Towards A More Distributed Energy Future

Recently, the Department of Energy (DOE) has announced that it is finalizing the rules on distributed and small scale scale renewable energy projects in off-grid areas in the country. While this should have been done years ago, at least distributed generation is getting its fair share of attention. And the circular should go beyond just generation, it should now allow local groups or communities to establish, for themselves, a distributed energy platform. I have discussed this in another blog where I emphasized the realities of the 21st century in power distribution.

The draft circular entitled “Guidelines Governing the Development, Registration and Administration of Distributed, Small-Grid Renewable Energy Projects and Facilities” aims to promote the development and utilization of Renewable Energy (RE) resources in isolated or off-grid areas through qualified RE developers.

The DOE stresses that the guidelines are in line with the government’s efforts to achieve 100 percent electrification in the country. The Energy Department added that the new guidelines will also help in expanding Distributed Energy Resources (DER) and Distributed Generation (DG) in the country. The former refers to any technology that allows those with distributed generation facilities to be sold back to the grid as permitted by regulators while the latter is  any technology that produces energy outside of the grid. The challenge here, of course, is how much will the “grid” purchase the generated power?  This poses the same problem as “net metering” where power distributors undercut the rooftop solar owners by paying them only the “average” power generation rate.  As solar produces only during the day, the power distributors get an arbitrage by buying low during peak hours.

Under the draft circular, RE developers must apply and register their small-grid facilities of not more than one megawatt capacity. Again, limiting it to 1 megawatt does not make sense.  The whole idea of distributed generation does not imply limits in generation. Hopefully the DOE will see this flaw and amend the circular.

Admittedly, the new guidelines are a welcome development as DGs and DERs are helpful in achieving 100 percent electrification rate for countries, especially those that are archipelagic such as the Philippines. I hope, however, the DOE will push the envelope even further.

DER technologies, which consist of mostly energy generation and storage systems such as batteries and flywheels that are located near the end users are becoming rampant.  Around the world, power systems are moving away from centralized distribution as energy mixes are now integrating DERs,  according to a study of the Massachusetts Institute of Technology (MIT) entitled, “Utility of the Future”. This means that the traditional model of distribution where consumers source energy from a single utility with the help of main transmission lines are slowly being replaced by DERs.

The growth of DERs is due to a variety of factors, the MIT study says. For one, more nations are shifting away from traditional sources of power and are adding more renewable sources into their energy mix. The study notes that the growth of renewable energy is happening partly due to and in parallel with the world’s focus on decarbonizing power systems to combat climate change. As such, many advanced nations are leveraging DERs technologies to distribute cleaner power to decarbonize their countries.

DER system

Around the world, power systems are moving away from centralized distribution as energy mixes are now integrating DERs. Photo c/o of Siemens.com

Welcoming DERs bodes well for the Philippines. The main benefit of DERs is that its distributed nature allows for cheaper, more effective energy distribution services, especially for those without access to centralized resources such as our off-grid islands. 

Renewable energy and DERs mean cheaper power for off-grid areas especially in the Philippines. Various studies have stressed the importance of renewables in achieving electrification at cheaper costs for the country. 

For example, the study entitled, “Electricity-Sector Opportunities in the Philippines: The Case for Wind- and Solar-Powered Small Island Grids,” noted that there’s roughly Php10 billion in savings if the Philippines rely on RE instead of traditional sources of power for off-grid areas or missionary areas. “Small island grids powered by solar, wind, and other renewable energy could reduce dependence on expensively imported fossil fuel generation without compromising the availability of power and grid reliability,” the reported noted.

According to the DOE the Philippines’ electrification rate is at 89 percent. There are still around three million Filipino homes without electricity as of the end of 2018. These DERs then would be helpful in providing stable power to these households.

Aside from helping the off-grid areas achieve electrification, there are still many benefits in integrating DERs in our power system even in on-grid areas. This is because as the MIT study stressed, DERs help competition flourish in the energy sector given. After all, these technologies are changing the way electricity service delivery by altering the use and management of distribution systems. 

The MIT report stressed that current electricity distribution systems create a natural monopoly since regulators are blind to the distribution utilities’ actual cost and managerial efficiencies. This creates an opportunity for distribution utilities to increase their profit by merely convincing regulators that they have higher operating costs than they actually do, which is then passed on to consumers. 

The same cannot be said of DERs along with other technological advancements and mechanisms in the energy sector such as dynamic-based prices, advanced metering and energy management systems. These all require efficient price signal and information control systems.

Indeed, moving to a distributed energy system has many advantages. But changes in regulations must take place, too. Our Energy Department and regulators by this time should be rolling up their sleeves and getting ready to work for a more distributed energy system in the country for the benefit of the Filipino consumers.

References:

https://www.philstar.com/business/2019/05/27/1921099/doe-issue-new-rules-small-re-projects

Utility of the Future by Massachusetts Institute of Technology

https://business.inquirer.net/271715/napocor-sets-bidding-for-2-bohol-projects#ixzz5pmIont8q