Powering Philippine Post-COVID-19 Recovery With Renewable Energy
By Patrick Dayao
Last July 1, 2020, I was privileged to attend the webinar conducted by the Energy & Power Committee of the American Chamber of Commerce (AmCham) of the Philippines entitled “Energy Talks: Renewable Energy Updates and Developments.” To provide the business community with updates and developments in renewable energy in the Philippines amidst the COVID-19 pandemic, AmCham invited Atty. Monalisa C. Dimalanta, chairperson of the National Renewable Energy Board (NREB) as resource speaker.
For everyone’s information, NREB was created in 2008 to support government agencies and craft policies to promote renewable energy in the country. Atty. Dimalanta was appointed by the president in March 2019 and she is leading the board during this time of pandemic. She started her presentation by giving a brief background on Republic Act №9513, also known as the Renewable Energy Act of 2008. The law is a little over 10 years old and, according to her, it is already due for review. This is what the NREB has been doing for the past two years — they call it “Roadmap to Revival.” She said that the economy is, hopefully, poised for recovery and they wanted to fuel that recovery with renewable energy.
The Philippines has had a long history with renewables. Atty. Dimalanta kept mentioning the 2008 law, but even prior to 2008, we have had a long race with renewables. It started in 1936, when the National Power Corporation (NPC) was established to initially develop hydropower resources in the Philippines. In the 1970s, geothermal power was developed and, in 1991, it was opened to the private sector so they can help develop geothermal projects. In 2007, small projects were allowed by the Department of Energy (DOE) — initial programs on solar and wind were part of these initiatives. In 2008, the Renewable Energy Act was passed. It was meant to consolidate all programs meant to promote renewables. The speaker said that she always likes to share this slide (history of renewables) because it lets the audience know that the country has a long love story with renewables. Also note that in 2008, about 35–40% of the power generation mix was already composed of renewables.
The Renewable Energy Act was created to promote renewable energy, both in the on-grid and in off-grid areas. Baskets of incentives were developed under the law.
The on-grid areas are the connected areas in Luzon, Visayas, and Mindanao. The law provides two types of incentives — the fiscal incentives and the non-fiscal incentives. During the session, Atty. Dimalanta focused on four non-fiscal incentive programs in place.
- The Renewable Portfolio Standard (RPS). Setting a minimum percentage of generation from renewable energy sources to be sourced by mandated participants, currently set at 1 percent of electricity sold above FIT allocation.
- Green Energy Option Program (GEOP). Voluntary market for sourcing of renewable energy supply and available customers with monthly average peak demand of 100kW. These are non-regulated transactions and establishes new players like renewable energy suppliers.
- Renewable Energy Market (REM). To facilitate tracking and trading of renewable energy certificates (RECs) to be administered and operated by the RE Registrar (RER). REM rules for the orderly implementation of the RPS rules.
- Net Metering Program. A consumer-based incentive with 3,132 registered participants (as of December 2019) from various Distribution Utilities (DU). Pricing or cost recovery scheme is regulated by the Energy Regulatory Commission (ERC).
The NREB is focusing on the on-grid market because this is the largest. Meanwhile, the off-grid market are non-connected areas. Since the Philippines is an archipelago, connecting to grid lines is really a challenge for independent power producers. While RPS is set by the government, GEOP is initiated by the customer, which is why the contracts and pricing are not regulated. Another challenge of the government is the requirement for regulatory approval before distribution utilities and their suppliers make effective contracts.
Below is a snapshot of the national renewable energy program of the Philippines so that, as a country, we can track our growth with renewables. Note that, here, they used 2010 as the base year. NREB set a very ambitious target. They wanted to triple the country’s capacity, from 5,438 MW to 15,305 MW by 2030 and, of course, considering a 35% share in the power generation mix.
However, when Atty. Dimalanta and her team reviewed the actual versus the target, they found out that they are nowhere near those numbers, except for the solar sector (refer to the table below). According to her, this is what’s keeping her awake at night.
Remember that the goal is to have at least 35% share of the generation mix. But in 2019, instead of increasing that share, that share has actually been reduced to 20.8%. That’s the glaring result of their analysis — and this compels them to work harder.
The speaker also shared the pre-COVID power supply demand forecast for the country. It was projected using a quite high GDP scenario of 8%. Based on the graph hereunder, we need 43,765 MW additional capacity by the year 2040.
The speaker also showed the summary of the existing RE projects in the Philippines (see below). Here is the potential for RE. This data came from the Department of Energy. These are renewable energy contracts that have been awarded to developers in total. If you take a look at the table, there is a potential capacity of 32,000+ MW. If they will just work on these projects, they can already supply the 43,765 MW forecasted demand. But of course, that is not the whole picture because they have to factor in the capacity figure of the available technology. Again, since the country is an archipelago, transmission has always been a challenge.
The previous presentation on the four non-fiscal incentives concentrated on grid-centered programs. The shift now is to focus on consumer-centered uses of RE systems. They have to align with the DOE perspective. They have identified these 3 baskets for this approach below:
Despite the COVID situation, NREB remains committed to their RE targets. They believe that RE is the cost-effective and most reliable source of power supply for the country. The solar and wind sectors are growing. A lot of independent power developers are into rooftop solar ventures.
ISSUES AND CHALLENGES
- Delayed implementation of the RE programs and policies
- Permitting processes (delay and/or sequential requirements)
- Land acquisition for site and transmission lines/grid availability
- Availability of financing
- Resource accessibility or availability (hydro, geothermal)
- Availability of suitable and/or affordable technology or feedstock (geothermal, biomass)
- Grid or system-related concerns
REVISITING THE FUNDAMENTALS
- Renewable energy is no longer an alternative, but a priority. Considering our current situation brought by the COVID-19 pandemic, developments in the power industry will surely lean towards the more resilient and sustainable option of energy. In this case, it will be renewable energy.
- Shifting of metrics from Megawatt (MW) to MW and Megawatt hour (MWh)
- Using the same language and planning tools used in the preparation of the Power Development Plan (demand-driven projections)
- Market-unlocking measures (Distributed Energy Resources and adoption of corporate Power Purchase Agreement)
- LGUs as primary champions for RE (resource identification at LGU level — Local Renewable Energy Planning as building blocks of National Renewable Energy Program)
- Energy Transition Audit (review of existing assets, programs, laws including regulatory framework for energy pricing)
- Market-based (e.g., auction) and resource-specific support programs, including consumer capacity building (for GEOP) and access to financing.
At the beginning of the year, the renewable energy sector has already been challenged with financing, policy uncertainty, and transmission or grid integration. The COVID-19 pandemic is now intensifying these issues and concerns of the RE developers and independent power producers. However, the Philippine government is doing everything they can to help this industry.
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About the author:
Patrick has been with John Clements for over 13 years now. He holds a Bachelor of Science in Accountancy degree. He spent his first 8 years with John Clements under the Accounting team before transitioning to the Sales team in 2015. He has passion for cooking for family and friends. He loves to play basketball, bowling and badminton.
