By THERE is a big push for renewable energy (RE) to dominate the country’s energy mix as the Philippines seeks to strengthen energy security.
While industry stakeholders make the shift to RE, more new green technologies are making waves in other countries, thus the need to accelerate the transition to hit the RE target. But can we achieve those targets? Are the RE technologies mature enough to scale as a viable replacement for current energy sources?
Right now, the country’s RE share in the mix is approximately 22 percent.
The Philippines and the US—the world’s largest national economy—have almost the same RE percentage share at 22 and 23 percent, respectively, and yet the Philippines’s carbon emission share represents 0.4 percent of global carbon emissions versus the US at 13.9 percent of carbon emissions.
The country’s goal is to increase the RE share to 35 percent by 2030 and 50 percent by 2040. The numbers could be higher, possibly up to 70 percent by 2050, once the updated Philippine Energy Plan (PEP) is completed.
Department of Energy (DOE) data showed that the 2040 target would mean a total of 52,826 megawatts (MW) of new-build capacities from RE on top of the 2020 existing and committed power plants in the country, and almost seven times than the 2020 level at 7,914 megawatts (MW).
Based on the breakdown of the 2040 target, 27,162 MW and 16,650 MW will comprise solar and wind, respectively, followed by hydro at 6,150 MW, geothermal at 2,500 MW and biomass at 364 MW.
While the target numbers appear to be promising, some of the industry players wonder if it could be done right away.
“By our estimation, if we are to reach 35 percent by 2030, on top of the 5 to 6 percent annual demand growth, our estimation—given that most of [those] renewable technologies will come from solar and wind, which . . . have relatively lower capacity factor than geothermal, hydro and biomass, which will no doubt happen albeit on a lesser scale—our estimate is, we would need to build around 18,000 MW or 18 gigawatts (GW) of renewables between today and 2030. That is an astounding task ahead of us,” said ACEN Corp. President Eric Francia.
The RE capacity target does not even include offshore wind (OSW) power, which is heralded as the next big thing in the RE space.
The World Bank (WB) group has issued a roadmap showing the Philippines has the potential to develop 21 GW, or 21,000 MW, of OSW by 2040 in line with the country’s goal to increase the share of renewables in the energy mix.
OSW was not part of the equation when the 50-percent RE share target by 2040 was envisioned. “But then we have that as an additional source and the potential is also great even if the gestation period is even beyond the life of this administration. We hope we will be able to see already the fruits of using offshore wind before the end of the President’s term,” DOE Secretary Raphael Lotilla commented.
The DOE plans to conduct an auction for OSW technology next year and possibly commercial operations by 2028. There are already two OSW developers committed to carry out their proposed projects within the Marcos administration, according to DOE Undersecretary Rowena Guevarra.
In Taiwan, developers of OSW estimate that it will take roughly eight years to finish construction of some their projects. In Japan, the “next-generation floating axis wind turbine” will take three years to conclude tests, while commercialization could happen by 2032.
Support infrastructure
THE current political will of the government shows that these target goals are possible but there is so much more that needs to be done.
For instance, industry players cited significant transmission backbone expansion; support infrastructure, such as roads and ports that are ready to accommodate the expected influx of materials needed to build transmission facilities; rate implication; reinforcement of policies; and prioritization of the development of Competitive Renewable Energy Zones (CREZ) to synchronize generation and transmission projects.
“The 35 percent and 50 percent targets are certainly achievable provided government enables all these projects to be completed by building necessary infrastructure—transmission lines, ports, roads, logistics,” said energy expert Jay Layug, president of Developers for Renewable Energy for Advancement Inc. (DREAM), in an interview. Layug previously served as DOE undersecretary and chairman of the National Renewable Energy Board.
An expert in Taiwan noted that for OSW projects, ports should have a minimum capacity of 40 tons to accommodate incoming equipment. Supposedly, the largest port in the Philippines can only accommodate five tons.
For the DOE’s part, Guevarra said the agency is working on policies that would minimize roadblocks, especially for OSW installations. It is also in close coordination with concerned government agencies, local government units and the transmission concessionaire to implement the directives of President Ferdinand Marcos Jr. under Executive Order (EO) 21.
Under EO 21, the DOE is directed to publish the policy and administrative framework for the efficient and optimal development of OSW resources in the country within 60 days from its issuance. It seeks to harmonize and streamline permitting processes and leasing fees under a whole-of-government approach and fully implement the Energy Virtual One-Stop Shop (EVOSS) system to cover all relevant government agencies and bureaus.
“The concerns on roads and ports will be addressed by the EO. We are also coordinating with the DOTr [Department of Transportation] and PPA [Philippine Ports Authority],” added Guevarra.
Strengthening the grid
EVEN if RE developers act more aggressively and more urgently, their efforts would probably go to waste if the transmission grid is not yet capable of integrating high levels of variable RE. Industry experts often point out that building new transmission lines and expanding substation capacity are equally important as increasing power supply.
International energy policy group Institute for Climate and Sustainable Cities (ICSC) said there is a need to modernize the transmission grid. “We welcome the announcement of NGCP [National Grid Corporation of the Philippines] to integrate RE projects in the Philippine grid,” said ICSC energy transition adviser Alberto Dalusung III.
“Simply integrating RE in the current transmission setup is not enough,” he pointed out.
