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

Off-Grid Renewable Energy is the Way to Go

 

Southeast Asia Market Analysis man on boat solar panels

Growth of off-grid renewables in Asia increased to 4.3 GW in 2017 from 1.3 GW in 2008. Photo c/o http://www.irena.org

The number of people served by off-grid renewables around the world has increased six-fold since 2011 as there are roughly 133 million people enjoying renewables in remote areas in 2016 according to International Renewable Energy Association in its report, Off-Grid Renewable Energy Solutions: Global and Regional Status Trends.

Of the 133 million, there are 100 million who are using solar lights, 24 million solar homes and nine million are connected to a mini-grid.

In terms of capacity, off-grid renewable capacity has also increased three-folds from under two gigawatts in 2008 to 6.5 in 2017.

The report noted that growth came from the Asia and Africa regions with 76 million Asians and 53 million Africans enjoying the benefits of off-grid renewable energy. Asia accounted for the most significant growth over the last decade from 1.3GW in 2008 to 4.3 GW in 2017. The population that’s enjoying RE in the region has increased by eight times, from 10 million in 2008 to 76 million in 2016.

The growth of renewable energy use in remote areas is not surprising since it has long been established that renewable can reduce energy poverty as well as help lower power costs even for isolated areas.

In the Philippines, various studies are concluding that the country will have big savings by using renewables for off-grid locations.

For example, recently, the Access to Sustainable Energy Program (EU-ASEP), a European Union (EU) funded program has said that the National Power Corporation can save as much as Php 2.25 billion, which is the equivalent of Php 4.50 per kilowatt-hour if the agency chooses hybrid technology for its mini-grids.

The EU, through its strategic advisor of the study, Dr. Christoph Menke defines hybrid mini-grid as “combines at least two different kinds of technologies for power generation and distributes the electricity to several consumers through an independent grid.” This means combining renewable energy with a traditional source of power such as diesel power plants as what most off-grid islands use for their energy.

The Php 2.25 billion savings is feasible, our Energy Department confirms in a statement: “Hybridization, in combination with properly maintained generator-sets will enable NPC to save around P2.25 billion annually.”

The EU-backed research is not alone in emphasizing the importance of adding more renewables for off-grid islands in the Philippines.

Similar recommendations were provided by the paper entitled “Electricity-Sector Opportunities in the Philippines: The Case for Wind- and Solar-Powered Small Island Grids,” which stressed that country could save as much as Php10 billion if off-grid islands use RE rather than traditional power sources.

The study also noted that shifting to more use of renewable power will not affect the availability of power in these 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.”

Choosing renewables is the best solution to address energy poverty in the country especially when there are some 2.4 million Filipinos homes without access to poverty as of 2014.

Energy Undersecretary Felix William Fuentebella has recently announced that the Energy Department is ready to release a Department Circular named Renewable Portfolio Standards Rules for Off-grid Area, mandating industry players of off-grid and missionary areas to source a part of their needs from renewable sources. The RE requirement or percentage, as well as the yearly incremental RE generation in every off-grid area yet, has to be determined.

The circular could have been released much earlier given that the need to provide access to power and lower energy rates has been there all along. Nevertheless, may this circular help in providing stable and affordable electricity to fellow Filipinos living in isolated areas.

References:
Off-Grid Renewable Energy Solutions: Global and Regional Status Trends IRENA
http://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jul/IRENA_Off-grid_RE_Solutions_2018.pdfhttp://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jul/IRENA_Off-grid_RE_Solutions_2018.pdf

Electricity-Sector Opportunities in the Philippines: The Case for Wind- and Solar-Powered Small Island Grids. The Institute for Energy Economics and Financial Analysis

https://business.mb.com.ph/2018/09/11/doe-eu-estimate-p2-25-b-savings-in-hybrid-solution-for-off-grid-areas/

https://www.manilatimes.net/energy-circulars-on-uniform-electricity-bill-re-use-inked/438275/

Such Folly

sulu pinterest

Modular nuclear plant for Sulu? Renewables is a much better option. Photo c/o pinterest

The local government unit (LGU) in Sulu is said to be looking at putting up a modular nuclear power plant (NPP).

A report by The Inquirer quoted Energy Department’s spokesperson and undersecretary Felix William saying, “Yes, Sulu. It’s actually small. They are looking at a modular facility.” The undersecretary, however, admitted that a modular nuclear plant is a remote possibility.

