Energy Security Series Part 2: Energy Poverty

Some 840 million people worldwide don’t have to electricity. Photo c/o WEF

Energy poverty can be defined in several ways. In its simplest definition, energy poverty is the lack of access to energy services.

The World Economic Forum (WEF) defines it differently. For the WEF, energy poverty is “the lack of access to sustainable modern energy services and products.”

In his encyclical letter entitled Fratelli Tutti, Pope Francis touched on energy poverty, stressing that “forms of poverty are emerging.” He calls on us to to view poverty differently since the modern world’s current criteria do not correspond to present-day realities. “For example, lack of access to electric energy was not considered a sign of poverty, nor was it a source of hardship. Poverty must always be understood and gauged in the context of the actual opportunities available in each concrete historical period.”

Data from the United Nations (UN) shows that there are some 840 million people who live without access to any electricity worldwide. 

In the Philippines, some 1.62 million households still don’t have access to power. The country’s archipelagic nature makes it challenging to provide electricity for the many remote islands and communities.

We cannot talk of energy security in the Philippines without discussing energy poverty. After all, access to electricity is necessary for economic growth.

A study by the Philippine Institute of Development Studies showed that rural households and rural-based economic agents need electricity to enhance their productivity and expand home-based economic ventures. Having access to electricity is a significant determinant of agricultural productivity. Electricity enables Filipino families to operate their livestock and poultry farms as well as store their produce efficiently. Electricity is necessary for many Filipinos to engage in micro-small businesses to help them get out of poverty.

That’s the economic side. Health-wise, the absence of electricity increases the risk of premature deaths due to household air pollution as many rely on solid fuel for cooking like fuelwood or charcoal. 

The World Health Organization (WHO) estimates that roughly four million die prematurely annually e due to household air pollution from the use of solid fuel for cooking.

As we still have seven percent of Filipino households without access to electricity, what must we do?

To connect the hardest to reach and the poorest households, we must invest in off-grid solutions such as mini-grids, solar home systems, and solar lighting. It has been working for the entire world as according to the World Bank since at least 34 million people in 2017 gained access to basic electricity services via off-grid technologies. At the local level, we have been receiving grants from other countries to develop mini-grids powered by renewables.

Off-grid technologies will not only provide access to electricity to Filipinos but will help cut down electricity costs for off-grid locations.

A study conducted by the Institute for Energy Economics and Financial Analysis (IEEFA) and Institute for Climate and Sustainable Cities (ICSC) concluded that the Philippines can save as much as Php 10 billion if off-grid islands rely on renewable sources than traditional ones.

The study stressed that mini-grids powered by generators running on imported diesel and bunk oil are not only proving to be expensive but have also resulted in blackout and power outages. It noted that Filipino taxpayers are footing a huge bill by subsidizing these expensive imported fuels.

The authors of the study “Electricity-Sector Opportunities in the Philippines: The Case for Wind- and Solar-Powered Small Island Grids” have called for prudent reforms where electric cooperatives and distribution utilities (DUs) will be required to procure cheaper sources to reduce costs.

Similarly, a European Union-funded program, the Access to Sustainable Energy Program (EU-ASEP) also concluded that the National Power Corporation (NPC) can also save roughly Php 2.25 million or Php 4.50 per kilowatt-hour if the agency combines renewable energy with traditional power for off-grid islands’ mini-grids.

Indeed, renewables are also the way to go in giving access to electricity to all Filipinos. 

IEEFA’s recommendation in its study echoes mine as I have been vocal in requiring distribution utilities to testify that there are no available indigenous resources in their franchise area during the procurement stage. We must change regulations as our goal is to provide electricity not regardless of the cost but to provide electricity that’s affordable. 

The DOE has already come up with rules and guidelines on renewable portfolio standards (RPS) for off-grid areas in 2018, which was supposed to be implemented this year. The department, however, has suspended first-year compliance to resolve a variety of issues.

Even if the RPS for off-grid areas is being implemented it’s not enough. I have been advocating for higher levels of renewables in the RPS. 

Our goal is not simply to provide electricity to all but as WEF said to ensure that there is access to modern energy services and products. The dominance of diesel-fired mini-grids should be a thing of the past. 

Advances in technology have driven prices of renewable energy technologies down and it’s time that we benefit from new technologies that make electricity more accessible and affordable. Modern times require us to change regulations as our goal is not only to make electricity accessible to all but to provide affordable electricity to all.

Is Power Distribution Still a Natural Monopoly?

Photo c/o https://energydemocracyyall.org

In his last State of the Nation Address (SONA), President Rodrigo Duterte asked Congress to pass priority bills including the proposed amendments to the Public Service Act.

Senate Bill No 1441 seeks to amend the Public Service Act to define the difference between “public service” from “public utility.” The amendment will lift nationality restrictions in the investment in areas of transportation, power generation, and supply, telecommunication, and broadcasting, among others. The 1987 Constitution does not define “public utility” and thus limits the allowed foreign investments in various sectors.

Under the bill, public utility will be treated as a mere subset of public service. Only three main industries will be treated as public utilities as they are argued as a natural monopoly. These three include Water Works and Sewerage, Transmission of Electricity, and Distribution of Electricity, which will be covered by the 60-40 rule on foreign ownership.

But my question is, must electricity distribution be considered a natural monopoly? A “natural” monopoly cannot be legislated by Congress. It is a market condition Legislating it as such is tantamount to legislating the law of supply and demand.

A natural monopoly exists because of either powerful economies of scale or high start-up costs in specific industries. It’s when a single entity is technologically capable of serving an entire market at lower costs rather than having multiple firms serve the same market.

According to a paper by Electricity Daily, it was more than a century ago when Samuel Insull, considered a legend in exploiting new technologies, masterfully demonstrated how a single firm could offer power at a much lower cost than the combined multiple small power companies. He invested in large turbines and boilers and connected such generators with many customers.

The paper entitled “Will distributed energy end the utility natural monopoly” stressed that natural monopolies thrived as policymakers embraced the idea of providing power at a lower cost to consumers by giving a single firm a legal monopoly and regulating power prices to recover costs. The policy was to offer exclusive rights to serve and combine it with cost-based regulation.

The study noted that the policy approach to natural monopoly is still highly recommended by economists today. I share the views of the authors of the paper when they said that we can easily confuse legal monopolies with natural monopolies. The Senate bill proposing to classify electricity distribution as a public utility is a testament to that fact. Plus, in the Philippines, only one entity is allowed to distribute in a franchise area.

The monopoly is legally created and is a clear illustration of Nobel Prize winner Vernon Smith’s point that regulators have encouraged monopoly in electricity markets. Economics professor Smith’s paper “Currents of Competition in Electricity Markets” noted that “Regulation has been applied far too broadly to the electric power industry. As a result, policies intended to restrain monopoly power have instead propagated that power.”

