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Keynote Speech: Convergence for a 100% Renewable Energy in the Philippines: A Symposium on Challenges Faced by Stakeholders in Advancing Renewable Energy in the Country

July 18, 2018

Keynote Speech
by Senator Loren Legarda at the
Convergence for a 100% Renewable Energy in the Philippines:
A Symposium on Challenges Faced by Stakeholders in Advancing Renewable Energy in the Country
19 July 2018, SEDA Hotel, Vertis North, Diliman, Quezon City

 

 

(Introductory Greetings)

 

Good morning.

 

I wish to congratulate the organizers of this symposium for continuing the dialogue on renewable energy (RE) development in the country.   As one of the authors of the RE Law, I am honored to participate in this symposium.

 

While many initially thought that the adoption of the RE Law in December 2008 represented a firm and decisive policy position on the country’s shift to cleaner and indigenous forms of energy, stakeholders, to date, continue to grapple with mixed signals from those charged with implementing the RE Law.

 

Amidst the backdrop of escalating crude oil prices, which peaked at USD 147 per barrel in 2007, the Department of Energy (DOE), more than ten years ago, ramped up its campaign for the adoption of an RE law.  It believed then, and hopefully, up to now, that promoting the exploration, development, utilization and commercialization of indigenous energy resources is a necessary and essential step toward achieving the country’s energy independence agenda.

 

Enacted in December 2008, the RE Law was designed to help the country achieve energy independence.  It took eighteen years for the RE Law to be passed, but not without protracted debates on policy mechanisms incorporated in the measure.  It was hard then, but even more so now, to convince naysayers on the importance of renewable energy in the country’s development agenda.

 

To date, those charged with implementing these policy mechanisms seem to want to continue the debate on matters decided upon by legislators ten years ago.

 

The DOE, at that time, did a hard sell on the importance of the RE law to the country’s development goals.  They said the RE measure was aligned with the government’s two-fold energy sector agenda, which included energy independence and power market reforms.

 

Today, the government continues to espouse these goals, although clothed differently in words.  Energy security, low carbon future, energy access are the buzz words now…but they mean the same as the objectives we have laid down in the RE law.

 

The DOE presented very strong justifications at that time. Its RE Policy Framework, dubbed as “100 in 10” — which stands for doubling the RE capacity in ten years, from the 4,450 megawatts (MW) in 2002 to 9,418 MW by 2013, served as a critical pillar for the country’s drive to clean energy and energy independence.

 

The energy agenda then also sought for a reduction in coal imports by 20% in ten years.  The adoption of the RE Law, it said, will help achieve these outcomes.

 

As any reasonable person would expect, the passage of the RE Law was supposed to be the pathway to higher levels of energy self-sufficiency; but performance indicators, to date, betray the mixed policy positions of the government on this matter.

 

The government’s energy independence agenda then aimed to increase the energy self-sufficiency level from 56.6% in 2005 to 60% in 2010.  Today our energy self-sufficiency level is down to 55%.  This scenario could be quite disturbing if you know that in 2009, our energy self-sufficiency level was already at 59.5%.[1]

 

As a policy maker, I find great difficulty in making sense out of this outcome.

 

It is not because we have a weak law.  On the other hand, it is a good law.  The Philippines was one of the first countries in the region to adopt an RE Law.

 

To quote the late Senator Edgardo Angara, the principal sponsor of the RE Act, “It was a remarkable piece of legislation when it was passed … years ago; however, it remains remarkable only on paper.”

 

Many will agree, there is much to be desired in the outcomes, ten years since the adoption of the RE Act.  Let us look at the numbers.

 

  • For a period of eleven years, from 2005 up to 2016, the installed capacity of RE increased only by an average of 157 MW per year — from 5,226 MW in 2005 to 6,958MW or an addition of only 1,732 MW in 11 years! This meant a paltry 3% increase every year for eleven years.[2]  These figures present one glaring fact – We miserably failed in meeting our goal of doubling the installed capacity of RE.

 

  • Ironically, while the RE Law aimed to reduce the volume of coal importations, we ended up importing more. The volume of coal importation increased by an annual average of 12.8% from 1989 to 2015.  Between 2015 and 2016, the volume of coal imports was even higher by 16% from 17.3 metric tons to 20 metric tons.[3]

 

  • Installed capacities of coal power plants jumped by 87% — from 3,967 MW in 2005 to 7,419 MW in 2016. Another 10,423 MW of coal-fired power plants is in the current pipeline.[4]  This coal dependent strategy creates stranded assets, and consequently, stranded costs that our consumers will ultimately have to bear.

