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 

Overtaking Coal

For the first time, renewable energy has generated more electricity than coal in the United States. 

According to the Energy Information Administration (EIA), renewable power has overtaken coal generation last April by 16 percent. And renewables are expected to dominate the US power mix on May with EIA predicting that clean power will eclipse coal power by an additional 1.4 percent. 

Renewables dominating the energy mix of the United States is not a stroke of luck. In fact, clean power will consistently catch up with coal in the US in the near future says the Institute for Energy Economics and Financial Analysis (IEEFA): “Coal’s proponents may dismiss these monthly and quarterly ups and downs in generation share as unimportant, but we believe they are indicative of the fundamental disruption happening across the electric generation sector.”  

The IEEFA also foresees that renewable energy will generate more power consistently this year all the way to 2020 for the US. After all, coal’s share of the overall energy generation has been declining in the past few years from 45 percent in 2010 to 28 percent in 2018. By 2020, coal power is only expected to contribute just 24 percent of the needed power demand for the country.

The US is not the first country to achieve such a feat. Other countries have already managed to generate more power from renewables in the past.  One of the notable examples is Iceland, which produced 97 percent of the country’s household power requirements from wind in 2015. Its neighbor, Denmark also sourced 42 percent of its power from wind turbines in the same year. Similarly, Germany at one point was able to generate 78 percent of the day’s power demands from renewables.

image

Germany was able to generate 78 percent of the day’s power demands from renewables at one point. Photo c/o Time.com

The decline of coal power in the US is in sync with the developments in the global energy trends. According to the International Renewable Energy Agency (IRENA), a third of the world’s installed electricity generation capacity in 2018 was from renewables. This is because 2/3 of the added power capacity last year came from renewable power.

Renewable power’s greater share in many countries’ energy mix only shows that renewables are the key to sustainable future notes IRENA Director-General Adnan Z. Amin. “The strong growth in 2018 continues the remarkable trend of the last five years, which reflects an ongoing shift towards renewable power as the driver of global energy transformation.”

The shift to renewable power is much needed since experts have warned us that we only have a few years left to mitigate the effects of climate change. The United Nations in its report Intergovernmental Panel on Climate Change last year stressed that the world only has 12 years to keep global warming to a maximum of 1.5 °C. Otherwise, we will all suffer the risks of droughts, droughts, extreme heat, and poverty. 

Plus, recently, we were greeted with the news that the Earth’s carbon dioxide level is at an 800,000-year high. Our world has breached 415 part per million sometime this May, a level that has not been seen in millions of years according to data from the Scripps Institution of Oceanography at the University of California-San Diego.

Taking drastic actions to limit global warming then is imperative for all of us. This means we should be cutting carbon dioxide emissions swiftly by reducing our fossil fuel consumption, the primary producer of greenhouse gasses. Going to renewable power is one of the best ways to decarbonize countries, after all.

Sadly, and as I have been pointing out, the Philippines is nowhere near the accomplishments of other countries when it comes to shifting to greener and cleaner energy.  Clearly, some of the major developers and major international banks have told me that they are no longer allowed to develop and/or finance coal power projects.

According to IRENA, the Philippines, from 2009 to 2018 only increased the share of renewable energy in the total power mix from 4732 to 6482 megawatts(MW) or roughly 37 percent. This growth is significantly less when compared to some of our Southeast Asian neighbors. For example, Vietnam has managed to grow its renewable power capacity from 7323 MW to 18523 MW or almost 153 percent in the same period. Likewise, Thailand has added roughly 152 percent of renewables into its generating capacity from 4130 MW to 10411 MW as well.

Some argue, that the Philippines only has a small contribution to the world’s carbon footprint. This is probably true, but it does not change the fact that the use of coal and fuel for power generation remains as the biggest contributor to greenhouse gas emissions in the country. However, this is not the only point.  A more important perspective here is the fact that the presence of coal has the tendency of INCREASING power cost.  As I have always argued the volatility of coal prices and the exchange rates contribute greatly to higher power costs.

