Prof. Rowaldo del Mundo College of Engineering University of the Philippines Diliman, Quezon City

Renewable Energy for Energy Security

ENERGY SECURITY 16th session of the UP Academic Congress

Feb. 16, 2010 Malcolm Theater, Malcolm Hall, U.P. Diliman

2 Prof. Rowaldo del Mundo College of Engineering, University of the Philippines Diliman

Energy Security as National Issue

  International Energy Agency (IEA) 1.  Adequate 2.  Affordable 3.  Reliable

  European Commission “Uninterrupted physical availability of energy products on the market, at a price which is affordable for all consumers (private and industrial)”

What is Energy Security?

Considering the above definition, one can say that the Philippine energy is NOT SECURED because we have been experiencing the cycle of power capacity deficiencies and high prices (3rd highest in Asia)

3 Prof. Rowaldo del Mundo College of Engineering, University of the Philippines Diliman

Energy Security as National Issue

The dismal growth of our economy which lead to high unemployment and migration of many Filipinos as overseas workers can be attributed in part to unstable supply and high price of energy.

  Electricity Demand of the Philippines

PERIOD Average Annual Growth Rate (%)

1999 – 2008 3.5% 2001 – 2008 3.4% 2004 - 2008 1.8%

The declining growth rate of electricity demand in spite of high population growth rate shows a declining economic activity

Source: DOE

4 Prof. Rowaldo del Mundo College of Engineering, University of the Philippines Diliman

Energy Security as National Issue

  Per Capita GDP and Energy Consumption in Southeast Asia

Source: Maria Nimfa F. Mendoza, “The Socioeconomic Impact of Energy Security in Southeast Asia”, School of Economics, University of the Philippines

5 Prof. Rowaldo del Mundo College of Engineering, University of the Philippines Diliman

Energy Security as National Issue

  Phases of Philippine Power Industry   1900 – 1935: Introduction of Electricity and Organization of

power industry (Regulated Monopoly Private Enterprise)   1936 – 1971: Government Initiatives in the Industry

Development (Power Generation/Transmission and Electrification)

  1972 – 1984: Nationalization of Power (Generation and Transmission) Industry

  1986 – 2000: Private Sector Participation in Power Generation (IPP Program)

  2001 – present: Restructuring of Power Industry to introduce competition

Each Phase of the Industry has its problem or issue to solve.

6 Prof. Rowaldo del Mundo College of Engineering, University of the Philippines Diliman

Energy Security Risks   Energy Market Instabilities

  Caused by unforeseen changes in geopolitical or other external factors (Political unrest and trade embargoes)

  Compounded by uneven distribution of reserves (35 oil producing countries out of 220 countries and not all producing are exporting)

  Technical Failures   Power outages caused by plant or grid malfunctions

  Physical Security Threats   Terrorists, sabotage, theft, or piracy and natural disasters

Adequacy, Reliability and Prices are disturbed because of uncertainties

7 Prof. Rowaldo del Mundo College of Engineering, University of the Philippines Diliman

Potential of Renewable Energy in Energy Security

  Renewable Energy sources are INDIGENOUS resources and can reduce dependence on energy imports

  RE is appropriate for archipelagic character of Philippines   Can be dispersed (minimize impact of technical failures and physical

security threats)

2008 Power Generation Mix

(%)

8 Prof. Rowaldo del Mundo College of Engineering, University of the Philippines Diliman

Potential of Renewable Energy in Energy Security

  Renewable Energy Resources abound in the Philippines   Hydro Power Resources

• Potential: 10,500 MW • Utilization: 3,2242 MW

  Geothermal Power Resources • Existing Capacity: 1,900 MW (2nd Largest producer in the world) • Potential Additional Capacity: 1,200 MW

  Wind Power Resources • Technical Potential: 7,404 MW (Grid-Connected) • Utilization: 33 MW

  Solar Power Resources • Potential: 5.1 kWh/m2/day (5 sunshine-hours) • Major solar cell manufacturing hub in SEA

  Biomass Power Resources • Sugar Cogeneration Potential : 540 MW • Rice Husk Potential: 360 MW Sources: DOE, NREL,

UPSL

9 Prof. Rowaldo del Mundo College of Engineering, University of the Philippines Diliman

Potential of Renewable Energy in Energy Security

  Policies that provide an environment for development and deployment of Renewable Energy are in place   MARKET DEVELOPMENT MECHANISMS

1.  Renewable Portfolio Standard (RPS) •  Minimum percentage of generation to be sourced from eligible RE

resources 2.  Feed-In-Tariff (FIT) •  Guaranteed fixed price for electricity produced from emerging RE

Resources 3.  Energy Market and Regulation •  Submarket in WESM where RE certificates will be traded •  Priority dispatch for Intermittent RE Power •  Exemption from Deep-Connection Charging Policy

4.  Off-Grid Development •  Minimum Annual Production from RE and Cash Incentives for ME

Sources: DOE, Phil. Congress

10 Prof. Rowaldo del Mundo College of Engineering, University of the Philippines Diliman

Potential of Renewable Energy in Energy Security

  Policies that provide an environment for development and deployment of Renewable Energy are in place   FISCAL INCENTIVES

1.  Duty-free importation of RE equipment (within 10 years) 2.  Special realty tax rates 3.  Special corporate tax rate (10%) 4.  Net Operation Loss Carry-over (7 consecutive years) 5.  Tax Exemption of Carbon Credits 6.  Tax Credits on Domestic Capital Equipment and Services

Sources: DOE, Phil. Congress

11 Prof. Rowaldo del Mundo College of Engineering, University of the Philippines Diliman

Potential of Renewable Energy in Energy Security

  Policies that provide an environment for development and deployment of Renewable Energy are in place   Other Incentives

1.  Commercialization •  Tax and duty free importation •  Tax credit on domestic components •  Income tax holiday (7 years) •  VAT zero-rated for all RE equipment transactions •  Tax Rebate for purchase of RE Components

2.  Consumption •  Zero percent VAT on sale of fuel generated from RE •  Green Energy Option •  Net-Metering

Sources: DOE, Phil. Congress

12 Prof. Rowaldo del Mundo College of Engineering, University of the Philippines Diliman

Potential of Renewable Energy in Energy Security

  Declining Cost of Renewable Energy Technologies

13 Prof. Rowaldo del Mundo College of Engineering, University of the Philippines Diliman

Conclusion and Recommendations

  The Problem of Energy Security manifested in unstable supply and high prices of energy are inter-related

  Renewable Energy provides potential for ensuring energy security of the Philippines   Renewable Energy Resources are abundant   Technology costs are declining   Policy environment is in-place

  The Challenge: Translating Incentives to Energy Security

How to translate the incentives for power developers and suppliers to ensure energy infrastructures are developed on time and the price of energy affordable to customers?

14 Prof. Rowaldo del Mundo College of Engineering, University of the Philippines Diliman

Conclusion and Recommendations   Changes in industry structure and market is not a

guarantee that the problems will be solved   Market Competition and Regulation must work to assure us of

adequate, reliable and affordable prices. The challenges due to the following factors must be addressed:

•  Asymmetrical positions in Power Supply Contracting •  Capacity building •  International Tendering •  EPIRA amendment to remove Cross-ownership

•  Small market for competition to work •  Conversion of WESM from Gross Pool to Net Pool

•  Appropriateness and Timeliness of Regulatory Interventions •  Assure technically competence and independence of regulator

15 Prof. Rowaldo del Mundo College of Engineering, University of the Philippines Diliman