The gnawing coronavirus pandemic we’re wrestling with puts in view the fragility of any country – the crisis stirred up extreme socio-economic conundrum that will push not just government leaders but also the citizens to re-think policies and life choices moving forward.
In the Philippines, the economic managers are already sounding off economic recovery – initially seen at a gradual pace, but they are expecting it to ricochet with greater force next year through 2022. What does that entail for us then?
Specifically, an economic rebound needs to be underpinned by reliable and sufficient energy supply. The Philippine energy sector itself is in a transition – not just in ensuring ample power capacity in the next 3-4 years, but toward a greater diversification to clean energy sources.
More broadly, the balancing act of the Duterte administration’s remaining less than two years will tread along critical business paradigms because it must carefully weigh the polarity of voices within and among the investing community. The government – or the Department of Energy (DOE) for that matter cannot afford to fail – because mistakes in energy planning could commit the country to another round of power crisis– and this could happen at the cusp of the country’s economic recovery around 2022 to 2024.
Energy Secretary Alfonso G. Cusi had set the alarm bells ringing when he said, “We are all aware that our current energy situation leaves much to be desired. We are in urgent need of additional capacity.”
For those involved in policy and decision-making like his agency, Cusi said, “We must strike a balance between meeting our current energy needs and building a better and cleaner world for the coming generations.”
Rewiring RE’s pathway
The country’s extended honeymoon with feed-in-tariff (FIT) incentives for renewable energy (RE) projects culminated last year (at its prescribed cut-off date of December 31) – and the last technology-recipients had been the unsubscribed capacities for biomass and hydropower installations.
That investment perk of course is the FIT Allowance (FIT-All) line item in the electric bills that consumers will have to pay for in a span of 20 years.
And when Cusi speaks of the FIT incentives, he will always sound off regrets on how the Filipino consumers had been vulnerably committed to pay higher subsidy compared to other RE markets, even in the ASEAN region. Taking his cue from that, he noted that the next round of RE investments must veer away from financially burdening subsidy schemes.
This year, the energy sector is binding itself into another love affair with RE – and that will be through the Renewable Portfolio Standards (RPS), or the policy that will require distribution utilities (DUs) to source mandated percentage of their supply from RE capacities. The target is to hike RE capacity share by additional 13,000 megawatts in the country’s energy mix until year 2040.
That policy enforcement, along with other market mechanisms like the net metering program, and the Green Energy Option Program (GEOP), have been reigniting fresh round of investment excitement in the RE sector – or how they call themselves as the “BIG SHOW” of technology aggrupation – in reference to biomass, geothermal, solar, hydro, ocean and wind RE technologies.
At best, the RE developers are pitching for their projects as the solution that the country needs not just for energy sustainability, but also in addressing the bigger dilemma of climate change risks. And more importantly, it is what is needed to generate jobs for many Filipinos displaced in the workforce by the pandemic.
For instance, in solar and wind installations, a study by the World Bank had shown that job creation could be 5 to 8 times more than that of thermal power plants, hence, this could partly solve the unemployment dilemma of the Philippines if capital flow in the sector is reignited soon.
Jan Willem Zwarteveen, managing director of Siemens Gamesa Philippines, opined that if the Philippines could take advantage of the reinvigorated interest of investors in the RE sector, “this will serve as a fantastic opportunity to solve the predicament of the millions of job losses caused by Covid-19.”
Atty. Monalisa C. Dimalanta, chairperson of the National Renewable Energy Board (NREB) signals that the RE sector is now open for fresh round of investments – and the major anchor this time is the RPS policy.
“We’re excited for 2020 even with the situation that we are in now. This is a critical year for RE because this is the year for the full implementation of RPS and we will also start implementing the green energy option program. These are huge market opening programs for RE,” she said.
But given the economically crashing impact of the pandemic, NREB and the DOE announced that the auction for the initial round of RPS capacity will happen first half of next year.
According to Director Mylene C. Capongcol, the initial target for the RPS capacity had been set at 2,000 megawatts, but this is undergoing re-evaluation because of the demand slump in the power system this year. And the final figure must also correspond with the calculated supply-demand outlook that the DUs will have in the coming years.
“We’re doing a recalculation of the RPS requirement. Because of the COVID, there is a slide in demand, particularly on the electricity sales of mandated participants or the DUs,” the energy official explained.
Cusi previously apprised media that he instructed both NREB and the DOE’s Renewable Energy Management Bureau (REMB) to submit to him the final figure for the RPS auction by month-end of September.
Beyond the planned greenfield RE developments, Dimalanta indicated that part of the capacity to be included in the RPS bidding next year will be 460 to 480MW of ‘stranded capacities’ from solar and biomass projects that had not been absorbed under the FIT program.
“For the first auction, we are looking at including the plants or the capacities that were not able to make it to the FIT. So initially, we already have 360 to 380MW from the solar plants; and maybe 100MW also from the biomass plants,” she said.
Redefining ‘power of choice’
The energy sector is a sphere where consumer-choices are being redefined in a major way – not just in power supply sourcing, but also in technology advancements ushered in by digitalization and the country’s smart grid ambitions.
And since climate change is a global concern flogging humankind, this postulates powerful logic on how each economy or country must exert choices in meeting present and future energy needs – keeping in mind that energy is one major sector known to have massive carbon emissions harming the planet.