The Philippine Climate Change Assessment Working Group 3 Report released last year notes that 41.8 percent of GHG emissions of the country comes from coal and fuel used for power generation and continues to grow by 3.7 percent annually. So, yes, there is a need for the Philippines to take drastic steps in decarbonizing our nation. This is feasible only if renewable power dominates our energy mix. And the sooner we act the better for us Filipinos as our country remains one of the most vulnerable countries to climate change. 

Many countries are working harder to do share their share for the environment by turning to renewable power. Soon, nations will have more cleaner energy to use as they walk away from coal. The Philippines is nowhere near such a state. Yet, one can remain hopeful that we can soon see our country is also taking the fight against climate change by like other nations by allowing renewable energy to flourish and surpass coal power in the country.

References:

https://qz.com/1610977/solar-wind-plus-other-renewables-beat-coal-for-first-time-in-us/

https://cleantechnica.com/2016/02/04/how-11-countries-are-leading-the-shift-to-renewable-energy/

https://news.abs-cbn.com/news/11/20/18/greenhouse-gas-emission-in-ph-rising-report

IRENA RENEWABLE CAPACITY STATISTICS 2019

Press Release: Summary for Policymakers of IPCC Special Report on Global Warming of 1.5ºC approved by governments

http://www.ipcc.ch/pdf/session48/pr_181008_P48_spm_en.pdf

https://edition.cnn.com/2019/04/29/business/renewable-energy-coal-solar/index.html

https://www.forbes.com/sites/johnparnell/2019/04/03/one-third-of-worlds-power-plant-capacity-is-now-renewable/#5801d1043064

https://www.usatoday.com/story/news/world/2019/05/13/climate-change-co-2-levels-hit-415-parts-per-million-human-first/1186417001/

They’re Diversifying And We’re Not

Recently, Petronas, the Malaysian oil and gas company has announced that it will be dabbling in the renewable energy sector. The firm recently announced that it inked a deal with Singapore-based renewable energy firm specializing in solar panels, Amplus Energy Solutions.

Petronas said that its deal with Amplus is part of the firm’s strategy to develop solar power plants and rooftop project. This deal says Petronas CEO Tan Sri Wan Zulkiflee Wan Ariffin is the first step into the firm’s diversification.  “This acquisition reflects Petronas’ strategic intent to grow in the renewable energy space as part of our strategy to step out beyond oil and gas into the new energy business. This also represents our first international solar venture and we look forward to providing energy solutions to our customers in these high-growth energy markets.”

Petronas is not alone in turning to renewable power to serve their customers well and maximize their profits. In fact, many Southeast Asian energy companies that are highly dependent on fossil fuels are also entering the renewable energy market in order to meet the region’s demand for electricity.

For example, Thailand-based energy firm, Banpu sources 90 percent of its revenue from its coal plant, but recently entered the renewable energy market. “We will integrate coal with renewable energy with the aim of maximizing profit and meeting social needs,” Banpu’s CEO Somruedee Chaimongkol says.

Banpu, which operates in several Asian countries as well as the United States has installed some 150,000 Kilowatt hour worth of solar generators. The firm also plans to build 80,000-kilowatts wind farm in Vietnam by 2021.

Likewise, State-backed energy companies in Southeast Asia are adopting the same diversification strategy. For example, Tenaga Nasional, a Malaysia energy firm started the commercial operations of its 50,000 kWh solar power plant near Kuala Lumpur, which is one of the largest solar plants in the country. 

Similarly, Indonesia’s state-run utility PLN is tapping on the country’s geothermal potential by purchasing renewable energy generated by independent geothermal power producers.

Darajat_geothermal_plant_Chevron_Indonesia-1024x682

PLN’s Darajat Unit Geothermal Power Plant. PLN is buying renewable energy from independent power producers. Photo c/o http://www.thinkgeoenergy.com

These companies, which once only had coal in their portfolio are probably now seeing the value of energy diversification. 

In energy systems planning, there are three basic properties of diversifications, namely, balance, variety, and disparity as pointed out by Andy Stirling,  a professor of Science and Technology Policy at the University of Sussex.

Variety pertains to the number of energy supply options available. This is what these companies are aiming for as having varied energy types means more diversity in their portfolio.

On the other hand, balance refers to the reliance on each available energy source option available. This means an energy system is also considered more diverse if there are proportionate dependence on each energy source. Disparity pertains to the differences in each power option.

