by Dennis Posadas

The recently held GTZ symposium on renewable energy held last October 8 at the Fully Booked in Bonifacio High Street was an interesting example of how investors and the public are now interacting with our new Renewable Energy Act. The passage of the 2008 Renewable Energy Act of the Philippines has paved the way for an increase in investments in the renewable energy sector. One of the areas that have benefited is the wind energy sector. It is estimated that the Philippines theoretically has around 76,000 MW in wind energy capacity, based on studies conducted by the U.S. National Renewable Energy Laboratory (NREL) and the Philippines Department of Energy.

It was reported in the Inquirer.net that the Department of Energy last September awarded three companies four new wind energy service contracts—Energy Development Corp. (PSE: EDC) for its planned 86-MW wind farm in Burgos, Ilocos Norte; UPC Asia Corp. for its 50-MW wind project in Pagudpud, Ilocos Norte; and PetroEnergy Resources Corp., which bagged two contracts for a 30-MW project in Sual, Pangasinan and a 30-MW project in Nabas, Aklan. Also, Energy Logics Philippines Inc.’s pre-commercial contract for a 120-MW wind farm in Pasuquin, Ilocos Norte, was converted to a wind energy service contract.

Several joint ventures between local businessmen and foreign companies and investors have also been announced in the local dailies, among those that have been reported include the Alterenergy Partners joint venture with Eurus Energy Japan and Korea East West Power Co. to identify projects in the 30 to 40 MW range; and the French wind turbine manufacturer Vergnet Group, said to be looking for joint venture partners.

The rule of thumb given is that each megawatt of capacity costs around USD $2m to 2.5m dollars. At present, aside from small isolated micro-wind installations in remote communities, the largest one at present is the 33MW wind farm in Bangui Bay, Ilocos Norte run by the Northwind Power Corporation, which contributes only 0.21% of the total electricity generated in the country, that is when the wind is blowing.

The 7,100 islands of the Philippines make it difficult to make electricity available in many areas, particularly those that are isolated from the main electric grid. Most large islands with large populations, such as Luzon, Panay, Cebu, Mindanao, and others have their own generation, distribution and utility companies to service their areas.

However, smaller islands with sparse populations or mountainous areas are a particular challenge. In these cases, sometimes the only practical solution is to use renewable energy power sources (e.g. wind, solar, biomass) or diesel powered generators.

Because wind, like solar, is an intermittent energy source, there has to be a means of storage to compensate for times when it is not generating power. In isolated off-grid areas, for smaller wind systems, this normally means a battery. In countries like the U.S., in the Texas Panhandle for example, T. Boone Pickens’s backup of choice is a natural gas turbine. But for the Philippine setting, the typical approach much like in most countries is to simply connect these large wind systems to the electric grid, and to simply sell power to the grid when it is generating. Anyway, just like in the U.S., the Philippines operates a spot market for electricity. In the case of renewable energy, a special spot market for renewable energy has been developed by the Philippine government to guarantee that there will be buyers for producers of renewable energy electricity.

One concern of some investors is the limit on foreign ownership. It is defined in the Philippine constitution that in certain key industries/sectors, foreign ownership is to be a minority, with a slight majority going to a Philippine partner. For some investors, it is not an issue, but for some it is. As former Energy Secretary and now Alterenergy Partners CEO Vince Perez mentioned during the GTZ symposium, at the moment the only choice is to look for a trusted Philippine partner to work with.

Another concern is in the way the public may perceive the Feed-in-Tariff, which is a key subsidy mechanism to attract investors to invest in renewable energy in the Philippines. During the Ramos administration, the government suddenly had to build power plants to meet a large capacity shortfall, and to do this, they had to entice investors with a ‘take or pay’ scheme meaning that even if the power was not being used, electricity utilities and therefore consumers had to shoulder part, if not all, of the cost of the unused generated power. There was such a big public outcry, especially in this country where the ‘cheapest power possible’ mentality rules, that it will sometimes if not always be difficult to pass measures that subsidize for example, renewable energy. Just like the personal computer and the semiconductor industry, renewable energy requires a steady market in order for private sector technologists to be attracted to constantly improve it. Unfortunately, the appetite for renewable energy seems to be correlated with the price of oil. If oil is cheap, the appetite for renewable energy disappears and vice versa. The Feed-in-Tariff hopes to counteract this tendency.