The past few decades have shown that technological advances are eroding utilities’ natural monopolies. Take the case of Independent Power Producers (IPPs) that are financed, developed, and operated by multiple independent companies that offered lower-cost power than a single larger counterpart. These IPPs proved that generation can be done by smaller firms at a lower cost, thus breaking the notion that power generation is not a natural monopoly.

We are now seeing the same happen on the distribution side with the emergence of distributed energy resource (DER) technologies and digital technologies.

A study published by the Massachusetts Institute of Technology noted that “DERs and digital technologies dramatically expand the number of potential investors in and operators of power system infrastructure, challenging traditional means of planning and coordinating the construction of generation, storage, and network assets.”

The study entitled “Restructuring Revisited: Competition and Coordination in Electricity Distribution Systems” stressed that there are relatively few barriers preventing investors and even consumers from adopting DERs in most developed power systems.

The authors also noted that “Indeed, many DERs (for example, “smart” HVAC units and water heaters) look more like consumer electronics than power sector resources. Consumers do not need to coordinate with the DNO/SO to install and operate these devices, despite the fact that these devices can have significant impact when considered in aggregate.”

The emergence of new technologies such as battery storage, rooftop solar, and non-wire alternatives (NWAs) are disrupting the long-held notion that power distribution is naturally monopolistic. These technologies are bringing down the fixed costs and high start-up costs in distributing electricity.

We only need to look at the case of NWAs, which use microgrids and DERs to replace the traditional “wire and poles” infrastructure in power distribution. Utilities that opt for NWAs avoid the expensive infrastructure investments.

US-based utility firm, Duke Energy makes a great case for the use of NWAs. The firm built a renewable micro gird on Mount Sterling in Great Smoky Mountain National Park and opted for non-wire alternatives in distributing electricity. The microgrid used 10kW of solar and 05 kWh of storage, allowing the firm to avoid shelling out large investments of a four-mile, 12.47 kV grid-connected distribution feeder.

Another US firm, Con Edison was able to avoid spending $1 billion for infrastructure by using $200 million non-wire alternatives under the Brooklyn-Queens Demand Management program. Con Edison opted for the combination of NWAs, DERs, solar-plus-storage microgrids to provide independent power to an area in Brooklyn while avoiding the high costs of lines and poles.

There are other new technologies available that can remove the barriers to entry in power distribution.

We also now have an Advanced Meter Infrastructure, enabling two-way communication of homes and network providers. The two-way communication allows the system to analyze data and act accordingly. Data that can be aggregated, analyzed, and communicated allows sector players to come up with services and products previously unavailable in the system.

Plus, the decreasing cost of information and communication technologies (ICT) will drive the network to improve resiliency and grid management, and increase competition. The Philippines is in a good position to capitalize on the decreasing ICT costs as the entry of the third telco, DITO will pave the way for more seamless integration of ICT and the power system.

So, must we still consider power distribution as a natural monopoly? New technologies are removing the barriers to entry, enabling more entities to enter the sector. Technological advancements allow multiple firms to serve the market more efficiently and cost-effectively than a single firm these days. Why do we insist that natural monopoly exists when there is a second or third player willing to distribute in the same franchise area?

The 1987 Constitution says that monopolies should not exist when public interest is at stake. The State after all should protect the public interest rather than the regulated or legal monopoly. Maintaining legal monopolies runs counter to what the constitution mandates as monopolies put consumers at a disadvantage. The lack of competition gives no incentive to the franchise holder to lower operating costs or provide excellent power distribution services.

We now have the opportunity to introduce competition into electric power distribution as new technologies offer new opportunities to lower power system costs. Instead, we are continuing to legally create monopolies. Smith’s assertion comes into mind “There are numerous ways to introduce competition into electric power distribution. Perhaps the most obvious is to eliminate state policies which grant distributors exclusive operating permits. Customers should have the right to bypass distributors and contract directly with generator owners.”

Power distribution is not a natural monopoly, we are only viewing it as such. Unfortunately, this view runs counter to the essence of the Electric Power Industry Reform Act (EPIRA), which was signed into law primarily to promote competition. Creating legal monopolies and protecting them also goes against our constitution. Failing to recognize that competition in power distribution exists and is possible with the right regulation is a disservice to Filipino consumers.

Energy Security Series, Part 1: High Power Rates

The Internal Energy Agency (IEA) defines Energy Security as “the uninterrupted availability of energy sources at an affordable price.” Energy security, the agency says, has many aspects. There’s short-term energy security, which the agency defines as “the ability of the energy system to react promptly to sudden changes in the supply-demand balance. There’s also the long-term energy security, primarily concerned about timely investments to supply energy for both economic development and environmental needs

There’s no better time than now to talk about energy security in the Philippines, especially as we are experiencing a lack of power supply, resulting in rotating brownouts and energy price spikes. 

And energy security in the Philippines is what I would like to discuss in this post and succeeding ones.

Personally, the term “energy security” is difficult to define. “Secure” from what? Does the concept pertain to physical threats to power supply or exposure to global prices? What sector are we referring to– transport or electricity? Does energy security pertain to the ability of power utilities to weather economic uncertainties?

Long before the COVID-19 pandemic, the Philippines was already exposed to various risks.

For one, more than 80 percent of our coal is sourced from Indonesia. And at the start of the pandemic, I was worried that our supply from our neighbor could be affected by border closures and hampered supply chain and logistics.

There’s also the big percentage of tariffs on energy regardless of whether they are electricity or fuel that are affected by global supply and prices. These risks are shouldered by consumers.

Let me start tackling energy security in the Philippines by discussing high power rates.

It’s no secret that the Philippines has one of the highest power prices not only in Southeast Asia but also around the world. A report by the Institute for Energy Economics and Financial Analysis (IEEFA) noted that our power rates are higher by Php10 per kilowatt-hour (kWh) when compared to global standards.

The report entitled “Prospects Improve for Energy Transition in the Philippines” said that our reliance on imported fossil fuel, uncompetitive market structures, and high financing costs are causing the high power rates in the country. The pass-through costs have inflated power prices in the country.

Let me expound on this as I have long been saying that the high power rates in the country can be attributed to our cost recovery mechanism in our tariff setting, our dependence on imported coal, and our energy planners’ penchant for the least-cost method.

Let’s start with the least-cost approach, which has failed to live up to its name. If anything it has driven power rates up.

The least-cost approach compares various technologies and prioritizes the “cheapest” power source to produce. It only looks at the upfront and standalone costs and fails to factor in other considerations such as risks of supply shortage, global price fluctuations, and foreign exchange.