It’s not only companies that will benefit from having a diversified energy mix. As I keep repeating, nations too will be in an advantageous position if there is diversity in their energy system.

For example, the Philippines relies heavily on coal to meet energy demands. This means our power costs go up when prices of coal in the global market increase. It also does not help when the peso falls against the dollar as we import coal. Whether power consumers will pay higher electricity bills highly depends on world prices and the strength of the peso. And this is all because we source most of our energy needs from coal plants.

We also have to remember that fossil fuels are finite resources. What happens then when these resources are depleted?

This is why we need to diversify our the power mix. This means we should be able to source a majority of our power from sources that are not vulnerable to external factors such as exchange rate and global prices. And again, as I have been saying, renewable energy prices can be fixed for many years. Of course, we also have to prepare for the scenario when finite power sources are low in supply or worse, already gone.

On a side note, many see the Supreme Court decision as challenging the supply of power in the future. I think we should take a step back and think of this as an opportunity to re-think about the energy mix of the country.  We have an opportunity to inject more indigenous and renewable energy in the system. We should grab this chance.

Energy diversification indeed has many virtues. Energy companies with mostly coal power plants in their portfolios are now seeing the value of diversifying their energy sources. Sadly, the same cannot be said about our energy system, our planners and regulators in the country.

References:

https://asia.nikkei.com/Spotlight/Environment/Southeast-Asia-s-energy-majors-pivot-sharply-to-green-power2

https://www.power-technology.com/news/petronas-renewable-energy/

Diversity and Sustainable Energy Transitions: Multicriteria Diversity Analysis of Electricity Portfolios By Andy Stirling

What Lack of Competition Means

A recent World Bank report says that more competition in the power, transportation, telecommunication can boost economic growth in the Philippines.

According to the study, “Fostering Competition in the Philippines: The Challenge of Restrictive Regulation,” the above-mentioned sectors are crucial in improving job generation and services in the country. Unfortunately, there is limited competition in these sectors.  

When compared to other countries, the Philippines’ economy is more concentrated due to the higher proportion of oligopoly, duopoly, and oligopoly in the market, the report added.  The author of the report and World Bank senior economist, Graciela Miralles Murciego stressed that such market structures have hampered productivity growth in the sectors: “The entry of politically connected companies limited productivity.”

The study also emphasized that restrictive regulations and restrictions such as complex regulatory procedures and barriers to trade and investments including foreign equity investments have constrained the growth of the economy. This in turns led to the high prices of services. It also cited that the limitations on foreign direct investment have stunted the development of infrastructure in the energy sector.

The World Bank is not alone in pointing out that more competition is needed in the energy sector. For example, the Massachusetts Institute of Technology released a paper, Utility of the Future by Massachusetts Institute of Technology, which concluded 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 report may not be talking about the Philippines directly, but it nevertheless echoes the sentiments of the World Bank.

The MIT study added that there is a need to review electricity markets especially since new technologies can be integrated into the power system. “Wholesale market design should be improved to better integrate distributed resources, reward greater flexibility, and create a level playing field for all technologies.”

I have been vocal about the needed reforms by the power sector so Filipinos can enjoy lower electricity rates. Our rules are skewed to favor the few. 

Take for example the lack of competition in service areas. Currently, another power player is barred from offering its services in an area that is already being served by a distributor. This, in turn, creates a monopoly. And as our economic professor will tell us, monopolistic practices will always put consumers at a disadvantage.

It also does not help that we are not allowing more foreign investments in the power sector. As the World Bank Report stressed, limitations on foreign direct investments have curtailed the growth of energy infrastructure. This is especially true for renewable energy development. 

We have to remember that renewable sources need to be explored (as in the case of geothermal) and plants have to be constructed. These undertakings require new technologies and equipment. Foreign investors can provide these two while we limit the foreign investors’ ownership on the natural resources if they are allowed to do so. This is the best way forward if we are serious in shifting to greater use of cleaner and sustainable energy sources.

