PH lags in global push for renewables

The Philippines has been slow to action and way behind its commitments to global initiatives on reducing or avoiding gas emissions harmful to the environment, despite the existence of many laws seeking to promote the use of renewable energy sources.
Instead of attracting investors in power projects run by nonfossil fuels, the current regulatory environment has only discouraged foreign capital and even pushed big local players to put their money outside the country where the investment climate for renewable energy is considered “more hospitable.”
Globally, a lot is riding not only on turning to renewable forms of electricity generation, but also on moving away from fossil fuels such as coal and oil, and even natural gas, as the entire world has its sights on the 2050 goal of having greenhouse gas (GHG) emissions reduced to a net zero and limit global warming.
Against this backdrop, the Philippines appears to be gripped by inertia, especially when viewed along with the equally lofty goals of providing access to electricity for all and providing each household a choice of consuming electricity produced by renewable energy technology.
The International Energy Agency (IEA), based in France, notes that more and more countries are announcing pledges to achieve net-zero emissions—or balancing the amount of carbon dioxide emitted into the atmosphere with the amount of emission removed or avoided.
But the IEA says that even if fully achieved, these pledges so far put forward by governments fall well short of what is required to achieve net zero by 2050.
For the Philippines, the government in April 2021 committed to the United Nations Framework Conference on Climate Change to reduce and avoid 75 percent of GHG emissions for the period 2020-2030. This goal covers the sectors of energy, transport, industry, agriculture and wastes.
The big “but” is that only 2.71 percentage point of this goal is unconditional, which the Philippines can do on its own. The main part, or 72.29 percentage points, is conditional. This means that its policies and measures will have to conform with the Paris Agreement, the international treaty on climate change adopted in 2015.

Legal framework

Thus far, the Philippines’ toolbox that is helping these efforts include the Electric Power Industry Reform Act of 2001, the Biofuels Act of 2006, the Renewable Energy Act of 2008, the Climate Change Act of 2009, and the Energy Efficiency and Conservation Act.
Last month, amid mounting criticism of failing to address a rising threat of power shortage, the Department of Energy (DOE) said that over the past five years, it had completed the mechanisms under the Renewable Energy Act to facilitate greater private sector investments in renewables. These include the traditional ones—hydro and geothermal—as well as solar photovoltaic, wind and biomass.
One facet of this that the DOE is drumming up is the participation of consumers by producing on their own the electricity that they need, or to choose renewable energy as the source of electricity delivered to their premises.
The mechanisms, the DOE said, include the Renewable Portfolio Standards (RPS) policy, Green Energy Option Program (GEOP) policy and Enhanced Net-Metering System. These three, among others, are geared toward achieving a 35-percent share of renewable energy in the country’s power generation mix by 2030.
The RPS is a market-based policy mechanism that requires power utilities to increase the use of renewable energy by 1 percent a year beginning in 2020 until 2030. The GEOP provides end-users the option to choose renewable energy facilities as their source of energy. Meanwhile, the net metering program enables ordinary electricity consumers to become a “prosumer,” with the ability to generate electricity for their own consumption and sell any excess generation to the distribution grid.

 