Personally, most people would like to see renewable energy succeed in the Philippines. The severe flooding brought about by typhoon Ondoy has brought home more awareness of the need for low carbon energy sources. Supporters of renewable energy hope that electricity consumers will actually step up to the plate and pay a little extra for renewable energy through the feed-in-tariff, in order to increase the returns for the companies and investors that go into this sector, already saddled by high upfront capital expense costs for wind (currently $2.5m per MW) and solar (currently $2/watt for silicon based photovoltaics and $1/watt for less efficient thin film based photovoltaics) and the threat of cheap oil. Besides, electricity consumers in the Philippines already pay a foreign currency adjustment charge for imported oil used in power generation. There is no reason why they should not accept a feed-in-tariff adder, given that they will no longer need to pay the foreign currency charge for that portion of the electricity bill.

Otherwise if consumers do not agree to pay the piper, then coal, the current king of the hill in terms of price, will really become entrenched as the power source of choice.

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Dennis Posadas is the editor of Cleantech Asia Online, and the author of Jump Start: A Technopreneurship Fable (Singapore: Pearson Prentice Hall, 2009). He is is currently working on a new business fable on climate change and clean energy.

By Alexander Villafania
INQUIRER.NET

In the aftermath of perhaps the worst typhoon that struck Metro Manila in recent years, environmental groups are blaming climate change for the effects of “Ondoy” (international name “Ketsana”).

In different statements, the World Wildlife Fund (WWF) and Greenpeace warned that such a disaster could be repeated unless comprehensive measures are taken immediately.

Greenpeace, in their statement , reiterated their call for industrialized countries to put in money to fund climate change measures especially in disaster-prone countries, including the Philippines.

Greenpeace Climate and Energy Campaigner Amalie Obusan said in a statement that the disaster in the Philippines had to happen in between two international climate change meetings, the recently concluded G20 Summit and the upcoming United Nations Framework Convention on Climate Change (UNFCCC) Summit.

“While world leaders are pussyfooting on their commitments, countries like ours are left to experience the ravages of climate change,” Obusan said.

In a separate statement, WWF-Philippines Vice Chair Jose Lorenzo Tan is calling for the reduction of fossil fuel consumption, which is being blamed for contributing to climate change.

Tan said the country is not equipped to take the brunt of another similar disaster and so measures must be taken to help mitigate its effects.

“Planning must start from scenarios of the future, rather than from the present. Collectively, we must identify ‘next practices’, because today’s ‘best practice’ will no longer suffice. We must start small, learn fast and scale rapidly,” Tan said.

The Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) reported that Ondoy dropped the heaviest rainfall in Metro Manila in recent history, a record 34.1 centimeters (13 inches) of water in less than six hours.

The previous record was in 1967 with 33.4 centimeters of rainwater over the course of 24 hours.

By Dennis Posadas

While I appreciate the enthusiasm that groups like Greenpeace and WWF about enabling as much clean/renewable energy as we can put into the system, given that we have a new renewable energy law, there are also a few mindset changes we need to put into place. I am all for renewable energy; however, as a trained engineer, I also realize that there are some hurdles that need to be overcome.

First is, some renewable energy sources, like solar and wind, while abundant, are also intermittent. The sun doesn’t always shine, and the wind doesn’t always blow. On the other hand, cogeneration and biomass plants, which are clean sources, can be stable if enough heat or biomass material is forecast and planned. For solar and wind, if we want to use it for 24×7 use, we need to make sure that there is an energy storage mechanism of some type. The most common energy storage device is of course a battery.