And Fuentebella is right to say so. After all, the suggestion is a folly.

For one, what we have are outdated legislative and regulatory frameworks to guide us in developing a nuclear power plant. Whoever suggested building a nuclear power plant in Sulu seems to have forgotten that our regulatory framework covering NPPs were created more than 50 years ago. However all these were either repealed or downgraded during President Cory’s time. In particular, Philippine Atomic Energy Commission (PAEC) was downgraded to a Philippine National Research Institute (PNRI). PAEC was regulating the nuclear power development and operations including licensing of engineers.

The existing legislative framework in the regulation of nuclear technology in the country are the Science Act of 1958 and the Atomic Energy Regulatory Act of 1968 or RA 5207 where there are two different regulating agencies in the use of radiation, namely the Philippine Nuclear Research Institute (PNRI) and the Bureau of Health Devices and Technology (BHDT) under the Health Department.

The PNRI is in charge of regulating nuclear and radioactive materials while the BHDT governs the electrically generated radiating emitting devices in all the fields. Unfortunately, our current framework fails to define the regulatory responsibilities of nuclear plants. Neither of these bodies have the competence nor authority to regulate nuclear power.

Who then would issue a license to build and operate the nuclear facility since there is no licensing agency anymore? We need to create a new law that would define the responsibilities of each regulating agency in charge of nuclear power.

And even if we can pass a law quickly, there remains the question of human resources. In the first place, how much expertise do we have on nuclear technology locally? This leads me to my second point.

The Philippines lacks the technical skills for a nuclear power plant. There is a shortage of qualified experts and experienced workers in running an NPP. Those involved in building the Bataan power plant may no longer be around or have retired from work altogether.

This a known fact. The absence of qualified people is a gap that some lawmakers tried to address when they proposed the re-opening of the Bataan Power plant.

For example, House Bill 580 or the “Bataan Nuclear Power Plant (BNPP) Operability Act” filed by the late Senator Mirriam Santiago had a provision mandating the creation and implementation of a training program for the management and operation of all technical aspects of the BNPP.

The same bill also proposed for the University of the Philippines (UP) to form a Nuclear Power Engineering Department under the College of Engineering, which should only be to “offered for enrollment to the top twenty percent (20%) of engineering graduates” of the university. The proposal also called for a separate course in UP that will specialize in nuclear power industry regulation.

The late senator obviously knew what she was proposing. Her senate bill recognized the lack of qualified people to build, run and regulate NPPs in this country and the need to recruit the brightest minds to handle nuclear energy. Up to this day, there remains a shortage of people to run and regulate nuclear power.

In the absence of local experts and experienced personnel, who will then build and run the NPPs? Are we to turn to foreigners and rely solely on their expertise? This raises the question of whether we should entrust the operations of a power plant entirely in the hands of foreigners. Our current laws, unless exempted by another law, prohibits foreigners from practising their profession in the country.

Plus, let us not forget that Sulu remains to be a conflict area where bombings and gunfights are constant. Keep in mind that an accidental release of radioactive material from a nuclear could cause death, acute health effects and even long-term environmental consequences. Putting a nuclear plant in the middle of a war zone may have dire repercussions. The idea of putting a nuclear power plant in a location with persistent bombing and shooting is absurd.

So, where did the suggestion of using a modular nuclear power plant come from? Was this the idea of a person or entity who has yet to hear the benefits of renewable energy? Have we forgotten that the Philippines including conflict areas in Mindanao are well endowed with natural resources that can be utilized to generate power?

We should focus on what is doable. Banking on indigenous renewable energy and distributed generation is the sensible alternative rather than the modular nuclear power plant.

A Gloomy Warning

What would you do if the temperature becomes too hot that you must stay every single day indoors?

Sounds like doom to me, right?

Unfortunately for us, this a possible scenario if we keep up with the business-as-usual in dealing with climate change. Or at least that’s what a climate change expert says.

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)  warned us that the Philippines and its neighbors in Southeast Asia could suffer from extreme temperatures daily if countries continue with the present high emission levels.

The Nobel Prize Winner stressed that “All of the tropics will develop conditions that physiologically, humans cannot live outside anymore.”

