Small Victories

 

eucommision

The EU agreed to increase RE share to 32% by 2030. Photo c/o https://www.finchannel.com

There are many small victories to celebrate among renewable energy advocates.

Last June, the European Commission, Parliament and Council agreed to increase renewable power use in the region to 32 percent by 2030, up from the previous goal of 27 percent.

Aside from setting this target, the agreement also included removal of barriers to entry of renewable energy small players as well as a review of the 32 percent goal in 2023.

The new goal was set so that the region can meet its goal of reducing greenhouse gas emissions by 40 percent, below 1990 levels by 2030 as part of its commitment to the Paris Agreement of keeping global warming below 2 degrees. “This deal is a hard-won victory in our efforts to unlock the true potential of Europe’s clean energy transition,” EU Climate Commissioner Miguel Arias Canete was quoted.

And there is more good news from this region since Sweden is set to achieve its renewable energy targets 12 years ahead of the deadline.

The Nordic nation is likely to reach its 2030 renewable energy target of generating 18 terawatt-hours annually from renewables by the end of the year according to the Swedish Wind Energy Association (SWEA). This feat will be possible, thanks to the aggressive installation of wind turbines since some 3,681 wind turbines will be operational across the country by year-end.

Europe is not the only one that brought good news. Japan also recently announced its plans of boosting renewable energy use by 2030 by 22 to 24 percent. Currently, the country sources 15 percent of its energy demand from renewable sources.

Unfortunately, the Philippines did not make a similar announcement and instead opted to push down our goal of sourcing 35 percent of overall power needs from RE by 2030 to 2040.

But this is not to say that we lack good news in renewable energy front or that Filipinos entirely lack appreciation for renewable energy. After all, several local government units (LGUs) have declared their support for cleaner forms of power.

For example, last June, the city council of Ozamiz revoked an earlier resolution endorsing the proposal to build a 300-megawatt coal-fired plant and instead adopted a new one to look for prospective investors for renewable energy in the city.

The same case happened in Bohol last March where its local government prevented the building of new coal power plants since “the entire Provincial Government of Bohol are fully intent on maintaining the sanctity and pristine condition of the environment.”

Eventually, the LGU of Bohol passed an ordinance against the establishment of coal power plants in the province on April 6, joining the ranks of Guimaras and Ilocos Norte, which had already banned coal and shifted to renewable energy.

Yes, our national government may be slow in realizing the value of renewable power, unlike other nations like the European countries and Japan but at least our provinces know the worth of going renewables. Maybe soon, more Filipinos including government officials will realize what renewable power can do for our country and that, as Guimaras Governor Samuel Gumarin said in a speech, “a sustainable-development path, powered by renewable energy, is not only possible but more viable.”

References:

https://www.rappler.com/nation/203386-bohol-no-coal-ordinance-epira-greenpeace

https://climatereality.ph/climate-reality-ph-lauds-ozamiz-city-climate-action-819/

https://www.channelnewsasia.com/news/asia/japan-aims-for-24–renewable-energy-but-keeps-nuclear-central-10495024

https://www.theguardian.com/business/2018/jun/14/eu-raises-renewable-energy-targets-to-32-by-2030

Sweden to reach its 2030 renewable energy target this year

Survey Says

The majority of Filipinos are dissatisfied with current power prices according to a survey by Pulse Asia.

Last August, the research firm released its report revealing that around 60 percent of Filipinos are dissatisfied with the power rates. “With the exception of Mindanao, at least half of adults in the main geographic areas are dissatisfied with the price of their electricity,” Pulse Asia said.

The survey also showed that a significant majority of Filipinos or 82 percent are in favor of “having a new option for electric service provider or electric utility.” In the National Capital Region (NCR), 88 percent of adult Filipinos expressed openness to having new electric service providers. Plus, 89 percent of Filipinos also favor renewable energy.

The survey results are a testament to the growing dissatisfaction of Filipinos on our high power rates. They are also aware that there is a need for more competition in our energy sector even in the distribution segment to cut the cost of electricity. Competition, after all, will always drive down market prices. And it is not surprising that the vast majority of the survey participant for NCR is open for more distributors as the monopoly of a company in any business will never be beneficial for consumers.