The least-cost method favors traditional power plants as the upfront costs of building them are cheaper than developing renewable sources. However, relying on traditional sources such as coal comes with big risks. For one, they are purchased in dollars, and as we all know, foreign exchange fluctuates. Plus, there’s the risk to its supply. Had Indonesia closed down its borders due to the pandemic, then where would we source coal?

The problem with the least coach approach is exacerbated by our Power Sales Agreements (PSAs), which typically last for 25 years. Our PSAs have pass-through provisions, meaning the foreign exchange and higher fuel prices are passed on to consumers to allow power producers to recover costs. This means that for the next 25 years or as long as the PSAs are valid, the consumers are exposed to volatilities of foreign exchange global price risks. It’s what I have been calling the ‘floating contract.’

I have then argued for a fixed contract, which is possible for renewable energy sources. The consumers pay the same prices for as long as the PSA is valid. It minimizes the exposure and likelihood of consumers paying when the peso is weak or when global fuel and coal prices are up.

Some generation companies have started to offer fixed-price contracts. I am not privy on how these companies hedge the coal price and forex risks, but I can imagine that these companies play on portfolio management, tenor of power sales agreements and over-the-counter hedging instruments to allow them to offer fixed price contracts albeit for a shorter period. This augurs well for consumers in the long-run as they will be paying the same rate for a fixed period rather than shoulder the costs of a weaker peso or higher global prices.

However, let us go back to our energy planners’ penchant for the least-cost method has gotten consumers into trouble. Just take this pandemic as an example.

Another study by the IEEFA entitled “Philippines Power Sector Can Reach Resilience by 2021″ revealed the weaknesses of the Philippine Energy sector. It noted that the country’s dependence on large scale fossil plants with guaranteed contracts have resulted in grid inflexibility and price instability

Coal plants are inherently inflexible. And so as the pandemic depressed the power demand, fossil fuel plants turned to their mid-merit load factors, which are more costly to run, increasing the cost per kilowatt-hour. This is allowed as the PSAs have cost recovery mechanisms of coal plants that in the words of IEEFA are “designed to ensure IPPs can recover their capital costs and repay their loans on a timely basis. This means that neither the financial sector nor the power sector is liable for the risk they take, as these are passed on to end-users who are ill-equipped to manage such risk.”

Sadly, 80 percent of our caseload coal plants are inflexible.

Again, our reliance on coal, penchant for the faulty appreciation of the least-cost method, and our pass-on provisions are causing consumers to pay more than what they should. All these have caused price instability. Our regulations allowing pass-on costs to consumers are a disservice to the Filipinos. I am happy to note, however, that there are now concrete plans to put up new gas-fired generation plants. Adding gas-fired power plants will allow the entry of more intermittent renewable energy projects. This, partly addresses some of the issues causing high power rates.

Aside from batting for more fixed-price contracts, we should also push the government to order the immediate development of indigenous sources along with making changes to procurement rules. The Energy Regulatory Commission (ERC) does not differentiate imported energy from indigenous ones. 

The commission should require distribution utilities during procurement to testify that either there are zero offers from indigenous power producers or there are no available indigenous resources in their franchise area.

When we talk about energy security, particularly energy prices then we should look at how favoring the least-cost approach has led us into more trouble. IEEFA in its report said it best “Power sector planners assumed that a large system lock-in such as coal would lead to the least-cost system. Unfortunately, this lock-in for countries that import coal has led to inflexibility, price instability, and high prices.”

Additionality: A Concept Often Overlooked in Local Geothermal Energy Development

Photo c/o https://climatographer.com/

The term “additionality” is often used in the climate change space, pertaining to when greenhouse gas projects’ impact exceeds their initial targets.

Cambridge Dictionary defines the word “additionality” in two ways.

In an environmental context, additionality according to the Cambridge dictionary is when there is “the reduction in the amount of carbon dioxide gas released into the environment that happens only as a result of trading carbon credits.”

The Dictionary’s other definition is finance-related, with additionality being described as “the situation in which a government or organization is able to get money from another government or organization especially the European Union, only if it pays for most of the project itself.”

The Organisation for Economic Co-operation and Development (OECD) has identified three kinds of additionality in impact investing, namely financial additionality, value additionality, and development additionality. It is financial additionality that I would like to focus on in discussing the problems in our local renewable energy development

According to the OECD, financial additionality “describes a private-sector investment that otherwise would not have happened.”

Energy consultancy group in the Asia Pacific, Lantau Group has a simplified definition, describing the term additionality as “when someone takes an otherwise non-viable project and makes it happen anyway.”

We can take the concept of additionality and apply it to our local geothermal energy development conundrum.

Local geothermal energy development has been stagnant as very few private entities are willing to undertake exploration risks. Previously, the government shouldered the cost of the preliminary surveys of geothermal areas. Those days are gone now since after the passage of the Electric Power Reform Act or EPIRA, geothermal power exploration and development are left entirely to the private sector. The exploration costs are assumed by the private developer. So, we can say that private firms offer financial additionality when they embark on geothermal exploration and eventually development.

The Lantau Group stresses that additionality implies a premium, and “is clearly a requirement of the economic concept of making something happen that would not otherwise have happened. “

The research group further added that risk is an important element of additionality as investors typically spot an opportunity that looks attractive in current market conditions “but if that value proposition is incomplete or could deteriorate in the future, the investor has to consider risk.”

And there lies the problem with our renewable energy projects, particularly geothermal energy development. Unfortunately, our regulators fail to realize that additionality is about premium. Local regulators have such little appreciation of the risks being assumed by private geothermal developers. This can be seen in our current tariff setting.

I have discussed this lack of appreciation in a previous post. To recap, our tariff setting uses the Beta in computing for the cost of the equity under the Capital Asset Pricing Model or CAPM. The Beta determines the return on equity for any project.

Given the risks being assumed by the private sector in geothermal energy development, one would think that Energy Regulatory Commission (ERC) would offer a premium for the risks of geothermal energy development. Sadly, our ERC uses the same Beta across all power projects, failing to consider the risk profile of each power plant project. The CAPM is being incorrectly applied in our tariff setting.

So, as with the concept of additionality, why should investors put their money into developing geothermal resources when there is no premium to make something happen that would not otherwise happen? Geothermal greenfield exploration costs a lot of money. And one study done by the International Finance Corporation some years back showed that worldwide, only 60 percent of the explored holes turned out to be successful.

It’s clearly easy to see why investors are shying away from geothermal energy development as they are assuming high risks of exploration but won’t be properly compensated for assuming those risks. Again, for investors, a premium is needed to make something happen that would not otherwise have happened.