Schellnhuber was in the country to present the study “A Region at Risk: The Human Dimensions of Climate Change in Asia and the Pacific.” He said that based on modeling and simulation studies from the report, temperatures would keep increasing by 1.7 degrees Celsius above pre-industrial levels by 2030, and up to 2.7 degrees by 2050. By 2070, temperatures could be up to 4 degrees.

According to Schellnhuber, we could “see a complete shift in living conditions,” if people fail to address climate change. He further stressed that we would be facing extreme summer heat, an unusual weather condition, which the Philippines only experience once in every 740 years.

Nations must do everything they can to avoid such extremes, he warns. If not, Schellnhuber pointed out, that millions of people will be forced to flee their homes. “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, and by the way, needs a lot of fossil energy to keep air-conditioned, and that would exacerbate global warming, so it is certainly not a solution.”

Gloomy, indeed.

Schellnhuber’s words reminded me of the Pope’s encyclical on climate change two years ago. Pope Francis made strong calls to act quickly on the issue of climate change. “We may well be leaving to coming generations debris, desolation and filth. The pace of consumption, waste and environmental change has so stretched the planet’s capacity that our contemporary lifestyle, unsustainable as it is, can only precipitate catastrophes, such as those which even now periodically occur in different areas of the world. The effects of the present imbalance can only be reduced by our decisive action, here and now.”

Unfortunately, two years after the powerful message of the Pope, little has been done locally to work on reducing our carbon footprint if we are to talk about renewable energy development.

The BMI Research of the Fitch Group recently released its study noting that there will be more coal-fired power plants in the next 10 years. “Growth in the Philippines power infrastructure sector over the next 10 years will be driven by investment in coal-fired generating capacity as companies and the government build a slew of new power plants to support growing electricity demand.”

The report noted that 90 percent of roughly 7,300 megawatts (MW) power plant projects in the pipeline are coal-fired ones.

So, we are in the business-as-usual scenario, still relying heavily on coal for our energy needs.

We certainly have failed to heed the Pope’s call. I can only pray and hope that Schellnhuber’s warning below will not be ignored, too.

Reference:

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

Unfortunate But Not Hopeless

While other countries in the world are slowly shifting to cleaner forms of energy, the Philippines seems to be moving in the opposite direction.

The recent BMI Research of the Fitch Group noted that coal-fired power plants would dominate new energy infrastructure in the next 10 years. “Growth in the Philippines power infrastructure sector over the next 10 years will be driven by investment in coal-fired generating capacity as companies and the government build a slew of new power plants to support growing electricity demand,” according to the report.

Based on the group’s research, there is roughly 7,300 Megawatts (MW) capacity that is either under, approved or already for construction. Of these, 90 percent are coal-fired energy plants. Even the Visayas and Mindanao regions, which by the way have more renewable energy sources particularly, hydro and geothermal in their power mix, will be recipients of the future coal plants.

The report pointed out that the there is a price to pay for the country’s continued reliance on coal-fired plants.

One of the significant consequences is that the Philippines will have to keep fuel imports steady in the next five to 10 years when these power stations become operational.

“As the share of electricity generated from thermal — and especially coal — sources grows from 73% in 2017 to 77% in 2026, the Philippines will have to increase imports of fuels to feed newly built coal-fired power plants.”

There are various reasons why this report bothers me.

For one, we are lagging behind in our commitments to provide cleaner forms of energy given the amount that would be generated in the coming years from coal plants. While the rest of the world is moving away from coal, we are still stuck and depending heavily on this form of energy.

Again, I stress that I have no issues with coal plants per se, having built some of them during my time as Napocor chief. But the world and its needs have changed, and we need to get our energy from cleaner sources. Other countries are making drastic changes. China alone, the world’s biggest consumer of coal is shifting to RE by pouring some $361 billion worth of RE investments by 2020. Its government has also canceled roughly 150 coal projects from September last year to March this year.

Unfortunately, we are heading towards the opposite direction largely because our government regulations are not supportive of the growth of the RE sector. For one, we still have limited participation from foreign investors in the energy infrastructure, and as such, limited funds flow to build more RE plants.

Our regulatory environment is far from friendly for both consumers and RE producers, too.

