivers of the economy. In other words, poor planning by the Government is pushing the problem onto the business community. This is a troubling trend that undermines the growth and stability of Vanuatu’s economic landscape.
The Government and regulatory bodies must acknowledge that the long-term neglect of the grid infrastructure has contributed to the current challenges faced by the energy sector. By failing to make the necessary investments to upgrade and maintain the grid, they have created an environment where businesses and consumers are forced to bear the costs of inefficiencies and instability.
The solar charge proposal has raised several issues that require further discussion, including the fairness of billing for unused energy generated by solar systems, the impact on the cross-subsidy mechanism designed to support access to essential services for small users, and the potential deterrence of future investments in renewable energy.
To address these challenges, alternative solutions should be explored. Net metering, dual metering, and feed-in tariffs have been successfully implemented in other countries, such as Fiji, to accelerate renewable energy deployment. These options allow customers to feed excess power back into the grid, providing clarity and security of income for investors.
Increased governmental support through tax incentives and targeted investments in the energy sector could also help mitigate the impact of the solar charge on businesses and domestic customers. The National Green Energy Fund could provide capital assistance to suppliers of renewable energy solutions to minimise the risk associated with the introduction of the solar charge.
As VUI conducts a three-month trial on the solar charge and the URA plans consultations in Port Vila, it is imperative that all stakeholders are given a platform to voice their concerns and contribute to the debate. The Vanuatu Chamber of Commerce and Industry urges everyone to actively participate in this important discussion to ensure that the final policies implemented are well-informed, equitable, and beneficial to Vanuatu’s economy and its people.
Moving forward, the Government must prioritise investments in the grid infrastructure to create a stable and efficient energy sector that supports economic growth. By addressing the chronic underinvestment and engaging in meaningful consultation with the business community and other stakeholders, we can develop policies that promote sustainable development and distribute the costs and benefits fairly.
We must work collaboratively to find solutions that foster a thriving and resilient economy for Vanuatu.
Written by Glen Craig, Chair of the Vanuatu Business Resilience Council and business owner of Pacific Advisory
