wwf power switch scenario philippines

8/8/2019 Wwf Power Switch Scenario Philippines

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2003, Kabang Kalikasan ng Pilipinas (WWF Philippines) / University of thePhilippines Solar Laboratory

This report was produced by the University of the Philippines SolarLaboratory for the Kabang Kalikasan ng Pilipinas.

No part of this publication may be reproduced in any form or meanswithout the prior written permission of the Kabang Kalikasan ngPilipinas and the University of the Philippines Solar Laboratory.

University of the Philippines Solar Laboratory (UPSL)German Yia Hall, University of the PhilippinesDiliman, Quezon CityTel. No. (632) 924-4150Fax No. (632) 434-3660Email: [email protected]: http://www.upd.edu.ph/~solar

Kabang Kalikasan ng PilipinasWWF PhilippinesLBI Building# 57 Kalayaan Avenue, Quezon CityTel. No. (632) 433-3220 to 22


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POWER SWITCH:Scenarios and Strategies for Clean Power Development in the Philippines

TABLE OF CONTENTS

LIST OF FIGURES...........................................................................................................iii

LIST OF TABLES.............................................................................................................vi

LIST OF APPENDICES.................................................................................................viii

LIST OF ABBREVIATIONS ............................................................................................ix

EXECUTIVE SUMMARY .................................................................................................x

1 EXECUTIVE SUMMARY .................................................................................... 1

1.1 Introduction................................................................................................ 1

1.2 Technology and Resource Assessment

for Clean Power Development ...............................................................1

1.3 Historical Performance of the Philippine Power Sector .....................4

1.4 Scenarios under the Philippine Energy Plan 2003-2012 ................... 7

1.5 Clean Power Development for the Philippines ....................................8

1.6 Conclusions and Recommendations ...................................................10

2 ENERGY TECHNOLOGIES AND RESOURCES FOR

CLEAN POWER.................................................................................................13

2.1 Clean Energy Technologies .................................................................14

2.2 Resource Assessment...........................................................................20

2.3 Cost Comparison of Power Generation Technologies .....................32

2.4 Environmental Externalities ..................................................................35

2.5 Mitigation Options ...................................................................................37

3 HISTORICAL PERFORMANCE OF THE

PHILIPPINE POWER SECTOR ......................................................................38

3.1 Historical Energy Demand and

Installed Generating Capacity ..............................................................38

3.2 Historical Reliability Performance ........................................................41

3.3 Historical Environmental Performance ...............................................42

3.4 Cost of Electricity....................................................................................46


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4 SCENARIOS UNDER THE PHILIPPINE ENERGY PLAN

FOR 2003-2012.................................................................................................3.1

4.1 National Energy Planning Process ......................................................48

4.2 Gross Domestic Product Projections ..................................................49

4.3 DOE Plan for the Low Economic Growth Scenario ..........................50

4.4 DOE Plan for the High Economic Growth Scenario .........................57

5 CLEAN POWER DEVELOPMENT OPTIONS..............................................63

5.1 LEGS-MCPD Scenario..........................................................................64

5.2 LEGS-ACPD Scenario...........................................................................68

5.3 HEGS-MCPD Scenario .........................................................................715.4 HEGS-ACPD Scenario..........................................................................75

6 CONCLUSIONS AND RECOMMENDATIONS ............................................81

6.1 Energy Planning .....................................................................................81

6.2 Transmission and Distribution Development .....................................82

6.3 Rules and Regulation ............................................................................82

6.4 Incentive Programs ................................................................................83

7 REFERENCES ...................................................................................................84


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LIST OF FIGURES

Figure 2.1 Practical Wind Resources in the Philippines .....................................23

Figure 2.2 Practical Small Hydro Resources in the Philippines.........................27

Figure 3.1 Electricity Consumption by Sector, 2001 ............................................39

Figure 3.2 Electricity Consumption, Gross Domestic Product andPopulation, 1991-2001 ..........................................................................39

Figure 3.3 Electricity Generation by Grid, 1991-2001 .........................................40

Figure 3.4 System Peak by Grid, 1991-2001........................................................40

Figure 3.5 Total Installed Generating Capacity by Source, 1999-2001..........................................................................................................41

Figure 3.6 Carbon Dioxide Emissions by Fuel Type, 1999-2001 ......................43

Figure 3.7 Energy Mix, 1999-2001 .........................................................................44

Figure 3.8 Share of Renewable and Non-Renewable Energy inthe Energy Mix, 1999-2001...................................................................45

Figure 3.9 Energy Mix and Carbon Dioxide Emissions, 1991-2001..........................................................................................................45

Figure 4.1 National Energy Planning Process ......................................................49

Figure 4.2 Generation under the Low Economic Growth Scenario...................50

Figure 4.3 DOE Plan for Installed Capacity for the Low EconomicGrowth Scenario.....................................................................................51

Figure 4.4 Energy Mix for the DOE Plan for the Low EconomicGrowth Scenario.....................................................................................53

Figure 4.5 Coal and Oil-Based vs. Renewable and Natural GasEnergy Mix for the DOE Plan for the Low EconomicGrowth Scenario.....................................................................................53

Figure 4.6 Fossil Fuel Consumption for the DOE Plan for theLow Economic Growth Scenario..........................................................55

Figure 4.7 Carbon Dioxide Emissions for the DOE Plan for theLow Economic Growth Scenario..........................................................56

Figure 4.8 Generation under the High Economic GrowthScenario...................................................................................................57

Figure 4.9 DOE Plan for Installed Capacity for the HighEconomic Growth Scenario ..................................................................58

Figure 4.10 Energy Mix for the DOE Plan for the High Economic

Growth Scenario.....................................................................................59


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Figure 4.11 Share of Renewable and Non-Renewable Energy inthe Energy Mix for the DOE Plan for the HighEconomic Growth Scenario ..................................................................60

Figure 4.12 Fossil Fuel Consumption for the DOE Plan for theHigh Economic Growth Scenario.........................................................60

Figure 4.13 Carbon Dioxide Emissions for the DOE Plan for theHigh Economic Growth Scenario .........................................................62

Figure 5.1 Installed Generating Capacity for the LEGS-MCPDScenario...................................................................................................65

Figure 5.2 Energy Mix for the LEGS-MCPD Scenario ........................................66

Figure 5.3 Coal and Oil-Based vs. Renewable and Natural GasEnergy Mix for the LEGS-MCPD Scenario ........................................66

Figure 5.4 Fossil Fuel Consumption for the LEGS-MCPD

Scenario...................................................................................................67Figure 5.5 CO2 Emissions for the LEGS-MCPD Scenario..................................67

Figure 5.6 Installed Generating Capacity for the LEGS-ACPDScenario...................................................................................................69

Figure 5.7 Energy Mix for the LEGS-ACPD Scenario .........................................69

Figure 5.8 Coal and Oil-Based vs. Renewable and Natural GasEnergy Mix for the LEGS-ACPD Scenario.........................................70

Figure 5.9 Fossil Fuel Consumption for the LEGS-ACPDScenario...................................................................................................70

Figure 5.10 CO2 Emissions for the LEGS-ACPD Scenario ..................................71

Figure 5.11 Installed Generating Capacity for the HEGS-MWPPScenario...................................................................................................73

Figure 5.12 Energy Mix for the HEGS-MCPD Scenario ........................................73

Figure 5.13 Coal and Oil-Based vs. Renewable and Natural GasEnergy Mix for the HEGS-MCPD Scenario........................................74

Figure 5.14 Fossil Fuel Consumption for the HEGS-MCPDScenario...................................................................................................74

Figure 5.15 CO2 Emissions for the HEGS-MCPD Scenario.................................75Figure 5.16 Installed Generating Capacity for the HEGS-ACPD

Scenario...................................................................................................77

Figure 5.17 Energy Mix for the HEGS-ACPD Scenario ........................................77

Figure 5.18 Coal and Oil-Based vs. Renewable and Natural GasEnergy Mix for the HEGS-ACPD Scenario ........................................78

Figure 5.19 Fuel Consumption for the HEGS-ACPD Scenario............................78

Figure 5.20 CO2 Emissions for the HEGS-ACPD Scenario..................................79


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LIST OF TABLES

Table 1.1 Cost Comparison of Power Plants......................................................... 2

Table 1.2 Typical Capacity Factors of Power Plants

and Levelized Generation Costs ............................................................ 2

Table 2.1 1994 Philippine Greenhouse Gas Emissions by Sector ..................13

Table 2.2 1994 Greenhouse Gas Emissions from the

Philippine Energy Sector .......................................................................13Table 2.3 Philippine Wind Electric Potential ........................................................22