For one, our regulators use an incorrect valuation for the beta by taking the value from the point of view of the generator than of the consumers for our floating Power Sales Agreements or PSAs. Unfortunately, our PSAs have pass through costs, which means power consumers pay end up paying for higher energy prices when the peso falls against the dollar and when coal and oil prices surge in the global market because of the value of the beta, which has a positive value.

As I have said previously, this is incorrect as the the consumers are the ones who are shouldering the cost of foreign exchange fluctuation as well as the fuel risks. Hence, the beta in our tariff setting should be a negative one to reflect the risks borne by consumers for both the foreign currency adjustments and world prices of oil and coal.

Plus, I have discussed in an old blog post, our regulators place an arbitrary value on the beta when it comes to cost recovery in our tariff setting. For example, a geothermal plant and coal-fired power plant will have the same beta value. This is faulty because the developer of a geothermal power plant takes more risks given the exploration cost than the coal-fired power plant developer. The incorrect application of the core concept of the capital asset portfolio model is detrimental to the development of renewables.

 

IMG_0015.JPG

Coal-fired plants must be a thing of the past. Renewable Energy is the future. 

 

Again, at the risk of sounding like a parrot, our energy planner belongs to the school of thought that coal-plants are cheaper the RE ones. These planners only look at the upfront cost of building power plants rather than scrutinize the risks that consumers shoulder when relying significantly on fossil fuels.

I have repeatedly pointed out that traditional sources of energy are not necessarily cheaper as we could end up paying more given our heavy dependence on imported coal. Even the above report of BMI stressed that we are importing 70 percent of our coal needs from neighbors. So, what happens when coal prices increase? What happens if importation becomes more expensive due to various factors? We have been in this situation before where our power rates have increased because getting coal abroad has become difficult.

Sadly, it is the Filipinos who are screwed with such flawed thinking as the ordinary Pinoy consumer pays for these upward price adjustments. We do, after all, have the pass-on provisions where customers pay for price fluctuation.

We have been suffering from high power rates for several decades now. And as I have been discussing in quite some posts, the key to solving high electricity prices is to one, have more renewable energy in our mix and second to have fixed-price contracts for our PSAs.

Our best bet to lower power prices is to have more RE in our energy mix. RE will be a cheaper alternative as many experts have stressed that the prices of RE technologies will continue to fall.

Regrettably, it seems unlikely that our country will shift to more cleaner form of energy soon. Understandably, moving to cleaner energy will not happen over night.

In the meantime, we must find ways to mitigate the consequences of relying heavily on coal-fired plants. I stand firm on my position that we need a greater share of renewables. But we must, at the very least, consider having fixed-priced contracts where we use a risk-free rate, the negative beta as I have mentioned above in the discount rate in computing for the tariff (reasons for this are in an in-depth discussion in my previous post.)

RE sources are in the best to position to give out these fixed-priced contracts, which do not pass-on the costs to consumers. These contracts will not burden consumers by making them pay for price fluctuation of coal importation costs since there are no import costs of raw materials in RE production.

Yes, we do need more infrastructure, particularly more power plants as our economy develops. But we must also pay attention to the welfare of ordinary Filipinos as we build for our future. Heavy reliance on coal-fired plants will be detrimental to our families as they shell out more money to pay their electric bills. I implore our energy planners to map out and scrutinize all options available as we try to meet our increasing demands for energy.

Reference:
http://beta.bworldonline.com/bmi-coal-remain-primary-power-source/

 

Faster Than Expected

Some experts are expecting that solar will eventually take over as the king of the energy mix. And it may come sooner than anticipated. Soon,  solar power, as well as renewable energy (RE), will dominate the power basket according to a Bloomberg New Finance outlook released last June.

The solar photo voltaic panels cost for one is expected to drop by 66 percent by the year 2040 while onshore wind power will dip by 47 percent after 2040.

The report noted that solar costs are now already just one-fourth of its prices in 2009 while onshore wind has seen a 30 percent decrease in the last eight years. Off shore wind prices are also expected to drop by 71 percent, making this RE technology more attractive.

Presently, solar costs are already comparable to new coal power plants in the United States and Germany. By 2021, the same will happen to emerging markets like India and China. By 2020s, both countries are expected to have lower power prices with the countries’ aggressive investments in solar energy. The BNEF report noted that close to 39 percent or some $4 trillion of RE investments of the world are to be poured in China and India.