Unfortunately, the passage of the Electric Power Industry Reform Act (EPIRA) did little to invite competition in the markets in the distribution side as we focused more on having more players in the generation business.

But there are steps our regulators can take to generate more players in the distribution of power. For one, we can break away from the current practice of disallowing a new distribution entity to enter the market where one DU is in place. Such practice fails to promote competition and instead allows for a monopoly to flourish.

Aside from allowing other power players to enter an already franchised service area, our regulators should also consider lifting the cap for the Retail Competition and Open Access (RCOA).

Currently, the rule says that only those with a monthly peak demand of 750 kilowatts or higher can be considered contestable customers and can choose their preferred service providers. In my opinion, this rule should be revised as anyone regardless of their power consumption should be given the option to decide where to source their power.

We have to keep in mind that contestable customers get to save on their energy bills than the captive customers or those who are required to source from their distribution utilities or electric cooperatives. In a column in BusinessWorld, President of Minimal Government Thinkers, Bienvenido S. Oplas, Jr. President of Minimal Government Thinkers notes that contestable customers on average only pay Php 9.61 per kilowatt hours (kWh) considerably lower than the captive customers who pay roughly Php 7.78 kWh.

Our government then should work on giving choices to the majority of the Filipinos by allowing them to choose their power generator or distributor rather than force them to stay with their current ones. Naturally, aside from lifting the restriction on RCOA, there is also a need to make the infrastructure and resources available to pave the way for this scenario where customers have the freedom to choose their energy type, generator, and even distributor.

DU competition

Technology will soon render the traditional distribution system obsolete according to experts. Photo c/o https://m.dailyhunt.in

We have to make these changes if we do not want to be left behind. Let us keep in mind that the technological advancements will soon render the traditional distribution system obsolete as asserted by many experts. For example, David Cane, former CEO of NRG Energy believes that the existing utility system will become irrelevant in the near future since many advanced countries are moving towards decentralized homegrown energy where home automation be of great importance. He argues that “When we think of who our competitors or partners will be, it will be the Googles, Comcasts, AT&Ts who are already inside the meter.”

Indeed, we need to create an environment that can accommodate these technologies, so we can benefit from having more options as well as cheaper power prices to consumers.

Having choices is one of the best ways to promote competition and hence lower down the power costs in the country. However, major changes are needed that require a lot of willpower. It is time for our regulators to put the interest of the Filipino consumers above anything else.

References:

https://www.philstar.com/headlines/2018/08/21/1844441/filipinos-not-satisfied-high-power-rates-poll

https://www.bworldonline.com/electricity-competition-epira-and-wesm/

Moving Forward: Introducing Competition in Power Distribution

Around the globe, significant changes are taking place in the power sector, particularly in the distribution of energy given the advances in technology. Many countries are gearing up to take advantage of new technologies to help reduce the cost of power, among other reasons.

For example, the European Union (EU) is paving the way for its electricity system to be more efficient by encouraging consumers to use intermittent renewables at different times of the day to save on power and lower their electricity bills. At this time, the EU is working on policies to make it possible.

Those who use more power during off-peak demand or when renewable energy technologies are running on their peak will be given incentives also known as the dynamic pricing scheme.

Other European countries like Spain and Nordic states are already implementing the dynamic pricing. In the long run, EU envisions that customers’ appliances such as washing machines or dryers will run automatically during the day when the sun is shining at its brightest or during windy days. This dynamic pricing scheme is expected to save as much each household an estimated average of €400 annually with the help, of course, of smart meters and smart grids.

Some may be doubtful of EU’s vision and label it as too ambitious. But EU’s goal is achievable. After all, breaking away from the traditional model of the distribution of having power stations at one end with the customers on the other end of the supply chain is long overdue.

Consumers now should have the option of selecting their preferred kind of energy, source, and even meters. This is possible except our tolerance for monopoly has limited the choices available to us consumers, a point stressed by several experts.

For example, Nobel Prize awardee Vernon Smith, who as early in the 1980s, argued that deregulation of the electricity market is possible if there is competition for generation, transmission and even distribution.