For bigger solar and wind systems, running in the megawatt range, batteries would have to be connected together, so it probably won’t be practical. Concentrated Solar Plants (CSPs) that employ banks of mirrors in the desert use some type of liquid like molten salt. Another possibility is to use pumped storage, like in Lake Caliraya. When power is available, it is used to pump water up an elevated lake. During nighttime, the lake water can be released to drive a generating turbine. Other schemes involve compressed air (in the US), or as in the case of some wind systems, natural gas turbines. But for many systems, the storage technique they employ is to simply connect the renewable energy system to the grid.

Now as we increase the percentage of renewable energy systems that connect directly to the grid, we have to remember again that these are intermittent. You can’t exactly tell the sun to shine exactly at 6:00am, or the wind to start blowing at 9:00pm. So there has to be a way to prevent blowups of circuit breakers or fuses, a way to plan when each energy source will come on stream. There is a role for software and intelligent grid systems that work with meteorological information to determine that there is a high/low likelihood that the wind/sun will be available at a certain time. The grid itself, and components will have to be redesigned to take into account the higher occurrence of intermittent turn-on and turn-off of power sources, many of them being renewable. Appliances may need to have chips in them, telling them that the power at a given hour is mostly coming from renewable sources, or not.

Meralco’s plan, for example, to offer Internet over broadband lines, is indicative of this. The common perception is that they plan to mainly utilize this to offer broadband services to the public through their power lines. Actually, it is not as simple as that. The Internet over power lines can also be used to command and control equipment, such as chillers in malls, to turn on or to idle at a certain time. The grid needs to be intelligent, to handle the intermittent nature of clean/renewable energy systems.

There will be a lot of new capabilities, already being experienced in places like California and Europe, that we will soon have here. Our electric meters (“kontadors”) for example, will run backwards and forwards. So if we decide to install solar panels or wind turbines on our roofs, not only can we be consumers, we can also be mini power producers supplying to Meralco. The amount we sold, is then subtracted from the amount we consumed.

The more citizens and private industry, as well as government, invest in these mini and private renewable energy systems, the less need there will be for big, and often carbon emitting power plants. In other words, power generation will be decentralized to many small renewable power producers, as opposed to a few large ones. Now who will pay for that? Some cities in the US consider solar panels as part of the house (roof) and allow citizens to simply add a little extra to their real estate tax, and amortize the solar panels over 25 years. The payment can actually be taken from the savings generated by the panels, so in effect a no-cash out scheme is feasible.

Are we ready for that?

We all want reduced carbon emissions. But we don’t get there by simply joining token Earth Hour or Earth Day celebrations. We also need to do some work, and take the time to educate ourselves.
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Dennis Posadas is the editor of Cleantech Asia Online, and the author of Jump Start: A Technopreneurship Fable (Singapore: Pearson Prentice Hall, 2009)

By Dennis Posadas

It was apparent from the Asian Clean Energy Forum (ACEF) held at the Asian Development Bank (ADB) and the USAID sponsored Private Financing Investment Forum held in Manila during the same week last June 15-19, that energy efficiency is enjoying an increased attractiveness for investments, like its more popular cleantech cousin, renewable energy. More than 500 delegates from around the world, policy makers, government officials, investors, entrepreneurs, media, attended the event. ACEF was co-sponsored by ADB, USAID, AusAID, Japan ODA, and the Spanish, Swedish and Norwegian governments, as one prelude to the Copenhagen summit on climate change later this year.

One of the concepts explored in the ACEF was the concept of an equivalent power plant, or “efficiency power plant,” as some of the speakers called it. An efficiency power plant is a visualization of savings in power capacity from energy savings, a concept that is useful considering that most laypersons struggle to conceptualize energy efficiency, unlike the popular images of renewable wind turbines and solar farms etched in many minds.

