Republic Act 9513 or the Renewable Energy (RE) Act of 2008 was signed by then President Gloria Macapagal-Arroyo to promote the exploration and development of cleaner energy sources in the country.
The legislation also pushed for the adoption of indigenous energy sources that will reduce the country’s dependence on imported fossil fuels to minimize exposure to price fluctuations in the world market.
More than a decade after the enactment of the RE Act, data from the Department of Energy (DOE) show total installed capacity of all power plants in the country in 2009 was at 15,610 megawatts (MW) and jumped by 68 percent to 26,286 MW in 2020.
Between those 12 years, the combined share of RE power plants composed of geothermal, hydro, biomass, solar and wind projects went up by 44 percent to 7,653 MW from 5,309 MW.
However, for the similar period, coal was also consistent as the biggest fuel source, with total installed generation of 4,277 MW in 2009, jumping by 155 percent to 10,944 MW in 2020.
Similarly, in 2009, RE’s total contribution to the power mix was equivalent to 34 percent but dropped to 29 percent in 2020, whereas coal’s share in the power mix in 2009 was at 27 percent and leaped to almost 42 percent in 2020.
In terms of generation, the total electricity produced in 2009 hit 61,934 gigawatt hours (GWh) which went up by 64 percent to 101,756 GWh in 2020.
Out of the total electricity generated in 2009, 16,476 GWh or almost 27 percent was from coal while the total generation from RE sources was greater at 20,191 GWh or almost 33 percent of the mix.
However, by 2020, power generation from coal went up to 58,176 GWh or 57 percent of the mix while generation from RE was only at 21,609 GWh or 21 percent of the mix.
In various online webinars last month, Jose Layug Jr., a former undersecretary of the DOE and now president of the Developers of Renewable Energy for AdvanceMent Inc., said the development in the country’s installed capacity and generation signals a problem.
“As a result of relying more on coal, oil and conventional fuel, we also reversed the trend in sufficiency. Once upon a time, we were 65 percent energy self-sufficient (in 2009) because we were relying more on our own energy resources but we are now down to 46 percent (by 2019),” Layug said.
Layug said it will be a big problem especially when major sources of fuel like Indonesia for coal and the Middle East for petroleum products suddenly prohibit the Philippines from buying them or when logistical issues arise.
Since the RE Act alone was not capable of enough to push RE investments, several support policies were issued by the DOE and the Congress along the way.
Among the first was the feed-in-tariff (FIT) that offered priority dispatch in the spot market as well as fixed rates for 20 years to qualified solar, wind, biomass and run-of-river hydro projects.
The policy kickstarted the RE growth in the Philippines but allocations were capped to also avoid burdening consumers with higher additional rates since the incentive for FIT is shouldered by all power users through the FIT-Allowance collected in individual power bills.
More recently, the DOE also introduced the renewable portfolio standard which forces all power distribution utilities to source a certain percentage of their supply from renewable power plants, as well as the green energy option program that gives consumers the power to choose RE as their source of energy and demand them from their power suppliers.
Last year, the DOE also issued a moratorium on endorsements of greenfield coal power plants meant to encourage banks and multilateral groups to veer away from investing in the development of coal power projects in the country.
The DOE is likewise preparing for the implementation of a green energy auction program where a special incentive rate for an initial 2,000 MW worth of RE projects will be introduced and auctioned off based on power plants’ ability to run power either as peaking or mid-merit capacity. A ceiling rate will be implemented but players will have to compete and offer the lowest rate to secure the incentive.
Based on the government’s submitted Nationally Determined Contribution to the United Nations Framework Convention on Climate Change last April, the Philippines committed to reduce emissions by 75 percent by 2030 from the agriculture, waste, industry, transport and energy sectors.
However, only 2.71 percent of the 75 percent emission reduction target remains unconditional, while the remaining 72.29 percent is conditional.
In an online forum, the Department of Finance (DOF) said the government is also working on policies to attract more RE investments in the country while working on mechanisms to achieve the transition from coal-fired power plants.
The DOF also said to implement the energy transition, a total of $121 billion is needed from 2020 until 2040 or around 20 percent increase in terms of technology cost alone for the power sector.
Meanwhile, power and finance stakeholders said the introduction of government subsidies to enable financing of RE projects that intend to become merchants or those that sell their power to the wholesale electricity spot market (WESM) should be considered.
Jo Ann Eala, Bank of the Philippine Islands (BPI) vice president, said banks are not confident to provide financing to RE power projects due to the lack of assured income to pay their loans.
Eala said based on BPI’s experience, it was only able to approve financing for a solar power project that will sell its output to WESM because the proponent has other available sources of income.
Eala addedprivate banks, which are mostly listed companies and owned by the public, are very careful as they may also get into trouble if they lend funding without taking into account those who may not be able to pay.
“If there can be a mechanism whereby financial assistance can be given to these RE generators, then that would make it more feasible for them to have WESM and if when WESM (prices) drops and there can be a mechanism where government subsidy can kick in, that would work. We have to find the numbers but the concept alone is a possible solution,” Eala explained.
Eduardo Francisco, president of BDO Capital, said lack of a floor price in the WESM is also a factor why private banks cannot bet on financing merchant RE power plants.
As for Sara Jane Ahmed, finance advisor of the Vulnerable Group of 20 Ministers of France, government guarantees for merchant RE power plants could be an opportunity but mentioned that implementing it on a per project basis would be a “tedious task.”
“Maybe this is something we can look into as we’re looking into financing options because that way, it allows the market to function; bring in financing secured surety and does not support specific players. Anyone can have this opportunity,” Ahmed said.
“We want new participants in the market, we want to encourage new recognition that renewables has a role to play in our system and we just need to transition the financing along with the technology,” Ahmed added.
