Renewable Energy in the Philippines

Challenges in an Emerging Market

Alan Silayan, IMRE 2002

Philippine Energy Sector

Text

Power Sector Situationer

2009 Transmission

Interconnection Line Capacity

•! Leyte-Luzon (440 MW)

•! Leyte-Cebu (400 MW)

•! Cebu-Negros (200 MW)

•! Negros – Panay (100 MW)

•! Leyte-Bohol (100 MW)

*

Energy sector distribution - ! 32% Renewable

14%

17%

28%

0%

9%

32%

Hydro Geothermal Coal Wind/Solar Oil Nat Gas

Geothermal resources have been explored since the 1970s and geothermal power make up about a quarter of the countryʼs energy mix

Hydropower resources have been harnessed since the 1940s and today account for more than 20% of the energy mix

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Current Conditions Surrounding RE Project Development in the Philippines

Large resource potential for RE

Increasing demand for energy

High electricity costs

Legislative framework in place

Limited fossil fuel resource

Availability of environmental technologies from less expensive sources

Nature of RE Projects in the Philippines

Relatively small - less than 1MW - 50MW

Pioneered by entrepreneurs with little or no experience in RE

Project development is learning by doing

Expertise sporadic

hydro/geothermal - strong

Wind/biomass - weak

Local technology missing

RE Policy

RA 9513 - Renewable Energy Act of 2008

On-Grid Renewable Energy Development

Renewable Portfolio Standards

Feed-In Tariff System

Renewable Energy Market

Green Energy Option

Net-metering for Renewable Energy

Off-Grid Renewable Energy Development

Minimum RE generation capacities

Market Barriers

High upfront cost and technologies

Non-viable markets

Inaccessible Financial Packages

Social Acceptability

High Upfront Cost and Technologies

Income Tax Holiday and Low Income Tax Rate

Duty-free Importation of Equipment and VAT-zero Rating

Reduced Government Share

Viable RE Markets

Harmonization of Market Rules, in accordance with other Laws

Oil Deregulation Law

Electric Power Industry Reform Act

Accessible Financial Packages

Preferential Financial Packages from

Government Financial Institutions

Available International Financing Programs

Education of the Financial Sector

Social Acceptability

Information, Education and Communication Campaigns

Capacity Building of Stakeholders, particularly the Local Government Units

Social Mobilization to Strengthen Advocacy Programs

Socio-Economic Development Programs for Host Communities

Market Barriers - Realities

High upfront cost and technologies - Remain High USD2-3 Mill / MW

Non-viable markets

Inaccessible Financial Packages - Weak private commercial banking system / project financing

Social Acceptability

Projects Issued RE Service Contracts by DOE

RE Project TypeRE Project

TypeMW

Max Allowable (MW)

Hydropower 107 840 250

Wind 44 921 200

Geothermal 17 2,388 -

Biomass (own-use) 16 145 100

Biomass 11 139 150

Ocean Thermal Energy Conversion

2 To be determined

-

Ocean 1 5

Solar 50

TOTAL 199 4,439.2

Proposed Feed-In Tariff

Wind

Solar

Ocean

Run-of-river Hydro

Biomass

Project Concept

Project Implementation

GAP

‣Financing for pre-project development

‣Project financing

‣Local technology not available

‣Lack of experience in RE projects

CDM - Global Context

Decreasing Demand for CERs

Uncertainty in Post-2012 agreement

Transition from Seller to Buyer’s market

Increasing trend of market fragmentation

CER as a credit enhancement tool

Incremental annual cash flow for the project

Incremental IRR for the project

PROJECT Incremental IRR

Wind 0.8 - 1.3 %

Biomass 1-2 %

Hydro 1 - 3 %

Waste to Energy 3 - 5 %

Type of ProjectNumber of Projects

RegisteredCERs issued

Biomass 5 0

Hyro 5 0

Geothermal 1 0

Wind 1 173.589

CDM and RE in the Philippines