Contracting with the Philippines’ green ambitions

Reading Time: 5 minutes
Mario_Marasigan
Mario Marasigan, Director of the Renewable Energy Management Bureau of the Philippines

The Philippines has outlined an ambitious energy plan to generate 15,000 megawatts from renewable energy by 2030, or half of the projected supply. There are now over 100 green energy projects outlined for study in the country, all of which plan to be driven by the private sector under a contracting scheme with the government. Inside Investor spoke with Director of the Renewable Energy Management Bureau Mario Marasigan at the Department of Energy about the challenges this strategy will be met with, the country’s pioneer solar farms and the government’s contracting system between the public and private sector.

Q: What challenges does the Philippines face in achieving its ambitions of deriving half of its energy mix from renewables by 2030?

A: Here in the Philippines, the government regulates the power sector and industry, while much of the investment comes from the private sector. There is very limited government intervention otherwise. The government is more involved with policy intervention than monetary. Currently the Philippines has more than 5,000 megawatts of renewable energy and over the next 17 years we want to come up with 15,000 megawatts total. The largest challenge getting to this stage is enticing the private sector to participate. Our National Renewable Energy programme is dependent on the private sector coming in and providing the loan.

Q: In Sarawak, we have connected major investors from the Gulf to the government to cooperate with the development of big-ticket hydro projects. Through which mechanisms could similar investors work with developing DOE energy assets?

A: In the Philippines, the private sector is the sole developer of renewable energy plants and a foreign investor must find a local partner to participate. Instead of being covered by licenses, renewable energy projects are awarded through a contract system, which is a form of a public-private partnership, whereby the government owns the resources; i.e., the water resources, the wind resources. We then allow the private sector to invest and share the profit with the public sector. The most visible private developers in the Philippines are the Energy Development Corporation, First Generation – both under the Lopez Group of Companies — as well as the Aboitiz companies. Companies affiliated with Petron and San Miguel are also major investors.

Q: Solar energy remains untapped in the Philippines, but there are two pioneer solar farms now in the pipeline. Can you detail where these will be, who will develop them and what their capacity is?

A: One solar project will be in Luzon and the other in Leyte, Visayas; both are 30 megawatts in capacity. The first one was awarded a certificate of commerciality to the Philippine Solar Leyte Farm. And the other is Luzon, but I cannot release those details yet. Philippine Solar Leyte Farm will enter the project with a South Korean partner. They can start anytime and they should be in commercial operation by January 2015.

“In the Philippines, the private sector
is the sole developer of renewable energy plants
and a foreign investor must find
a local partner to participate.”

Q: What renewable strategy is there for Mindanao, an island with a constant power crisis?

A: The people of Mindanao have developed this dependence on two big hydro complexes on the island, but they are more than 30 years old, and as they age they will have a tendency to go down in capacity. There are now several coal facilities coming up in Mindanao, as well as a programme to increase geothermal capacity by 50 megawatts. A large issue is the availability of land. In Mindanao, the land is used mostly for agriculture, and much of the land is not accessible to the grid. Thus these areas cannot be developed because they are inaccessible.

Q: How does the Philippines hope to wean itself away from fossil fuels?

A: We are targeting renewable energy generation to cater to greater power demand, and looking for more economic indicators exceeding the barometers that we have used in coming up with the National Renewable Energy Program to access this demand. There will be continuous importation of fossil fuels, but we hope that this will taper off.

Q: What policies and programmes does the Philippine government follow to assist displaced communities?

A: We don’t see major issues coming up for the hydropower projects being proposed in the country, mostly become a lot of them are targeted for development in remote areas that will have very little social impact.

Q: Can you detail the list of hydropower projects in the pipeline?

A: There are no projects in the pipeline per se because they are still in the feasibility stage, although some of those potential sites have been tested. There are very limited players within the power industry. But government policy initiatives have resulted in more players in renewable energy; in hydro you may notice that we have separated policy direction between impounding hydro and run-of-river hydro. The big difference is that run-of-river projects are afforded the feed-in tariff incentives, while impounding dams only enjoy the mechanism provided by our renewable energy law. 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.