Revisiting the problems in geothermal energy development in the Philippines is not just timely but also necessary. For one, we are now experiencing rotational brownouts as of this writing given the lack of supply as more people turn on their cooling device this hot season.

For the entire first week of June, red and yellow alert statuses were raised on the Luzon grid. The grid operator was projecting a power supply deficiency of around 201 megawatts. The long-term solution, National Grid Corporation of the Philippines (NGCP) says is to add to the current power supply as demand continues to rise.

The NGCP has warned us of an impending power supply shortage in Luzon as early as March saying that operating margins were forecast to be thin from April to August this year. The grid operator called on policymakers and power industry players to address the impending shortage.

It was a warning that was downplayed by the Department of Energy (DOE) claiming that supply and demand projections don’t indicate any possibility of a red alert, although the Energy Secretary did admit in a Senate Energy Committee that a power generating capacity supply shortage does exist.

The current power supply and demand situation highlight the Philippines’ problem with energy security, particularly energy power supply problems.

More so, since there has been a moratorium on new coal power plants. Banning new coal-fired plants is a step in the right direction but without proper planning, the moratorium also leaves the country in a more vulnerable position. We are left with very limited options for baseload power plants, namely diesel, gas, and geothermal.

Geothermal power can act as a baseload plant, which is why it’s a great substitute for traditional sources of power. We can use geothermal to replace coal-fired plants.

Plus, new geothermal technologies are emerging. For example, there’s Google’s partnership with Fervo and Dandelion energy.

Fervo is developing the world’s next geothermal project, which will offer an “always-on” carbon-free resource. The company is working on how to use advanced drilling, analytics techniques, fibre-optic sensing, artificial intelligence and machine learning. Fervo aims to use AI and machine learning so the geothermal plants are more effective in responding to energy demands while fiber-optic cables can collect real-time data on temperature and flow of the geothermal resources so the best existing geothermal resources can be identified.

As for Dandelion, it’s making home geothermal heating more accessible. So far, the firm has installed hundreds of geothermal heating sites in New York and is currently improving its drilling technology to make residential drilling and heat pump installation easier and also more competitive with the current fossil fuels.

All these new technologies and developments in geothermal energy development should bode well for us as the Philippines have massive geothermal energy sources. Addressing the challenges hindering the growth of geothermal energy development in the country swiftly will go a long way in providing more baseload power and more alternatives for the consumers.

Thus, it’s important for us to review the concept of additionality and how our failure to provide investors with a premium is keeping us from using other sources of power for baseload. Our regulators need to incentivize investors. The government can no longer engage in exploration and development so it’s up to the private sector to make something happen that would not otherwise have happened or simply put help make more geothermal power more available.

Revisiting the Role of Battery Storage in Renewable Energy Development

According to the annual report of the International Renewable Energy Agency (IRENA) entitled “Renewable Capacity Statistics 2021” more than 80 percent of all new electricity capacity added in 2020 was renewable. In contrast, total fossil fuel additions fell to 60 GW fin 2020 for the 64 GW recorded in 2019, which as the report noted stresses the continued downtrend of fossil fuel expansion.

IRENA Director-General Francesco La Camera says that “2020 marks the start of the decade of renewables” since costs continuously falling, and clean tech markets are growing. It’s an unstoppable trend but more needs to be done if the world is to achieve the Paris Agreement goals of bringing C02 emissions close to zero by 2050.”

Another IRENA report entitled “World Energy Transitions Outlook” says the world needs more technology and innovation to advance the energy transition. The world will have to increase investments in the energy transition by 30 percent to a total of $131 trillion from now to 2050

It’s a conclusion that Morroo Shino president and CEO of Marubeni Asian Power echoes. The head of the Japan-based independent power producer sees two categories that will accelerate our shift from fossil fuels to sustainable, clean power. The first category is investments in proven technologies like wind, solar, and energy storage. The second is increasing investments in rolling out new technologies that can help overcome current challenges in RE development such as solutions for baseload power.

Indeed, more investments are needed to store renewables as only geothermal energy can act as a baseload plant. Energy storage plays a crucial role in our electricity grid and will pave the way for increased renewable energy generation.

Let us keep in mind that most electricity grids virtually have no storage capabilities. In the Philippines, we have the most mature and common storage facilities, that is pumped hydropower, where two reservoirs with different elevations can store extra power. The Kalayaan pump is an example, except it was not originally intended to store renewable energy and presently provides ancillary services to the system.

Recently, San Miguel Corporation’s power arm, SMC Global Power Holdings Corp announced that it will be spending more than a billion dollars to build new battery energy storage facilities with a rated capacity of 1,000 megawatts (MW). SMC said that 31 new battery energy storage units are already underway with some storage facilities already in the advanced stages of completion.

SMC Global Power is building battery energy storage facilities to help address power quality issues. Photo c/o https://www.sanmiguel.com.ph/

The company said that the immediate goal of building the facilities is to address power quality issues as the projects will be used as a regulation reserve ancillary service by our grid operator, National Grid Corporation of the Philippines (NGCP).

Having more battery energy storage systems (BESS) bodes well for the Philippines. BESS stores energy during off-peak times while the battery supplies power during peak periods, thus providing frequency regulation and voltage control to the power system. This is over and above its use as a generation resource. Because of its nature, it can provide energy at 100% capacity factor. Think of your mobile phones – even if the charge goes down, it still delivers the same energy and capacity. Of course, eventually, you will need to recharge the battery of your phone.  This is the same what happens when batteries provide energy to the grid.

BESS is also the optimum solution to problems of storing energy from renewable sources as it can also discharge when more power is needed in central, de-central, and off-grid situations. It is exceptionally useful for our faraway provinces or off-grid areas.

Plus, battery energy storage also reduces the need for both peak generation capacity and transmission and distribution capacity upgrades. It also lowers greenhouse gas emissions.

Those are just the operational benefits of a battery energy storage system. There are also social and economic benefits to be gained. For one, the ability to shift demand to off-peak results in energy bill saving and reduces the need for dispatching expensive peaking generators during peak time. There are significant savings on fuel bills In hybrid systems where diesel generating sets operate alongside BESS and renewable energy.

And more importantly, in renewable energy, battery energy storage systems address the challenges of dealing with the intermittency of renewables. In the words of ADB senior energy specialist Atsumasa Sakai,“Mega battery energy storage systems are one technology that holds significant promise for increasing the share of renewable energy available for the grid, and for energy consumers.”

Unfortunately, we lack ancillary services in the Philippines. Data from the Department of Energy (DOE) shows that a total of 2,604 MW have been identified as required ancillary service but to date only 727 MW are deemed confirmed ancillary services.