Federico R. Lopez, chairman of First Gen Corporation, resonated this warning: “today, we have a narrowing window left to keep warming within the desired 1.5 degrees Celsius agreed to in Paris under COP 21, or watch it run away from us irreversibly,” with him adding that “our planet’s natural environment and its social fabric are actually ripping at the seams.”
To succeed in abating climate change risks, he noted that “humanity needs to reduce carbon dioxide emissions by 6 percent every year until we achieve net zero emissions in 2050.” And the way forward, Lopez asserted is for us to live “in a time of great paradigm shifts, and businesses that seek to thrive in this era must be able to reimagine and redesign themselves for this new world.”
Very often, when one speaks of “power of choice” that is generally referred to a consumer exercising his or her supreme preference which energy service or technology to patronize and at what cost and quality or reliability the consumer wants that service delivered or bestowed on him/her.
On broader terms, Carlos Lorenzo Vega, vice president of First Gen Corporation, rationalized that “choice” no longer just refers to the consumer being at the head of the table wielding influence on service preferences, but this also touches on policy leanings of the government as well as business paradigms or technology inclinations that corporates will opt for.
And for First Gen, he emphasized that the clean energy investment pathway is taken as an intrinsic choice from a supplier’s perspective “because we believe there is a need to create symbiotic mutually beneficial relationship with nature and society that benefit more than just shareholders.”
Vega expounded “we believe and we made this choice because we know that the environment, the customers, the communities, employees, suppliers and contractors are equally important and should be taken ahead of investors.”
On a macro-level, the First Gen executive pointed to another ‘power of choice’ – and that is on the policy response that must be taken by government.
“This choice is our leaders, our government’s way to empower contestable customers who can now choose where to buy their power from,” he said, referencing both to the Retail Competition and Open
Access (RCOA) policy and the Green Energy Option Program (GEOP) — two industry policies that already warrant consumers to directly contract or source their electricity service from preferred suppliers.
And in the process of exercising that power of choice, Vega asserted that “a perfect match is no longer about price,” but also the source of that power supply, like the clean energy proclivity of the expanding list of the RE 100 companies.
“When they go out and look for that perfect match, they specify that they need the power to come from RE, so it’s no longer just price – that’s not anymore the criteria, it is also where you source it. So the energy source matters,” he stressed.
While the debate rages on how the Philippines shall sort out its future energy needs, it is not just enough for policymakers to ensure that the technology choices would be one that will make them look good or pleasing to impatient stakeholders, but they must lead on solutions that are sustainable and reliable for decades to come.
Efficient planning, according to Zwarteveen, is key – and the energy supply modeling must not just factor in the technology choices in the system, but what energy efficiency can also contribute in the overall solution.
He acknowledged that the “transition will be particularly difficult,” but it would help government policymakers if they can delineate an energy plan that will determine the country’s need for the short-term and then complement that with longer term planning paradigm – and these plans must also be updated in sync with the economic growth targets of a country.
In the deployment of RE technologies, Zwarteveen indicated that planning must also firmly harmonize the integration of these installations into the power grids; and must blend in the required system flexibility especially for variable REs — like if the sun doesn’t shine or when the wind won’t blow – what is the practical technology to be made available in the system to plug the intermittency of these RE installations.
Technology advancements – primarily for battery energy storage and hydrogen, shall also be in the foresight of energy planners; and ultimately, a viable energy plan must not only serve the requirements of end-users traditionally connected to the grid; but also the off-grid consumers who are still breaking free from the chains of long years of energy poverty.
In the view of the Siemens Gamesa executive, whose company is technology provider to array of wind farm projects in the country, the Philippine RE sector has great potential to spring back as hub for capital flow of foreign direct investments and be able to create job opportunities for its citizens if it can lay down the right policies and energy planning strategies that could then re-stimulate investors’ interest.
Disheartened or encouraged
Dimalanta of NREB reckoned that if one has to weigh up the scale of RE installations in the country now, it appears that the battle is just half-won.
But even in this re-assessment of investments in the sector, she noted that one can choose to get disappointed or be inspired – primarily if the consideration is how little we have done so far in promoting net metering for RE in the country’s power system.
“Of course, we get excited by the big things, by the FIT and all the things that will increase RE penetration in the grid. But on an individual or closer to heart level, what makes us more excited also is the ‘prosumer’ initiatives,” she said, referring to net metering program that will allow consumers to generate their own electricity (i.e. through solar installations in their homes) and whatever generation surplus they have can be injected back into the power grid.
Dimalanta noted what is tangibly seen as low figure of installations on net metering may not really bring cheers to the industry at this point. That kind of mindset though could still change, she asserted, depending on how an investor would appraise the potential especially if the consumers are already fully armed with the information and tools (including concerns on upfront financing) that they need to take the shift on their energy usage.
“We can choose to be disheartened, why after all these years, the number is still very low. Or we can choose to be encouraged that: wow, there’ still that huge potential for net metering and now that technology is available to us, we can look at these technological innovations as our choices also in powering our homes.”
Through all the chaos and uncertain future that we’ve been wading through because of the niggling health crisis, Dimalanta highlighted that there are still a lot of things to be excited about, especially technological advancements and consumer preferences in the energy sector. And it is no accident that the Filipinos are not losing faith yet. In the energy sector, it is just a matter of reinforcing the choices and bolstering up policies – because any strategy will not be sustainable if the people will not believe in it.