Table 2.4 Practical Wind Resources in the Philippines .....................................22

Table 2.5 Available Large Hydro Resources .......................................................25

Table 2.6 Philippine Small Hydro Electric Potential ...........................................26

Table 2.7 Practical Small Hydro Resources in the Philippines.........................26

Table 2.8 Small Hydro Power Sites Verified by the DOE ..................................26

Table 2.9 Projected Supply of Biomass Resources ...........................................28

Table 2.10 Philippine Bagasse Electric Potential..................................................30

Table 2.11 Available Geothermal Resources for Power Generation.................31

Table 2.12 Philippine Natural Gas Resources.......................................................32

Table 2.13 Cost Comparison of Power Plants.......................................................33

Table 2.14 Typical Capacity Factors of Power Plants

and Levelized Generation Costs..........................................................34

Table 2.15 Value of Air Emissions Reductions in California ...............................36

Table 2.16 Carbon Dioxide Emissions of Different Power Plant Types ............36Table 2.17 Emission Factors for Various Power Plants .......................................36

Table 3.1 Energy Consumption by Sector, 1991-2001 ......................................38

Table 3.2 Reserve Margin, 1991-2001 .................................................................42

Table 3.3 Historical Environmental Emissions for

the Philippine Power Sector .................................................................42

Table 3.4 NPC Average Electricity Rates, 1991-2001 .......................................46

Table 3.5 NPC and IPP Production Cost at 1990 Constant

Prices........................................................................................................47


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Table 4.1 Low and High GDP Forecasts for 2003 to 2012 ...............................49

Table 4.2 Percentage Reserve Margin for the DOE Plan for theLow Economic Growth Scenario..........................................................52

Table 4.3 Environmental Emissions for the DOE Plan for the

Low Economic Growth Scenario..........................................................55Table 4.4 Generation Costs for the DOE Plan for the Low

Economic Growth Scenario, 2003-2012.............................................56

Table 4.5 Percentage Reserve Margin for the DOE Plan for theHigh Economic Growth Scenario.........................................................58

Table 4.6 Environmental Emissions for the DOE Plan for theHigh Economic Growth Scenario.........................................................61

Table 4.7 Generation Costs for the DOE Plan for the HighEconomic Growth Scenario ..................................................................62


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LIST OF APPENDICES

Appendix A Wind and Hydro Potential in the Philippines

Appendix B Historical Performance of the Philippine Power Sector

1991-2001

Appendix C Economic Scenarios and DOE Plans for the Power Sector 2003-

2012

Appendix D Clean Power Development Options


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LIST OF ABBREVIATIONS

AWPP Aggressive Wind Power Penetration

BCF billion cubic feet

Btu British thermal unit

CC combined cycle power plant

CENECO Central Negros Electric Cooperative

CER Certificate of Emissions Reduction

CH4 methane

CO carbon monoxide

CO2 carbon dioxide

FFHC First Farmers Holdings Corporation

GHG greenhouse gas

GWh gigawatthour

HAEGS Historical Average Economic Growth ScenarioHEGS High Economic Growth Scenario

IPPs Independent Power Producers

ktonne kilotonne

kW kilowatt

LEGS Low Economic Growth Scenario

LOLP loss of load probability

MERALCO Manila Electric Company

MMBFOE million barrels of fuel oil equivalent

MWPP Moderate Wind Power Penetration

NMVOC non-methane volatile organic compound

NOx nitrogen oxides

NPC National Power Corporation

NREL National Renewable Energy Laboratory

N2O nitrous oxide

PPA purchased power adjustment


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SO2 sulfur dioxide

UNDP United Nations Development Programme

UPSL University of the Philippines Solar Laboratory

VMC Victorias Milling Company


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POWER SWITCH!Scenarios and Strategies for Clean Power Development in the Philippines

1 EXECUTIVE SUMMARY

1.1 Introduction

An area that has great potential for greenhouse gas (GHG) reduction is the power

sector. In 1994, the energy sector accounted for 50.038 million tonnes of the100.738 million tonnes, or roughly 47 percent, of total net GHG emissions in thecountry. Of the energy sector GHG emissions, the energy industries, mainly thepower industry, accounts for more than thirty (30) percent as a result of the burningof fossil fuels. Although it ranks only second to the transport sub-sector in terms ofGHG emissions, the power sub-sector represents a large opportunity for carbonemissions reduction and sequestration, given that clean energy technologies andresources are available.

This study focuses on reliability, cost and environmental performance (particularlyGHG emissions) of the power sector. In particular it looks into scenarios that would

entail switching to clean energy technologies from conventional fossil fuel-basedtechnologies for grid-connected power generation.

1.2 Technology and Resource Assessment for Clean Power Development

This study has assessed the technologies and resources that could be used topursue clean power development in the Philippines.

Clean Energy Technologies

For the clean energy technologies, the assessment focused on technology measuresthat reduce carbon intensity of energy (e.g., renewable energy technologies andcleaner fossil-based technologies such as natural gas). Despite the high potential oftechnology measures that reduce energy intensity, which could be treated as aresource in energy planning, it is not used in this study because data available in thePhilippines is insufficient to do so.

The following are the clean energy technologies that could be utilized for cleanpower development in the Philippines:

a) Wind Energy Conversion Systems;

b) Hydroelectric Power Plants;c) Biomass Energy Conversion Systems;

d) Geothermal Power Plants; and

e) Natural Gas-Fired Power Plants.

Improved coal technologies, such as the circulating fluidized bed combustionsystem, is considered as relatively cleaner only to pulverized coal plant technology.Hence, if considered in power development with the objective of pursuingenvironmental sustainability, these technologies will be at the bottom of the list.

Other renewable energy technologies were excluded on the basis of costcompetitiveness and/or maturity of technology.


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Cost Comparison of Power Generation Technologies

The economics of power generation technologies depends on several factors,including: (a) investment cost, (b) operation and maintenance cost, (c) fuel cost, and

(d) the level of generation (also called capacity factor). Table 1.1 below shows thecosts used in this study. Screening curves (costs per kWh vs. capacity factor) weredeveloped based on the life cycle of each power generation technology and the foureconomic factors mentioned above.

Table 1.1: Cost Comparison of Power Plants

Type of Power PlantTypical

EconomicLife, years

InvestmentCost, $/kWa

AnnualFixed O & MCost, $/kWa

Fuel Cost,$/MWh

Oil-fired steam turbine 30 850 1,000 17 20 41.04Oil-fired gas turbine 20 450 - 550 11 14 49.93

Oil-fired combined cycle gasturbine 20 700 900 14 18 32.56

Diesel motors 20 550 650 14 16 73.10Pulverized coal-fired powerplant

30 1,200 1,400 30 35 11.40

Fluidized bed coal powerplant

30 1,750 1,800 44 45 9.12

Wind technologies 20 1,000 1,250 20 25 0Hydroelectric power plants 50 2,000 3,500 40 70 0Fluidized bed combustors(for biomass)

30 1,750 1,800 44 45 3.53

Geothermal technologies 50 1,150 1,500 29 38 0Gas-fired combined cyclegas turbine (for natural gas)

20 700 900 14 18 36.68

Table 1.2: Typical Capacity Factors of Power Plants and Levelized GenerationCosts1

Levelized Generation CostPower Plant Type

Capacity Factor(%) $/kWh PhP/kWh

Geothermal 88 0.0193 1.0602Coal (Pulverized coal plant) 82 0.0405 2.2282Coal (Pulverized coal plant) 82 0.0405 2.2282

Hydro 57 0.0494 2.7153Oil-fired steam turbine 54 0.1059 5.8236Natural gas combined cycle 54 0.0794 4.3644Oil-fired gas turbine 31 0.1101 6.0557Wind

Without ancillary services 30 0.0512 2.8174With ancillary services 30 0.0625 3.4376

Diesel 9 0.2277 12.5219

1

A discount rate of 12% was used to derive levelized generation costs. Actual industry discount ratesmay be higher depending on the following factors: required equity return, market risks, regulatoryrisks, country risks and availability of financing.


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The above screening curve table was used in preparing the alternative powerdevelopment plans in this study. The figures used are only intended for relativecomparison.2 It can be noted that on life-cycle basis, renewable energy technologiescan be competitive with conventional fossil fuel-based technologies. However, mostpower developers are biased to fossil-based power plants because of its

comparative advantage in terms of investment cost and shorter recovery period.Thus, the need for policy instruments and mechanisms that will create a moresecured investment climate for renewable energy developers cannot be over-emphasized.