Wrong direction

According to Noel Estoperez, professor at Mindanao State University’s Iligan Institute of Technology, power generation using renewable energy started in the Philippines in 1913 with the 560-kilowatt Camp John Hay hydroelectric power plant that was developed by missionaries. As this flourished, hydro power was nationalized 23 years later through the law that also created National Power Corp. (Napocor).
Geothermal power came much later in 1979 in Tiwi, Albay. According to Guido Delgado, former president of Napocor, this facility that was initially rated at 55 megawatts and three years later at 330 MW, took 12 years to achieve commercial operations starting from a ceremonial lighting held in 1967.After decades of incubation as a technology, solar and wind power started delivering to the Philippine grid in 2005. Biomass followed suit in 2009.
But in the Philippine Energy Plan 2018-2040, which was not finalized until November 2020, the energy department reiterates its stance of maintaining a “technology neutral approach” for an optimal energy mix.
This is explained as giving priority to “a reliable, sustainable and affordable energy mix” that will meet the country’s supply needs.
As of 2020, the share of renewable energy in the power mix was 29.2 percent, or 6,825 MW out of 23,410 MW of dependable generating capacity. The DOE defines dependable capacity as the capacity that “can be relied upon” or the performance that a power plant can actually deliver vis-à-vis its installed or nameplate capacity. This was a reduction from 32.5 percent in 2005 when solar and wind debuted in the mix and total dependable capacity across the archipelago was 13,595 MW.
Over the same 15-year period, the share of coal-fired power plants alone jumped to 43.8 percent (10,245 MW) from 25.2 percent (3,432 MW). Apparently, coal-based power may not be ecologically sustainable, but it is reliable and affordable.
Coal-based plants run round the clock as baseload facilities to cover the minimum demand while renewable energy facilities are dispatched mid-merit at best, to augment the baseload output when consumption kicks up. Also, power produced by coal-based energy arguably remains to be the lowest-cost for consumers.
Oil-based power plants—mainly used in small islands and also for additional capacity when demand peaks—accounted for 13 percent (3,054 MW) in 2020. In 2005, oil’s share was higher at 22.4 percent (3,403 MW). Rounding up the fossil fuels that fire up generators is natural gas—also used for baseload plants—which represented 14 percent of total dependable capacity in 2020 (3,286 MW), going down from 19.9 percent (2,703 MW) in 2005.
In terms of actual output, renewable energy technologies accounted for 21.2 percent or 21,609 gigawatt-hours out of a total of 101,609 gWh in 2020. This was lower than the 32.4-percent share in 2005, when renewables generated 18,609 gWh out of a total of 56,568 gWh. That was the first year when renewables were part of the power generation mix, with a combined 19 gWh from solar and wind. Biomass power plants came online only in 2009.

 

Policy backlash

This technology-neutral policy is, in fact, a double-edge sword. On the one hand, neutrality means not promoting any technology such as renewables. The result is the end of subsidies for renewable energy platforms, particularly solar and wind power, at a time of healthy investor interest.
As recently as 2019, Energy Secretary Alfonso Cusi was reiterating that power-generation projects should be competitive rather than dependent on incentives such as the Energy Regulatory Commission-approved Feed-in Tariff rates and guaranteed dispatch—which are forms of government subsidy.One result of this policy materialized in the form of big renewable energy facilities abroad that are backed by local companies, and foreign companies looking at other markets instead of the Philippines.
In April 2019, the Ayala group’s power generation platform AC Energy (Acen) marked the commercial operation of its first project in Vietnam. This was the $294-million, 330-MW Ninh Thuan solar farm, a joint venture with Vietnamese partner BIM Group.
Fernando Zobel de Ayala, president of Ayala Corp., who attended the ceremonial switch on, described the project as “a very large and meaningful investment” for Acen.
“Vietnam’s government has been very aggressive in attracting investments in renewables, particularly solar and wind,” Zobel said back then, noting that the Ninh Thuan facility was part of a renewable energy boom in Vietnam.
Eric Francia, president and chief executive of Acen, would be echoing this as recently as last month, when he said: “Vietnam is an ideal place for sustainable investments as it leads the race to clean energy transition in the post-COVID world.”
Over the next two years from the inauguration of the Ninh Thuan solar farm, Acen would announce renewable energy-related partnerships in India and Australia.
Other Philippine players such as the Aboitiz group are taking steps in the same direction. Aboitiz Power Corp., which had also explored Vietnam, is looking at opportunities in Indonesia.

 

More coal plants

The Philippines’ policy of neutrality in power generation technology, on the other hand, also means not discouraging any technology such as coal-fired plants. Advocacy groups like the Center for Energy, Ecology and Development call for a ban, despite the coal industry flexing “clean coal technology” innovations through high-efficiency, low-emission generators in tandem with “carbon capture storage and utilization.”Also in 2019, Cusi told the committee on appropriations at the House of Representatives that a “moratorium on any technology is a disservice to our country.” On Oct. 27, 2020, the DOE chief would announce at an international forum that the government has decided on a moratorium on new coal projects. The DOE would take almost three months, releasing in mid-January 2021 a written advisory that spelled out the policy. The umbrella group Power for People (P4P) Coalition finds this “underwhelming” considering that the ban was about no longer accepting new applications for endorsement of coal projects, instead of outrightly disallowing the construction of any new coal-fired facility.
According to P4P, there are at least 8,070 MW of coal-based generating capacity in the pipeline that will still be left untouched by the DOE’s “alleged effort to pursue a more sustainable power sector.”
In a 2018 report on its assessment of the Philippine energy sector, the Asian Development Bank (ADB) notes that compared to fossil fuel-based power generation, the permitting process for renewable energy development is more complex.For one, the issuance of a Renewable Energy Service Contract must undergo a competitive selection process. Also, incentives for renewable energy such as duty-free importation and income tax reduction can be accessed only after the project has been issued the contract. “The same regulations and permitting processes are applied to all renewable energy projects whether large or small scale, including renewable energy deployment in mini-grids to enhance energy access in areas that are not yet energized or that receive limited power supply,” the ADB said.
“The transaction cost and time for undergoing such lengthy regulatory processes can make smaller renewable energy projects unattractive to investors,” it adds.

