Renewable EnergyA Boon or Bane to Agri-Business?

Presented by:Archie B. Amarra

Executive Vice PresidentRoxas Holdings, Inc

• Relevant policy framework for the Renewable Energy Program– Republic Act 9637 (Biofuels Act of 2006)– Republic Act 9513 (Renewable Act of 2008)

• Both laws seek to promote the accelerated development and utilization of fuels and power from renewable sources.

• Agribusiness, being the channel for biofuels and biopower production, is expected to benefit from the successful implementation of the RE Program

Bioethanol Program

Bioethanol Program• Production of bioethanol is largely dependent on the

production of feedstock which constitutes about 75% of the cost of production

• Required feedstock for 540 M li. bioethanol– @ 90% sugarcane and 10% molasses as feedstock

• 7.0 million tonnes cane from 115,000 has.• 200,000 mt molasses

– @ 80% sugarcane and 20% molasses as feedstock• 6.0 million tonnes cane from 100,000 has.• 410,000 mt molasses

• The Philippine Agriculture Development Corporation has identified greenfield/currently unproductive areas available for the development of new ethanol projects

Bioethanol Program

• Contribution to the economy:• Investments in the countryside in the establishment of

distilleries• ~ P25 billion in value added from production of

feedstock up to sale of bioethanol (@P45/li x 540 M li)• Availability of organic fertilizer from the distillation

process• ~ 87,000 jobs in the construction, operation of

distilleries and downstream industries• ~ 120,000 additional employment in feedstock

production

Renewable Energy Program

• Installation target for biomass RE – 250 MW (under Feed-in Tariff mechanism)– 2,693 Giga Watt hours p.a– Equivalent to 5 billion tonnes of biomass

• Initially proposed projects - 433 MW installed worth US$ 1.3 Billion investment

• Most of the proposed projects are designed to use agriculture residues as fuel

Renewable Energy Program

• Estimated volume of biomass from major crops

• Volume of biomass required for 250 MW installation target – 5.4 Million mt/yr

Crop

Planted/Harvested Area,

Million Ha.

Production , Million Tonnes p.a.

Estimated Volume of Biomass,

Million Tonnes p.a.

Rice 4.270 16.24 Hull = 4.06Straw= 4.27

Coconut 3.359 14.85 Husk = 7.00 Fronds = 6.95

Sugarcane 0.400 22.00 Bagasse = 6.00Field Trash = 6.00

Source: Basic crop data, Bureau of Agricultural Statistics (www.bas.gov.ph)

Renewable Energy Program

• Benefits to agri-business:• Increased investments in the countryside -

biomass RE facilities will be installed where the fuel is

• Estimated value added to agriculture from utilization of agri residues ~ P7 billion/year

• Additional income to rural folks > results in increased purchasing power

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Renewable Energy Program

• Benefits to agri-business:• Incentivized food production due to higher

returns from farming• Sustainable employment

• 78,000 Jobs to construct the power plants• 4,000 jobs for plant operation (professionals, skilled and semi-

skilled workers)• 7,000 jobs from the feedstock supply chain• 6,000 jobs from cultivation of energy crop

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Reality Check

• Bioethanol program - 7 years from enactment of Biofuels Law in 2006 – Only four bioethanol plants are operational,

supplying 12% of annual bioethanol requirement– 87 percent or 479 million li. – still imported

• RE program – 4 years from enactment of RE Law– About four biomass RE plants have been

established but still cannot avail of incentives, primarily the feed-in tariff

Barriers to Development of Bioethanol and Biomass RE Projects

• Delayed development and implementation of enabling mechanisms for the incentives under the laws, e.g.:– allocation/withdrawal of locally produced bioethanol– Establishment of feed-in tariff for RE-derived electricity;

mechanisms for renewable portfolio standards, interconnection and wheeling

• Stringent regulatory requirements that scare off developers– DOE registration/contract– DOE plan to implement occupational health, safety and

environmental requirements even if these are already being done by other government agencies

Barriers to Development of Bioethanol and Biomass RE Projects

• Mixed signals with respect to the commitment of government to push for the development of renewable energy projects

• Approval of higher rates/returns for coal-fired power projects compared to biomass

• Recent approval for a coal project equates to around P8/kwh rate (@ 18.3% IRR) while the approved FiT for biomass is only 6.63 (@17% IRR)

• Proposal to bid out FiT after ERC has already issued the FiT Rules

• Limiting installation targets (for availment of FiT) of technologies, particularly run-off river and biomass, which have shown to be competitive with newly approved coal projects

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Proposed RatesApproved

Rates Difference

Hydro 6.15 5.90 0.25

Biomass 7.00 6.63 0.37

Wind 10.37 8.93 1.44

Solar 17.95 9.68 8.27