If we keep growing such as the 7.8 per cent
that was posted in the first quarter of 2013
then we will have to come up with
more solutions in the medium-term.”

Q: Will the mothballed Bataan Nuclear Power Plant ever be revitalised?

A: That plant will definitely not be rehabilitated nor will there be an option to make it operational. It is not a priority. However, we are looking for private sector investor to offer a new development scheme for that plant.

Q: Given the current rate of growth, can the current energy strategy meet this unexpected demand?

A: If we keep growing such as the 7.8 per cent that was posted in the first quarter of 2013 then we will have to come up with more solutions in the medium-term. It’s [the current energy strategy] not a true representation of what’s happening at the moment. This area [Fort Bonifacio, Manila] will need an extra 50 megawatts in three to five years. Look and the vertical and horizontal development going on here. However, if we have the majority of the committed projects online by 2015, then we can safely say that we’ll have sufficient supply until 2020. We still have ample supply but resources are disappearing.

Q: The Philippines is the only country in ASEAN that doesn’t subsidise power, making rates higher than Hong Kong and Singapore. What programme is in place to shield the country’s poorest from these astronomical rates?

A: Under the Lifeline programme, consumers using below 100kw/h on a monthly basis pay only a fixed rate as long as they don’t exceed this quota. Off-grid consumers that are located where the national transmission system cannot reach are dependent on embedded generators personally run by the government. The government pays a universal charge for this generation and this addresses the operation as well. This is a cross subsidy and there is no other government intervention. The Philippines retains a policy averse to energy subsidies to ensure that we have continued economic growth and access to funds for investment in industry, technology and so on. We can invest in renewable energy through the feed-in tariff policy, which will accommodate more expensive technologies and have minimal impact, effectively distributing the cost between the public and private sector. Most important moving forward is identifying energy resource areas and look for possibilities to increase energy reservations to lock-in future development.

 

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Reading Time: 5 minutes

Mario Marasigan, Director of the Renewable Energy Management Bureau of the Philippines

The Philippines has outlined an ambitious energy plan to generate 15,000 megawatts from renewable energy by 2030, or half of the projected supply. There are now over 100 green energy projects outlined for study in the country, all of which plan to be driven by the private sector under a contracting scheme with the government. Inside Investor spoke with Director of the Renewable Energy Management Bureau Mario Marasigan at the Department of Energy about the challenges this strategy will be met with, the country’s pioneer solar farms and the government’s contracting system between the public and private sector.

Reading Time: 5 minutes

Mario_Marasigan
Mario Marasigan, Director of the Renewable Energy Management Bureau of the Philippines

The Philippines has outlined an ambitious energy plan to generate 15,000 megawatts from renewable energy by 2030, or half of the projected supply. There are now over 100 green energy projects outlined for study in the country, all of which plan to be driven by the private sector under a contracting scheme with the government. Inside Investor spoke with Director of the Renewable Energy Management Bureau Mario Marasigan at the Department of Energy about the challenges this strategy will be met with, the country’s pioneer solar farms and the government’s contracting system between the public and private sector.

Q: What challenges does the Philippines face in achieving its ambitions of deriving half of its energy mix from renewables by 2030?

A: Here in the Philippines, the government regulates the power sector and industry, while much of the investment comes from the private sector. There is very limited government intervention otherwise. The government is more involved with policy intervention than monetary. Currently the Philippines has more than 5,000 megawatts of renewable energy and over the next 17 years we want to come up with 15,000 megawatts total. The largest challenge getting to this stage is enticing the private sector to participate. Our National Renewable Energy programme is dependent on the private sector coming in and providing the loan.

Q: In Sarawak, we have connected major investors from the Gulf to the government to cooperate with the development of big-ticket hydro projects. Through which mechanisms could similar investors work with developing DOE energy assets?

A: In the Philippines, the private sector is the sole developer of renewable energy plants and a foreign investor must find a local partner to participate. Instead of being covered by licenses, renewable energy projects are awarded through a contract system, which is a form of a public-private partnership, whereby the government owns the resources; i.e., the water resources, the wind resources. We then allow the private sector to invest and share the profit with the public sector. The most visible private developers in the Philippines are the Energy Development Corporation, First Generation – both under the Lopez Group of Companies — as well as the Aboitiz companies. Companies affiliated with Petron and San Miguel are also major investors.

