A Sensible Philippine RE and Climate Change Policy

David Celestra Tan

12 January 2016

The Philippines does not really have a handle on a sensible policy and strategy to address climate change. Even its Renewable Energy program that so far is really its only concrete attempt at a global warming solution is confused and misguided. Our current programs are out of control and will hit hard the Filipino electric consumers.

1. Putting Things Into Perspective

Global warming (also climate change) is a human race problem and indeed the Philippines must do its share in limiting it. However, our contribution to the solution must be sensible and realistic for the Philippines and the Filipinos. We must provide solutions that are suited to our energy resources, our archipelagic geography, our economic development timeline, and our people’s ability to pay.

We cannot ride on First World country solutions of the United States, Europe, China and India.

In the first place those are countries that contribute 65% of the greenhouse gases (GHG). The USA that contributes 20% had pursued solutions that are feasible and affordable by their affluent citizens and economy. Its shift away from coal is feasible because they are rich in natural gas from fracking. Their advanced financial sector supports RE installations.

The Philippines contributes a miniscule 0.35% of global warming but we suffer big from the earth’s climatic alteration due to global warming. Part of that had been because our power generation mix already included cleaner hydro, geothermal, and natural gas.

We similarly already have the highest electricity rates in Asia due to unmitigated abuses in rate setting and pass on charges and the way we are going with RE and transmission development, consumers will be paying a hefty price and aggravate our expensive power woes.

2. Our misguided RE program

We have a wonderful enabling law to support Renewable Energy. That’s the RE law of 2008. However, we are again failing in its implementation. First, RE does not mean only Solar and Wind. There is biomass, mini-hydro, and ocean. There is also hybrid.

Solar and Wind had been at the forefront of the RE program because they are heavily promoted by the technology providers and the companies who are used to the heavy subsidies in other countries. And heavily subsidizing them is a rich-country solution.

Unfortunately these two technologies have drawbacks of low load factors with outputs of only 5 hours a days for solar. And their intermittence or output variation as frequent as every 15 minutes required expensive load following capacity support. Consequently, the RE subsidy called FIT that started with a palatable 0.045 per kwh charge to consumers can hit P0.50 per kwh if it reaches the 2,500mw as being lobbied by the promoters.

The solar lobby group originally wanted a subsidized rate of P19 per kwh or a subsidy of P13.50 per kwh for grid connected systems. They eventually settled at P9.68 per kwh which still now requires a subsidy from the consumers in the amount of P4.68 per kwh. Now that the Meralco average generation rate is P4.25 per kwh, the subsidy has become P5.43 per kwh. That’s a consumer subsidy of P1.6 billion per year for the first 200mw that got the 9.68 rate. Those that got P8.68 rate would still cost the consumers P660 million per year for every 100mw of solar installation. And there are about 2,000mw more of utility scale solar projects in development.

One wonders why with all these interests in solar, that the Department of Energy insists on doling out arbitrary subsidized rates of P8.68. Why not subject it to bidding because there are those indicating a rate of P7.00 per kwh.

3. Hidden Costs of Wind and Solar

On top of the FIT subsidies the hidden costs of solar and wind are hefty and those will also be passed on as well to the consumers in one form or another.

a. Solar and Wind are installed where wind resources and available lands for solar which are invariably far from the power transmission lines. This will require the building by NGCP of more transmission lines and those costs will add to the transmission charge.

b. The variability of the output over the course of the hour and day require costly load and frequency reserves called ancillary services. The costs of those of will be passed on to the consumers. In the island of Negros up to 1000mw of grid connected solar projects are in implementation and proposed. A concentration of solar facilities in one area will make the large output susceptible to output drops from passing clouds. If there is 1000mw of solar installations the sudden drop can be 75% or 750mw. That is a lot of hot standby power reserve that would be needed to stabilize the supply. And the cost of those will again be passed on to the electric consumers.

4. A more Sensible RE and Climate Change Policy

The Philippines needs a climate change policy that is suited to its unique environment, energy resources, and consumers’ capacity to pay. We cannot afford First world solutions.

a. Let us provide more aggressive support for roof-top solar and not grid connected solar. Grid connected large installations require heavy subsidies that will be passed on to the consumers. Roof-top solar is viable because the output is valued at the retail rate which range from P9.00 to P12.00 per kwh. And we have an enlightened enabling rule called Net Metering, one of the few forward looking consumer friendly regulatory actions of the Arroyo ERC.

