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. _________________________________________________________________________________ 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.
Recently in Math Olympics Category
By Dennis Posadas THERE are interesting developments in Chinese cleantech, and I will discuss some headlines of interest that have been reported recently. While I will continue to write about Philippine cleantech efforts in renewables and energy efficiency, it is also important to take note of what is happening in the region, and maybe some implications for us. The first is a news report in the New York Times that First Solar, a company that makes thin film solar photovoltaics, bagged a contract to build the world’s largest solar installation in Mongolia. The rated capacity of the solar plant will be 2GW (or 2,000 MW if you prefer), and will be built using the non-silicon technology of First Solar. Thin films like Cadmium Telluride are typically deposited on surfaces like glass, and do not require silicon. The upside of thin films is that you can make it into windows and basically coat a building with it, at a cheaper price. The downside is it is only around 7% efficient, as compared to 11% efficiency of silicon-based solar photovoltaics, which means you need more cells and you need more space (e.g. land). Another is that Cadmium is poisonous, and so while there is no danger of leaching for the active life of the solar cell, the cells have to be disposed of properly once these are past their useful life of around 25 years. The implication for us is that this particular project, because the winner was a thin-film solar technology (which we do not make here as far as I know) did not result in additional business for the local Philippine operations of SunPower and Solaria, which make silicon-based photovoltaics. However, if the 2GW China project is an indication of future opportunities, maybe it will be good for the industry as a whole. The second, featured in both in MIT Technology Review and the New York Times, is what the Chinese are doing with clean coal. It appears that most of the plants being built in China these days are advanced technology clean coal plants, which do not burn the coal directly (which releases carbon dioxide) but instead, using an old pre World War II process, converts coal into synthetic gas (similar to natural gas). China has the world’s third largest coal reserves, after the US and Russia. US Energy Secretary and Nobel Laureate Steven Chu has promised to prioritize its adoption in the US as well. It is important to stress that while the carbon dioxide emissions have been cut by a large percentage, these new plants still emit carbon dioxide. The Chinese have even built a small experimental plant to remove the carbon dioxide from power emissions, and use it for softdrinks carbonation. What a creative way to do carbon capture and storage! Store it in our bodies when we drink it. Of course, we will eventually release it back to the atmosphere. But seriously, the Chinese are also looking at Carbon Capture and Storage (CCS), although I have not seen any major advances yet in China in this arena. The implication here for us is that if the Chinese can develop a better way, or an alternative to CCS that cuts carbon emissions of coal, then maybe coal can have a second life, particularly since we have a lot of it. But that is, in my opinion, still in the realm of research. I do not expect to see carbon capture and storage in the Philippines for a long time; it is still very, very expensive, unless someone comes up with a breakthrough. In wind, China has doubled its capacity in the past few years and will become the world’s largest market for wind equipment. Interestingly enough, India, through a company called Suzlon Energy (you may have seen their commercials on CNN) is now giving US and European wind players like GE and Vestas a run for their money. Locally, I think we should pursue the development of micro-wind and micro-hydro systems. In electric vehicles, Fortune recently did a profile on a company called BYD (Build Your Dreams) which Warren Buffett recently invested in. In solar photovoltaics, Suntech, a Wuxi-based company which was started by local government funds is now one of the largest solar cell manufacturers in the world. The key learning for us here is that Suntech was started by Chinese local government funds, not even national government funds. The figure mentioned in Fortune was $4m, which is doable even here. Maybe that is a learning we can use, but I am not sure if local laws will permit that. Finally, the UK Guardian recently reported that US President Barack Obama may be in China this November to sign a major US-China cleantech alliance accord, prior to the December Copenhagen climate summit. While it is hard to convince the US Senate, which has to contend with a strong oil, gas and coal industry lobby, to go green, it appears that the Chinese see green as a way, not just to improve their worldwide image in the climate arena, but to actually make some serious green (as in greenbacks) out of it. The question there is where does that leave us? __________________________________________________________________________ Dennis Posadas is the editor of Cleantech Asia Online, and the author of Jump Start: A Technopreneurship Fable (Singapore: Pearson Prentice Hall, 2009)