The War Against Renewable Energy

According to the Report Global Trends in Renewable Energy, the year 2015 was a record-breaking year for renewable energy (RE). Investments in the sector reached $258.9 billion globally. Of the total capacity installed last year, excluding hydro power, a whopping 53.6% came from renewable energy. There was also a significant increase in the installed capacity for wind and solar photovoltaics last year—rising remarkably from 49 GW to 62 GW for wind and from 45 GW to 56 GW for solar photovoltaics.

There is no denying that the world is starting to make its shift towards renewable energy. However, it seems that there are those who work hard against the tide. An ongoing war in the US hinders the rising demand to harness one of the world’s most constant sources of energy: the sun.

Nevada, which has the highest percentage of solar energy among all the states in the US, is regressing from its commitment to develop renewable energy, especially for solar. Its utility regulator allowed its state utility firm, NV Energy, to increase its fees to solar users arguing that these consumers should be charged for the use of the grid. The energy firm also decreased the amount they pay customers for the solar energy that they place back on the grid. Residents who have invested a lot to install solar rooftops on the premise of cheaper electricity are now at a disadvantageous position, given the change of heart of the state regulator.

Similarly, in 2013, Arizona regulators also approved a $5 monthly fee that was slapped on solar users. Reports also note that utilities in other states are lobbying to curtail the development of RE in their areas.

Why are large utilities battling against solar or perhaps, RE in general? Given the many calls to shift to the cleaner energy sources, energy companies that have been making profits in developing and supplying traditional sources of energy will fight hard to keep their businesses alive. As more people shift towards RE, we can also expect more initiatives launched against it.

Unfortunately, the war against renewable energy is not just confined in the US or other developed nations. I will argue that, locally, the renewable energy sector is facing its own battles.

For example, our local regulators are far from being friendly to redevelopers. Again, as I have stressed before, our regulators make it less enticing for private investors to develop renewable energy plants. Our regulators, unfortunately, do not give importance to the risks taken by RE plant developers when approving the tariff setting. As I have explained before, the ERC uses the same value for the Beta or measure of risk regardless of the technology used for the plant project instead of giving premium. Regulators are unable to reflect the real costs of the risks undertaken by developers in tariff setting. Simply put, the regulators’ behavior is unfair to RE developers as the cost recovery computation does not reflect the real cost of producing RE. RE developers, after all, take higher risks than traditional energy developers.

Similarly, the Competitive Selection Process or CSP implemented by DOE can be construed as a war against renewable energy.  The CSP, the brainchild of former Energy Secretary Jericho Petilla requires aggregation of demand and mandatory bidding to be conducted by a third party. It takes away the power of distribution utilities to contract power on their own. There have been many objections to the CSP by power industry players, and yet, despite consultations, our regulators have decided to implement the CSP (although ERC’s version is different from DOE).

Why do I say that the CSP is a form of war against RE? Keep in mind that under the CSP, demand must be aggregated first and bid out by a third party. The result is a bid for a large quantity of energy. Unfortunately, renewable energy plants relatively have small capacities. Any small power plant would have a difficult time competing against those traditional power plants that can generate large amounts of power. The CSP places RE plants at a disadvantage. Again, as I have expounded on in my previous post, the CSP runs counter to the goal of EPIRA, which is to promote a level playing field among industry players—as the implementation of such measure leaves RE developers in the cold.

Data from the DOE showed that as of 2014, some 43 % of power generated came from coal-fired power plants while geothermal energy and hydropower only accounted for 13% and 11%of the total power generated, respectively. Sadly, other RE technologies only accounted for 1% of the total power generated.

The DOE wants a fuel mix consisting of 30% RE, 30% coal and 30% natural gas by 2030. But it also admitted that if we continue with our usual business of neglecting the RE sector, and then coal will account for 70% of the energy mix.

Such great reliance on coal will obviously have its consequences. For one, we will be at the mercy of global prices of coal prices.

Just recently, Reuters reported that Indonesian authorities have blocked ships from leaving for the Philippines from two Indonesian coal ports for fear of ship hijacking in the Philippines seas by Islamist militants.  Such security concerns have led to the non-approval of shipping permits to the Philippines in these ports. This is an alarming situation as Indonesia supplies 70 percent of our coal. This means that our country might suffer from coal shortage, and likely to face higher electricity prices given that almost half our power are sourced from coal. Again, situations like this leave us vulnerable to energy price spikes.  What we need to do is to end our reliance on coal, and create a stable supply of energy by putting to good use our natural resources.

As they say, no one wins in any war. There will always be casualties and losses—and this case is no exception. It is time to put an end to the hostile environment suffered by RE developers and create a friendlier one for RE developers.

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