Unfortunately, our 1987 constitution limits foreign participation in many industries including power. These provisions, however, are already outdated and needs to be revised. Former National Economic Development Authority chief, Cielito Habito emphasized this need aptly when he said, “The hope is we will be willing to amend economic provisions of the constitution because that is what really is holding us back. It is outdated. Many of the restrictions in foreign advertising, mass media, education, are really out of date. Given the technology in recent years, those rationales don’t apply anymore to the information age.”

Time and time again we are reminded by various experts on the many virtues of competition in various areas including the power sector. But these reminders seem to fall on deaf ears. The Philippines still has one of the highest power rates in Asia, and we all have to thank our regulators and policymakers for that.

References:

https://www.philstar.com/business/2019/03/05/1898614/greater-competition-power-telco-transport-boosts-growth-world-bank#UcJx07M8WylEry0k.99

http://www.bworldonline.com/constitutional-amendments-needed-boost-fdi/

From Second To Third: How PH Dropped To 3rd Place in Geothermal Power Production

The Philippines was once the second largest producer of geothermal power in the world. Sadly, this is no longer true.

Last year, the Mineral Resources Industry of Indonesia announced that its country’s geothermal power production has reached 1,800 megawatts (MW), making the country the second largest geothermal power producer. The Philippines, on the other hand, production has decreased from 1850 MW to 1600. We now just rank third.

There are many reasons for our country’s lower geothermal power production. And we need to look at the history of geothermal power development in the country to understand how we got to our current state.

In the early 1970s, the government had a partnership with Union Oil Company of California, or Unocal, now known as Chevron. Under this partnership, the Unocal will provide technical expertise while the Philippine government, through the National Power Corporation on NPC will build and operate the geothermal plants. In 1976, the government decided to do away with the private sector and build and do the exploration with Philippine National Oil Corporation-Exploration Development Corporation (PNOC-EDC) as the head agency.

At the height of the power crisis in the 1990s, the National Power Corporation signed an agreement with PNOC-EDC, then a government corporation, to develop and provide 700 MW of geothermal power in Leyte. This move catapulted the Philippines to the second largest producer of geothermal power in the world. We were second only to the US.

The Electric Power Industry Reform Act or EPIRA was a game changer for the energy sector. With the passage of this law, geothermal power exploration and development was left to the hands of the private sector. This means that the private sector has to spend for the exploration of possible geothermal sources and build the power plants, which are expensive. Exploration expenses cost more than half of the total project cost for geothermal power plant projects. And test drilling just a single hole can cost some $5 million as it is the most costly phase of the exploration. It is the private firm that assumes the cost and risk of the exploration activities.

The high capital needed for greenfield exploration is one of the reasons why most private entities stay away from geothermal power development. There was a time when the government shouldered the cost of the preliminary survey of the areas, but this is now being assumed by the private sector developer.

Unfortunately, our regulations do not help in making geothermal exploration and development enticing to investors. On the contrary, our regulators have little appreciation for the risks being taken by geothermal developers in our tariff setting.

geo

I have talked about this greatly in a separate post. But to put it simply, we use the BETA in the computation of the cost of equity under the Capital Asset Pricing Model or CAPM for our tariff setting. The Beta in the tariff equation determines the return on equity for any project. And sadly, the Energy Regulatory Commission uses the same Beta of ~1.03 for all power plant project regardless of technology. This means that the ERC does not consider the risk profile of the power plant project. This is an incorrect application of the CAPM and sadly puts geothermal power developers at a disadvantage since they assume the high-risks of the exploration but will not be properly compensated for it.

Why the ERC insists on using the same Beta for all power projects is mind- boggling especially since it has long been established that geothermal development is a high-risk undertaking. A study conducted by the International Finance Corporation years ago concluded that only 60 percent of the explored holes during geothermal exploration worldwide turned out to be successful.

The ERC’s attitude towards geothermal energy is just one of the regulatory issues that renewable energy advocates and developers have to contend with. Overall, previous administrations have paid little attention to renewable energy development anyway. Unfortunately, the lack of opportunities in this field has also lead geothermal energy experts to find work in other countries such as Indonesia.

It is no wonder why many local investors are not too keen to get into geothermal development in the Philippines. It also does not help that our constitution prevents us from getting more foreign investors to help us develop our natural resources.