In his paper, Currents of Competition in Electricity Markets, he stressed that “Competition is now evident on the fringes of power generation, and a foundation is in place for deregulating not only generation but possibly transmission and distribution as well.”

The economics professor pointed out that regulators have encouraged monopoly in electricity markets rather than implement rules that promote competition: “ An examination of the electric power industry as it exists today reveals a tremendous untapped potential for the development of competitive markets. 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.”

smart meters 2

Smart meters in Europe. Changes in the consumption and provision of electricity driven by emerging technologies are taking place and making way for more options in power consumption. Photo c/o http://www.nec-display-solutions.com

A recent paper, Utility of the Future by Massachusetts Institute of Technology (MIT), discusses how changes in the consumption and provision of electricity driven by emerging technologies are taking place and making way for more options in power consumption.

One of the goals of the research is to identify inefficient barriers to the integration of cost-effective new sources of electricity services to help create a level playing field for the provision and consumption of power services.

One of the recommendations of the study is that “the structure of the electricity industry should be carefully re-evaluated to minimize conflict. It is critical to establish a level playing field for the competitive provision of electricity services by traditional generators, network providers, and distributed energy resources.”

The study further stressed that it is essential to review how markets work to make way for new technologies and their integration into the electricity system: “Wholesale market design should be improved to better integrate distributed resources, reward greater flexibility, and create a level playing field for all technologies.”

And it seems that the researchers are addressing our local regulators with their recommendations. It is no secret that I have been calling out for revisions in our policies that would pave the way for new players so that Filipino consumers can enjoy lower power costs especially since new technologies are emerging.

Time and time again I have been calling the attention of the Department of Energy (DOE) to take drastic measures to promote competition rather than protect private interests as this is the essence of the Electric Power Industry Reform Act (EPIRA).

Unfortunately, despite the passage of this law, the welfare of the Filipino consumers takes a backseat while private interests in the distribution sector prevail as manifested in different ways.

For example, currently, our energy regulators are disallowing other franchise holders to enter the market where a Distribution Utility (DU) is already in place, which against runs counter to the essence of promoting competition.

This was the same point made by Smith in his paper when he stressed that “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.”

If one understands basic economics, then it is evident that having more players in the market would always push down prices and create a more efficient delivery of goods and services because this is what competition among businesses does. Preventing the encroachment of another player in an already franchised area will only result in a monopoly where consumers will have to endure higher prices and less efficient service delivery. There is no incentive for the lone provider to improve the services and lower down costs, anyway.

Our flawed power procurement rules should also be reviewed. At present the Energy Regulatory Commission (ERC) procurement rules do not require DUs or Electric Cooperatives (ECs) to differentiate between baseload, peaking and mid-merit, and fail to take account that some power sources are better used for baseload and others for peaking or mid-merit. The classic example is the use of coal-fired power plants during mid-merit, which when done, diminishes the cost advantages of the plant. Such practice results in inefficient deployment of energy sources.

Unfortunately, procurement rules do not differentiate the power requirements to the detriment of the consumers as they are not enjoying the cost advantages of a particular power source. Instead, our practice only benefits the DUs or ECs.

There is a remedy for this as the ERC can refuse to grant Power Sales Agreements (PSAs) that does not define the limits on the use of a particular power source. We can use each energy source more efficiently and at the same time help level the playing field for generators if the ERC puts such restrictions in the PSAs.

These are just some of the few issues that prevent competition to flourish within the power distribution sector. There are more that requires the attention of our regulators. Change is necessary if we want to move to where the EU is heading.

There are many reasons why countries and regions like EU are embracing technology such as the concept of dynamic pricing by changing and drafting new regulations. Lowering the cost of power rates is just one of them.

The Filipinos can enjoy lower power prices, too. They can even choose where or from whom to source their power as well as select their meters rather than merely accept the ones from the distributor. Consumers can also become generators and distributors themselves if they wish. All these are possible if major policy shifts take place and when our regulators finally prioritize the welfare of the public rather than those of the few.