NGCP in a recent senate hearing admitted that the grid operator could not contract firm AS reserves due to the lack of available capacity. So, SMC’s foray in BESS is beneficial in closing the gap between our grid’s needed ancillary services and available capacity in the market.

It would also be helpful if we have independent platform for ancillary services. One that’s transparent and inclusive, meaning a platform that includes all ancillary services as long as they meet safety and security requirements. NGCP had plans of having its own ancillary procurement platform but it yet has to push through.

BESS has so much to offer us both on renewable energy development and the economic and operational side. But as experts have been saying, when it comes to renewable energy development, more support is needed in the policy framework. In the case of battery energy storage, much like other developing countries, we need to adopt laws and regulations that would encourage market players to provide ancillary services, or specifically a transparent procurement platform.

All Is Not Lost

The world was on its way to massive energy transitions before the pandemic came. Governments were announcing ambitious clean energy targets and banks were shying away from funding coal projects. Big businesses, too were flexing their muscles, announcing 100 percent renewable energy targets to be met in the next few decades.

However, the COVID-19 pandemic, one of the major shocks in major history, happened. It caused disruptions in every business, mobility, and everyday life. This pandemic also caused the most severe economic recession since World War II.

As the world grapples with the effects of the COVID-19 pandemic, has all been lost when it comes to clean energy transition? Are governments less keen on keeping up with their clean energy goals and Paris Agreement targets?

Not all bets are off said Boston Consulting Group (BGC) Center for Energy Impact. COVID-19 may have changed the economic calculus of many governments but these could bode well for renewable energy development.

The consulting group studied how regions around the world are adopting evolving stimulus measures that are altering energy transition plans. The study noted that Europe’s clean energy shift is likely to move forward while some hard-hit countries in South Asia, Africa, and Latin America’s ability to promote energy transitions are severely constrained. It also said that the adoption of renewable and electrification of transport in Northeast and Southeast Asia are likely to increase.

BGC said some countries are pushing forward with their clean energy plans as they have suffered less adverse health and economic impacts from COVID-19. Many leading Asian economies such as Singapore, Malaysia, China, Japan, and South Korea are in a good position to make substantial energy infrastructure-related investments required to make the energy transitions. These countries, after all, are likely to gain the most by aggressively investing in renewable energy generation. These Asian countries have also adopted policy reforms and stimulus measures aimed at increasing industrial competitiveness.

BGC also looked back at history to determine how governments’ responses to economic recessions influence the energy sector’s trajectory.

Back in the global recession of 2007 to 2009, various governments implemented green stimulus programs justifying such moves by saying that a greater commitment to renewable energy development could jolt economic development and offer long-term competitive benefits. 

Green energy policy measures back then were not entirely brought about by climate change concerns. The Paris Agreement did not exist back then. BGC stressed that the European Union and the United States governments directed stimulus spending towards renewables to generate new installation, domestic construction, and manufacturing jobs.

Governments too can bank on renewable energy development to drive economic activities during this pandemic. A report by the International Renewable Energy Agency (IRENA) released last year showed that accelerating investments in renewable energy can help economies recover as they can spur the global gross domestic product (GDP) by almost $98 billion between 2020 and 2050. Renewable energy development can also quadruple the number of jobs over the next three decades.

BGC recognized in its report that the COVID-19 pandemic and the economic recession that comes with it are quite different from the 2007 to 2009 global recession. The collapse of the economy back then required governments to stimulate and sustain new economic activity while the present recession is forcing governments to allot more resources to combat the health crisis while minimizing the impacts of unprecedented short-term employment. Governments are more focused on keeping the economy afloat given their smaller tax revenues and higher spending, rather than jump-starting new economic activity.

In the Philippines, we can expect a much slower energy transition. Aside from the fact that the government’s lukewarm reception to renewable energy before the pandemic, the Philippines also has trouble getting back to its feet economically speaking. As I write this, we are on the fifth week of the enhanced community quarantine or ECQ part 2. The recent jobs report also showed that 4.2 million Filipinos lost their jobs while 7.9 million took pay cuts in February alone. 

According to BGC, “the worse a country is affected by the pandemic, the less likely its government and businesses are to be able to focus on materially altering its energy infrastructure.” It added that energy transitions require a stable economic and social environment to pour substantial investments in energy infrastructure. As the Philippines is badly affected by the pandemic, our country’s clean energy transition will probably be slower.

But this is not to say that the Philippines is in a hopeless situation regarding the clean energy transition. There has been good news last year, after all.

For one, the Department of Energy (DOE) implemented a moratorium on the approval of new coal contracts. It was a move that surprised many as the DOE previously rigorously defended its technology-neutral stand. 

Second, Yuchengco-led Rizal Commercial Banking Corporation surprisingly declared that it would stop funding local coal-fired power projects, following the footsteps of international banks like US third-biggest bank, Citigroup, Sumitomo Mitsui Banking Corporation of Japan, South Africa’s ABSA bank, and Mizuho Financial Group. Such a bold move deserves the country’s gratitude for pioneering this much needed change in our energy landscape.

The Philippines, however, has to make some policy adjustments to attract low-cost funding for renewable energy development. As I have been saying, requiring a higher level of fixed-price contracts is long overdue. Likewise, I have been advocating for a portfolio approach to energy planning so that the tariffs are also based on this portfolio approach.

I’m not alone in these assertions. A study by S&P Global entitled, “How is COVID-19 Impacting the Energy Transition” noted that global investment appetite for green energy remains strong but sustaining appetites requires either fixed-price auctions or long-term visibility in terms of power price agreements. As I have always argued in the last, fixed price contracts will lead to lower power rates for the man on the street.

The Philippines has so much to gain in shifting to renewables swiftly. Even before the pandemic, our government was aiming to become an upper-middle-income country status by 2022. Sustaining economic growth will require more electricity, and local electricity demand is seen to increase by an average of 6.7% annually.

Plus, we need energy security. This pandemic should teach us that it is necessary to end our reliance on imported fossil fuel to power our nation. Just imagine the devastating effect had Indonesia closed its borders and decided to stop exports of its coal. Thankfully, it didn’t happen, but by now we should be working on ensuring our local energy supply.

And experts after experts predict that it would be cheaper to build renewable energy plans than continue the use of existing coal-fired plants, which eventually would become stranded assets.

We are facing monumental challenges in the Philippines as the coronavirus continues to claim lives and cause havoc in our economy. But hopefully, we continue our quest for a faster clean energy transition as more renewables will help us in our economic recovery and ensure energy security. As they say, we need to build back better.

A Stronger Case for Distributed Energy

Apart from disaster resilience, the country will do well in welcoming more distributed energy systems because of other benefits. Photo c/o http://www.advisian.com

Time and time again, thousands of Filipinos are left in the darkness after destructive typhoons hit us.

