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WITH the recent oil price shock, where we saw the price of oil going up to around $140 a barrel, the question is whether that is enough political impetus for us to go into renewable energy in a big way. By a big way, we mean that we make the investments now in “renewables.” The problem is that renewable energy, technology-wise, is still being perfected, so that means it is not yet cheap. But if nobody invests, it will never become cheap because industry holds back on R&D, because there is no demand. So it becomes a chicken and egg situation. Given that the so-called carbon credits from developed countries can pay for up to 10 percent of the cost of the project upfront, it is still not attractive for some. Enter the Philippine Renewable Energy bill. When passed, it will actually give a lot of incentives to investors to go into renewable energy (RE). Aside from the fact that RE is a good way to contribute to the climate change effort, if the RE bill is passed, it may actually make good financial sense to go into RE. Because right now, the climate change advocates root for the use of renewables but when you talk to the financial folks, they'll tell you now is not yet the time. But what is the right time? After the oil crunch of the 70s, we should have gone big time with renewables. But naysayers said at that time, "Now is not the time." So now the world is slowly realizing that, now is the time. Because if not now, when? When the oil runs out? That will be too late. If you look at the new version of the RE bill, aside from the typical tax breaks and tax credits, particularly for those who go into the manufacture and installation of RE systems, there will also be new incentives. This includes the lowering of royalties, and even the elimination of charges related to the use of the grid distribution system (also known as wheeling charges). One of those being contemplated as a new feature of the RE bill is the concept of a Feed-In-Tariff (F-I-T). Feed-In-Tariff was developed in Europe, and was adopted in California, which caused massive amounts of investments in RE. F-I-T works by requiring the utilities by law to source part (or a percentage) of their power requirements from RE sources. Now if that is implemented, that will not be enough to offset the current higher cost of RE compared with coal, for example. So what F-I-T does is require the utility to pay the RE source at a slightly higher price than what the fossil fuel based power sources sell. This will then improve the net present value financial calculations for RE investors. You need to give all these incentives, because frankly, renewables are not yet attractive financially as compared to, say, coal or other fossil fuel sources. The utility is then (typically) allowed to pass on the added cost to consumers. Since there are many consumers, it turns out that the public is helping subsidize RE investments. Now people can argue that this shouldn't be passed on to the public. But that was the only way they were able to justify RE investments in Europe and the US. Without it, nobody made the investments. So one can argue that we either move into RE or not. Think of it as investing for our children's future. After all, when massive investments pour into RE, eventually the prices will drop and future RE plants will be cheaper to build and install. Arguing that government should foot the bill might work for a certain amount but eventually we should ask where will we get the money? Another way to look at this issue is now we are paying a foreign currency adjustment fee for oil. If we don't move into RE now, we will keep paying that foreign currency adjustment. So why not move into a spread out public subsidy for RE, which eventually will mean cheaper power for everyone. We can take part of that oil price adjustment factored into our electricity bills and turn it into a subsidy for RE investments. What do you think? Should the Philippines still live with the status quo or go into renewable energy in a big way? (This article was written by the office of the Deputy Executive Director of the Congressional Commission on Science, Technology and Engineering).