References:

Currents of Competition in Electricity Markets by Vernon L. Smith

Utility of the Future by Massachusetts Institute of Technology

Run Your Dishwasher When the Sun Shines; Dynamic Power Pricing Grows

https://www.reuters.com/article/us-europe-electricity-prices-insight/run-your-dishwasher-when-the-sun-shines-dynamic-power-pricing-grows-idUSKBN1KN0L7

For European utilities, demand for dynamic pricing on the rise
https://www.accenture.com/us-en/blogs/blogs-european-utilities-demand-dynamic-pricing

A Timely Reminder

Three years ago, Pope Francis made a strong appeal to the world to address the growing problem of climate change. In his 180-page encyclical, the pope stressed that “Climate change is a global problem with grave implications: environmental, social, economic, political and for the distribution of goods. It represents one of the principal challenges facing humanity in our day.”

Pope Francis recently made the same appeal with investors, oil executives and Vatican experts during an unprecedented conference at the Pontifical Academy of Sciences.

The pontiff had stressed that climate change must be addressed soon and the world has to use a power mix that will combat pollution, promote social justice, and combat pollution. “But that energy should also be clean, by a reduction in the systematic use of fossil fuels. Our desire to ensure energy for all must not lead to the undesired effect of a spiral of extreme climate changes due to a catastrophic rise in global temperatures, harsher environments and increased levels of poverty,” the pope said.

He reminded his audience that development must not come at the expense of the environment “Civilisation requires energy, but energy use must not destroy civilisation.”

The head of the Catholic Church has never wavered in his appeal to the world to make the planet a better place by saving the environment. His recent plea is also timely as studies and reports show that the world has to do more in fighting the effects of climate change.

The recent United Nation (UN), a yearly report entitled ‘The Sustainable Development Goals Report 2018” concluded that climate change along with inequality and conflict are the primary factors in growing hunger and displacement around the world.

The figures in the report showed that the world has a long way to go in combating the effects of climate change including the health hazards. After all, the World Health Organization once tagged climate change as “the defining issue for the 21st century.”

The UN study revealed that in 2016, around the world, 91 percent of the urban population were breathing dirty air or air that failed to meet the WHO Air Quality Guidelines. What’s worse is that more than half of the said population were exposed to air pollution levels that are at least 2.5 times higher than the safety standard. It is not surprising then that around 4.2 million people died due to high levels of ambient air pollution.

The same report showed that renewable power’s share in the final energy consumption had a moderate increase from 17.3 percent in 2014 to only 17.5 percent in 2015.

That’s a sad figure, especially when the more significant use of renewable energy can save lives. Let us remember that both coal and oil power have greater death prints, or what energy expert James Conca defines as the “number of people killed by one kind of energy or another per kilowatt hour (kWh) produced.”

In fact, the mortality rate of coal, which is derived by dividing the trillion kilowatt hour of use, is 100,000 when we get 50 percent or our energy needs from this source. Likewise, oil has a mortality rate of 36,000 for every eight percent of the energy it supplies.

Apparently, the growth of renewables in the world’s energy mix had been slow and more people are literally dying because of it. Clearly, more must be done to combat climate change, which includes developing and using more cleaner forms of energy.

Let us heed the Pope’s call, shall we?

References:

https://www.theguardian.com/world/2018/jun/09/pope-francis-tells-oil-bosses-world-must-wean-itself-off-fossil-fuels

http://sdg.iisd.org/news/sdg-report-2018-finds-conflict-climate-change-inequality-hindering-progress/

https://www.forbes.com/sites/jamesconca/2012/06/10/energys-deathprint-a-price-always-paid/#16e2ea1b709b

 

 

 

 

100% Clean and Profit Maximizing

 

apple headquarters

Apple’s headquarter running on renewables. Photo c/o Forbes.com

 

Tech giants Apple and Google are now 100% powered by renewable energy.

Google hit the goal early this April after confirming that the firm’s RE purchases exceeded the amount of energy the company used for operations worldwide in 2017. “For every kilowatt-hour of electricity we consumed, we purchased a kilowatt-hour of renewable energy from a wind or solar farm that was built specifically for Google,” Google Senior Vice President Urs Hölzle proudly announced.

Google is the largest corporate buyer of RE worldwide. Its vow of going 100% renewables started as early as 2010. By 2015, the tech firm was able to source 44 percent of its power needs from renewables.