One low hanging fruit to implement energy efficiency is more efficient lighting like compact fluorescent lights (CFLs) to replace incandescent bulbs. “Lighting by itself is responsible for 19% of total electricity consumption,” said Martin Willemsen, Director of Marketing at Philips Lighting. Willemsen said energy consumption can be reduced by a factor of five if new technologies, such as CFL and more advanced ones such as LED lighting, are implemented fully. “For example, a 60w incandescent bulb can be replaced by a 12w CFL bulb,” said Willemsen.

But large scale replacement of incandescents by CFL lighting brings about its own issues. In an interview with consultant Dilip Limaye, who has worked with various multilateral funded programs on CFL replacement in various countries, he stated that there are various hurdles to contend with in distributing CFL’s. These include: 1) the quality of the CFLs; 2) whether to give away these CFL’s or have people purchase them; 3) recycling issues; 4) testing and certification; and the destruction and proper disposal of incandescents.

Fortunately, bilateral organizations like USAID have stepped in to help manufacturers, lighting companies, lighting councils and supporting organizations to identify and promote quality CFLs for the Asian region. According to a report (Confidence in Quality) released in October 2007 by the USAID ECO-Asia Clean Development and Climate Program, as many as half of the CFL’s produced in Asia are substandard, producing less light or burning out more quickly than advertised. Many stakeholders who wish to see CFLs replace incandescent are concerned that this finding may threaten to derail that goal. A March 2009 USAID report (Phasing in Quality) stated that 10 to 12 million metric tons of CO2 emission reduction can be achieved if poor quality CFL’s will be replaced by good quality CFL’s.

“Energy saving lighting is one of the few ways where you can save energy and is at the same time cost beneficial,” says Willemsen of Philips Lighting. But in order to succeed, efforts in creating awareness, as well as the efforts of groups like the Asian Lighting Council, will have to continue in order for this strategy to succeed. Farther into the future, LED lighting will also be an option for widescale deployment. Asia plays a role at the moment, as most LED light manufacturing is done in the region.

In order to encourage more local banks to lend for implementing energy efficiency projects, there should be a concerted effort to explain the benefits of energy efficiency to them. William Beloe is with the Sustainability Energy Financing program of the International Finance Corporation (IFC) in Manila. IFC is the World Bank’s private sector finance arm. “We see ourselves as more of a catalyst,” Beloe said, citing IFC’s strategy of supporting climate change adaptation and mitigation efforts.

One of their initiatives at IFC is the Small Power Utility Group (SPUG). Many of these small utilities are typically off-grid, and are normally the domain of governments. IFC is trying to move these types of utilities, which are ideal for renewable energy, to the private sector. On energy efficiency, the main issue according to Beloe, is awareness. “It requires millions of decisions to make an impact,” he said. Recently, IFC has used the lack of demand for products because of the recession, to make its case. “We try, at IFC, to raise awareness that energy efficiency can contribute to the bottom line by cutting costs,” he said.

To do this, IFC is eager to work with local banks. “We are working to build their [local banks] loan capacity to support clean energy projects,” he said. IFC normally finances large projects; their smallest tranche size in these types of projects would be in the $5 million range, said Beloe. However, he points out that the banks themselves will determine the nature of their portfolio.

“All we do is to try to make the banks comfortable, maybe offer financial instruments,” he said. Some will be more comfortable putting money in energy efficiency, some in renewable energy, he said.

Energy efficiency is a relatively inexpensive and proven way to contribute to climate change mitigation, and at the same time contribute to the bottom line. We should expect it to share the limelight with its more visible cleantech cousin, renewable energy, particularly with ADB’s announcement during the closing plenary (and in media releases) that its target for energy efficiency loans is around $2bn/year.

But until a way can be found to help businessmen and investors visualize what energy efficiency is and its viability as an investment vehicle, it will always remain the unsung relative of its more popular cleantech cousin, renewable energy.
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Dennis Posadas is the editor of Cleantech Asia Online an opinion site for cleantech in Asia. He is also the author of Jump Start: A Technopreneurship Fable (Singapore: Pearson Prentice Hall, 2009)

by Dennis Posadas

Coal is cheap and plentiful. Unlike oil, majority of which is controlled by OPEC states, coal can be found in many areas of the world, including the Philippines. As such, it has formed a significant portion of electric power generated worldwide, despite recent inroads by nuclear and renewable energy.

