Are the Philippines’ energy dreams too ambitious?

Reading Time: 3 minutes

Philippine_geothermalAlongside the C-5 highway in Metro Manila, one of the pulsing thoroughfares of the capital, a raggedy tarpaulin banner belonging to a hotel known for its discreet services boasts, “Absolutely no brownouts.”  On the Philippine island of Luzon, where 15 years ago power outages were so common that, as one 20-something Manila lawyer said, “cartoons were often cut short,” the worry is not what it once was, yet not altogether gone.

Today Luzon has become a powerhouse grinding of economic growth that made the Philippines the fastest growing country in the Asia-Pacific region the first quarter of 2013. But with that 7.8 per cent growth, aging power grids and new energy consumers plugging in their slick new white goods have pressured the nation to dream up a sustainable path to maintain momentum. How hyped the government has gotten, however, begs concern over its attainability.

The Philippines has among the greenest dreams of the ASEAN countries, envisioning 50 per cent of power supply to derive strictly from renewable resources by 2030. Enshrined in this green scheme is the ambition to make the Philippines the world’s top geothermal energy producer and ASEAN’s largest wind producer, while doubling the capacity of hydropower, the largest contributor resource to this plan.

By 2030, the Philippines plans to bring 5,400 megawatts of additional hydropower energy online, or double the current capacity from the largely underutilised resource, the Department of Energy disclosed to Inside Investor. A pillar of the country’s energy roadmap, the private sector has been designated to lead the charge to the country’s dreams, with industry heavyweights such as the Philippines’ largest producer of geothermal energy Energy Development Corporation leading the way.

The Philippines’ hydro landscape is currently defined by the 345-megawatt San Roque dam and the 408-megawatt Angat dam in Luzon, with the aged Agus and Pulangui hydropower complexes powering the majority of the grid on the island of Mindanao. But these centerpieces of the Philippine energy supply are but droplets in the bucket to what will be required to hit outlined goalposts. Furthermore, incentives used by the government to attract the private sector require that investors enter into a form of public-private partnership, whereby profits of resources must be shared.

This might be a bit hard to swallow for many foreign direct investors looking to secure steady streams of income from assets. But the domestic ball has at least begun rolling.

Countless domestic private players have been awarded contracts for developing hydropower facilities ranging from a few megawatts to 600 all across the archipelago.One of those private players is the Philippines’ Jolliville Holdings, which recently announced plans to put up two new hydropower facilities with a generation capacity of 20 megawatts worth about $75 million. The first phase of commercial operations will begin in 2015 for this run-of-river venture, a type of hydropower project that is heavily incentivised in the country’s green energy plan.

“The Philippines is an archipelago that is always affected by natural disasters. This is one of the primary reasons why we prioritise run-of-river hydro projects: They are dependent on available water, there is no need for big infrastructure and they have less of an impact on surrounding communities,” Director of the Renewable Energy Management Bureau Mario Marasigan at the Department of Energy told Inside Investor.

But in looking serve up tempting carrots to attract private investment, the Philippines is incentivising projects incommensurate with profitability in large-scale investments, located throughout a haphazard archipelago still fraught with all the banditry of the dark ages.

Big and ugly embankment dams may be equally fraught with politically destructive social impacts, but big dreams need big support. The Philippines will need more of both to become the green machine it envisions.

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Reading Time: 3 minutes

Alongside the C-5 highway in Metro Manila, one of the pulsing thoroughfares of the capital, a raggedy tarpaulin banner belonging to a hotel known for its discreet services boasts, “Absolutely no brownouts.”  On the Philippine island of Luzon, where 15 years ago power outages were so common that, as one 20-something Manila lawyer said, “cartoons were often cut short,” the worry is not what it once was, yet not altogether gone.

Reading Time: 3 minutes

Philippine_geothermalAlongside the C-5 highway in Metro Manila, one of the pulsing thoroughfares of the capital, a raggedy tarpaulin banner belonging to a hotel known for its discreet services boasts, “Absolutely no brownouts.”  On the Philippine island of Luzon, where 15 years ago power outages were so common that, as one 20-something Manila lawyer said, “cartoons were often cut short,” the worry is not what it once was, yet not altogether gone.

Today Luzon has become a powerhouse grinding of economic growth that made the Philippines the fastest growing country in the Asia-Pacific region the first quarter of 2013. But with that 7.8 per cent growth, aging power grids and new energy consumers plugging in their slick new white goods have pressured the nation to dream up a sustainable path to maintain momentum. How hyped the government has gotten, however, begs concern over its attainability.

The Philippines has among the greenest dreams of the ASEAN countries, envisioning 50 per cent of power supply to derive strictly from renewable resources by 2030. Enshrined in this green scheme is the ambition to make the Philippines the world’s top geothermal energy producer and ASEAN’s largest wind producer, while doubling the capacity of hydropower, the largest contributor resource to this plan.

By 2030, the Philippines plans to bring 5,400 megawatts of additional hydropower energy online, or double the current capacity from the largely underutilised resource, the Department of Energy disclosed to Inside Investor. A pillar of the country’s energy roadmap, the private sector has been designated to lead the charge to the country’s dreams, with industry heavyweights such as the Philippines’ largest producer of geothermal energy Energy Development Corporation leading the way.

The Philippines’ hydro landscape is currently defined by the 345-megawatt San Roque dam and the 408-megawatt Angat dam in Luzon, with the aged Agus and Pulangui hydropower complexes powering the majority of the grid on the island of Mindanao. But these centerpieces of the Philippine energy supply are but droplets in the bucket to what will be required to hit outlined goalposts. Furthermore, incentives used by the government to attract the private sector require that investors enter into a form of public-private partnership, whereby profits of resources must be shared.

This might be a bit hard to swallow for many foreign direct investors looking to secure steady streams of income from assets. But the domestic ball has at least begun rolling.

Countless domestic private players have been awarded contracts for developing hydropower facilities ranging from a few megawatts to 600 all across the archipelago.One of those private players is the Philippines’ Jolliville Holdings, which recently announced plans to put up two new hydropower facilities with a generation capacity of 20 megawatts worth about $75 million. The first phase of commercial operations will begin in 2015 for this run-of-river venture, a type of hydropower project that is heavily incentivised in the country’s green energy plan.

“The Philippines is an archipelago that is always affected by natural disasters. This is one of the primary reasons why we prioritise run-of-river hydro projects: They are dependent on available water, there is no need for big infrastructure and they have less of an impact on surrounding communities,” Director of the Renewable Energy Management Bureau Mario Marasigan at the Department of Energy told Inside Investor.

But in looking serve up tempting carrots to attract private investment, the Philippines is incentivising projects incommensurate with profitability in large-scale investments, located throughout a haphazard archipelago still fraught with all the banditry of the dark ages.

Big and ugly embankment dams may be equally fraught with politically destructive social impacts, but big dreams need big support. The Philippines will need more of both to become the green machine it envisions.

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