Apple is not far behind. Less than two weeks after Google’s announcement, the iPhone maker proudly told the world that its global facilities spread across 43 countries are now running on 100% renewable energy. Apple has been rapidly increasing its use of RE in the last few years as it started sourcing 16% from green energy in 2010 until reaching 96% in 2016. Its data centers have been running 100% on RE since 2014.

“We want to put new, clean power on the grid so that we’re not sucking up all the clean energy that’s there,” said Apple VP of environment, policy, and social initiatives Lisa Jackson said in an interview.

Google and Apple are not the only large global companies opting to go for clean energy. Some 130 big brands like General Motors, Wal-Mart, Nike, and Ikea, just to name a few have vowed to use 100% renewable energy under the RE100 initiative.

These big brands’ choice of sourcing their power needs from RE is not surprising. After all, as our teachers in economics taught us, all firms are profit maximizing. It does indeed make business sense to choose renewable energy.

Perhaps, our regulators and even some of the local industry players should take notice of how and why big global firms are betting on renewable energy. As I have been saying for some time now, fossil-fuel powered plants are not exactly the least cost.

These global firms choose to go renewables as part of their commitment to save the planet and also to save money. These companies are reducing their financial risk of having to pay more for their power bills in the future by reducing if not eliminating their dependence on traditional sources of power. This is the same observation of Bloomberg New Energy Finance Analyst, Kyle Harrison when he said: “It gives them stability into what they’re paying for their energy prices, but it also gives them the potential to save money in the longer term.”

Many of the global brands’ management understand the risk of relying heavily on traditional sources of power knowing that commodity prices are unpredictable. These big brands do not want to be vulnerable to commodity price surges, so they diversify their energy mix to hedge against potential increases in world prices. They know that the least cost is not about looking at the upfront costs alone, but rather, also computing the price they will need to pay in the future for the costly consequences of factors beyond their control such depletion of fossil fuels, price spikes, and foreign exchange fluctuation, to name a few.

Plus, of course, the falling cost of RE technology makes going 100% renewable more cost-effective. The price of solar photovoltaic systems alone have dropped by 73 percent since 2010 and will fall further by 2020 according to IRENA.

Surely, these global firms will be grateful to have made the shift to RE when they see their financials in the future. Going renewable makes business sense. And the Philippines could do well by following the footsteps of these global companies instead of sticking with traditional forms of energy.

References:

https://www.forbes.com/sites/energyinnovation/2017/01/26/clean-energy-is-at-the-core-of-american-strategic-interests/#1dc0d6225765

Honoring Commitments: A Hot Warning

The historic 2015 Paris climate agreement saw world leaders committing to limit the average global temperature rise to “well below 2°C” above pre-industrial levels to combat climate change and its effects.

However, more than two years after the signing of the accord, the International Renewable Energy Agency or IRENA notes that “current emission trends are not on track to meet that goal.” In its report, the Global Energy Transformation: A Roadmap to 2050, released last April, the agency stressed that current and planned policies of governments are far from achieving their emission reduction targets. Fossil fuels like natural gas, oil and coal would still dominate the global energy mix in the next decades.

The Energy agency stressed that the goal of keeping the world’s temperature rise below 2 degrees Celsius is technically feasible. But it is imperative to scale up renewable energy (RE) at least six times faster so that the world can start hitting the goals set out in the Paris Agreement. “Global energy system must undergo a profound transformation from one largely based on fossil fuel to one that enhances efficiency and is based on renewable energy,” the report added.

The report also emphasized that all countries can grow the proportion of RE in their overall energy use. According to IRENA’s global roadmap, the REmap, nations can source 60 percent or more of their total energy consumption from renewable energy. After all, the world would need to increase the share of renewable energy in the power sector from 25 % in 2017 to as much as 85% by 2050. “If we are to decarbonize global energy fast enough to avoid the most severe impacts of climate change, renewables must account for at least two-thirds of total energy by 2050,” IRENA Director-General Adnan Amin said.

To accomplish this feat, new approaches to the power system, planning, system and market operations, regulations and public policy must take place IRENA stressed

The Energy agency also noted that all regions of the world would benefit from the energy transformation. Areas like East Asia, Southern Africa, S. Europe and Western Europe are set to have high welfare gains from this transition through reduced greenhouse gas (GHG) emissions.