The NGCP recognized this. While its partnership with State Grid Corp. of China (SGCC) made sure that it was “more than capable” of accommodating the increasing integration of RE into the grid, the grid operator needs the support of the Energy Regulatory Commission (ERC) in utilizing capital expenditures (capex) to fund transmission projects. Capital-intensive projects require regulatory approval from the ERC.
“The ERC, among all agencies, will be centrally crucial to the success of all this. The DOE itself has recognized, through Undersecretaries Rowena Cristina Guevarra and Sharon Garin, that transmission projects to support their recent off-shore wind projects have not been included in NGCP’s 5th regulatory period application with the ERC,” the company stated. “Access to funding was never a problem for NGCP. If the ERC will allow us to spend the capital expenditures needed to support this laudable push towards green energy, we are very confident that NGCP will be able to deliver,” the company had said.
There had been delays in the resolution of applications filed not only by NGCP but even distribution utilities, power generation companies, among others. The ERC came to its defense, citing public interest as to why it is taking a long time before it can issue a resolution. After all, most of the proposed tariff adjustments are subsequently passed on in the electric bills of consumers.
“We expect to complete the transmission rate reset review for NGCP for the years 2016 to 2020 in the next few days, and this will cover the fourth regulatory period for the transmission operator. We are also completing the review for the fifth regulatory period. So we are trying to catch up,” said ERC Chairperson Monalisa Dimalanta.
The last transmission reset completed by the ERC was for the five-year regulatory period covering 2010 to 2015.
On that note, the private sector is indeed ready and is more than willing to put in all capital investments.
Holistic approach, quick action
THE Philippine Independent Power Producers Association Inc. (PIPPA), a group of 28 generator members with 18,132-MW grid installed capacity, stressed the importance of aligning policies and regulation with the needs of the investors and developers for more players to enter the market.
“Our industry is growing and learning. PIPPA looks forward to the eventual implementation of all the planned grid infrastructure, CREZ, penetration study for new RE investments, grid code review, a strengthened EVOSS, additional markets, proper interpretation of the public offering requirement. [These] are some of the items which, if addressed, will send the proper signals to developers that we are ready for new capacities,” said PIPPA President Atty. Anne Escoro Montelibano in an interview.
“As we have always emphasized, the more players in the market, the more competitive the prices will be for all,” she added.
Aside from infrastructure and policies, Layug cited other concerns that should be addressed parallel to achieving the targets. He said the government should also facilitate with ease all pertinent permits, both national and local, without any delays; ensure the needed
baseload power to allow large-scale intermittent renewables in the system; and, to the extent possible, grant resource-specific incentives and issue enhancing policies, rules and regulations to further attract investments in the RE sector.
“Government can do it if it has the political will to do it. So far, the Marcos administration has led the way and has signaled to the sector that indeed it prefers renewable energy investments. We laud the government for its efforts now and it needs to follow through all these recent policies with efficient and whole-of-government approach and quick action,” Layug pointed out.
The DOE noted that permitting agencies are guided by the different stages of an OSW development project and the activities necessary for the successful and efficient implementation of said projects.
To speed up the proposed projects and deliver these on time, Lotilla had said these could be built in parallel to the transmission lines as well as the tollways that are going to be built.
With the help of international financial organizations, the energy chief also said the government could facilitate the upgrade and modernization of the country’s power grid. “We also look forward to the upgrading completion with adequate funding from our development partners of the backbone in the major islands,” Lotilla said.
He did not elaborate, but he mentioned that the DOE wants to partner with the WB and the Asian Development Bank in achieving it. “ . . . Once the government has fiscal space, it will revisit and re-evaluate financing investment in transmission…. Financing investment will be separate from the regulatory structure of transmission tariffs…. Investment in transmission expansion offers enormous potential benefits for efficiency by increasing access to low-cost generation, improving reliability, and mitigating counterbalancing market power,” Lotilla said during an event hosted by the World Bank in June.
‘There should be a valid reason’
NGCP holds a 25-year concession and a 50-year congressional franchise to expand and operate the country’s power transmission grid. If this task is to be assigned to the owner of the country’s transmission assets, which is the National Transmission Corp. (TransCo), this may send mixed signals to the private sector that government is again taking over the asset.
The Presidential Communications Office said in an earlier statement that President Marcos agreed with the proposal of Sen. Raffy Tulfo, chairperson of the Senate Committee on Energy, to conduct a comprehensive study to determine NGCP’s alleged violations and, “if necessary, the government will take back control of the entity.”
The President, however, made it clear that there has to be a “good reason” to withdraw the NGCP franchise.
“So, [supposing] you withdraw the franchise and remove everyone there, where will we get their successors? We will have to find a way to absorb the others into it. In other words, we will have a gap somehow because of the absence of management experience. We still need to train people,” he said.
“Whoever will take over, the problem remains the same. The problem is that we will have to replace the personnel who will operate and we still have to build [infrastructure]. That’s the same problem, whatever option we choose to exercise,” the President told reporters in May.
TransCo operated the power grid from March 1, 2003, to Jan. 15, 2009, then turned over the management and operation of its nationwide transmission system to NGCP.
It’s no secret that there is a “power struggle” between TransCo and NGCP, but they need to work together, along with other agencies and industry stakeholders, so that the goals set would be achieved because the move towards a greener and more sustainable energy requires a holistic approach.