Q: Solar energy remains untapped in the Philippines, but there are two pioneer solar farms now in the pipeline. Can you detail where these will be, who will develop them and what their capacity is?

A: One solar project will be in Luzon and the other in Leyte, Visayas; both are 30 megawatts in capacity. The first one was awarded a certificate of commerciality to the Philippine Solar Leyte Farm. And the other is Luzon, but I cannot release those details yet. Philippine Solar Leyte Farm will enter the project with a South Korean partner. They can start anytime and they should be in commercial operation by January 2015.

“In the Philippines, the private sector
is the sole developer of renewable energy plants
and a foreign investor must find
a local partner to participate.”

Q: What renewable strategy is there for Mindanao, an island with a constant power crisis?

A: The people of Mindanao have developed this dependence on two big hydro complexes on the island, but they are more than 30 years old, and as they age they will have a tendency to go down in capacity. There are now several coal facilities coming up in Mindanao, as well as a programme to increase geothermal capacity by 50 megawatts. A large issue is the availability of land. In Mindanao, the land is used mostly for agriculture, and much of the land is not accessible to the grid. Thus these areas cannot be developed because they are inaccessible.

Q: How does the Philippines hope to wean itself away from fossil fuels?

A: We are targeting renewable energy generation to cater to greater power demand, and looking for more economic indicators exceeding the barometers that we have used in coming up with the National Renewable Energy Program to access this demand. There will be continuous importation of fossil fuels, but we hope that this will taper off.

Q: What policies and programmes does the Philippine government follow to assist displaced communities?

A: We don’t see major issues coming up for the hydropower projects being proposed in the country, mostly become a lot of them are targeted for development in remote areas that will have very little social impact.

Q: Can you detail the list of hydropower projects in the pipeline?

A: There are no projects in the pipeline per se because they are still in the feasibility stage, although some of those potential sites have been tested. There are very limited players within the power industry. But government policy initiatives have resulted in more players in renewable energy; in hydro you may notice that we have separated policy direction between impounding hydro and run-of-river hydro. The big difference is that run-of-river projects are afforded the feed-in tariff incentives, while impounding dams only enjoy the mechanism provided by our renewable energy law. 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.

If we keep growing such as the 7.8 per cent
that was posted in the first quarter of 2013
then we will have to come up with
more solutions in the medium-term.”

Q: Will the mothballed Bataan Nuclear Power Plant ever be revitalised?

A: That plant will definitely not be rehabilitated nor will there be an option to make it operational. It is not a priority. However, we are looking for private sector investor to offer a new development scheme for that plant.

Q: Given the current rate of growth, can the current energy strategy meet this unexpected demand?

A: If we keep growing such as the 7.8 per cent that was posted in the first quarter of 2013 then we will have to come up with more solutions in the medium-term. It’s [the current energy strategy] not a true representation of what’s happening at the moment. This area [Fort Bonifacio, Manila] will need an extra 50 megawatts in three to five years. Look and the vertical and horizontal development going on here. However, if we have the majority of the committed projects online by 2015, then we can safely say that we’ll have sufficient supply until 2020. We still have ample supply but resources are disappearing.

Q: The Philippines is the only country in ASEAN that doesn’t subsidise power, making rates higher than Hong Kong and Singapore. What programme is in place to shield the country’s poorest from these astronomical rates?

A: Under the Lifeline programme, consumers using below 100kw/h on a monthly basis pay only a fixed rate as long as they don’t exceed this quota. Off-grid consumers that are located where the national transmission system cannot reach are dependent on embedded generators personally run by the government. The government pays a universal charge for this generation and this addresses the operation as well. This is a cross subsidy and there is no other government intervention. The Philippines retains a policy averse to energy subsidies to ensure that we have continued economic growth and access to funds for investment in industry, technology and so on. We can invest in renewable energy through the feed-in tariff policy, which will accommodate more expensive technologies and have minimal impact, effectively distributing the cost between the public and private sector. Most important moving forward is identifying energy resource areas and look for possibilities to increase energy reservations to lock-in future development.

 

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