Environmental Externalities

A number of studies have attempted to put a cost on the various externalities causedby power generation using the abatement cost or the damage cost approach. Theabatement cost approach uses the cost of pollution control as a proxy to the trueexternality cost. On the other hand, the damage cost approach puts a value on the

damages that may be directly attributable to a particular pollutant. Studies vary intheir estimation of externality costs because of a number of factors, including sitespecificity (e.g., geographical and climatological conditions), population density,emissions reduction policy, scope of analysis, among others.

In this study, abatement cost values for the North Coast of California, which has thelowest abatement costs among the districts of California, were used to compute forthe cost of externalities of the different power development plans. These figureswere used in the absence of actual abatement cost assessment for the Philippines.Moreover, abatement technologies, if required in the Philippines power generationsector, will be imported from developed countries such as U.S.A or Europe. It istherefore deemed reasonable to use the lowest available value in developedcountries for purposes of evaluating the prospective performance of a powerdevelopment plan.

It can be concluded that if environmental externalities will be considered, cleanrenewable energy technologies will be the least cost option for power development inthe Philippines

Clean Indigenous Energy Resources

Energy resource assessment was conducted based on secondary data to quantifythe available indigenous resources that can be utilized by the clean energytechnologies as fuel. Assessment was made for wind, hydro, biomass, geothermaland natural gas resources for power development.

Resource assessment and mapping conducted in the past for the Philippinearchipelago have shown that the country has a big wind power potential. TheNational Renewable Energy Laboratory (NREL) has estimated that there are 76,600MW of installed wind power capacity in the Philippines that can generate about

2 True costs will vary for a number of reasons, including variability of fuel costs, dollar discount rates,

among other things. Further, these costs do not include site development costs, connection to thetransmission system, transformer costs and taxes. These costs were derived using only the cost ofthe power plant technology, operations and maintenance cost and fuel costs.


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195,200 GWh of electricity per year. For the purposes of this study, a re-analysis ofthe NREL wind mapping data was conducted. Additional screening criteria wereimposed to determine practical and viable wind power sites. This include consideringonly sites with power density of at least 500 W/m2. This first criterion reduced thenumber of wind sites to 2,092 with an aggregate potential of 14,323 MW. A second

criterion that relates to grid connection costs was also used. The transmissionsystem of the National Transmission Company (TransCo) was overlaid to the GIS-based wind resource map to determine the proximity of the sites to the grid. Onlythose sites whose connection (i.e., construction of transmission lines) will cost up to25% of the total life-cycle cost were considered. The application of the secondcriterion further reduced the number of sites to 1,038 with 7,404 MW potential.

A re-analysis of the NREL small hydro resource assessment was also conducted.Selecting only the sites with capacities of 5 MW or more as criterion, the UPSLidentified 236 small hydro sites in the country with an aggregated capacity of about2,308 MW. Using the second screening criterion similar to that use in the wind

resource assessment, (i.e., limiting the transmission investment cost to 25% of totalinvestment cost) resulted to the elimination of three sites from the small hydroresource pool.

Of all the biomass resources in the country, UPSL considered only bagasse fromsugarcane processing as practical resource for grid connection. Other biomassresources are still facing problems or issues like collection, storage, and competinguses to be viable for large-scale power generation. UPSL estimates the electricpower potential of bagasse at 235.7 MW. This potential is spread all over the countrywhere sugar centrals are situated.

The Philippines power sector largely depends on geothermal energy to meet thedemand and energy requirements of the country. In 2001, total geothermal installedcapacity amounted to 1,931 MW, which generated a total of 10,442 GWh. Thisaccounts for 14% and 22% of the total installed capacity and total generation,respectively in the country. In addition to existing geothermal power facilities, anestimated capacity of 1,200 MW that could generate about 8,935 GWh annually canbe obtained from additional verified geothermal sites in the Philippines.

A few natural gas finds in the Philippines have been made, the most significant ofwhich is that found in Malampaya and San Martin in Palawan, with a combined

estimated reserves of 2,771 to 4,731 billion cubic feet (BCF). The Philippinegovernment is considering plans to develop a local natural gas industry. If thispushes through, local natural gas production would be supplemented by importednatural gas.

1.3 Historical Performance of the Philippine Power Sector

The performance (in terms of reliability, cost and environmental emissions,) of thePhilippine power sector from the period beginning 1991 to 2001 was also assessedin this study.


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Energy Demand and Installed Capacity

The Philippines electricity consumption posted a moderate growth rate of 8.3%annually from 1991 to 2001. The industrial and residential sectors, accounting for31% and 29% energy share for the year 2001, respectively, are the biggest users of

electricity. The commercial sector accounts for 21% of the total consumption for2001. The rest are attributed to own use, losses and miscellaneous uses. It shouldbe noted however, that the industrial sector demand grew only by 5.5% while that ofthe residential sector grew by 11.7% annually for the 11-year period. Geographically,the energy demand in the country was distributed among the three (3) main islandsof Luzon, Visayas and Mindanao. Bulk of the energy demand and consequently thegeneration comes from the main island of Luzon. In 2001 for example, the LuzonGrid has a share of 36,184 GWh of the total 47,049 GWh energy generation whichrepresents 77% of the requirements of the country. Visayas and Mindanao share theremaining balance almost equally.

In order to meet the growing demand for electricity, the installed generating capacityin the country doubled in 11 years with 6,789 MW in 1991 to 13,402 MW in 2001.

Historical Reliability Performance

To analyze the reliability performance of the power system in the Philippines, thereserve margin (i.e., generating capacity compared to the system peak) from 1991 to2001 was determined from historical data. The analysis has shown that thegenerating facilities in the early 1990s were performing very badly from the point ofview of reliability. However, from mid 1990s onward, the Philippines power sectorperformance went to the other extreme of having excessive capacity compared tothe demand. This validates the clamor of the people regarding high electricity rateswhich is due to oversupply since most of the generating facilities are operating underthe take-or-pay contract with the National Power Corporation (NPC) and otherdistribution utilities.

It can be concluded, therefore, that the generating capacity of the power system inthe Philippines can be considered highly reliable. The interruptions that the countryhas been experiencing can be attributed to the unreliable transmission anddistribution systems and their operations.

Historical Cost Performance

This study also assessed the power development in the Philippines by analyzing thecost of electricity. It was noted that the rates of NPC is for its bundled generation andtransmission services. For purposes of this study, these rates were unbundled into76% and 24% for generation and transmission, respectively. The rates of NPCappear to be increasing annually except for the year 2001 when R.A. 9136 (ElectricPower Industry Reform Act) was enacted and the national government hasintervened in the market due to the growing clamor against the Purchase PowerAdjustments (PPA) in the electric bills. The increase in rates is attributed to theeconomic performance of the country (as exhibited by the exchange rates) and due

to the take-or-pay contracts of NPC with Independent Power Producers (IPPs).


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Records also show that the production cost of IPPs were always higher than theNPC rates. This contradict the avoided cost principle of the NPC IPP Program thatIPP power development project proposals will be accepted as it offer electricity atprices lower than or at least equal to NPC rates.

Comparing the average rate of NPC with that paid by the consumers, which rangefrom PhP 4.00 to PhP 6.00 per kWh, there is difference of PhP 1.00 to PhP 3.00 perkWh. This considerable difference can be attributed to the cost of distribution and tothe PPA of IPPs that sell electricity directly to the distributors.

It is also worthwhile to note that with the existence of the Non-NPC IPPs (permittedto operate through Executive Order 215), particularly those owned by electricitydistributors like Manila Electric Company (MERALCO), many power plants wereinstalled even though there were already excess generation capacity in the system.The main culprit here is that the IPPs return on investments were guaranteed by thetake-or-pay contracts with NPC and the distribution utilities. This indicates the poor

coordination of the plans of the IPPs that deal directly with Distributors in the contextof centralized planning of the government, particularly the NPC.

Historical Environmental Performance

The environmental performance of the Philippine power sector from 1991 to 2001(measured in terms of the amount of gases and particulates that are emitted by theelectric power generating plants) shows that CO2 emissions increased by 74 percentwhile the rest of the air emissions increased by 10 to 169 percent.

For the CO2 emissions, coal power plants are the major contributors. Its contributionincreased almost ten times from 1,082,279 tons in 1991 to 10,471,222 tons in 2001.CO2 emissions from oil-based power plants, on the other hand, decreased by 21percent from its level of 9,236,541 tons in 1991 to 7,338,665 tons in 2001.Accounting the changes in oil and coal, the net increase in CO2 for the 11-yearperiod is 73%.