Just a few weeks ago, Tropical Depression Auring left some residents of Surigao del Norte and Davao Oriental without electricity although the outages didn’t last that long. Auring, after all, was merely classified as a Tropical Depression and didn’t wreck as much havoc as the three typhoons that we experienced last year.

In the last quarter of 2020, Typhoon Quinta, Super Typhoon Rolly, and Typhoon Ulysses battered the country, leaving massive destruction and causing major power outages. The Bicol Region suffered a total power blackout due to these typhoons. 

According to the National Electrification Administration (NEA), the country suffered some Php500 million worth of damages to the utility system because of these three typhoons.

It’s a given that the Philippines will always suffer from catastrophic typhoons given its location. On average, the country is visited by at least 20 typhoons annually, five of which are destructive. We can’t change our location but we can invest in resiliency measures.

 For the Energy Sector, this means revisiting our energy systems, and reinvesting in distributed energy and smart grids

As I have mentioned in a previous post, many countries are already moving away from traditional central power production and are moving toward distributed energy production. The Philippines must follow suit as distributed energy will bring many benefits to Filipinos.

Disaster resilience is one benefit. Our current centralized systems require power lines spanning long distances, which proves detrimental for us when natural disasters happen. Damage to a single line can leave thousands without electricity, which is why it’s hard to restore power immediately. Power distributors, cooperatives, and the transmission company will first have to assess which lines are damaged and affected. Only then can linemen start physically restoring power. Power restoration after a calamity is risky and sometimes results in the deaths of some linemen.

Apart from disaster resilience, the country will do well in welcoming more distributed energy systems because of other benefits.

A recent study in the United States conducted by Vibrant Clean Energy found out that investing in local solar and wind energy, storage, and distributed energy technologies can save the US some $473 billion in power bills from now and year 2050. This amount of savings the research said is feasible if the US invests heavily and uses solar and wind power and distributed energy to power businesses, farms, homes, and schools.

The research also revealed that investments in distributed energy and other technologies that can power 25 percent of US homes are the most efficient way of meeting the country’s climate goals while generating 2 million jobs along the way. And as I have discussed above distributed energy can also help boost the resilience of communities that are dealing with wildly variant weather patterns.

Speaking of farms renewables and distributed energy can also help our agricultural sector.

Recently the Department of Agriculture (DA) and the Department of Energy (DOE) announced that they will jointly undertake pilot renewable energy (RE) projects for the agriculture and fishery sectors in strategic areas of the country. The goal is to promote the use of clean energy in boosting food security. 

Some of the pilot RE projects will include off-grid electrification in corn, rice, and sugar cane farms and the use of solar-powered systems for aquaponics, hydroponics, crop irrigation, and poultry egg incubators and hatchers. The pilot projects will help jumpstart the Renewable Energy Program for the Agriculture and Fishery Sector (REPAFS).

The REPAFS will eventually serve as the blueprint for efficiently and effectively integrating renewables in the agriculture and fishery sector to enhance productivity and ensure sustainability and environmental protection.

The REPAFs will benefit from distributed energy and renewables. Areas that heavily rely on variable energy resources such as wind and solar are better off investing in distributed energy systems as renewable power can be deployed to help balance the grid and improve system reliability.

In this regard we are looking at off-grid solar with battery solutions to be implemented in such areas. One system we are seriously looking into will allow almost a 24-hour electrical source to power  a TV, radio, and a set of lights. And the system will cost below what it currently costs NPC to provide electricity to SPUG areas. We are also exploring collaboration with Land Bank of the Philippines (LBP) to provide the financing needed for the farmers and fishermen.

Distributed energy can also help power rates become more affordable as consumers can sell back power to the grid or receive compensation for allowing the use of their storage systems to help stabilize the grid.

Plus, distributed generation can help breakdown monopolies in power distribution. A study by the Massachusetts Institute of Technology (MIT) entitled, “Utility of the Future” noted that present electricity distribution systems create a natural monopoly as regulators tend to be clueless about the distribution utilities’ managerial inefficiencies and costs. This in turn allows DUs to justify their higher operating and convince regulators to pass the additional costs to consumers.

Distributed energy systems work differently as they bank on other advanced technologies such as advanced metering, energy management systems, and dynamic-based pricing, all of which offer more transparency on pricing.

The transmission and distribution businesses were once conceded as natural monopolies, but technological changes proved that transmission and distribution need not be dominated by a single or few players. 

The transmission and distribution businesses were once conceded as natural monopolies, but technological changes proved that transmission and distribution need not be dominated by a single or few players. Around the world, the energy sector is undergoing massive changes given the many technological advancements and the need to address climate change. It’s high time the Philippines joins other countries that are moving away from centralized distribution as Filipinos will benefit more from distributed energy.

What 2020 Taught Us

Image c/o https://www.sdmmag.com/


To say that the year 2020 was tough is an understatement. But the COVID-19 pandemic along with natural disasters we experienced in the Philippines in the last quarter of the year, have taught as many valuable lessons.

For one, the community quarantine imposed by the government exposed the vulnerabilities of the energy sector. 

The report by the Institute For Energy Economics and Financial Analysis (IEFAA) showed the downside of our inflexible coal baseload plants and long-term guaranteed contracts. 

The study entitled “Philippines Power Sector Can Reach Resilience by 2021” noted that the depressed demand for power due to the lockdown forced coal plants to turn to mid-merit load factor. This in turn increased the power cost per kilowatt-hour. The pass-on provisions of our Power Sales Agreements (PSA) that allow cost recovery for the independent power producers ensured that the higher costs are shouldered by consumers.

Our penchant for large volumes of baseload capacity running on imported fuel did not bode well for us given that 80% of baseload coal plants are inflexible. This means that fuel and other variable expenses in running power plants remained flat regardless of power demand. We may have experienced a depressed demand during the Enhanced Community Quarantine but plants had to run at their minimum operating levels.

The study, released in June, estimated that power consumers could be paying PHP9.679 billion more in power rates if energy sales volume decline by 10% in 2020. 

These illustrate what I have been pointing out as the downside of not having fixed-price contracts and our over-reliance on coal-fired plants. This pandemic served as a wake-up call to fix the problems of the sector for the benefit of consumers

On top of the prolonged lockdown and the ensuing community quarantines, the Filipinos unfortunately also had to deal with natural disasters in the last quarter of 2020. Typhoon Goni, referred to as Super Typhoon Rolly in the Philippines, caused heavy rainfall, landslides, and flooding in Luzon. The super typhoon, considered the strongest landfalling typhoon in the world for 2020 left massive destruction in Luzon especially in Albay, Catanduanes, Camarines Sur, and Quezon. 

