WHEN the Electric Power Industry Reform Act under Republic Act (RA) 9136 was passed in 2001, it deregulated the complex structure of the energy sector into four subsectors of generation, transmission, distribution and supply.
Only the generation subsector is fully open to foreign investors, as it is not considered anymore as public utility subject to the 60/40 equity limitation imposed by the Constitution. Consistent with the idea of retail competition and open access, prices of power generations are no longer subject to the Energy Regulatory Board (ERB) and may avail of value-added zero-tax rates, consistent with lowering the price of electricity. Seven years later, RA 9513, or the Renewable Energy Act, was enacted to accelerate the exploration and development of natural-energy resources as a tool to address environmental concerns produced by traditional sources of energy and, ultimately, to lower the cost of electricity. Such law, touted as one of the most comprehensive and forward-looking renewable-energy (RE) laws in the world, enjoins all stakeholders in the electric-power industry to develop a road-map plan, in coordination with the National Renewable Energy Board, to attract new investments for sustainable development. Despite these efforts, however, the Philippines remained to have one of the highest electricity rates in Asia, which calls for more emphasis and streamline approaches to RE development.
Going renewable
AS of May 2015, there are at least 648 RE contracts approved by the Department of Energy (DOE), with a combined generation capacity of 10,632.22 megawatts (MW) as against the total installed capacity of 2,752.20 MW, 613 of which are for grid use, broken down as follows: 402 hydropower, 70 solar, 50 wind, 44 biomass, 41 geothermal and 6 ocean energy. The remaining 35 are self-generating electricity for their own use, which include 1 hydropower, 1 wind, 11 solar and 22 biomass. The DOE has been aggressively promoting RE sources and has streamlined the application processes from two years to 45 days. As a result, therefore, there are already 166 pending projects for approval that could possibly generate another 1,493.78 MW, 117 of which are hydropower, 29 solar, 6 wind, 5 biomass, 4 ocean and 4 geothermal.
Under the National Renewable Energy Program, the government targets to have 15,304-MW installed capacity by 2030, which is why the DOE implements fiscal and nonfiscal schemes to attract investments, such as the seven-year income-tax holiday; duty-free importation; special realty-tax rates, net-operating loss carryover; 0-percent value-added tax on RE sales and purchases; and practicing RE portfolio standard; feed-in tariff system; net metering; and green energy options. The government intends to increase geothermal capacity by 75 percent; hydropower capacity by 160 percent; additional 277-MW biomass power capacities; 2,345-MW wind power capacity; additional 284-MW solar capacity until reaching the targeted 1,528 MW, as well as develop the first-ever ocean-energy facility in the country.
Going renewable has several advantages for the Philippines and for any state worldwide. It diverts longtime dependence to fossil fuels, such as coal, oil and natural gas, that deplete across time and contribute exponentially to greenhouse emissions resulting to global warming. As an archipelagic state, the Philippines ranks on top of the list of vulnerable states on climate change. In fact, we have experienced new levels of storm signals that tremendously damage livelihood, claim precious lives, and destroy key infrastructures that enable trade. Yes, nature has its revenge, and the magnitude of such erodes humanity.
Less dependence to fossil fuels could also mean less reliance to foreign resources. It creates domestic employment, harnesses Filipino ingenuity; and utilizes our expertise on farming, planting and harvesting. For instance, Finland, due to abundance of forest resources, converts wood, waste and residual products to energy. Its wood-based biomass supplies considerable energy needs of its high-tech economy. Sweden gets two-thirds of its electricity from nonfossil-fuel energy sources, primarily hydroelectric and nuclear, and substantially investing in solar and wind energy that stimulate domestic jobs in the sector. In Denmark the wind turbines produce a lot of energy, which sometimes exceed total demand. In fact, in July this year, the wind farms produced 116 percent of its national electricity demands and exported some to Germany, Norway and Sweden. Being surrounded with water resources, the Philippines can learn from Norway’s utilization of hydropower that supplies 99 percent of electricity or Iceland’s experience combining geothermal and hydropower resources. RE reduces pollution that brings cleaner water, air and land. Although the Philippines is starting to uncover the potentials of solar technologies, it can learn techniques from the silicon-based solar cells of Norway that specializes on second-generation photovoltaic technologies or even Denmark’s third-generation thin-film solar cells. In other words, going renewable balances the overuse of fossil fuels and substantially mitigates risks.
Moving forward
AS immediate past Energy Secretary Carlos Jericho L. Petilla acknowledged, RE is the ideal form of energy, but the cost is high and coal is the answer to the nation’s current extreme power shortages. This, of course, can be seen in the rising level of coal-powered generation from 2001 to 2014. From 2001 alone, coal generated 18,789 gigawatt-hours (GWh) and has expanded to 33,054 GWh in 2014, or an estimated average generation growth of 32.82 percent for the past 14 years. However, the Philippines as a nation cannot depend on finite resources forever, where irreparable results are detrimental to health and environment. Thus, the low carbon- emission scenario of the Philippine Energy Plan should be actively pursued. To these ends, the Philippines can benefit from learning best practices on RE and clean-technology development from countries around the globe through public-private partnerships.
High capital costs can be addressed by collaboration between the government and investors. For example, the government ensures that the overall business environment is competitive, efficient and nondiscriminatory to local and foreign investors. It has to ensure that regulatory regimes are fair, adequate and enforceable to encourage establishment of businesses.
The government may also introduce incentives, as being done by the DOE and other agencies notably the Board of Investments and the Philippine Economic Zone Authority, to help companies augment capital expenditures. Since private investors have the expertise and the necessary capital, they can develop renewable facilities in line with the priorities of the government, like solar and ocean power.
The message is clear, fossil fuels will remain to be a significant source of energy but our country must develop alternatives, such as the renewable sources, to back up its growing economy and mitigate the risks of climate change.
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Kent Marjun Primor serves as the market research and communications specialist at the Nordic Business Council of the Philippines. For comments and inquiries, direct it to kent.primor@nbcp.com.ph.