Our energy choices

By Tony La Vina | Posted on July 03, 2012
Manila Standard



This is the first of a series of columns on the energy choices of the Philippines. I write on this topic as the Philippines confront a power crisis, most evident in Mindanao, and looming for Visayas and Luzon as well. Unfortunately our recent history does not give comfort to citizens that the government will make the right energy choices; indeed, it has frequently worsened things in the long run. But clearly the country must implement a strategy of rectification, a reform agenda in energy. And that agenda must begin by urgently and fully implementing Republic Act No. 9513, the Renewable Energy (RE) Act of 2008.


The heart of the RE Act is its Feed-in Tariff (FiT) mechanism of promoting RE-based electricity. FiT assures the RE power producer of attractive fixed purchase prices (per kilowatt-hour), for a fixed number of years. Critics hit FiT precisely because of their fear that because some RE sources, such as solar, appear to cost more than traditional electricity generation from fossil fuel or hydroelectric dam sources, they will drive the average price of electricity up, an effect which would be frozen in place by fixed rates. But as I have written before, quoting extensively from RE visionary Ramon C. Abaya, who died earlier this year, this criticism of FiT as applied to solar is not correct.


In any case, critics see FiT as an enforced subsidy taken out of consumer pockets, while pointing out that the Philippines already has the highest electricity rates in the Southeast Asian region. Concerns about the economic impact of higher electricity prices should be taken seriously but applying its criticism to FiT is over-generalized. It makes us miss out on the finer details of the Philippine energy picture. Our traditional reliance on coal and oil-based electricity, lacking any indigenous fuel reserves, leaves us at the mercy of the world fossil fuel market and competition from other energy-hungry economies—not to mention the environmental impacts, which costs are not perfectly addressed by market prices. The country’s higher electrical rates are themselves a consequence of energy policy over the past two decades, and properly are the subject of energy policy and industry reform.


FiT, on the other hand, addresses objectives as equally important as lowering electrical rates (though it runs in parallel with that policy objective). One obvious objective is environmental: increasing the Philippines’ electrical generating capacity without increasing greenhouse gas emissions or otherwise destroying the environment. RE technologies, such as solar, wind, micro-hydroelectric generators, and biomass/biofuel, don’t depend on extracting, storing, and burning fossil fuels, and can safely be established on locales with highly sensitive ecologies (e.g., critical island ecosystems detached from the main electrical grid).


A second objective is localization and rural electrification. Because they do tend to generate less electricity than their traditional counterparts, RE technologies are best suited to filling gaps and shortfalls in the electrical grid, a non-polluting complement to large-scale electrical generation, and to provide power at individual (residential, commercial, industrial) and community levels. To date, this function is met by provincial-level independent power producers (IPPs) running diesel generators. A third objective, meanwhile, is ensuring an indigenous supply of power that, while dependent on the elements, is otherwise not dependent on the world market for fossil fuels.


Not mentioned is another approach to FiT, adopted in the more affluent West: private non-utility power generation. Governments provide incentives for homeowners (as opposed to IPPs) to provide for their own electricity using RE technologies—and an additional incentive to sell any excess generated electricity to the grid under FiT rates. While the average Filipino household certainly could not afford this approach, commercial and industrial centers, which can afford this, could set up their own turbines or solar panels under the same FiT terms as IPPs, lowering their demand on the public power grid and consequently making more power available for other users.


These three objectives are essentially tactical, short and medium-term. RA 9513’s ultimate objective is energy resiliency, or Philippine electricity’s survival in a world dominated by increased energy resource competition and climate change. FiT should be seen as an indirectly taxed, government-directed investment into clean energy, deferred consumption in order to grow the economy in the long run. The primary weakness of most RE technologies—their higher relative costs of power generation and initial investment—can be offset by increased economies of scale of production through widespread adoption, at national and global levels.


An old saying goes: “the best time to plant a tree is twenty years ago; the second best time is now.” If we don’t establish the incentives for renewable energy now, we will be draining momentum on our country’s push for resilient energy in the future. Already potential RE investments have fled to countries like Thailand which have chosen to make a stand for clean power. Contrary to some views, FiT is not unfit for the country. So it’s time to flex some muscles and clean up Philippine energy.