Looking into the energy mix to link the environmental performance of the powersector, it can be concluded that that non-renewable energy have remained greatlydominant over renewable energy as source of fuel for power generation. The shareof non-renewable sources in the energy mix even increased from 57.49% in 1991 to

62.71% in 2001. Over the period considered, generation share from oil-based powerplants declined from 49.9% in 1991 to 21.9% in 2001. However, coal contributionincreased more than fivefold, from 8% in 1991 to 40% in 2001. In addition,renewable hydro share decreased from 20% to 5% over the same period. Thisscenario allowed the continued dominance of non-renewable fuels.

Clearly, the shift is only towards the use of coal, which emits more greenhousegases, and not towards the utilization of renewable resources. This explains why theemissions of the power sector almost doubled in only 11 years.


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1.4 Scenarios under the Philippine Energy Plan 2003 - 2012

The prospective performance of the Philippine Power Sector was also assessedbased on the Philippine Energy Plan 2003 2012 prepared published by the

Department of Energy. Reliability, environmental emissions and costs werecalculated similar to that of the historical performance assessment.

PDP for the Low Economic Growth Scenario

The PEP, based on the low economic growth projections of NEDA, shows thatenergy generation will increase by 93% (55,142 GWh in 2003 to 106,430 GWh in2012) over the entire period at an average rate of 7.57% annually. Total installedcapacity of 14,632 GW for 2003 will increase to 20,706 MW by 2012. The increase indemand will be met mostly by increases in coal power plants (3,500 MW) and oil-based plants (1,775 MW). The increase in the share of renewable energy generating

capacity will come from a 795 MW large hydro, 65 MW wind and a 40 MWgeothermal capacity additions. No additional capacity addition for natural gas isexpected in the period. Capacity additions, operations and maintenance and fuelwould require a total cost $ 23,828 million (UPSL estimate at 2002 present value).

In terms of reliability, the planned capacity additions will result in high reservemargins. For example, the reserve in 2003 will be 66%. Although this is expected todecline to 22% by 2012, it is still unrealistic to expect that cost of electricity in thePhilippines in the near term will decrease under this scenario.

While the generation cost for this scenario is estimated at PhP 3.16/kWh, thePurchased Power Adjustment (PPA) component in the electricity bills of the endusers is still expected to result in higher cost due to the high reserve margins.

To meet the energy requirements, this scenario would require 124.5 million barrelsfuel oil equivalent (MMBFOE) of oil, 91.9 million tonnes of coal and 1,263 billioncubic feet (BCF) of natural gas. Of these amounts, 124.5 MMBFOE of oil and 80.2million tonnes of coal would have to be imported.

The environmental emissions resulting from DOEs generation plan for the loweconomic growth scenario would result in an increase in CO2, SOx and other

emissions. Total CO2 emissions for the DOE plan for the low economic growthscenario is 309.3 million tonnes. The increase in the use of coal will account tocontributing 55% of the total CO2 emissions for the period. Oil-based and natural gasplants will contribute 17% and 26% to the CO2 emissions, respectively. Geothermalplants will contribute only 2%. These emissions will be the direct result of the shareof coal, natural gas and oil-based sources in the energy mix which is 34%, 24% and4%, respectively for year 2003. From a share of 37% in 2003, renewable energysshare will decrease to only 22% in 2012. The contribution of non-renewable energysources to the energy mix, on the other hand will increase by 24%, with thecontinued dominance of coal plants. This scenario will require $ 29,368 million inabatement cost.


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The PEP under the Low GDP Scenario reflects the continued preference on the usecoal. Notably, this plan can be judged as a business-as-usual plan that will onlyreplicate (or be even worse than) the historical performance of the Philippine powersector from the point of view of sustainable development.

PDP for the High Economic Growth Scenario

The DOE also prepared a power development plan based on high economic growthprojections of NEDA. Analysis of the PEP under this scenario indicates that the planis also a business-as-usual plan that will perform no better than the historicalperformance of the Philippine power sector, nor the scenario for the low economicgrowth.

The following performance indicators can be expected if this scenario push through:

a) Installed capacity: 14,632 MW in 2003 to 22,756 MW in 2012

(56% increase for the 10-year period)

b) Energy generation: 55,556 GWh in 2003 to 118,470 GWh in 2012

(213% increase for the 10-year period)

c) Reserve Margin: 25% (minimum) to 65% (maximum)

d) Energy Mix: Coal - 16% in 2003 increase to 47% in 2012

Oil - 5% in 2003 increase to 16% in 2012

Natural gas - 24% in 2003 decrease to 17% in 2012

R.E. - 37% in 2003 decrease to 20% in 2012

With the continuous decline in the share of renewable energy, within the planningperiod, greenhouse emissions is expected to further soar, increasing by 195% from2003 to 2012, and will require $ 32,995 million in abatement cost.

1.5 Clean Power Development Options for the Philippines

Using the clean energy technologies and resources, two (2) alternative powerdevelopment plans (or strategies) that will meet the demand of the Low EconomicGrowth Scenario and the High Economic Growth Scenario of the PEP were prepared

by UPSL. These strategies are the following:

Moderate Clean Power Development (CCPD) Plan

In this plan, capacity addition and utilization of renewable energy (geothermal,biomass, wind and hydro power) and natural gas plants are given priority overthat of non-renewable plants for power generation. Total installed capacity ofwind power plants is allowed to reach a maximum of 5% of the peak demand.


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Aggressive Clean Power Development (ACDP) Plan

For this plan, the strategy is to utilize all the practical renewable energyresources where possible without caps. Cost penalties for intermittent powerplant capacity beyond 5% (based on peak demand) was also imposed to

account for the additional ancillary services.

It was assumed in these plans that the local natural gas industry will be able tosupply fuel for up to 3,800MW natural gas power plants (maximum generation of23,000 GWh annually) for the next twenty years. The additional natural gasrequirement will be supplemented by imports from the neighboring Asian countriesand other natural gas producers until new local resources are developed.

For all the plans, the 2003 to 2007 capacity additions were based solely on the PEPlist of committed projects. The percentage installed reserve margin for the years2008 onwards is kept as close as possible to the corresponding PEP reserve

margins for comparison. Note, however, that these reserve margins do not take intoaccount the ancillary diesel engines, which serve as frequency regulating plants forthe wind power plants. Assuming a five-year lead-time for the planning tocommissioning of the additional power plants, the capacity additions starts only in2008.

In this summary, only the power development plan to meet the Low EconomicGrowth Scenario of the PEP 2003 2012 is presented. The plans that correspond tothe High Economic Growth Scenario are detailed in Chapter 5.

Moderate Clean Power Development (MCPD) Plan

To meet the demand of the Low Economic Growth Scenario, this plan will increasethe renewable energy plant installed capacity by 95% (from 4,450 MW in 2003 to8,685 MW in 2012) and the natural gas plant capacity by 117% (from 2,763 MW in2003 to 5,983 MW in 2012). This translates to a 69% total installed capacity for thecombined natural gas and renewable energy plants.

The share of renewable energy in the energy mix will increase from 37% to 41%,from the period 2003 to 2012. The natural gas contribution will also increase from24% to 31%. This will translate to a 72% total share of clean energy in the energy

mix by 2012. The share of coal and oil in the mix will be reduced by about 11% at theend of the period.

This plan will reduce the GHG emissions and abatement costs for the Low GDPScenario by 14% and 21%, respectively, as compared with the PEP. Total CO2reduction as compared with the PEP is 44.6 million tonnes.

The total cost calculated for this plan is $23,592 million and the average generationcost is PhP 3.12/kWh. This average generation cost is even cheaper than that of thePEP Low GDP scenario, which is PhP 3.16/kWh.

Considering the investment, O&M and fuel costs, this plan will save $235 million inthe planning period.


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Aggressive Clean Power Development (ACPD) Plan

To meet the demand of the Low Economic Growth Scenario, the ACPD plan willincrease the renewable energy plant installed capacity by 159% (from 4,450 MW in

2003 to 11,520 MW in 2012) and the natural gas plant capacity by 95% (from 2,763MW in 2003 to 5,383 MW in 2012). This translates to a 79% total installed capacityfor the combined natural gas and renewable energy plants.

The share of renewables in the energy mix will increase from 37% to 48%, from theperiod 2003 to 2012. The natural gas contribution will also increase from 24% to31%. This will translate to a 79% total share of clean energy in the energy mix by2012. The share of coal and oil in the mix will be reduced by about 20% at the end ofthe period.

This plan will reduce the GHG emissions and abatement costs under the PEP Low

GDP Scenario by 18% and 27%, respectively.

The total cost calculated for this plan is $23,881 million and the average generationcost is PhP 3.17/kWh. This is comparable to the PEP Low GDP scenario, which isPhP 3.16/kWh but five centavos (PhP 0.05) per kWh more expensive than theModerate Clean Power Development Plan due to the additional ancillary services forthe intermittent wind power supply.