“These tipping points are all happening earlier, and we just can’t deny that this technology is getting cheaper than we previously thought,” said Seb Henbest, the lead author of the BNEF research.

Due to the falling costs of the two technologies, the BNEF outlook stressed that in 2040, solar and wind power combined will account for close to half of the world’s installed generation capacity, more than four times the current 12 percent share.

Naturally, the greater share of these renewable sources will displace coal and natural gas plants. The estimate showed that roughly 369 gigawatts (GW) of coal plants projects would likely be canceled, an amount that’s equivalent to the combined generation capacity of Brazil and Germany.

IMG_0005.JPG

At present, solar costs are already comparable to new coal power plants in the U.S. and Germany

Even the United States where President Trump signed an executive order to “start a new era of production and job creation” especially in the coal sector, will see coal capacity drop by half in 2040.

Europe’s coal capacity is also expected to slide by 71 percent given the region’s environmental laws that will make fuel burning cost more.

The new king of the renewable mix is indeed coming.

Unfortunately, for us Filipinos, we still yet have to see a dramatic increase in the renewables’ share in our power mix. While India, has already embraced technology and the benefits that a nation can reap from harnessing its resources properly, our country has remained in the same position for years. In the last two years, the share of renewables— solar and wind combined– only accounts for one percent.

As I have been saying, our energy planners remain fixed in their incorrect thinking about how expensive RE is. While the rest of the world have been sensitive to the development of the RE sector, we still insist on having our ‘quick fixes.’ We favor the least cost in terms of capital outlay for power plants but refuse to look at the additional cost that consumers will shoulder for our heavy dependence on fossil fuels.

We only need to look at the devastating impact on energy prices from history to see the risks of relying heavily on either coal or oil plants. In the 1990s, the Gulf War, for example, brought roughly 30 percent increase in the average spot price for crude oil.  According to the average unit price of crude oil increase in the country was approximately 56.1 percent.

We don’t even have to go as far as the 1990s. Just last year, our Energy Department officials warned of a possible disaster with the news that Indonesia has extended its imposed moratorium on coal exports to the Philippines due to the kidnapping of several Indonesian sailors in the Sulu sea by the Abu Sayaff.  We, after all, get 70 percent of our coal or 15 million tons for 2015 from Indonesia. A few years before that, Indonesia also changed its rules about coal exports which led to an even higher cost of generating power from coal.

A necessary consequence to all these is this: coal and other similar fossil fuel-based technologies will increasingly have difficulties in getting financing. Not only because financial institutions will institute policies to avoid fossil fuel technologies, but if at all, banks will have to shorten the tenors it will give to coal plants. Because of the expected decline in costs of RE technologies, the competitiveness of coal plants will increasingly decline.  Therefore, banks will have to lend, if at all, at much shorter maturities.  With shorter maturities come higher annuities.  This will make financing coal plants extremely difficult and uncompetitive.

All these points to one thing: Let us be like other countries, like our Asian neighbors India and China that have embraced and capitalized on developments of the RE. And part of it is welcoming fixed contracts in our energy mix to take advantage of the falling prices of RE technologies and having the maximum levels allowed in our Renewable Portfolio Standard (RPS), where power players are required to either source or produce a specified percentage from RE

Given that our Power Sales Agreements (PSAs) are ‘floating’ where risks such as price escalations of fossil fuel and foreign exchange rates are passed on to consumers, we need to have our fixed priced contracts to at the very least soften the blow on the negative impact of the ‘pass-on costs.’ Fortunately, renewables are in a good position to hand out those much needed fixed contracts.

While the rest of the world are embracing the lower costs of RE generation, we are still stuck in the old ways of thinking that fossil fuels and fixed price contracts are the correct formulae to our power rates woes.  Let us see the economic sense in investing and helping renewable energy flourish in our rich country.

If we want to maximize our abundance of RE sources in the country, which as many have said is the key to lower energy prices, then we must consider those fixed priced contracts for RE. And if we want to truly embrace and benefit from the falling costs of RE technologies such as what the recent BNFF report has noted, then we must be quick in adopting my above proposals. Otherwise, we will be left wondering years from now how and why we failed to find a solution to what seems to be never ending high electricity prices in the country, when in fact, the answer had been quite obvious.

