Hampering Our Growth

Southeast Asian countries are at different stages of economic development and will have higher demand for energy. In fact, according to the Global Energy & CO2 Status Report published by the International Energy Agency or IEA, Southeast Asia (SEA) accounted for eight percent of global energy growth last 2017.

An earlier report released by the same agency, the Southeast Asia Energy Outlook 2017  revealed that the region’s energy demand is likely to grow by roughly two thirds and account for a tenth of the world demand by 2040. Installed capacity is set to increase from 240 GW in 2017 to 565 GW by 2040 with coal accounting for  40 percent of the growth. This will push Southeast Asia to become a major importer of fossil fuels by 2040. The IEA predicts that the region’s annual net import bill will be over $300 billion, which is equivalent to four percent of the SEA’s total gross domestic product.

The IEA, however stressed that the region can still avoid incurring such a huge net import amount if governments implement policies that will reduce the demand for energy and increasing the use of renewables. Based on IEA’s estimates, Southeast Asia can lower the import bill by $180 billion if  the region increases Renewable Energy’s share in the mix by 20 percent.

The agency stressed that the increasing energy demand both pose as a challenge and an opportunity as governments can opt to go for affordable policy and technology options. ” The rapidly declining cost of wind and solar PV provides an opportunity to help meet growing electricity demand in a cost-effective and sustainable manner  while also helping spur local manufacturing industries.”

IEA also noted that attracting investments in RE will be crucial to meet the region’s energy requirements as Southeast Asia will need some $2.7 trillion to $2.9 trillion in investments by 2040.

For his part, International Renewable Energy Agency or IRENA director-general Adnan Z Amin noted that Southeast Asian countries should do a better job in attracting higher investments for RE development.

He stressed that despite the falling costs of RE technologies around the world, financing for RE in SEA countries remain a challenge given the lack of clear policy and regulatory frameworks for investors. He urges SEA countries’ leaders and regulators to come up with clear and reliable long-term policies to attract financing for the sector: “Basically what we’re lacking right now is a sense of government resolve and a sense of adequate, reliable policy framework that allows the private sector to come in…The market opportunity has to be created by policy and regulations.”

 

eco business

Southeast Asia can save $180 billion if more renewables are used by 2040. Photo c/o www.eco-business.com

 

Unfortunately, the observation of the IRENA president reflects the state of our policies and regulatory environment of the energy sector in the Philippines. The regulations here in the country are far from friendly to RE developers and do scare potential investors.

For one, the foreign ownership restriction in our constitution prevents investors from coming in to help us build more RE plants. As I have suggested in the past, it is time for us to consider allowing foreign investors to provide the equipment and technologies needed convert our resources into power while limiting their ownership on the natural resources. After all,  building RE power plants is an expensive undertaking and there are very few local businessmen who can afford to develop RE.

Aside from our problem in the foreign ownership, our regulators and even some of the players in the sector fail to realize the importance of renewables on the economy.  As I have been discussing thoroughly in this blog, we need to realize that the concept of least cost– where we only look at the upfront cost of building our power plants– hinders RE from becoming mainstream in the country.

We seem to forget that the risks of foreign exchange fluctuations, global fossil fuel prices and other market conditions will cost us more in the future. Our country cannot fully realize the benefits of RE unless we appreciate  the crucial role it plays in ensuring both energy security and equity. This is unfortunate for us as our country has been blessed with natural resources we can tap to help us achieve equitable economic growth.

Plus, the world is heading towards distributed generation and smart grids with the advancement of technology and yet the Philippines still rely on central generation. Unfortunately, we still lack rules on distributed generation and remain focused on distribution monopoly controlling the development of embedded generation. This hampers the development of RE.

Our government should pave the way for a more flexible design of a distribution system that can immediately supply the power demands and at the same time deliver the preferred sources of power to the customers.  Our distribution companies should have intelligent systems capable of accommodating renewable energy sources. We need to take a good look at our distribution system and make some drastic changes if we are serious in our desire to bring more renewables in our energy mix.

These are just are some of the problematic  issues that the sector needs to address and there are more.  Around the world, developments are taking place to accommodate greater use RE, and unless our country and regulators are able to address the myriad of problems hounding the energy and hampering more investments in renewable development, then the Philippines will surely be left behind by the rest of the world.