 

  • RE’s share in the power mix as of 2016, on the other hand, declined to 32% from 33.5% in 2005, while that of coal surged from 25% in 2005 to 35% in 2016.[5]

 

  • The RE law was intended to spur investments in the country. Prior to the adoption of the RE Law, investments in RE in the Philippines amounted to 2.3 billion US dollars.   Two years after the RE law was adopted, investments were down to 1.6 billion US dollars and in 2016, investment levels were just close to the pre-RE Law level at 2.6 billion US dollars.  In real terms, the 2016 levels meant less investment.

 

These numbers lead us only to one conclusion – the country continues to heavily depend on coal-fired power and imported coal.

 

The RE advocates, led by the DOE and the RE Coalition, waited for eighteen years for the RE Law to be adopted into law.  Ten years since its adoption, we still continue to await executive action on a number of policy mechanisms including the Green Energy Option, the Renewable Energy Market, the Renewable Portfolio Standard, the RE Trust Fund, among others.

 

Is there reason to be hopeful that these will be implemented soon?

 

I invite you to examine the 2017-2040 Philippine Energy Plan where you will see that for the short term, the DOE intends to review RE policy mechanisms.  What is there to review if the mechanisms have not yet been implemented?

 

The most intriguing aspect of RE Law implementation in our country is, arguably, the absence of a clear and strong political commitment to develop and stimulate a healthy market for renewable energy development.

The International Renewable Energy Agency (IRENA), a 158-member state inter-governmental organization, of which the Philippines is a founding member, issued a very pointed observation when it said, “The Philippine government has given many private sector stakeholders mixed signals.  On the one hand, it called for an increase in investment in renewable energy, especially from the private sector. On the other, it expressed concern about the high capital costs of renewable energy and variability of its supply.”[6]

Claims against RE as a high cost alternative is misplaced.  I say that such arguments are the most convenient excuse against the status quo.  It has been shown, by our own experience, that RE can be a cheaper source of electricity generation than fossil fuels.  Competitive bids have demonstrated this fact.  Regrettably, even the lowest bids from some RE companies do not guarantee a place in our power mix.

IRENA reported that the cost of generating power from onshore wind has fallen by around 23% since 2010, while the cost of solar photovoltaic (PV) electricity has fallen by 73%.  Other estimates even indicate that solar-powered electricity costs have declined by 90%, while the cost of wind-powered generation has fallen 50% since 2009.[7]

Price comparisons by IRENA and recent results of Philippine auctions show that onshore wind schemes are now costing an average of $0.06 per kilowatt hour (kWh), solar at a range of $0.05 to $0.10 per kWh, while electricity generated by fossil fuels typically falls in the range of $0.05 to $0.17 per kWh.

IRENA concluded that all renewable energy technologies should be competitive on price with fossil fuels by 2020.   We do not even have to wait until then, because in the Philippines, the cost of RE has begun to undercut the cost of fossil fuels. Notwithstanding its increasing affordability, however, the use of RE continue to be stifled.

Many countries, on the other hand, have the foresight to embrace RE as the energy of choice. Headlines banner their milestones:

 

  • “Sweden will reach its 2030 renewable energy target this year.” It aims 100% renewable energy production by 2040.[8]

 

  • “This October, London’s historic and primary business district will be running on 100 % renewable energy.”[9]

 

  • “Germany produced enough renewable energy in the first half of 2018 to power every household in the country for a year.”[10]

 

  • Portugal generated enough renewable energy to power the whole country last [11]

 

  • Costa Rica, in 2016, ran entirely on renewable energy for more than 250 days.[12]

 

  • Tokyo plans to install solar roads ahead of the 2020 Olympics[13]

 

  • Renewable sources account for 80.8 per cent of electricity generation in New Zealand in 2015. It targets 90% by 2025.[14]

 

  • Leaders of 48 developing nations committed to work towards achieving 100% renewable energy supply in their respective nations at the climate conference in Marrakesh in November 2016.[15]

 

  • Developing countries invested more in RE from 2015 to 2017. China, Brazil, and India were among them.[16]

 

Inspiring stories, such as that of the Netherlands National Football Stadium abound.  This stadium creates its own energy and stores it in electric car batteries.  It is capable of storing 3 megawatts of power – “enough to charge 500,000 iPhones or supply 7,000 households in Amsterdam for one hour.”[17]

 

Even private sector companies are shifting to renewables.