Estimates showed that Super typhoon Rolly’s damage to infrastructure reached Php 11.3 billion, causing massive livelihood loss as battered areas rely heavily on the agriculture sector.

As if that wasn’t enough, less than two weeks after Rolly’s devastation, the Philippines was once again battered by Typhoon Vamco. Locally known as Ulysses, this typhoon triggered extensive flooding in many areas like Metro Manila, Rizal, Cagayan Valley and Isabella. Estimates show that its damages are around Php 20 billion, surpassing the damages caused by Typhoon Rolly.

These two typhoons are not the only ones to hit the country last quarter of the year. There were five in total in October and November, costing the Philippine economy Php90 billion in lost output. Plus, there was tropical depression Krovanh, or locally known as Vicky, which claimed lives and caused floods in some parts of CARAGA region just before Christmas.

These weather disturbances are due to the undeniable climate crisis. Our country, unfortunately, is among those most affected by natural disasters exacerbated by climate change, despite our meager contribution to the world’s carbon footprint.

Thus, it is imperative for us to also move fast in implementing effective mitigation. The wide adoption of renewable energy is one of the most effective climate change mitigation actions.

In the words of Finance Secretary Sonny Dominguez, “Severe weather events inflict human, social, and economic costs on the Filipino people. We lose billions every year in damage to crops and infrastructure. These mounting losses dampen our overall economic progress. These costs will continue to accumulate unless we move fast on mitigation measures.”

The need for a swifter shift to more renewable energy use is more emphasized than ever. We may have been survivors of many weather disturbances and natural disasters but this pandemic should fuel action for faster mitigation measures. More so since experts have pointed out that climate change contributes to pandemics. 

We may have experienced some of the worst times, but there are still great lessons and developments to be thankful for.

For one, this pandemic has also accelerated the use of digital technologies locally. 

For example, more payment options now available allow customers to settle bills more conveniently, to avoid crowding in distribution utilities and coops’ offices and there will be more seamless and contactless payment options coming soon. Other technologies soon to be available are contactless meter application and remote reading, activation, and deactivation of power supply, to name a few.

There’s also the announcement of the Department of Energy of the moratorium on approval of new coal contracts. This announcement came as a surprise since the department had been insisting on its technology-neutral stand. 

For years, the Philippines has been lagging in its commitment to shift to renewable energy development. The country may have once been a leader in RE development having passed the RE law, but later failed to advance in renewable energy development.

Following DOE’s announcement is Yuchengco-led Rizal Commercial Banking Corporation (RCBC) surprising declaration that it will stop financing new coal coal-fired power projects in the Philippines. Now RCBC joins the ranks of Citigroup, Mizuho Financial Group, and Japan’s Sumitomo Banking Corporation banks that have already made the same move.

RCBC President and Chief Executive Officer (CEO), Eugene Acevedo made it clear that the bank will shift funding to renewables and gas-fired power facilities. “I’m going to say that moving forward, all our loans for energy projects will be non-coal, it will be 100 percent non-coal.”

It’s a statement that’s highly similar to the strategy of Finance Chief, Sonny Dominguez “Our rule should be simple: projects that are not green and sustainable should not see the light of day.” 

Shying away from financing coal-projects makes financial sense as renewable energy technology prices have been falling in recent years. According to Carbon Tracker, soon it will be cheaper for Southeast Asian countries to build renewable energy plants than continue using existing coal-fired plants. Coal plants run the risk of becoming stranded assets, which eventually will drain resources.

We may have limited control over the many unfortunate events that unfolded this year. But we do have the power to act by learning from them and ensuring that we do things better. Fortunately, recent developments give hope that indeed we are using crises as opportunities to make better policies and programs that are more responsive to modern times.

As We Plan for Economic Recovery

The energy sector should also be overhauled to support government efforts to rebuild the economy. Image c/o http://www.benzinga.com

The COVID-19 pandemic resulted in a global recession. Here in the Philippines, the imposed months-long lockdown caused our economy to contract as much as 16.5 percent in the second quarter of 2020. Economists predict that the Philippine economy will likely experience an 8 percent negative growth for 2020.

Our government is banking on its flagship infrastructure program, “Build, Build, Build” to revive our battered economy. It has allocated P1.1 trillion, equivalent to 5.4 percent of our gross domestic product (GDP) to infrastructure projects in 2021.

For the power sector, this means higher demand for electricity as we as build more roads, bridges, ports, railways stations, and airports.

As we start planning for the Philippines’ economic recovery we should also overhaul our energy sector now so we can support our government’s effort to rebuild our economy. We need to address the short-term and long-term price stability so we can meet the demand for more power at cheaper prices.

The Philippine Peso has been touted as the best performing currency in Asia, strengthening 4% against the United States dollar. We can take advantage of the Peso’s strength by purchasing all imported fuel that’s oil-based or indexed to global prices while the Peso is strong. Let us remember that our fossil fuels are based on the U.S. dollar and indexed to global prices, and we have plenty of power plants that are importing coal and oil.

I have always talked about how a weak peso and increasing fuel costs hurt Filipino consumers because our Purchase Sales Agreements (PSAs) have pass-through provisions in previous posts. Consumers end up paying more for a weaker peso and more expensive imports. But a strong peso against the dollar can be used to our advantage as we can now use them to lower electricity prices for the next few years.

The government can order all power plants to buy all their fuel requirements in advance. Doing so will place a cap at fuel prices at today’s prevailing prices and foreign exchange rates. Power plants can buy years worth of their fossil fuel requirements so they can fix their prices at a rate that’s advantageous for their consumers.

This is a short-term solution. To ensure stable prices in the years ahead, the Department of Energy (DOE) and the Energy Regulatory Commission (ERC) should require a higher level of fixed-price contracts. I’ve been advocating for fixed-priced PSAs since the pass-on provisions always burden the consumers when the peso is weak and the global fossil fuel prices increase.

Likewise, the government can also order the off-takers of the Malampaya gas to purchase either part or all of the remaining gas so the prices of power will be pegged at current prices and present forex rates. The reasons are the same as my first suggestion for buying fuel requirements in advance. After all, the Malampaya gas is also based on prevailing forex and oil prices. 

One might argue that distribution utilities may not have enough funding to import fossil fuels and or purchase the Malampaya gas. However, we have our government banks, Land Bank and Development Bank of the Philippines that can lead a consortium of local banks to help purchase fossil fuels in advance.

Pegging fossil fuels at current global prices and forex rates will directly impact households and micro, small, medium enterprises (MSMEs) as they will be paying less for electricity. This is especially beneficial now as most Filipinos have less money to spend due to the economic recession. Taking away uncertainty is always a good option – it is valuable.