References:

Southeast Asia Energy Outlook 2017: https://www.iea.org/southeastasia/

Global Energy & CO2 Status Report
The latest trends in energy and emissions in 2017:https://www.iea.org/geco/

https://www.businesstimes.com.sg/asean-business/clear-reliable-policy-direction-in-asean-needed-to-attract-renewables-investment

A More Cost Effective Alternative

Even before he assumed office, US President Donald Trump vowed to bring back jobs to the coal sector. Shortly, after elections, he signed an executive order to overturn the Clean Power Plan to revive the coal industry.

However, it seems like his efforts did not stop US utilities from shutting down coal-fired plants. Last year, 27-coal-fired plants with a combined 22 gigawatts (GW) capacity were announced for closure and early this year, energy companies have said that that they will close down at least five coal plants with more than a 1000 GW total capacity.

These announcements of closure are not surprising. Coal generation in the US has declined by 28 percent from 2012 to 2015 as more energy companies realized that shifting to Renewable Energy (RE) is the most cost-effective solution in bringing down power rates. In fact, several US utility companies are set to retire their coal plants and replace them with RE ones.

For example, the Public Service Company of New Mexico (PNM), the largest energy company in New Mexico, which boasts of roughly half a million customers will start retiring coal by the year 2022. PNM, which generated approximately 56 percent of its power from coal in 2015 will begin shutting down coal plants as it plans to produce all its power from solar energy, natural gas and even wind power in a bid to improve their financials and lower rates.

PNM’s Integrated Resource plan for 2017-2023 released April last year concluded that phasing out coal completely was the best way for the firm to match the demand for power with the lowest cost in the coming years. According to PNM’s estimates, the company’s most cost-effective portfolio is to increase the use of renewables to 36 percent and 33 percent from natural gas by 2035 from 11% and 6% respectively in 2017.

Similarly, Wisconsin’s largest utility, We Energies decided to shut down its 1.2 GW Pleasant Prairie coal plant this year. The energy company with its 2.2 million customers, sourced 50.6 percent of its capacity from coal in 2015 and will replace a portion of the size with its 350 MW solar power plant by 2020.

Likewise, in Texas, Luminant, an energy firm that supplies some 18 GW of power has decided to close its 1.8 GW Monticello power plant in January as well as two other coal plants with a combined generation company of 2.3 GW and will replace the lost capacities from coal plants with wind power. So far, the firm can generate 21 GW of wind power and additional 14-27 GW solar power by the year 2030.

These are just some of the major utilities in the US that are now moving away from coal and shift to cleaner forms of energy, and there are more. After all, contrary to those opposed to RE, it is possible to go 100 percent renewables.

We do not have to look far to see such an example. Recently, the local government of Guimaras, the small island province in the Visayas announced its “Guimaras 100% Coal Free Declaration,” a ban on coal-fired plants in the province. In his speech, Guimaras Governor Samuel Gumarin said that “The people of Guimaras have embraced renewables over dirty, polluting energy. We want to show that a sustainable-development path, powered by renewable energy, is not only possible but more viable.”

guimaras

Windmills in Guimaras. The province declared a complete ban on coal power. Photo c/o http://www.evwind.es

 

Guimaras is not the only province in the country that favors RE. Last March, the Bohol local government through its Bohol Energy Development Advisory Group or BEDAG has decided to prevent the building of new coal plants in the province. In a statement, the BEDAG said: “the BEDAG and the entire Provincial Government of Bohol are fully intent on maintaining the sanctity and pristine condition of the environment.”

The development came after the provincial government via an SP ordinance has declared environmental impact as the most important consideration for the selection process for interested energy developers as part of the province’s energy development program. The provincial government will institutionalize its “No Coal” stand through an ordinance.

The above examples only show that it is possible to shift from coal power to cleaner energy. Unfortunately, while others are already shutting down coal-fired plants to lower energy costs, we in the Philippines are busy building them since 90 percent of the roughly 7300 MW capacity approved or already for construction by the Energy Department are coal-fired power plants. This despite calls from experts, world and business leaders to work extra hard to make the shift to greener forms of energy possible.

I wonder how long and what will it take to convince others that RE is the practical choice for all of us.

References:
https://www.forbes.com/sites/energyinnovation/2017/05/18/embracing-the-coal-closure-trend-economic-solutions-for-utilities-facing-a-crossroads/#1f05af1b1c99
http://www.iloilotoday.com/2018/02/guimaras-declares-coal-free-receives.html

http://www.boholchronicle.com.ph/2018/04/02/govt-blinks-no-to-coal-power-in-bohol/