The DOE can push for fiscal and guarantee incentives to the financial sector to support rooftop installations and assure that DU’s like Meralco facilitate connections instead of deterring them. Here once again Meralco is launching its own roof top solar ventures. Nothing wrong with that except that the rules must be clear for equal access to data and systems of independent and own-use installations for residential and commercial consumers.

Expand the deployment of this clean energy technology by encouraging mini-grids where neighbors can share the benefits of rooftop solar. Our read is this would not be a violation of Meralco’s distribution franchise which has exclusive rights to distribute power through their distribution system which is 13.8kv. Such neighborhood solar systems can be implemented also through the Barangays. A modestly successful Rooftop solar program can bring 2,000mw into the system in the National Capital Region alone.

b. Let us pursue and support more hydro-electric projects specially the large ones. The Agus complex must be progressively rehabilitated. Other hydro projects in Mindanao need to be aggressively encouraged by the Department of Energy. In Luzon, the Laiban dam project must be pursued as soon as possible both for water supply to the Manila metropolis and for power generation. There are hydro projects in the island of Negros and Panay island. Other existing hydro projects need to be rehabilitated and expanded. We have the potential of gaining an additional 1,500mw of capacity from these climate friendly generating resources.

In the electric coop areas, the National Electrification Administration can revive their mini-hydro program that promotes and supports the development of this generation option in many mountainous islands like Palawan, Mindoro, Mindanao, Catanduanes. The government owned banks, DBP and LandBank are already providing excellent financing packages.

c. Related to this, let us have a more comprehensive “rain water catchment” program so that the water that nature dumps on our country can be harnessed for water supply, agricultural irrigation, and energy generation. The country’s silted lakes like Laguna Lake in Luzon and the Agus lakes in Mindanao need to be dredged. Building codes should require open ground to allow water to sip into the ground instead of draining over the concreted roads and building yards, flooding communities along its path, and wasting into the sea. This will help replenish ground water and yes, help reduce flooding.

Promote residential, community, and building rainwater catchment programs for non-potable water uses like gardening, kitchen and toilet, cleaning.

d. Promote biomass projects all over the islands in the country. This will include agricultural feedstock development. Provide more incentives and facilitate land use for the energy crop plantation.

Biomass projects use steam boilers and turbines. Compared to solar and wind, they are more reliable and consistent generators of electricity. Biomass power plants are actually grid competitive in rates thus requiring little or no subsidy burden on the consumers. The DOE needs to develop more facilitative rules to support this technology and feedstock development.

We estimate the country has the potential for 2,000 to 3,000 mw of additional biomass power plants. And the economic contribution of livelihood projects in the plantation areas will be tremendous.

e. Promote co-firing of biomass fuel by coal power plants. South Korea requires its coal power generators to mix up to 20% of their fuel with biomass pellets. Of course this will also require the development of production capacity for biomass materials and pellets.

The estimated 7,500mw of existing and proposed coal power plants in the country can therefore be cleaned with the equivalent of 1,500mw of power.

f. Rapidly develop mass transit systems
Jeepneys, cars, and busses are major contributors of greenhouse gases. Expanding the mass transit system will help commuters and reduce vehicles on the road. Provide special sitting-only green coaches to encourage car owners to take the train systems instead driving. Provide them with parking areas in Quezon City and shuttle services at the Business District destinations. A Quezon City car owner would rather pay P100 to 150 roundtrip to Makati than drive and spend on gas, parking, and labor through the EDSA traffic.

Equally important provide better planned passenger loading and unloading areas at each train station. Let us think about reducing vehicles on the road by phasing out old private vehicles of say 15 year old cars from EDSA and major thoroughfares. They will not pass emission tests anyway. A higher standard for Jeepney’s for reliability and emission must be studied.

g. Pursue an enlightened Nuclear program

Nuclear is still the cheapest way to generate power currently and there are newer technologies, smaller capacities of 100 to 300mw operate on lower temperatures. Let us develop natural gas facilities but nuclear must be part of the mix. Let us not be afraid. Down the road, fusion technology offers alternatives for cheaper and cleaner power but that is 15 to 20 years away.

These potential greening projects alone if achieved 50% will already contribute significantly to reversing climate change and the Philippines will actually have a contribution to the worldwide carbon offset solution that would be way more than its 0.35% damage to global warming.

Matuwid na Singil sa Kuryente Consumer Alliance Inc.