Considering the investment, O&M and fuel costs, this plan will cost an additional$41M in the planning period compared to the PEP low GDP plan. This translates to amitigation cost of $0.67/tonne of CO2. With the current price of CO2 at $2 - $10 pertonne, this plan will create an opportunity for the country in the carbon market.

1.6 Conclusions and Recommendations

The Philippine power sector from 1991 to 2001 has not performed very well in termsof reliability and cost to end-users. While the PEP has tried to address theseproblems, it fails to consider the implications of the activities in this sector to theenvironment that could even be more important if only the externalities will beconsidered in the economics of energy supply.

This study has assessed the technologies and resources in the Philippines that couldbe tapped for clean power development. To avoid significant amounts of GHGemissions in the future, the country has to resort to biomass, small hydro, wind andnatural gas technologies, as was done in this study. To support power switching,new natural gas sites must be identified and developed. In addition, natural gasimportation may be pursued.

This study also offers two alternative paths (moderate and aggressive) through thealternative clean power development plans. These alternative plans are comparableto the PEP in terms of costs. There are even opportunities that can create additionaldollar income from carbon trading and local employment. At the current CO2 prices

($5 per tonne) in the market, the Moderate Clean Power Development Plans areviable greenhouse gas mitigation option for the Philippines offering so many


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opportunities both for the developers and the country. Switching to cleaner energy,therefore, is attractive as the price of carbon is expected to increase in the future.

Pursuing Clean Power Development plans requires the development of a cleanenergy market in the country through effective policy instruments and mechanisms

that will secure the investment climate while protecting public interest. A set ofmeasures that should be made to attract more investments in renewable generationtechnologies in the future discussed below.

Energy Planning

The first step in developing the market for clean energy is to introduce reforms in theprocess of energy planning itself. Since power developers will only respond to thegovernment call, it is important that the Philippine Energy Plan reflect the call forclean power development. This could be achieved through the following:

Improve the power development planning models

- Include environmental externalities in planning models to reflect the truecost to society of energy decisions;

- Consider the economics of smaller capacity, following load growth to dealwith the overcapacity issue (in contrast to large capacity power plantscurrently used in energy planning);

- Include energy efficiency as a demand side option in energy planningmodels;

- Use coal-fired fluidized combustion technology as benchmark fossil-basedplant instead of pulverized coal;

- Increase the number of candidate Renewable Energy-based Power Plantsin the selection process. To increase the number of candidate renewableenergy plants in planning, more rigorous and site-specific resourceassessment must be conducted.

Institutionalize a participative planning process. A decentralized planning processdown to the level of the local government and participated by the stakeholders inthe locality should complement the top-down planning process at the nationallevel. Electrification planning can be done in the municipality/city levels. Resource

assessment and local supply and demand balance can be done at the provinciallevel. This decentralized planning scheme will result in a more realistic demandforecast and will address local issues on energy, as well as issues on under- andovercapacity. While this planning process allows for a greater degree of publicparticipation, it will also entail capacity building for local government units in theareas of planning and resource assessment.

Transmission and Distribution Development

Transmission and distribution infrastructure should be developed to increase accessto renewable energy sites, most of which are site specific. Transmission facilities

should deliberately be expanded toward locations of promising renewable energysources.


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The cost of such an expansion should be borne by the transmission or distributionutility. This cost mechanism will ensure that all electricity consumers will share thecost of such a development. The Energy Regulatory Commission (ERC) shouldallow such an expansion even if it does not initially show recovery of investment.

Rules and Regulation

The Wholesale Electricity Spot Market (WESM) Rules must provide thatintermittent and small-scale grid-connected renewable energy generationsystems (such as wind, run-of-river small hydro and biomass) should be givenpriority in the dispatch of generating units. These plants must feed-in the Grid atminimum prices that will guarantee the returns of power developers.

The System Operator should be allowed to procure ancillary services needed bythe Grid to accommodate intermittent wind power and pass on the cost to all

users of the Grid. The Philippine Grid and Distribution Code (PGDC) must be clear on its

requirements and procedures on the connection, operation and control of non-conventional, renewable energy-based power plants, particularly on the requiredtechnical analysis and compensating equipment.

Incentive Programs

The Department of Energy must ensure that renewable energy developmentshould always be included in the Philippine Investment Priorities of the Board ofInvestment to ensure that the fiscal (e.g., tax exemptions, income tax holidaysand tax credits) and non-fiscal (e.g., simplification of custom procedures andimportation of consigned equipment) will be available for renewable energydevelopers.

An assistance program should be created for renewable energy development.This may include subsidy for resource assessment and feasibility studies forserious developers of renewable energy.

Dedicated Financing Windows that allow longer repayment periods for renewableenergy-based development.


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2 ENERGY TECHNOLOGIES AND RESOURCES FOR CLEAN POWER

An area that has great potential for greenhouse gas (GHG) reduction is the powersector. In 1994, the energy sector accounted for 50,038 ktonnes of the 100,738ktonnes, or roughly 47 percent, of total net GHG emissions in the country, as shown

in Table 2.1. Of the energy sector GHG emissions, the energy industries, mainly thepower industry, accounts for more than thirty (30) percent as a result of the burningof fossil fuels, as shown from Table 2.2. Although it ranks only second to thetransport in terms of GHG emissions, the power sub-sector represents a largeopportunity for carbon emissions reduction and sequestration, given that cleanenergy technologies and resources are available.

Table 2.1: 1994 Philippine Greenhouse Gas Emissions by Sector(equivalent ktonne CO2)

SECTOR CO2 CH4 N2O Total

Energy 47,335 1,985 717 50,038Industry 10,596 7 0 10,603Agriculture 20,800 12,330 33,130Waste 0 6,140 954 7,094Land Use & Forestry -2,774 2,403 245 7,094TOTAL EQUIVALENT CO2EMISSIONS

55,157 31,335 14,246 100,738

Source: The Philippines Initial National Communication on Climate Change

Table 2.2: 1994 Greenhouse Gas Emissions from the Philippine Energy Sector*(equivalent ktonne CO2)

SECTOR CO2 CH4 N2O Total

A. Fuel Combustion Activities 47,335 1,759 717 49,8111. Energy Industries 15,4583 11 40 15,5092. Manufacturing Industries 8,980 170 347 9,4973. Transport 15,801 45 43 15,8904. Commercial/Institutional 3,368 1 0 3,3695. Residential 2,544 1,529 285 4,3596. Agriculture 1,185 2 3 1,190

B. Fugitive Emissions from Fuels 226.59 2271. Coal Mining 216.72 2172. Oil 9.87 10

TOTAL EQUIVALENT CO2 EMISSIONS 50,038

* does not include emissions from biomassSource: The Philippines Initial National Communication on Climate Change

3

The University of the Philippines Solar Laboratory (UPSL) calculated a slightly different value fromthat of the Philippines Initial National Communication on Climate Change. The UPSL came up with13,548 ktonnes of CO2 for the Energy Industries for the year 1994.


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This study focuses on the reliability, cost and environmental performance(particularly on GHG emissions) of the power sector. In particular, it looks intoscenarios that would entail switching to clean energy technologies from conventionalfossil fuel-based technologies for grid-connected power generation.

In the sections that follow, technologies and resources that could be used to reduceGHGs from the power sector shall be discussed and evaluated to determine whatcould be used in the Philippine power sector.

2.1 Clean Energy Technologies

Clean energy technologies are those that result in relatively fewer GHG emissionsper unit of energy service delivered as compared to conventional technologies.These technologies may be classified as4:

measures that reduce the energy intensity of the economy (e.g., energy

conservation, improvement of power plant heat rates); measures that reduce the carbon intensity of energy (e.g., renewable

energy technologies); and

measures that integrate carbon sequestration into the energy productionand delivery system.

These technologies may be an attractive alternative to conventional fossil fuel-basedgeneration technologies in terms of its environmental benefits. However, they mustcompete with the same technologies in terms of other criteria such as cost, resourceavailability and technology maturity before application on a significant scale could beexpected.

In the following sections, a number of clean energy technologies shall be discussed.These technologies will then be evaluated to determine their viability for thePhilippine power sector.

Measures that Reduce Energy Intensity

One way of reducing the energy intensity of the economy is by minimizing energylosses in the system. In power generation, improvements could be made to improve

the efficiency of existing power plants by decreasing their heat rates, i.e., the heatenergy in Btu required by the power plants to produce a kilowatt-hour of electricenergy. This is done by looking at ways to improve the performance of existingpower plant components like boilers, turbines and generators. This measure is acost-effective method of achieving CO2 reductions in that it would not entail largecosts for equipment although it would require capability-building activities. ThePhilippines Department of Energy (DOE) has already started a Heat RateImprovement Program, which is expected to achieve a substantial amount of energysavings.