And to ensure long-term stable energy prices, our government should allow competition at the power distribution level. We have the Electric Power Industry Reform Act or EPIRA but there’s little competition still. In the past we thought that the wires business is a “natural” monopoly.  Latest developments in technology is showing that it ism not.  There are even non-wire alternatives (NWA) to power distribution.

 Currently, the the thinking is that two or more franchise holders for the same area is harmful. This policy, however, results in a monopoly, which does not benefit consumers. A monopoly doesn’t give the franchise holder any incentive to constantly innovate and improve its services.  Allowing more players will push utility companies to provide better services at cheaper rates to consumers. There are ways to improve the service to consumers through competition.

A clear definition of a load profile will also benefit us all in the long-run. Currently, our current procurement rules do not result in an efficient deployment of our energy resources because the ERC focuses on individual contracts. Consumers are paying more for power because we are not deploying power cost-effectively.

Coal-fired power, which is best used for baseload power is also being used for mid-merit power, thus whatever cost advantage of coal goes away. This happens because current procurement rules do not require ECs or DUS to differentiate the different power requirements. We need to define a load profile and regulate the appropriate levels of baseload, mid-merit, and peaking. The DOE and ERC can work on the limits and ensure that these are reflected in PSAs. The ERC should reject contracts that fall outside these limits. The recent announcement of DOE that there will be a moratorium in the issuance of permits for coal-firepower plants is a step in the right direction.

Reviving our economy requires the cooperation of all. For the power sector, this means ensuring sustainable and affordable electricity. More so since according to the Philippine Energy Plan 2018 to 2040 draft, local electricity demand is set to increase by an average of 6.7% annually. We can only meet this demand while making power rates cheaper by fixing the ills of our sector now.

Energy Transformation is What We Need

Sydney is powered by 100% renewable energy. Photo c/o https://www.energymatters.com

There’s been some good news on the renewable energy sector in recent months.

For one,  the City of Sydney, the biggest city in Australia, recently announced that is now powered by 100% renewable energy. This means that all public operations such as sports facilities, street lights, buildings, and the historic town hall in the city that’s home to 250,000 residents are running on clean energy starting July 1. The feat was made possible by a power purchase agreement (PPA) valued at $60 million, saving the city roughly half a million dollars annually over the next 10 years.

 Plus, there’s the United Kingdom (UK), which was able to generate almost half of its power needs from renewables in the first quarter of the year. The UK government data showed that renewable power made up 47% of the country’s electricity in the first three months of the year, breaking the previous set quarterly record of 39% in 2019. The substantial increase in the total renewable output of the UK was primarily driven by growth in power generated by wind farms and solar panels.

And RE sector’s record in the UK is likely to be broken in the coming years with the government’s plan for “a massive expansion of renewables as part of the UK’s green economic recovery” says Rebecca Williams, policy manager of RenwableUK, a non-profit renewable energy trade association.

Meanwhile, in the Philippines, the National Renewable Energy Board (NREB), recently reported that the renewable energy share in the power supply mix keeps on “dwindling.”

In 2015, renewable’s contribution to the supply generation mix was around 25%. RE’s share was even lower for 2016, 2017, and 2018 at 24.21%, 24.57%, and 23.38%, respectively. According to NREB Chairman Monalisa Dimalanta, renewable power’s share in 2019 was even lower at 21%.

In contrast, coal dominated the power mix, recording its highest share in 2018 at 52.05%.

As for the total installed capacity, the Philippines still is far from its target. Dimalanta notes that in 2019, RE capacity was only 5,000 megawatts (MW), more than 10,000 MW short of the 15,304 MW target by 2030.

But perhaps renewables contribution to the Philippines ’ power mix would be better in the following years. Hopefully, the government and the energy planners so engrossed in the faulty appreciation of the least cost method in power planning will finally appreciate what renewable power has to offer.

The COVID-19 has, after all, exposed the vulnerability of our energy sector. For a while, I was worried that Indonesia, the Philippines’ largest source of coal, would close its borders, thus putting our energy source at risk. Even the Energy Secretary has acknowledged that the coronavirus pandemic highlighted the need to ensure energy security by developing our indigenous resources.

Thankfully, the Indonesian government did not close its borders and stop the export of coal. But this pandemic should teach us valuable lessons, pushing us closer to clean energy transition. There’s a strong case for doing so given that experts have been saying that now is the best time to ramp up renewable energy development both locally and around the world.

For example, a policy paper, titled “Can COVID-19 spark an energy transition in the Philippines?” noted that this pandemic has provided an opportunity for the Philippines to pursue the development of more RE source more aggressively given that the lower coal generation due to the drop in power demand. 

The paper penned by Ateneo de Manila University economics department Associate Professor Majah-Leah Ravago and The University of Hawaii, Manoa economics department Professor Emeritus James Roumasset noted that “the rather dramatic fall in coal-fired generation may afford an opportunity for the Philippines to meet their renewable targets without resorting to costly subsidies.” 

The study noted that power demand dropped by 30% nationwide with coal generation decreasing from 56 to 48 %. On the other hand, generated energy from renewables remained the same with biomass and solar power generation rising slightly during our enhanced community quarantine.

Now is the best time, too to invest more in renewable energy projects says the International Renewable Energy Agency (IRENA) in its report “The Post-COVID Recovery.” It noted that the renewable energy sector has proven to be more resilient than other parts of the energy sector given the high shares of renewables continue to operate effectively. “Renewables have proven to be the most resilient energy sources throughout the current crisis. This evidence should allow governments to take immediate investment decisions and policy responses to overcome the crisis,” said Francesco La Camera, Director-General of IRENA.

The IRENA report added that accelerating the energy transition will bring substantial socio-economic benefits, specifically job creation. Aligning immediate stimulus action for the next three years, particularly from 2021 to 2023 and scaling up public and private energy spending to USD 4.5 trillion annually would boost the world economy by an additional 1.3 percent. 

This level of investment would also create 19 million more energy transition-related employment by 2030. Jobs in renewables power would grow to almost 30 million in 2030 from about 12 million in 2017. The study stressed that every one million dollars invested in renewables can provide three times more jobs than in fossil fuels.

I, along with other experts, have been arguing that the COVID-19 pandemic and the economic recession should not deter us from pursuing our clean energy transition goals. Like the experts quoted above, there’s an opportunity and a greater need for us to accelerate our shift to renewable energy.

A fast clean energy transition would reap enormous benefits for all and help in the global economic recovery. It also means ensuring energy security in the Philippines. And in the words of the IRENA President, “Now is the time to invest in a better future. Government policies and investment choices can create the necessary momentum to enact systemic change and deliver the energy transformation away from fossil fuels.”