 

Not enough

Still, the DOE has lists of “awarded” re­new­able projects, those that have been green lit and which in­clude projects in pre­de­vel­op­ment and on­go­ing de­vel­op­ment stages.
In terms of po­ten­tial gen­er­at­ing ca­pac­ity, these projects to­tal 11,284.92 MW of hy­dro; 814.2 MW of geo­ther­mal; 11,892.31 MW of so­lar; 5,760.58 MW of wind, and 182.03 MW of biomass. All in all, these rep­re­sent 29,034.04 MW of ad­di­tional ca­pac­ity for the en­tire Philip­pines.
As­sum­ing that all these projects are re­al­ized, they will cover al­most a third of the ad­di­tional 90,584 MW that the coun­try needs in or­der to meet the pro­jected peak elec­tric­ity de­mand in 2040 un­der a busi­ness-as-usual (BAU) sce­nario.
But in a clean en­ergy sce­nario (CES), the Philip­pines needs more ad­di­tional in­stalled ca­pac­ity at 93,482 MW.
“The high re­quire­ment for ad­di­tional ca­pac­ity in the CES is at­trib­uted to hav­ing more re­new­ables in the sys­tem, specif­i­cally so­lar and wind that are con­sid­ered vari­able ca­pac­ity,” the PEP 2020-2040 ex­plains.
This down­plays a gen­er­a­tor’s ca­pac­ity as de­scribed by the man­u­fac­tur­ers—thus called “in­stalled ca­pac­ity” or “name­plate ca­pac­ity.” It is more prac­ti­cal to look at the de­pend­able ca­pac­ity, much more so with so­lar and wind, con­sid­er­ing that these are in­ter­mit­tent and de­pen­dent re­spec­tively on the in­ten­sity of sun­light and the move­ment of air.
Also, the PEP 2020-2040 clar­i­fies that the CES does not mean all-re­new­able. In fact, the sce­nario takes into ac­count ca­pac­ity con­tri­bu­tion from nat­u­ral gas—crude oil’s twin and coal’s less-pol­lut­ing cousin—and “other low-car­bon and highly ef­fi­cient tech­nolo­gies.” This lat­ter part sug­gests that coal re­mains in play.
Fur­ther, the two-decade plan tags the in­vest­ment cost of the needed ad­di­tional ca­pac­ity un­der the BAU sce­nario at $104.7 bil­lion. The cost of ad­di­tional build needed for the CES is $124 bil­lion, higher by 18 per­cent.
And this is partly why in­dus­try play­ers balk at the idea of a swift and whole­sale shift to clean en­ergy, de­spite civil so­ci­ety’s as­ser­tion that the tech­nolo­gies and nat­u­ral re­sources are read­ily avail­able to make the tran­si­tion.

 

Ex­pen­sive tech­nol­ogy

“I think, at the end of the day, there must be a com­mer­cial ba­sis as to the choice be­tween coal and [nat­u­ral] gas for ex­am­ple or even re­new­ables, and at the same time we are mind­ful of the power rates that we will charge to the con­sumers,” Manila Elec­tric Co. (Mer­alco) chair Manuel V. Pangili­nan says at a press brief­ing held last July.
Not only is Mer­alco the big­gest elec­tric­ity dis­trib­u­tor in the Philip­pines, it is also build­ing up a con­sid­er­able pres­ence in power gen­er­a­tion.

“It’s al­right to talk about re­new­ables and gas, but if it trans­lates into higher prices, that ob­vi­ously will be met with some re­sis­tance, par­tic­u­larly politically.”