4 Marilyn A. Brown, Mark D. Levine and Walter D. Short, Scenarios for a Clean Energy Future, (U.S.:Interlaboratory Working Group on Energy-Efficient and Clean Energy Technologies), p. 1.2


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Another measure is the use of efficient end-use devices. Improved technologies forelectricity-consuming end-use devices are available in the market like more efficientmotors, lighting technologies, refrigerators and air conditioners. In a study made byLeverage International (Consultants) Inc. on the characterization of new commercial

buildings in the Philippines, it was mentioned that energy savings amounting to 39%,32% and 10% could be realized from more efficient air conditioning, lighting andother office equipment, respectively5. In the industrial sector, potential energysavings could be realized in the use of high efficiency motors. A study conducted in1994 estimated energy savings amounting to 423 GWh and about 74 MW ofcapacity could have been realized by the year 2010 in the Manila Electric Company(MERALCO) franchise area6 alone had a high efficiency motors program beenimplemented in 19977.

The DOE has for some time been implementing an efficiency and energy-labelingand standard program to help consumers select electric appliances and equipment.

The program includes the Efficiency Standard and Labeling for Room AirConditioners, the Energy Labeling Program for Refrigerators and Freezers, theFluorescent Lamp Ballast Energy Efficiency Standard and the PerformanceCertification of Fans and Blowers. The program is expected to achieve a potentialenergy savings amounting to 9.7 MMBFOE from 2002 to 20118.

Despite the high potential of technology measures that reduce energy intensity,which could be treated as a resource in energy planning, it is not used in this studybecause data available in the Philippines is insufficient to do so.

Measures that Reduce the Carbon Intensity of Energy

For the electricity generation sector, technologies that reduce carbon intensity ofenergy can be classified in a number of categories. These categories are notabsolute in that they sometimes overlap and some particular technology types fallunder two or more categories. They are as follows:

Renewable energy technologies

These are technologies that harness the energy from renewable energy sourcesfor power generation. Renewable energies include solar, wind, hydro, biomassand geothermal energies. Aside from its being clean, renewable energy sources,

because of its inexhaustibility addresses other challenges of the energy sectorsuch as sustainability and energy security.

5 Philippine New Commercial Building Market Characterization, (Philippines: Department of Energy,1998), p. 9.6 MERALCO is the distribution utility that services Metro Manila, Bulacan, Rizal, Cavite and parts ofthe provinces of Laguna, Quezon, Batangas and Pampanga.7 The study referred to is the Asian Development Bank-funded Long Term Power Planning Study

conducted by SRC in 1994, mentioned in the material for the March 12, 1998 meeting for the MotorEnergy Efficiency Enhancement Program.8 Philippine Energy Plan 2002-2011, (Philippines: Department of Energy), p. 59.


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1. Wind Energy. The kinetic energy of the wind can be converted to mechanicalenergy by means of a wind turbine. This mechanical energy can then be usedto run electric generators to produce electricity. Wind energy conversiontechnology (WEC) is a mature technology, with worldwide installed capacitytotaling to 24,000 MW by the end of 2001.

Intermittent power would affect power system operability and stability andtherefore poses limitations on levels of penetration of wind power. Variousmodeling studies show that wind generation capacities could amount from alow value of 4% to a high value of 50% of system load9, depending on systemconditions. Utilities operational experience, particularly in the United States,has been limited to low wind power penetration levels so far. Also, intermittentgeneration will require additional ancillary services to be provided in the grid,and therefore translates to higher electricity costs. For the Philippines, initialestimates for wind penetration levels are between 5% and 20%. TheUniversity of the Philippines Solar Laboratory (UPSL) is currently doing

studies to determine acceptable wind penetration levels consideringeconomics and the stability of the transmission system.

2. Hydro Power. Hydro power refers to the use of falling or flowing water forpower. It is a renewable form of energy because the energy of flowing waterultimately comes from the sun. Water evaporation from the oceans and otherparts of the earths surface consumes about one fourth of the total solarincidence on the planet. This water will return to the earths surface asprecipitation (e.g., through rain or snow) and part of it will eventuallycontribute to the flow of streams, rives and falls.

Hydro power resources come in various sizes. The Philippines Department ofEnergy (DOE) classifies hydro resources based on its potential capacity, asfollows: micro-hydro for hydro resources with capacities ranging from 1 to 100kW; mini-hydro for those with capacities from 101 kW to 10 MW, and; largehydro as those with capacities greater than 10 MW10.

Hydro power is considered a clean technology because it is renewable anddoes not emit air pollutants. In some cases, it generates some amount ofGHG gases as a result of the rotting of organic matter that get submerged inreservoirs, but the amount of emissions is small as compared to fossil fuel-

based electricity generation. The Canadian Hydropower association estimatesthat GHG emissions from hydro facilities is 60 times less than that of coalpower plants and 18 times less than that of natural gas power plants11.

9 p. 49, Yih-huei Wan and Brian K. Parsons, Factors Relevant to Utility Integration of IntermittentRenewable Technologies, (Colorado: National Renewable Energy Laboratory, 1993), p. 49.10 The World Energy Commission uses a different classification from that used by the DOE, which areas follows: micro hydro resources are those with capacities less than 100 kW; mini-hydro resourcesare those with capacities ranging from 100 kW to 1 MW, and; small hydro resources are those with

capacities from 1 to 10 MW. Large hydro resources are those with capacities greater than 10 MW.Thus, the Philippine definition of mini-hydro encompasses the WEC mini- and small-hydro resources.11 Quick Facts, Canadian Hydropower Association


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Hydro power facilities offer other benefits such as low generation costs, highefficiencies, little maintenance, long life and high levels of reliability. They are large hydro in particular - however, associated with a number of negativeimpacts. Among them are:

Ecological Effects

a. Landscape destruction

b. Destruction of fish habitat and fisheries

c. Rearrangement of water resources

d. Increase in water pollution

e. Displacement/wiping out of plant and animal species

f. Silting

Social Impacts

A major negative social impact of large hydro projects is the dislocationof population. Various hydro projects in the Philippines have dislocatedthousands. In the Philippines, the Agno River Basin DevelopmentProgram resulted in the loss of hectares of Ibaloy ancestral lands andthe subsequent dissolution of several Ibaloy communities. Thealteration of the local ecosystem also resulted in the loss of resourcebase, which served as livelihood of the Ibaloys.

Risk and Safety

Major disasters involving dams have occurred in the past at 6 to 10year intervals. With about 15,000 dams all over the world, thefrequency of disasters involving dams is 1 disaster for every 120,000dam years. Speculation also arise that dams cause earthquakes in itssurrounding areas.

3. Biomass Energy. Like hydro and geothermal power, biomass energy is arenewable resource that can be used for base load electric generation.

Technologies that can be used to generate power from biomass includegasification-electric generation systems and burner technologies similar tothat used for coal.

4. Geothermal Energy. Geothermal energy refers to the heat stored in therocks within the earth. In places where the earths heat flow is concentrated,this energy may be harnessed in the form of steam or hot water, which cansubsequently be used for power generation. Geothermal energy is not entirelyGHG emissions-free, but it emits far less greenhouse gases as compared tofossil fuel-based counterparts.


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5. Solar Energy. Solar radiation may be converted to electricity by using solarthermal engines or photovoltaic cells. Solar thermal engines make use ofsolar concentration systems, which, as the name implies, concentrates thepower of the sun, to generate high enough temperatures to heat and boilwater to drive steam engines. Photovoltaics, on the other hand, convert solar

energy directly to electricity in a solid-state device called the solar cell.

Clean coal technologies

Coal in itself is considered not a clean fuel because of the relatively high levels ofcarbon dioxide and pollutant emissions resulting from its combustion ascompared with other fuels. Despite its unfavorable environmental reputation, coalis still widely used around the world for power generation because it is abundantand cheap. Various research and development efforts in the past three decadeshave been successful in coming up with technologies that give better efficienciesthan the conventional pulverized coal technology or that convert coal into liquid or

gas fuels. Many such technologies have been demonstrated in various countriesbut still remain not widely used because its high investment costs are quiteprohibitive. These include fluidized bed systems such as pressurized fluidizedbed combustion (PFBC) and circulating fluidized bed combustion (CFBC),integrated gasification combustion cycle (IGCC) systems and coal-fueled dieselengines. Clean coal technologies are costly, sometimes requiring around $3,000per kilowatt of installed capacity.