 

The RE 100, consisting of 138 of the world’s largest companies, pledged to shift to 100-percent renewable energy in their supply chains.

 

Apple, for one, recently announced that its global facilities are now powered by 100 percent renewable energy.  This milestone includes retail stores, offices, data centers and co-located facilities in 43 countries.[18]

 

I, therefore, ask our policy implementors to observe closely enough, so they can begin to appreciate the rise of renewables in many countries around the world – not as symbolical gestures of support to climate action – but because it is what we need today, not just from a social and ecological standpoint, but also from an economic viewpoint.

 

The UN Sustainable Development Goals called for the integration of the principles of sustainable development into country policies and programmes.  The RE is a strategic alternative that will foster sustainable growth, energy independence and economic security for the country.

 

Following the Paris Agreement, several countries have adopted aggressive RE capacity installation targets over the next 10 to 15 years.  China and India are among them.  Even ASEAN increased its RE targets by 155% from 9.4% share in primary energy source in 2014 to 23% by 2025.

 

Those favoring the coal dependency strategy might argue that RE already account for a higher share in our power mix; but let me again invite their attention to the fact that while other countries strive to increase the share of RE in their power mix, our RE share has, in fact, been declining over the years.  There is therefore no reason to lay praise on our underperformance.

 

On the other hand, there is a growing policy momentum for upscaling low carbon energy options, including RE, in the developed and developing world.  We cannot be left behind.

 

The Philippine Energy Plan 2017-2040 sets an objective of “increasing the installed capacity of RE to at least 20,000 MW by 2040.”[19]  There were statements attributed to Secretary Al Cusi, however, that suggest an additional 20,000 MW shall be added to existing capacities until 2040.   Even this is not clear.

 

Whatever the case might be, it must be noted that the awarded RE projects as of December 2016 already has a potential capacity of 16,948 MW.  Adding the current capacity of 7,082 MW leaves practically very little, if no room for further RE expansion leading up to 2040.

 

A bigger question would be, how much of the projected 43,765 MW additional power capacity, between 2017 to 2040, is going to be sourced from coal and other fossil-based power?  What will be the power mix for the roughly 65,000 MW being projected by 2040? If RE will account for only 20,000 MW of this, then we are looking at a further decline in the share of RE in the power mix – from 33.5% before the RE Law was adopted, down to 30% by 2040.

 

This is not the scenario the RE Law had envisioned to usher in.

 

Researchers at Stanford University and with other US and European universities concluded in their study that “most of the world’s countries could run on 100% renewable energy by 2050.[20]  Based on the 2017-2040 Energy Plan of the DOE, clearly, the Philippines will not be among these countries.

 

For the country to enjoy the benefits of the rapid advancement and increasing affordability of renewable energy, the right decisions need to be made.

 

Regulatory overreach should not be allowed to stifle innovation in the power sector.

 

Having laid down the state of RE development in our country,  I hope that this symposium will help surface issues that has brought us to the situation we are in now.

 

We cannot claim energy independence for as long as we rely on imported fuel.

 

Unless we are willing to embrace the reality that RE is a global phenomenon that is beginning to replace coal and fossil fuels as a cheaper fuel source, our energy policies will continue to waver, reflecting the lack of political commitment that will consequently drive investors away.  All this will bear upon our power consumers.

 

There are key issues we need to examine.  This symposium can provide a platform for discussions on these, including possible reforms in the following areas:

  • Automatic fuel pass-through provision in existing Power Purchase Agreements;
  • Stranded asset risks presented by overbuild of coal-fired power;
  • Regulatory risks;
  • Grid infrastructure challenges;
  • Enforcement issues on the competitive selection process;
  • Factors hindering the development of an enabling environment for mini- and micro-grids;
  • Policy requirements to promote energy efficiency as a twin measure to RE development and utilization; among others.