—Manual V. Pangilinan, Chair, Meralco

Ad­di­tion­ally, Pangili­nan ar­gues that the shift to re­new­ables is a dif­fi­cult choice, es­pe­cially if the ques­tion of “who will pay for the cost of mi­gra­tion” is left un­clear.
“I wish it were [an easy choice], but re­new­ables don’t pro­vide the kind of ca­pac­ity that will sup­ply the re­serves that we need mov­ing for­ward,” he adds. “I don’t think it’s a clear-cut case for re­new­ables.”
In other words, the ques­tion is about bal­anc­ing the cost against the pace of the en­ergy shift. Cur­rently, coal and gas cover Mer­alco’s baseload sup­ply needs while re­new­ables are primed to ex­clu­sively pro­vide the com­pany’s mid-merit re­quire­ments—which rep­re­sent 29 per­cent of con­tracted ca­pac­ity.
Mer­alco has also made a com­mit­ment to in­vest in and de­velop at least 1,500 MW of re­new­able en­ergy projects over the next five to seven years.
Ray Es­pinosa, pres­i­dent of Mer­alco, points out that con­sid­er­ing the pre­vail­ing sen­ti­ment to move away from coal, the bur­den of pro­vid­ing baseload sup­ply falls on nat­u­ral gas — now con­sid­ered as the “tran­si­tion fuel,” since it is cleaner than coal al­beit still formed from fos­sils and thus rich in carbon.

 

Coal-free tar­get

In­deed, other play­ers like the Ayala group have set a goal of hav­ing their power-gen­er­a­tion busi­ness coal-free by 2030. In 2019, AC En­ergy and In­fras­truc­ture Corp. com­pleted the di­vest­ment of its 60-per­cent in­ter­est in the 632-MW GNPower Mariv­e­les coal-fired plant in Bataan. This was sold to its part­ner, the Aboitiz group.
Ayala is in the process of of­fload­ing its 85-per­cent in­ter­est in the 552-MW GNPower Kauswa­gan coal-fired plant in Lanao del Norte; the re­main­ing 35-per­cent stake in the 244-MW coal-fired plant of South Lu­zon Ther­mal En­ergy Corp. in Batan­gas, and the 40-per­cent stake in the 1,336-MW coal-fired plant of GNPower Dinginin in Bataan.
The Aboitiz group it­self has an­nounced a P190-bil­lion in­vest­ment pro­gram to achieve a 50-50 bal­ance in its re­new­ables busi­ness and its con­ven­tional ther­mal gen­er­a­tor as­sets.
“If de­car­boniz­ing the sys­tem is the goal, Mer­alco can­not do it alone with­out work­ing with the rest of the power in­dus­try and of course with the govern­ment,” Pangili­nan said. “Govern­ment has got to par­tic­i­pate in that tran­si­tion, which will be painful if done in a short time­frame.”
Alas, P4P, the con­sumer wel­fare coali­tion, laments the con­tin­ued non­men­tion of the en­ergy sec­tor in Pres­i­dent Duterte’s lat­est and fi­nal State-of the Na­tion Ad­dress last month.

 

Achiev­able goal

Ac­cord­ing to the IEA, global car­bon diox­ide emis­sions are ex­pected to reach new record lev­els start­ing 2023 amid govern­ment spend­ing short­falls in the tran­si­tion to clean en­ergy, es­pe­cially in emerg­ing and de­vel­op­ing economies.

“Since the COVID-19 cri­sis erupted, many gov­ern­ments may have talked about the im­por­tance of build­ing back bet­ter for a cleaner fu­ture, but many of them are yet to put their money where their mouth is. De­spite in­creased cli­mate am­bi­tions, the amount of eco­nomic re­cov­ery funds be­ing spent on clean en­ergy is just a small sliver of the to­tal.”

—Fatih Birol, ex­ec­u­tive di­rec­tor of IEA

Based on an anal­y­sis of 800 na­tional poli­cies in­clud­ing sev­eral that are im­ple­mented by the Philip­pine govern­ment, the agency found that gov­ern­ments have mo­bi­lized $16 tril­lion in fis­cal sup­port through­out the COVID-19 pan­demic. How­ever, only 2 per­cent or about $320 bil­lion of the to­tal is ear­marked for clean en­ergy tran­si­tions.
“Not only is clean en­ergy in­vest­ment still far from what’s needed to put the world on a path to reach­ing net-zero emis­sions by mid-cen­tury, it’s not even enough to pre­vent global emis­sions from surg­ing to a new record,” Birol said.
Birol said the path to net-zero emis­sion by 2050 “is nar­row but still achiev­able,” but gov­ern­ments must act now by lead­ing clean en­ergy in­vest­ment and de­ploy­ment “to much greater heights be­yond the [pan­demic] re­cov­ery pe­riod.

This story was first published in the August 27, 2021 issue of the Philippine Daily Inquirer’s Road to Clean Energy special report.