Majority of those coal plants belch CO2 into the atmosphere, which is why NASA chief climate scientist Jim Hansen and many other experts say publicly that there should be a moratorium on the building of coal plants worldwide.

Last April, the US Environmental Protection Agency (EPA) declared that six greenhouse gases were a threat to human health and welfare. Chief among the six greenhouse gases was carbon dioxide (CO2). One of the largest emitters of carbon dioxide in the world is the electric power industry, particularly those that operate coal plants. The US alone emits around a billion-and-a-half tons of CO2 annually from electric power generation through coal.

Try telling that to fast growing China and India, or the US. Or even to developing economies around the world like the Philippines. This needs to be discussed widely, because frankly, while clean energy is a great topic for discussion, there are still technical and economic issues in getting from where we are now to the point where we can replace coal totally.

Jim Rogers, CEO of Duke Energy, one of the largest electric utilities in the US, said in an interview in an episode of 60 Minutes (a popular U.S. television show) earlier this year, that Hansen’s proposal to stop the building of new coal plants cannot be done. While Rogers was one of the first electric utility CEOs who used coal plants to acknowledge the problem of global warming from coal, he says that the industry will arrive at a solution, but not at the pace that Hansen is recommending. When asked if his company had already made the investments towards so called clean coal technology, he said that they are in the process of studying the alternatives.

In reality, clean coal technology is really a way to capture the CO2 and store it underground. The technical term for the technology is called Carbon Capture and Storage (CCS).

One way to implement CCS is to pass the CO2 emission through a group of compounds called amines. This mixture is then pumped about one kilometer deep underground, into rock formations which have a lot of cracks that can absorb the mixture. The intense pressure underground causes the CO2 to liquefy, where it is hoped that the CO2 will stay underground forever. The solid form of CO2 is dry ice, which most of us have seen.

But the long-term effectiveness of CCS is still unknown. If despite the expense to implement, it will still leak CO2 into the atmosphere, then the exercise will be a gargantuan waste of resources. There are a limited number of sites around the world that have built CCS facilities but a study on the long term effectiveness of CCS has yet to be conducted. A coal expert who I spoke to, but declined to be identified surmised that one possible scenario is a leak caused by an earthquake in the vicinity, although he said that it was a hypothesis.

Aside from this, the scale of CCS is mindboggling. Unlike the nuclear power industry which can take nuclear wastes and store it in distant centralized repositories like Yucca Mountain in the US, each coal plant will need to have access to a CCS facility nearby.

The US alone emits more than a billion- and-a-half tons of CO2 a year, not counting China and India, which gives an idea of the undertaking. In the end, it could all boil down to costs. In 2004, the Massachusetts Institute of Technology (MIT) released a study called “The Future of Coal” which discussed the outlook for CCS technology. It estimated that to make CCS competitive, carbon emissions will have to be charged at around $30/ton. Recently, the US House of Representatives, through the Democrat sponsored Waxman-Markey bill, looks like it has arrived at a compromise, but will this be enough to justify CCS in new coal plants? Even if the US signs a treaty in Copenhagen later this year, it will be very hard to get private industry to support CCS if the economics doesn’t make sense.

At this point theoretically CCS looks like a way to make coal a potentially non-environmentally threatening energy source. However, unless the technology and economics is brought up to speed and more research is done, it will remain simply a public relations tool brought up by the coal industry to fend off attacks against it for the moment.

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Dennis Posadas is the Editor of Cleantech Asia Online, a newly launched site devoted to opinions and insights about the Asia cleantech economy. He is also the author of Jump Start: A Technopreneurship Fable (Singapore: Pearson Prentice Hall, 2009)