ENERGY SECURITY

16th session of the UP Academic Congress

Feb. 16, 2010
Malcolm Theater, Malcolm Hall, U.P. Diliman

Renewable Energy
for Energy Security

Prof. Rowaldo del Mundo

College of Engineering
University of the Philippines
Diliman, Quezon City
 Energy Security as National Issue
What is Energy Security?
  International Energy Agency (IEA)
1.  Adequate
2.  Affordable
3.  Reliable
  European Commission
“Uninterrupted physical availability of energy products on
the market, at a price which is affordable for all
consumers (private and industrial)”

Considering the above definition, one can say that the Philippine energy
is NOT SECURED because we have been experiencing the cycle of
power capacity deficiencies and high prices (3rd highest in Asia)

Prof. Rowaldo del Mundo

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College of Engineering, University of the Philippines Diliman
 Energy Security as National Issue
The dismal growth of our economy which lead to high unemployment
and migration of many Filipinos as overseas workers can be attributed
in part to unstable supply and high price of energy.

  Electricity Demand of the Philippines

Average Annual Growth
PERIOD
Rate (%)
1999 – 2008 3.5%
2001 – 2008 3.4%
2004 - 2008 1.8%
Source: DOE
The declining growth rate of electricity demand in spite of high
population growth rate shows a declining economic activity
Prof. Rowaldo del Mundo
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College of Engineering, University of the Philippines Diliman
 Energy Security as National Issue

  Per Capita GDP and Energy Consumption in

Southeast Asia

Source: Maria Nimfa F. Mendoza, “The Socioeconomic Impact of Energy Security in Southeast Asia”,
School of Economics, University of the Philippines

Prof. Rowaldo del Mundo

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College of Engineering, University of the Philippines Diliman
 Energy Security as National Issue
  Phases of Philippine Power Industry
  1900 – 1935: Introduction of Electricity and Organization of
power industry (Regulated Monopoly Private Enterprise)
  1936 – 1971: Government Initiatives in the Industry
Development (Power Generation/Transmission and
Electrification)
  1972 – 1984: Nationalization of Power (Generation and
Transmission) Industry
  1986 – 2000: Private Sector Participation in Power
Generation (IPP Program)
  2001 – present: Restructuring of Power Industry to introduce
competition
Each Phase of the Industry has its problem or issue to solve.

Prof. Rowaldo del Mundo

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College of Engineering, University of the Philippines Diliman
 Energy Security Risks
  Energy Market Instabilities
  Caused by unforeseen changes in geopolitical or other external
factors (Political unrest and trade embargoes)
  Compounded by uneven distribution of reserves (35 oil producing
countries out of 220 countries and not all producing are
exporting)

  Technical Failures
  Power outages caused by plant or grid malfunctions

  Physical Security Threats

  Terrorists, sabotage, theft, or piracy and natural disasters

Adequacy, Reliability and Prices are disturbed because of uncertainties

Prof. Rowaldo del Mundo

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College of Engineering, University of the Philippines Diliman
 Potential of Renewable Energy
in Energy Security
  Renewable Energy sources are INDIGENOUS
resources and can reduce dependence on energy
imports

2008 Power
Generation Mix
(%)

  RE is appropriate for archipelagic character of

Philippines
  Can be dispersed (minimize impact of technical failures and physical
security threats)

Prof. Rowaldo del Mundo

7
College of Engineering, University of the Philippines Diliman
 Potential of Renewable Energy
in Energy Security
  Renewable Energy Resources abound in the Philippines
  Hydro Power Resources
•  Potential: 10,500 MW
•  Utilization: 3,2242 MW
  Geothermal Power Resources
•  Existing Capacity: 1,900 MW (2nd Largest producer in the world)
•  Potential Additional Capacity: 1,200 MW
  Wind Power Resources
•  Technical Potential: 7,404 MW (Grid-Connected)
•  Utilization: 33 MW
  Solar Power Resources
•  Potential: 5.1 kWh/m2/day (5 sunshine-hours)
•  Major solar cell manufacturing hub in SEA
  Biomass Power Resources
•  Sugar Cogeneration Potential : 540 MW
•  Rice Husk Potential: 360 MW Sources: DOE, NREL,
UPSL