Gas turbines

Current gas turbine plants have efficiencies of around thirty percent. Newerplants are actually achieving efficiencies greater than forty percent. But since thistype of plant is normally used for peak load applications, this would have arelatively low impact on emissions reduction.

Fuel cells

Fuel cells are devices that convert fuel and oxygen to electricity and heat bymeans of an electrochemical reaction. For most fuel cells, hydrocarbon fuelsneed to undergo a process of reforming to produce hydrogen, which is the formof fuel required for the electrochemical reaction to take place. Fuel cells haveefficiencies ranging from 40 to 60 percent and could achieve very negligiblecarbon and air pollutant emissions when paired with carbon separation

technologies. Costs are prohibitive, however, ranging from $2,000 to $4,000 perinstalled kilowatt.

Distributed energy technologies

Unlike centralized generating units, distributed energy technologies are small andmodular, with sizes ranging from a few kilowatts to a few megawatts. Distributedenergy technologies can be located on the site where the resource is available ornear the place where the energy is to be used. Greater local control of the systemand waste heat utilization lead to higher energy efficiencies, and thus, less GHGand air pollutant emissions.


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Distributed power units could be connected directly to consumers or to thetransmission or distribution grid. These could provide standby generation andbase load generation, peak shave, and provide waste heat (cogeneration). Andbecause they are located near the load, transmission and distribution costs canbe reduced.

Technologies used for such applications include internal combustion engine-generators, fuel cells, turbine generators and renewable technologies like solarphotovoltaics, wind turbines and microturbines. Through a process calledgasification, biomass fuels could also be used for distributed generation toproduce a gaseous fuel that can be burned in diesel- or gas motors or in gasturbines.

Improved fossil fuel-based technologies

Aside from clean coal technologies, newer and more efficient versions of

conventional fossil fuel-based technologies have been and are being developedand designed.

Natural gas technologies

Natural gas is a fossil fuel that has clean burning properties and lower CO2emissions as compared to other fuels. Natural gas could be used to fuel anumber of power generating technologies, including combined cycle gas turbinesand fuel cells. Some of these technologies, particularly combined cycle gasturbines, have investment costs that are competitive with other conventionalpower generation technologies.

Measures that Integrate Carbon Sequestration

Carbon sequestration involves the capturing of carbon dioxide in the atmosphere orkeeping it from reaching the atmosphere. For the power sector, devices for carbonsequestration use the process of adsorption of carbon dioxide on materials likeactivated carbon, zeolites or inorganic membranes. Employing such devices inpower generation facilities would require significant capital cost and may thusincrease the cost of electricity.


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2.2 Resource Assessment

The technologies described above would be rendered useless without the energyresource required to run them. The following sections will quantify the amount of

clean energy resources in the Philippines, which will then be subsequently used forthe generation of power switching scenarios.

Wind Power

The wind resource analysis and mapping study for the Philippine archipelagoconducted by the National Renewable Energy Laboratory (NREL) shows that thecountry has plentiful wind electric potential. The NREL study identified around10,000 sites in the country, occupying a total area of 11,055 km2 or roughly 3.34% oftotal Philippine land area, with good to excellent resource levels - equivalent to anannual average wind power of 300 W/m2 or greater12 (wind speeds of 6.4 m/s or

greater). According to the study13, these sites could support at least 76,600 MW ofinstalled capacity and generate 195,200 GWh/yr. Including sites with moderate windresource levels, amounting to 97,000 installed capacity, would more than doubletotal installed capacity to 173,600 MW bringing the total estimated power generationfrom wind to 361,000 GWh/yr. The study, however, was not able to include factorssuch as transmission and grid accessibility constraints in the assessment.

The NREL study identified six regions in the country where the best wind resource inthe country are located. These are:

1. the Batanes and Babuyan islands of north Luzon;

2. the northwest tip of Luzon (Ilocos Norte);

3. the higher interior terrain of Luzon, Mindoro, Samar, Leyte, Panay,Negros, Cebu, Palawan, eastern Mindanao, and adjacent islands;

4. well-exposed east-facing coastal locations from northern Luzon southwardto Samar;

5. the wind corridors between Luzon and Mindoro (including Lubang Island);

6. between Mindoro and Panay (including the Semirara Islands andextending to the Cuyo Islands).

In contrast to the optimistic estimate of the NREL, an earlier study by the UnitedNations Industrial Development Organization (UNIDO) in 1994 puts the wind electricpower potential for the entire Philippines at a very conservative value of 250 MW14.

12 In one of the NREL scenarios, areas with annual wind power densities of 300 W/m2 or greater wereassumed to have sufficient potential for the economic development of utility-scale wind energy.13 Assumptions used by NREL to come up with estimates are: 500 kW turbine size, hub height = 40

m, rotor diameter = 38 m, turbine spacing = 10D by 5D, capacity/km

2

= 6.9 MW.14 UNIDO, Assessment of Technical, Financial and Economic Implications of Wind EnergyApplications for Power Generation, (1994).


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Despite the vastness of wind resources in the country, current utilization are mostlyto run wind pumps and a few small-scale turbine generators. At present, there aremore than 500 wind pump and 9 wind turbine installations in the country. All windturbine installations are of the stand-alone type, among which are the following:

1. A 10-kW system in Pagudpod, Ilocos Norte in Luzon. This is a pilot projectof the National Power Corporation to electrify a number of households. Itwas commissioned in 1996.

2. A 25-kW stand-alone system in Picnic Grove, Tagaytay, Batangas inLuzon.

3. A 3-kW system in Bantay, Ilocos Sur in Luzon. In tandem with a dieselgenerator, this system is used to power up a relay station of the PhilippineTelegraph and Telecommunications Company (PT & T). It is in operationsince 1994.

4. A 25-kW system in General Santos in Mindanao.

Two committed wind projects are expected to contribute a significant amount ofelectricity to grid. These are the 40-MW North Luzon Wind Power Project (NLWPP)of the Philippine National Oil Company-Energy Development Corporation (PNOC-EDC) and the 25-MW wind project of Northwind, which are scheduled forcommissioning in 2006 and 2004, respectively. These wind facilities will both belocated in Ilocos Norte. Proponents of these projects were able to secure powerpurchase agreements with the local distribution utility, which they used to obtainfinancing. Further, project proponents were able to obtain very lenient and attractive

financing schemes. The PNOC-EDC project was given a soft loan amounting to $48million dollars by the Japan Bank for International Cooperation (JBIC) at annualinterests below 1 percent (0.95 percent for goods, 0.75 percent for consultingservices) and a 40-year repayment period (inclusive of a 10-year grace period).Project proponents claim that they will be able to sell electricity at prices below thatof the grid.

It is significant to note two issues that developers of these two wind power projectshad to address. First is the absence of site-specific wind assessment data, whichrequired the developers to collect at least two-years of wind speed measurements.Second is the connection of the wind farms to the transmission grid. Transmission

facilities are quite far from the wind sites, that for the NLWPP, that the PNOC-EDCwas required to put up 42 kilometers of transmission line and 130 transmission linetowers/poles to connect to the nearest transmission line trunk.


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For the purposes of the present study, a re-analysis of the NREL data wasconducted by the UPSL using the following criteria to screen for viable wind powersites:

1. Power density of at least 500 W/m2

;2. The transmission line components to connect the site to the existing grid

will not exceed 25% of the levelized cost of the combined generation andtransmission cost. To compute for transmission cost, the UPSL computedfor the linear distance between the wind site and the nearest existingsubstation. This distance was multiplied by a factor of 1.5 to adjust fortopography and other factors that may affect the routing of thetransmission system.

The first criteria reduced the number of wind sites to 2,092, with an aggregate

potential of 14,363 MW. The application of the second criteria further reduced thenumber of sites to 1,038 with 7,400 MW potential. Tables 2.3 and 2.4 summarize theresults of the re-analysis. Locations of these sites are shown in Figure 2.1. AppendixA identifies the provinces where these wind resources are located, as well as itscorresponding estimated electric capacity and annual generation.