References:

https://www.bloomberg.com/news/articles/2017-06-15/solar-power-will-kill-coal-sooner-than-you-think

http://www.philstar.com/headlines/2016/06/27/1597092/philippine-power-supply-jeopardized-indonesian-ban

Oil Price Shocks and Devefoping Countries: A Case Study of the Gulf Crisis by Sarah Ahmad Khan

The Cost of Being Outdated

Numerous studies reveal the benefits of shifting to more renewable energy. These research papers debunk the myth that RE is more expensive and rather stresses that in the long-run, greener forms of energy may be cheaper if one is to consider many factors including cost of oil importation and effects on health and environment, to name a few.

One such study is the recently released “Electricity-Sector Opportunities in the Philippines: The Case for Wind- and Solar-Powered Small Island Grids¬” by the Energy Economics and Financial Analysis (IEEFA) and Institute for Climate and Sustainable Cities (ICSC).

According to the report, the Philippines is likely to save more than P10 billion annually if we are to replace diesel-fired power plants with renewables in off-grid islands or areas that are not connected to the grid.

For these off-grid islands, energy is provided by the small power utilities group or SPUG under the National Power Corporation (NAPOCOR) or by Independent Power Producers (IPPs). According to the report, there are 310 SPUG and IPPs combined with a total dependable capacity of 267 MW with mini-grids that uses oil-powered plants. The cost of generating electricity in these islands are subsidized under the Universal Charge for Missionary Electrification (UCME) of NAPOCOR where fuel costs account for 75% of the NPC-SPUG cost of power generation.

The reliance on oil for energy needs comes at a significant cost as fuel account for 75% of the NPC-SPUG cost of power generation. The cost of generating electricity in these islands are subsidized under the Universal Charge for Missionary Electrification (UCME). The researchers point out that P60 billion are spent on subsidies even if these areas only generate 0.49% of the overall generated power in the country and 6% of the total energy demand.

With the falling costs of RE technologies, the study noted that great savings can be made A swift transition to RE for these off-grid islands is possible says the researchers, except the country’s policies and regulations, are outdated: “Barriers to small island grid uptake of modern renewable energy power include outdated regulations that have not kept up with technology.”

The researchers emphasized that the present system fails to provide incentives to buy cheaper sources of power, which unfortunately causes the slow the shift towards RE in these areas “This system tends to be biased against renewable generation because franchise managers would rather stick with diesel generation they are used to, even though more expensive.”

The authors recommend for the Energy Department to provide incentives to the SPUG to hybridize their power plants as well as for the National Electrification Administration (NEA) to order electricity cooperatives to be neutral in their purchase of energy. After all, the researchers concluded that “Small island grids powered by solar, wind, and other renewable energy can reduce dependence on expensive imported fossil fuel generation without compromising availability of power and grid reliability.”

In a previous post, I have tackled the problem of energy poverty as some 1.2 billion individuals are without electricity. Unfortunately, our country is suffering, too from the lack of access to power.  We are in fact being left behind in terms of electrification in the region.

hybrid thailand

Photo c/o http://www.thai-german-cooperation.info

The Philippines is almost at the bottom of the list in South East Asia when we talk about national electrification rate which is at 79% while our neighbors such as Malaysia, Singapore, and Brunei have already achieved 100%. Thailand, Vietnam, Laos and Indonesia have impressive numbers at 99%, 97%, 87%, and 81%, respectively. We are at the bottom three along with Cambodia and Myanmar.

Indeed, there is a need to hasten in reviewing our policies to catch up with our needs especially since we are aiming for more inclusive growth.

The big picture is actually very simple: The Philippines should exploit and encourage the development of all renewable energy resources for the simple reason that: a) no need for fuel importation and thus saving foreign exchange; b) the Philippine economy will be shielded from wild swings in the global energy markets; and c) electricity prices will be stable over the long-term.

Clearly, falling prices of renewable energy aren’t enough for a major shift towards renewable energy. A problematic regulatory system must be addressed if we want cleaner and cheaper sources of energy.

The lack of foresight, willpower and competence can be a bane for the growth of any sector. And our power sector is one of those that stands to gain if only regulators competently enact changes needed to help our country develop.

References:

Electricity-Sector Opportunities in the Philippines: The Case for Wind- and Solar-Powered Small Island Grids

World Economic Outlook 2015 data base. International Energy Agency http://www.worldenergyoutlook.org/resources/energydevelopment