Why renewable energy costs are going down at a slower pace

By Jenina P. Ibañez, Reporter

RENEWABLE ENERGY made cheaper by economies of scale over the past decade will be made even less expensive, except at a slower pace, industry participants said.

However, moves to reduce cost and expand renewable energy sources in the Philippines are running up against lengthy regulatory processes and pricey technology.

For the most part, renewable energy has become significantly cheaper.

In 2013, producing a megawatt of power through solar energy would take $1.6 million to $1.8 million. A bulk of spending in solar and wind energy goes into construction, after which operational costs are small, SunAsia Energy, Inc. President and Chief Executive Officer Tetchi C. Capellan said in an online interview.

Today, producing a megawatt of power through solar costs $700,000.

“When the roll out of solar power started to penetrate Germany, Netherlands, Spain, US, Japan, Vietnam, Thailand, Australia — when it started to penetrate in big megawatt numbers, siyempre ang cost to produce bumababa (of course, the cost to produce went down),” Ms. Capellan said. “May volume ka, may economies of scale ka (You have volume, you have economies of scale),” she said.

Based on 2019 figures, the estimated levelized cost of energy of solar is P3.85 per kilowatt-hour (kWh), while biomass is at P4.56 [per kWh],” National Renewable Energy Board Director Alberto R. Dalusong III said in a phone interview.

The levelized cost of energy measures the lifetime cost of generating electricity through a plant or technology.

Wind is P5 per kWh and run-of-the-river hydro is P6.6 per kWh, according to his estimates based on available data from energy associations and projects. Coal was at P5.35 per kWh.

Given that the data is two years old, Mr. Dalusong said that wind and solar are likely cheaper at this point. The capacity of coal plants could also be lower given the outages, he said, which would mean his calculated coal costs could be an underestimate.

Ms. Capellan said the costs to produce power through renewable sources will keep going down over the next few years, but not as much as it did before.

Research and development into solar panels has been churning out technologies that produce more power efficiently by taking up less land and using lighter panel structures.

“Siyempre ’yung mga manufacturer ng panel (Of course, the solar panel manufacturers) — of which China is leading — their research and development and the materials that they’re using has cost and they also have to recover their R&D period,” she said.

Don Mario Y. Dia, vice-chairman of BioPower, said development of technology that would ultimately reduce costs through efficiency would require spending.

“When you develop new technologies, you have to spend. Like ethanol, for instance. We have to propagate so that you can be efficient, so that your costs can come down,” he said in a phone interview.

“The costs of development of new technologies is still on the high side.”

Expenses are also driven by the high cost of the hectares of land required to produce enough energy, and by the services needed to follow local regulatory processes.

“To build a solar power plant, including land conversion, you need 124 signatures,” Ms. Capellan said.

Developers of Renewable Energy for AdvanceMent, Inc. (DREAM) President Jose M. Layug, Jr. said that the manpower and repetitive research studies needed to put up the plants add up to such high expenses that cutting red tape would likely reduce costs by 10%.

For him, the expansion of renewable energy sources would ultimately reduce prices for consumers by adding more supply.

“Worst-case scenario, we will be where we are now currently trending: more coal power plants being built and more coal being imported for these power plants. Once coal becomes a problem in terms of imports, then prices will go up in the future,” he said in a virtual interview.

“If the demand for coal goes up, we are dependent on Indonesia and therefore our electricity rates will also go up. It’s a function of demand of that particular fuel. But if we have renewables, we don’t need to import. They are already here, so we will not be subject to price volatility,” he said.

He recommends that government policy prefers renewables.

“They are cheaper, indigenous. We don’t need to import coal and oil. We reduce dependence on imported fuel and therefore we’ll become self-sufficient and self-energy reliant.”

More ideal supply conditions could drive down prices for consumers, but BioPower’s Mr. Dia said the country has not prepared to build renewable energy plants or refurbished its existing coal plants to do so.

To address this, he said that the government must follow through on its renewable energy plans, making clear and consistent guidelines to attract investors.

Using solar energy — which is generated during the daytime — more expansively will also require expensive batteries for storage, he said.

“But we can already start trying out small capacities so that there’s practice, training, transfer of technology — and we learn from it. That’s how renewable energy should be developed.”

When it comes to the hectares of land needed to produce renewable energy, Mr. Layug said the Philippines can tap into other spaces: floating solar panels and offshore wind on bodies of water.

The future of renewable energy — and the cost of power — will ultimately depend on the decisions of the next administration, he said.

“It’s a function of what would be the fundamental policy of the next administration. Are you going to go technology neutral, the current policy now of this government? Or are you going to push for more renewables?” he said.

“If you push for more renewables, then we have seen already the trend. Prices have gone down, so why don’t we add more to the system?”