Table 2.3: Philippine Wind Electric Potential

(with wind power density 500 W/m2)

Luzon Visayas Mindanao PhilippinesNumber of sites 1,668 360 64 2,092

Total area, km2

1,755 385 66 2,206Potential installed capacity,MWe

11,381 2,527 455 14,363

Estimated AnnualGeneration, GWh/yr

35,437 7,865 1,397 44,699

Table 2.4: Practical Wind Resources in the Philippines(with wind power density 500 W/m2and transmission cost constraint)

Luzon Visayas Mindanao PhilippinesNumber of sites 686 305 47 1,038Total area, km2 753 330 49 1,132Potential installed capacity,MWe

4,900 2,168 336 7,404


15,277 6,738 1,032 23,047


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Figure 2.1: Practical Wind Resources in the Philippines(with wind power density 500 W/m2and transmission cost constraint)

LuzonNumber of sites: 686Potential InstalledCapacity: 4,900 MWeEstimated AnnualGeneration: 15,277 GWh

VisayasNumber of sites: 305Potential InstalledCapacity: 2,168 MWeEstimated AnnualGeneration: 6,738 GWh

MindanaoNumber of sites: 47Potential InstalledCapacity: 336 MWeEstimated AnnualGeneration: 1,032 GWh


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Hydro Resources

Hydro power contributes a large amount of energy to grid-based electricity in thecountry. By the end of 2001, a total of 2,518 MW of hydro power is installed in thePhilippines, with an annual production of 7,104 GWh. These hydro power facilities

range in size from 1 to 360 MW and includes reservoir type (dams) and run-of-riversystems15.

In addition to the existing hydro power generation facilities, a number of large hydrosites in country to be used as candidate power plants for energy planning. Table 2.5lists down identified sites for large hydro16.

The UPSL made a re-analysis of the small17 hydro resource assessment made bythe NREL, selecting sites with capacities of 5 MW or more. Using this criterion, theUPSL identified 239 small hydro sites in the country with an aggregated capacity ofabout 2,327 MW. An additional screening criterion was used, i.e., sites whose

transmission line components needed to connect to the existing grid must notexceed twenty five percent of the levelized combined generation and transmissioninvestment costs. These resulted to the elimination of three sites from the smallhydro resource pool. Tables 2.6 and 2.7 shows the results of the application of thecriteria mentioned above, while Figure 2.2 shows the location of the sites selected.The DOE has verified a number of these small hydro sites, as listed in Table 2.8.

15 Impoundment dams involve the impounding of a large volume of water in or upstream of powerplants by use of reservoirs or dams. This water may then be used to augment supply during low flowperiods and thus ensure a relatively constant supply of power. Run-of-river systems, on the other

hand, make use of the natural flow of a rivers as head.16 Two of these sites, Kalayaan and San Roque, are committed projects.17 As per WEC definition.


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Table 2.5: Available Large Hydro Resources

Site ProvinceEstimated

Capacity (MW)

LUZON

Abuan Isabela 60Addalam Quirino 46Agbulo Apayao 360Aglubang Mindoro Oriental 13.6Amburayan Benguet 93Bakun A/B Benguet 45Binongan Abra 175Catuiran Mindoro Oriental 24Diduyun Quirino 332Kalayaan PS Laguna 350Kanan Quezon 113Lamut Ifugao 12Matuno Ifugao 52 to 250Nalatang Benguet 45Pasil B/C Kalinga Apayao 42Saltan A/B Kalinga 34San Roque Pangasinan 345Tanudan D Kalinga 27Tinglayan B Kalinga 21Total Luzon 2,189.6 to 2,387.6

VISAYAS

Pacuan Negros Oriental 33Sicopong Negros Oriental 17.8Timbaban Aklan 29Villasiga Antique 29Total Visayas 108.8

MINDANAO

Agus III Lanao del Norte 225Bulanog-Batang Bukidnon 150Lanon Hydro South Cotabato 21Lake Mainit Agusan del Norte 22Liangan Lanao del Norte 11.9Pugo D/BA Agusan 44Pulangi V North Cotabato 300Tagoloan Bukidnon 68Total Mindanao 841.9

TOTAL PHILIPPINES 3,140.3 to 3,338.3


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Table 2.6: Philippine Small Hydro Electric Potential

(sites with power capacity 5 MW)

Luzon Visayas Mindanao Philippines

Number of sites 134 9 96 239Potential installed capacity,MWe

1,291 58 978 2,327


6,786 305 5,140 12,231

Table 2.7: Practical Small Hydro Resources in the Philippines

(sites with power capacity 5 MW and transmission cost constraint)

Luzon Visayas Mindanao Philippines

Number of sites 131 9 96 236Potential installed capacity,MWe

1,272 58 978 2,308


6,686 305 5,140 12,131

Table 2.8: Small Hydro Power Sites Verified by the DOE

Site Province Estimated Capacity (MW)

LUZONColasi Camarines Norte 1.0Total Luzon 1.0

VISAYASAmandaraga Eastern Samar 4.0Bugtong Samar 1.0Igbolo Iloilo City 4.0Siaton Negros Oriental 5.4Total Visayas 14.4

MINDANAO

Lower Dapitan Zamboanga del Norte 3.8Taguibo Agusan del Norte 7.0Middle Dapitan Zamboanga del Norte 4.4Libungan North Cotabato 10.0Upper Dapitan Zamboanga del Norte 3.6Total Mindanao 28.8

TOTAL PHILIPPINES 44.2


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Figure 2.2: Practical Small Hydro Resources in the Philippines(sites with power capacity = 5 MW and transmission cost constraint)

LuzonNumber of sites: 131Potential InstalledCapacity: 1,272 MWeEstimated AnnualGeneration: 6,686 GWh

VisayasNumber of sites: 9Potential InstalledCapacity: 2,308 MWeEstimated AnnualGeneration: 12,131 GWh

MindanaoNumber of sites: 96Potential InstalledCapacity: 978 MWeEstimated AnnualGeneration: 5,140 GWh


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Biomass

In the past, biomass has contributed a significant amount to the national energyconsumption, amounting to as much as 30% of the total energy mix. However, the

contribution of biomass to grid-based electricity is yet to be seen.

Among identified biomass resources in the Philippines include forestry resourcesand fuel wood, bagasse (residue resulting from the extraction of sugar cane juice),rice hull, coconut residues, animal wastes and municipal solid wastes. Table 2.9shows the projected supply of these biomass resources, as estimated by thePhilippines Department of Energy.

Table 2.9: Projected Supply of Biomass Resources

(petajoules)

Type 2005 2010 2015 2020 2025

Rice Residues 56.43 62.28 68.81 75.95 83.88

Coconut Residues 134.75 148.78 164.27 181.35 200.20

Bagasse 95.47 116.14 141.28 171.90 209.11

Fuelwood 608.54 693.63 796.05 919.21 1067.51

Animal Wastes 79.12 83.20 87.41 91.87 96.56

Municipal Wastes 736.40 833.14 934.77 1040.48 1149.12

TOTAL 1710.69 1937.19 2192.60 2480.76 2806.38Source: Promotion of Renewable Energy Sources in South East Asia (PRESSEA) website

This high resource estimate for biomass resources has led to optimistic opinionsregarding grid-connected electricity generation systems using biomass. A joint reportby the United Nations Development Programme (UNDP) and the World Bankestimates power from biomass that can be exported to the grid, as follows: 60 to 90MW from bagasse, 40 MW from rice hull and 20 MW from coconut residues.

Although the paper and sugar industries already are using their biomass residues togenerate heat and power for their own use, grid-connected systems have yet tomaterialize.

Two promising power generation projects using biomass as fuel are in thedevelopment stage, both of which will be located in the province of NegrosOccidental in Region VI (Western Visayas Region)18. These are the VictoriasBioenergy and the Talisay Bioenergy projects, both of which are joint undertakings ofBronzeoak Ltd of the United Kingdom and Venture Factors of the Philippines.

18 In 1999, Region VI accounted for almost 2 million tones of the total 3.6 million tones, roughly 54%,of bagasse produced from sugar mills all over the country.


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The first project will involve the construction of a biomass-fired cogeneration plantinside the Victorias Milling Company (VMC) complex19. The plant, which will consistof two 161.5-tonne/hr boilers and a 50-MW steam turbine generator, will supply all

the steam and power requirements of the VMC refinery facilities20

, and sell excesspower to the local electric cooperative Central Negros Electric Cooperative(CENECO).21 Fuel would consist of bagasse and cane trash from VMC, bagassefrom other mills, and if needed, wood chips from local sustainable plantations22. It isestimated that the plant would consume 741,000 tonnes of bagasse annually. It isalso estimated that the project could sell about 1.6 million certificate of emissionsreduction (CER) credits over a 10-year period. The project would cost about US$100 million23. The plant is expected to sell electricity at a price below that of the grid.Commercial operation of the plant is scheduled on October 2005.

The second project, Talisay Bioenergy, is similar to VBI but smaller in scale. It will

involve the construction of a cogeneration plant in the facility of First FarmersHoldings Corporation24 (FFHC). The plant, which will consist of two 85-tonne/hrboilers and a 30-MW steam turbine generator, will supply all of FFHCs steam andelectricity requirements in exchange for the mills bagasse production. The plant willalso provide any additional steam and electricity requirements of the FFHC atcommercial rates. Electricity that will be produce

wwf power switch scenario philippines

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