Finance


Powering the Philippines on renewable energy




FINEX FOLIO
FLOR GOZON TARRIELA


Posted on March 27, 2015


SUMMER is here, and also the hot weather discomforts and the expected brownouts as a result of the scheduled one-month maintenance shutdown of the Malampaya gas facility that provides fuel to three big power plants.

Faced with this situation, the government has taken steps to mitigate the power supply situation by prioritizing the development of the country’s indigenous renewable energy resources. Renewable Energy Management Bureau Assistant Director Marissa Cerezo briefed the Philippine National Bank (PNB) Board of Directors on the renewable energy industry. The Philippines has huge, diverse renewable sources of energy that can be harnessed to generate clean, non-polluting power. Developing these resources will reduce the country’s dependence on expensive imported fuel. The available renewable energy sources and their energy potentials are wind power estimated at 76,000 megawatts (MW), hydropower at 10,500 MW, geothermal at 1,200 MW, ocean energy at 170,000 MW, biomass (bagasse) at 236 MW, solar energy at an average of 5 kilowatt-hour (kWh) per square meter per day, as well as the vast untapped potential of micro-hydro power.

Making some quick computations, it appears that if we could develop all of these resources, the total potential power that can be generated will be more than thrice the total power consumed by the country in 2013. However, based on the power generation mix in 2013, the Philippines derived only about 26% of its power requirement from renewable energy particularly from hydropower plants which contributed 13.3% of the total and geothermal plants at 12.8%. Other renewable sources such as wind, solar and biomass generated a mere 0.4% of the total power consumed in that year.

To accelerate the exploration and development of the country’s renewable energy resources, two important laws were promulgated namely the Biofuels Act of 2006 (Republic Act 9367) that provides fiscal incentives and mandated the use of biofuel-blended gasoline and diesel fuels, and the Renewable Energy Act of 2008 (RA 9513) that provides fiscal and non-fiscal incentives to private sector investors and equipment manufacturers/suppliers.

According to Ms. Cerezo, since the enactment of the Renewable Energy Law in 2008, a total of 638 renewable energy projects with a potential capacity of 10,041 MW have been awarded as of December 2014. More than 60% of these are hydropower projects.

To encourage renewable energy investment, the government provides incentives such as:

(1) the feed-in tariff (FIT) scheme that provides priority treatment to renewable energy developers in terms of connection to the grid, purchase and transmission of and payment for by grid operators, and a fixed premium rate for a specified period of time. The FIT rates for the renewable energy sources are P9.68 per kWh for solar energy, P8.53 per kWh for wind energy, P6.63 per kWh for biomass and P5.90 per kWh for run of river hydropower. The power cost for solar projects is currently under review as the installation target for solar powered projects was increased;

(2) Second is the net metering scheme, which allows households and businesses to produce their own energy with solar rooftop installations of up to 100 kW. It should also be noted that renewable energy projects have relatively shorter development and construction periods compared to traditional large scale coal and fossil-fueled power projects.

The Forum on Renewable Energy 101 was held recently. With resource speakers Lean Leviste, President of Solar Philippines, former Department of Energy (DoE) Undersecretary Jose M. Layug, Jr., and Commissioner Alfredo Non of the Energy Regulatory Commission.

Lean, 22, spoke of this exciting time for renewable energy when we don’t have to choose anymore between business and investment with their current projects now supplying power to end-users at below Meralco’s per kWh rate of P9.00 and displacing electricity at the peak time of day where electricity rates are highest. Jay Layug spoke on the development of renewable energy projects in the Philippines with the highest percentage of renewable energy in use in the Association of Southeast Asian Nations (ASEAN) region and with a goal of hitting 30% of our total energy supply coming from renewable energy. DoE’s installation target (in MW) is 250 for biomass, 250 for run-of-river hydro, 250 for solar (previously at 50), wind at 200 and ocean at 10.

At the current price of solar panels which have significantly dropped, payback period is about six years, coupled with peace of mind that in case of power shortages, we have a back-up source of power. The major risks involved in renewable energy are: reliability of source, transmission, change in laws and billing and collection for the FIT.

The Philippines is truly blessed with renewable energy sources such as wind and the sun that can be harnessed to produce stable power that is needed to electrify homes and fuel businesses that will propel the country’s economic growth. Despite the progress in the renewable energy sector, there is certainly much work still to be done. It is hoped that renewable energy can be a good contributor to the power sources of the Philippines.

FLOR GOZON-TARRIELA is Chairman of PNB and Finex Trustee. She was formerly undersecretary of Finance. First Filipina Vice President of Citibank, and an aspiring natural farmer and gardener.