It’s sad that a country like ours is missing the missing out on the benefits of geothermal power. The Philippines also has a great advantage in geothermal since we are located in the ring of fire and has many volcanic areas where geothermal resources are abundant. In fact, some studies show that the Philippines 2,047 MW of proven reserves and 4,790 MW of potential reserves.

We have to keep in mind that geothermal energy can act as a base load plant, which makes it a great substitute for traditional sources of power. And if we can just use geothermal power to replace coal, then we can surely enjoy cheaper power rates. Geothermal energy, as well as any other renewable power technologies, have a fixed price as I have discussed previously. This means Filipinos will no longer have to pay for the fluctuating cost of international coal prices and foreign exchange rates.

The Philippines’ drop to third place in geothermal energy production worldwide only shows that the lack of government support for renewable energy development has dire consequences. It may be a pity that we now rank lower than our neighbor. But what’s worse is that our country is failing to harness its rich natural resources properly for the benefit of the Filipino consumers.

References:

https://www.pwc.com/id/en/media-centre/infrastructure-news/infrastructure-news—archive/december-2017/indonesia-second-biggest-geothermal.html

Isn’t It Ironic?

ocean

Record-breaking year for ocean temperatures in 2018. Photo c/o Business Insider

Germany recently made an announcement that it will end its dependence on coal power plants by 2038 in an effort to meet its commitment to the Paris climate change goals. Reports noted that the country intends to reduce its coal energy capacity from 42.6 gigawatts (GW) to around 30 GW in 2020 and to 17 GW by 2030.

Germany at present still sources 40 percent of its power needs from coal. Last year was a first for the country as renewable energy dominated the power mix.

Hans Joachim Schellnhuber a member German coal exit commission hailed the decision as a move that’s very much needed in this day and age “ This is an important step on the road to the post-fossil age – a step that also opens up new perspectives for the affected regions through innovation-driven structural change.”

And I agree that the move is a step in the right direction. Each country needs to make drastic actions to help keep the world’s temperature at the desired levels. After all, the United Nations recently warned us that we only have 12 years to keep the world’s temperature to a maximum of 1.5 °C. Otherwise, we will suffer from worsening of risks of floods, extreme heat, droughts, and poverty.

We are already, of course, seeing the effects of climate change.

For example, as early as November last year, experts have warned that 2018 was likely to be the fourth hottest year on record. There is no confirmation of this record as of now. But what has been confirmed is that 2018 is that ocean’s had their warmest year on record.

The study that was published in the journal Advances in Atmospheric Sciences noted that the hot record indicates the enormous amount of heat is being absorbed by the sea due to rising of greenhouse gas emission. Rising ocean temperatures are not to be ignored says, experts, since they contribute to intense hurricanes and destruction of coral reefs.

Plus, the world is likely to suffer from El Nino this year, which will make 2019 as most likely to be the hottest year on record according to the Climate Prediction Center.

These warnings, of course, are pushing many countries, like Germany to step up their fight against dirty sources of power and honor their commitment to the Paris agreement in 2015.

The Philippines, unlike Germany and other countries, are far from making waves when it comes to greater use of renewable. This is a pity since we Filipinos have more reasons to shift to renewable power.

For starters, we are a country that is endowed with plenty of natural resources. We are just the third biggest geothermal power producer in the world. The Philippines used to be second, but sadly was overtaken by Indonesia (which merits a separate article). We are also a tropical country as well. Yet here, we are a nation that has coal plants as the major source of energy.

It also makes sense for us to do our share to help the earth limit its global warming. The Philippines, after all, has been tagged as one of the most vulnerable nations to climate change. But we are a country that has pushed back its target of sourcing 35 percent of overall energy needs by 2030 to 2040.

Plus, there’s a clamor renewable power among Filipinos. A survey by Pulse Asia last year showed that 89 percent of Filipinos are in favor of renewable energy. But alas, the country will be adding some. 10,423 MW of coal power.

We have every reason to shift to renewable energy. We have the natural resources. We are a country that suffers greatly from the effects of climate change. Our citizens want cleaner forms of energy. But no, we remain a nation dependent on coal. How ironic. And sad.