 

Finally, fair competition is a goal we seek to achieve in the power sector.  We need to set our priorities, not just based on a limited view that if we build more power plants, regardless of its source, we can achieve development.  If we are serious about meeting our goal of providing access to energy for all, we need to look at the future.  This is what other countries are doing, thus, it is a lot easier for them to embrace the reality that RE is the energy for the future and that its development should begin today.

 

Effective energy planning cannot be limited to the “narrow confines of a single grid, a single country, a single city or a single sector.”[21]  There is a need to broaden the country’s energy options in ways that will allow us to integrate RE into the power system.

 

I invite our policy implementors to consider these:

 

  • Instituted policy frameworks, provided by law, should be integrated into our energy plans. Energy planning should not be done in isolation of policy design and formulation as well as sustainable development planning;

 

  • If we want to be technology neutral in our power development approach, we need to cast out our misplaced notions on RE; otherwise, our limited understanding will cloud our ability to meet our goal of achieving energy independence;

 

  • Wake up to the reality that coal and other fossil fuel investments could become stranded assets, the cost of which, our consumers will ultimately have to bear;

 

  • Eliminate barriers that hinder sustainable development, including policy and energy planning uncertainty;

 

  • There is no single solution to our power sector challenges. Give consideration to stand alone solutions, including mini- and micro-grids, particularly that we have severe grid infrastructure limitations;

 

  • Define clear targets for distributed RE alongside our broader electrification targets. It is not enough that we set capacity targets until 2040 based on average annual growth rate.  We need to define how best to meet that target by adopting complementary measures.  We cannot just focus on one measure whose time has clearly come to pass.

 

With these inputs, I wish all of you a very productive symposium.  I look forward to receiving a copy of the report that bears the inputs of everyone.

 

Thank you.

 

[1] Department of Energy, https://www.doe.gov.ph/energy-mix.

[2] Department of Energy, Power Statistics 2003 to 2016.

[3] Department of Finance, Study on the Taxation of Coal, 2017.

[4] Institute for Energy Economics and Financial Analysis and Institute for Climate and Sustainable Cities, Carving out Coal in the Philippines: Stranded Coal Plant Assets and the Energy Transition, October 2017.

[5] Ibid

[6] IRENA, Renewable Readiness Assesment: Philippines, 2017.

[7] Institute for Energy Economics and Financial Analysis and Institute for Climate and Sustainable Cities, Carving out Coal in the Philippines: Stranded Coal Plant Assets and the Energy Transition, October 2017.

[8] World Economic Forum (WEF). https://www.weforum.org/agenda/2018/07/sweden-to-reach-its-2030-renewable-energy-target-this-year

[9] WEF. https://www.weforum.org/agenda/2018/06/londons-historic-square-mile-district-will-run-on-100-renewable-energy

[10] Independent, https://www.independent.co.uk/environment/renewable-energy-germany-six-months-year-solar-power-wind-farms-a8427356.html

[11] Quartz, https://qz.com/1245048/portugal-generated-enough-renewable-energy-to-power-the-whole-country-in-march/

[12] WEF, Costa Rica ran entirely on renewable energy for more than 250 days last year, https://www.weforum.org/agenda/2017/04/costa-rica-ran-entirely-on-renewable-energy-for-more-than-250-days-last-year/

[13] WEF. https://www.weforum.org/agenda/2018/06/tokyo-announces-plan-to-install-solar-roads-in-time-for-2020-olympics

[14] Ministry of Business, Innovation and Employment, New Zealand, New Zealand Energy Efficiency
And Conservation Strategy 2017 – 2022.

[15] REN21, http://www.ren21.net/gsr-2017/pages/highlights/highlights/

[16] Frankfurt School-UNEP Centre/BNEF. 2018.
Global Trends in Renewable Energy Investment 2018, http://www.fs-unep-centre.org (Frankfurt am Main)

[17] WEF.https://www.weforum.org/agenda/2018/07/netherlands-football-johan-cruijff-stadium-electric-car-batteries

[18] Apple Inc., Apple now globally powered by 100 percent renewable energy, APRIL 9, 2018

[19] Department of Energy, Philippine Energy Plan 2017-2040 and Executive Order No. 30, Powerpoint presentation, 19 December 2017.

[20] Jacobson et al., Joule 1, 108–121 September 6, 2017, 2017 Elsevier Inc. http://dx.doi.org/10.1016/j.joule.2017.07.005

[21] REN 21, http://www.ren21.net/gsr-2017/pages/highlights/highlights/