So, it’s not only the Philippines that’s having a difficult time in meeting the goals set by world leaders in the Paris agreement since there is a need to undergo a major shift to cleaner forms of energy around the world.

Unfortunately, the world’s lack of action in fighting climate change will hurt vulnerable regions like Southeast Asia.

Hans Joachim Schellnhuber, a member of the Pontifical Academy of Sciences in the Vatican and the Director of Germany’s Potsdam Institute for Climate Impact Research (PIK) last year warned that Southeast Asia might end up suffering from daily extreme temperatures if the world keeps us with high emission level where “All of the tropics will develop conditions that physiologically, humans cannot live outside anymore.”

His study, “A Region at Risk: The Human Dimensions of Climate Change in Asia and the Pacific” showed that it is possible for temperature to increase to 1.7 degrees Celsius above pre-industrial levels by 2030, up to 2.7 degrees by 2050 and even up to 4 degrees by 2070 or the temperature “where you would collapse.”

This means that the Philippines and its neighbors could “see a complete shift in living condition” where people would be forced to flee their homes. The Nobel Prize winner further added that “You would actually have to give up the Philippines altogether….Unless you put the entire population into a shopping mall, which would be a very big mall,”

This summer, the Filipinos have already endured warm temperature with the heat index reaching 46.8 8°C in Sangley Point in Cavite. Our weather bureau, PAGASA, classifies heat index temperatures from 41 to 54°C as dangerous where “heat cramps and heat exhaustion are likely” and that “heat stroke is probable with continued activity.”

 

dried land

Dried-up rice field in Cavite as heat index this summer reaches dangerous levels. Photo c/o of philstar.com

 

Can you imagine having to endure warmer temperature than the ones we have this summer? As Schellnhuber stressed, we Filipinos will be unable to live outdoors if we all fail to limit our GHG emissions.

The problems of Boaracay may not be limited to the quality of the water alone. If we do not do anything about climate change soon, sea levels will rise in the coming century by as much as 1.4 meters most likely engulfing the not only Boracay but our other lovely islands as well.

Clearly, there is a pressing need for us to do our share in limiting the average global temperature rise to the desired level as we are the ones who will suffer from the effects of climate change. Fortunately for the Philippines, it is possible to help reduce GHG emissions by relying more on cleaner forms of energy.

In fact, the country can supplement its power needs with renewables by 57 percent to 60 percent by 2040 with the right policies according to research from the International Food Policy Research Institute (IFPRI). “The Philippines’s current energy-supply mix must be diversified to minimize import dependency on fossil fuels and meet the country’s energy needs,” said Alam Hossain Mondal, a researcher at IFPRI and lead author of the study. And as I have repeatedly stated in the past, the impact of reliance on fossil fuel hits our ordinary households. The weakening of the peso and increasing coal prices will adversely affect the ordinary Filipino.

He further added that failure to add more RE in the power mix would result in greater fossil fuel dependency by an average rate of seven percent per year. As a result, CO2 emissions could reach 144 million tons by 2040 from the 43 million tons recorded in 2014.

Indeed, it is time to pay attention to how we can help the world limit the average global temperature rise. Yes, the Philippines and even its neighbors’ contribution GHG emissions may be negligible compared to advanced countries. But since the country and its neighbors are at risk if we fail to mitigate the effects of climate change, then it would be beneficial for us to help reduce our GHG emission.

It is time for us to exert our best effort to honor our commitment in the Paris Agreement. And it starts by sourcing more power from cleaner sources.

References:

https://www.irena.org/publications/2018/Apr/Global-Energy-Transition-A-Roadmap-to-2050

https://businessmirror.com.ph/ifpri-phl-could-supplement-57-60-of-its-energy-needs-with-renewables-by-2040/

http://www.interaksyon.com/expert-warns-with-no-cap-on-greenhouse-gas-emissions-going-outdoors-will-be-deadly-by-2100/

http://www.gmanetwork.com/news/scitech/weather/650902/heat-index-over-41-degrees-in-several-areas-across-phl/story/