References:

https://www.philstar.com/business/2018/12/26/1879827/iemop-proposes-nationwide-system-renewable-energy-development

https://www.accuweather.com/en/weather-news/2019-may-be-the-warmest-year-on-record-as-a-result-of-an-el-nino-event-exacerbated-by-global-warming/70006943

https://edition.cnn.com/2019/01/16/world/climate-2018-hottest-year-for-ocean/index.html

Good and Sad Headlines

 

re germany

Renewable Energy dominated the power mix of Germany in 2018. Photo c/o Time.com

The New Year started with news of record highs for the renewable energy sector.

In Germany, renewable energy dominated the power mix for 2018. A study by Bruno Burger of the Fraunhofer Institute for Solar Energy Systems showed that Germany is on its way to becoming less dependent on fossil fuel as renewable energy accounted for 40 percent of the country’s electricity production in 2018 while 38 percent came from coal. This is the first time renewables has overtaken coal as Germany’s primary power source. Wind power also became the second biggest power source.

Similarly, a  new record high in renewable energy use was also recorded last year by the United Kingdom (UK).

According to climate research and news site, Carbon Brief, growth in renewable energy use in the UK rose to 33 percent, a record-breaking figure. On the other hand, fossil fuel use dropped to 46 percent, the lowest ever recorded as many coal power plant closed last year. The UK has earlier pledged to phase out all coal plants by 2025.

These two countries’ achievements only show that indeed a shift to cleaner forms of energy is possible.

Unfortunately, the Philippines has not been making headlines for its use of renewable power.

On the contrary, recent headlines about the energy sector talks about the increase in power rates due to the second tranche of the Tax Reform for Acceleration and Inclusion or TRAIN law.

The second installment of the law equals an additional excise tax of Php2.00 per liter of diesel and gasoline an added 12 percent value for 2019. The total increase per liter of diesel will be Php2.24. Last year, Php 2.50 taxes were levied on diesel and bunker fuel.

Naturally, the new taxes will have a domino effect on consumer prices, transport fares, and yes, power rates.

No, I am not questioning the merits of our new taxation scheme. I leave that to tax experts and economists. What I am merely pointing out is that the new taxes also increase power rates because of the Philippines’ dependence on traditional sources of power.

Estimates by The Independent Electricity Market Operator of the Philippines (IEMOP) show that the second tranche of TRAIN law will raise electricity prices by P0.1111 per kilowatt hour (kWh). By 2020 or on the third installment, the increase would be P0.1311 per kWh. The first phase already raised electricity prices by P0.0904 per kWh. These estimates according to IEMOP are based on the assumptions of Manila Electric Co. (Meralco) related to its sourcing energy mix.

Naturally, the power rates will increase if fuel prices in the world market increase, too. In the words of IEMOP President Francis Saturnino Juan, “So, these are the incremental amounts, but of course if the price of fuel itself will increase, then that will add to this incremental increase in 2019 and 2020 because of the staggered increase in the implementation of the law,” he said.

The issue of increasing power prices is a separate one from that of volatility. Volatility itself causes over-all costs to rise because of uncertainty. Because we are dependent on global markets, necessarily we are exposed to global price swings.

We could have spared the Filipinos from this additional burden if we increased the share of renewable power in our power mix a long time ago. Why pay more for expensive sources of energy when we could have just harnessed our natural resources well? This is especially true for off-grid islands that are powered on diesel-fired generators. We have to keep in mind that 80 percent of the operating cost of power generation in isolated islands are spent on diesel. And with added taxes on petroleum products, we can expect higher prices of power generation for the off-grid areas.

That’s just the problem with our reliance on traditional sources of energy and the government’s lack of appreciation for renewables — it leaves Filipinos vulnerable to a variety of factors. Sadly, it is the consumers that suffer when there is no political will to push for a greater share of renewable energy.

References:

https://businessmirror.com.ph/after-hurdling-2018s-regulatory-crisis-power-industry-players-are-ready-for-year-of-the-pig/

https://www.independent.co.uk/environment/renewable-energy-germany-coal-power-environment-green-solar-wind-a8711176.html

https://www.ft.com/content/ea2feb40-0e8e-11e9-a3aa-118c761d2745