Prof. Rowaldo del Mundo

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College of Engineering, University of the Philippines Diliman
 Potential of Renewable Energy
in Energy Security
  Policies that provide an environment for development
and deployment of Renewable Energy are in place
  MARKET DEVELOPMENT MECHANISMS
1.  Renewable Portfolio Standard (RPS)
•  Minimum percentage of generation to be sourced from eligible RE
resources
2.  Feed-In-Tariff (FIT)
•  Guaranteed fixed price for electricity produced from emerging RE
Resources
3.  Energy Market and Regulation
•  Submarket in WESM where RE certificates will be traded
•  Priority dispatch for Intermittent RE Power
•  Exemption from Deep-Connection Charging Policy
4.  Off-Grid Development
•  Minimum Annual Production from RE and Cash Incentives for ME
Prof. Rowaldo del Mundo
College of Engineering, University of the Philippines Diliman Sources: DOE, Phil. Congress 9
 Potential of Renewable Energy
in Energy Security
  Policies that provide an environment for development
and deployment of Renewable Energy are in place
  FISCAL INCENTIVES
1.  Duty-free importation of RE equipment (within 10 years)
2.  Special realty tax rates
3.  Special corporate tax rate (10%)
4.  Net Operation Loss Carry-over (7 consecutive years)
5.  Tax Exemption of Carbon Credits
6.  Tax Credits on Domestic Capital Equipment and Services

Prof. Rowaldo del Mundo

College of Engineering, University of the Philippines Diliman Sources: DOE, Phil. Congress 10
 Potential of Renewable Energy
in Energy Security
  Policies that provide an environment for development
and deployment of Renewable Energy are in place
  Other Incentives
1.  Commercialization
•  Tax and duty free importation
•  Tax credit on domestic components
•  Income tax holiday (7 years)
•  VAT zero-rated for all RE equipment transactions
•  Tax Rebate for purchase of RE Components
2.  Consumption
•  Zero percent VAT on sale of fuel generated from RE
•  Green Energy Option
•  Net-Metering

Prof. Rowaldo del Mundo

College of Engineering, University of the Philippines Diliman Sources: DOE, Phil. Congress 11
 Potential of Renewable Energy
in Energy Security
  Declining
Cost of
Renewable
Energy
Technologies

Prof. Rowaldo del Mundo

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College of Engineering, University of the Philippines Diliman
 Conclusion and Recommendations
  The Problem of Energy Security manifested in
unstable supply and high prices of energy are inter
-related
  Renewable Energy provides potential for ensuring
energy security of the Philippines
  Renewable Energy Resources are abundant
  Technology costs are declining
  Policy environment is in-place

  The Challenge: Translating Incentives to Energy

Security
How to translate the incentives for power developers and
suppliers to ensure energy infrastructures are developed on
time and the price of energy affordable to customers?

Prof. Rowaldo del Mundo

13
College of Engineering, University of the Philippines Diliman
 Conclusion and Recommendations
  Changes in industry structure and market is not a
guarantee that the problems will be solved
  Market Competition and Regulation must work to assure us of
adequate, reliable and affordable prices. The challenges due to
the following factors must be addressed:
•  Asymmetrical positions in Power Supply Contracting
•  Capacity building
•  International Tendering
•  EPIRA amendment to remove Cross-ownership
•  Small market for competition to work
•  Conversion of WESM from Gross Pool to Net Pool
•  Appropriateness and Timeliness of Regulatory
Interventions
•  Assure technically competence and independence of regulator

Prof. Rowaldo del Mundo

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College of Engineering, University of the Philippines Diliman
Prof. Rowaldo del Mundo
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College of Engineering, University of the Philippines Diliman