Accompanying the Philippines on the road toward sustainable energy supply. GIZ s support to renewable energy development in the Philippines

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1 Accompanying the Philippines on the road toward sustainable energy supply GIZ s support to renewable energy development in the Philippines

2 Imprint This publication is by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ). As a federally owned enterprise, GIZ supports the German Government in achieving its objectives in the field of international cooperation for sustainable development. Published by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Registered offices Bonn and Eschborn, Germany T (Bonn) T (Eschborn) Responsible Dr. Bernd-Markus Liss Principal Advisor 9th Floor PDCP Bank Centre, Rufino corner Leviste Streets, Salcedo Village, 1227 Makati City, Philippines T F Source and Copyrights 2013 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Authors Hendrik Meller, Chief Advisor for Renewable Energy Ferdinand Larona, Senior Advisor for Renewable Energy Editors F. Mara Mendoza Marifel T. Moyano Photo credits/sources The photos in this publication are owned by GIZ unless otherwise indicated in the photo. Layout/Design F. Mara Mendoza Printed and distributed by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Place and date of publication Makati, Philippines April 2013

3 1 Renewable energy: Cornerstone for sustainable development E nergy demand is growing worldwide, especially in Asia (Table 1). Prices for fossil fuels will further increase, whereas supply will decline and competition over resources will become tougher. Greenhouse gas emissions have reached an all-time high in 2012, with the energy sector being a major contributor, and emissions are supposed to increase further with dramatic consequences for the planet s climate. Current figures of the International Energy Agency foresee a long-term average temperature increase of 3.6 C. Developing countries and emerging economies need a stable energy supply at affordable prices to develop their economies. At the same time, a low emissions development path is required to mitigate the impacts of climate change. 1

4 Table 1. IEA World Energy Outlook % Increase of global energy demand 12,400 Mtoe 16,700 Mtoe 34 Increase of oil (primary energy demand) 4,100 Mtoe 4,500 Mtoe 10 Increase of coal (primary energy demand) 3,400 Mtoe 4,200 Mtoe 23 Increase of gas (primary energy demand) 2,700 Mtoe 4,000 Mtoe 48 Increase of renewables (primary energy demand) 1,500 Mtoe 3,000 Mtoe 50 Increase of nuclear (primary energy demand) 700 Mtoe 1,000 Mtoe 48 Energy-related rise of CO 2 emissions 31.2 Gt (2011) 37.0 Gt 19 Growth of global electricity demand 22,400 TWh (2011) 32,000 TWh 43 Source: IEA World Energy Outlook 2012 Renewable energy therefore is the key element in a diversified and sustainable energy mix. It increases energy security and contributes to the mitigation of climate change by reducing CO 2 emissions. The deployment of renewable energies further decreases the dependence on fossil fuel imports, thus generating savings on the national balance of trade. The utilization of renewable energy resources is far more decentralized than the power generation of the traditional power sector. This benefits the development of local communities in rural areas as well as on small islands. The deployment of renewable energy comes along with the creation of new markets and industries, and a variety of new jobs. The Philippines, the pearl of the orient sea, has abundant renewable energy resources, including solar, biomass, wind, geothermal and hydro. The country aims to accelerate its development of clean energy by increasing the use of renewable energy to ensure a more sustainable and environment-friendly power supply, to attain a more balanced mix in electricity generation and to reduce the dependence on fossil fuels. The shift from fossil fuels to renewable forms of energy is the cornerstone of the transition to a sustainable energy system. Achieving this transition relies on addressing major constraints in renewable energy development like administrational barriers, insufficient fiscal and financial incentives, technical issues on grid integration and lack of public awareness. Germany can share its experience of more than 20 years of renewable energy policy implementation. It has spearheaded the widespread deployment of renewable energy and has become a role model for many countries in setting up a supportive legal framework for renewable energy development. As experience from Germany and many other countries show, stable support policies are the driving force behind increasing shares of renewable energy in the energy mix. The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) has been a partner to the Philippines in the development of renewable energy since more than 30 years. Starting in the early 1980s with the Philippine-German Solar Energy Project, GIZ is now supporting the Philippine government to enhance the framework conditions for renewable energies. 2

5 2 Renewable energies in the Philippines: Trends and policies With a 40% share in 2011, renewable energies make up a major chunk of the primary energy mix of the Philippines. In comparison with neighboring Asian countries, this share is relatively high due to the advanced development of the Philippine geothermal sector. Another big part of the share comes from the traditional use of biomass as fuel wood and charcoal in rural areas. The power generation of the Philippines (69.05 TWh as of 2011; Figure 1) is dominated by coal with 37% and natural gas with 30%. The share of renewable energy accounts for 28% of the total power generation. Although geothermal and hydro power plants are almost solely responsible for this share, the other renewable energy sources such as wind, solar and biomass are either underrepresented or non-existing. To date, the existing on-grid wind and solar capacities are the 33-MW Bangui Bay Wind Power Project in llocos Norte and the 1-MW CEPALCO Solar Power Plant in Cagayan de Oro. In 2011, the installed capacity of renewable energy amounts to 5,438 MW enough to supply more than 2.7 million households with sustainable energy. In total, 16,162 MW (2011) of installed capacity are providing power to the Philippines. The demand for power is steadily growing by an average of 4% annually. According to IEA, in 2030, electricity generation of the Philippines is projected to rise above 160 TWh. This means that the Philippines have to more than double the installed capacity by 2030.This trend is unlikely to change in the medium term as the annual economic growth rate is supposed to stay around 7% over the next years, and the population is estimated to grow from about 92 million in 2010 to about 171 million by 2050 Figure 1. Gross power generation 2011, Philippines Source: DOE

6 With the increasing need for energy in mind, the rapid deployment of renewable energies is of utmost importance. Only a sustainable energy supply will prevent the Philippines from a lock-in into a CO 2 -intensive energy supply based on coal and oil, and improve the energy security of the country. As a non-annex I Country Party under the Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC), the Philippines does not have any responsibility to reduce or limit its anthropogenic emissions of greenhouse gases. However, the country has already started its efforts to address the challenge of climate change and formulated mitigation strategies to limit its greenhouse gas emissions. Mandated by the Climate Change Act of 2009 and guided by the National Climate Change Action Plan (NCCAP), the government has announced sustainable energy as one of the seven strategic priorities identified in the NCCAP to combat climate change. With the Philippine Renewable Energy Act (Republic Act 9513) of 2008, a policy framework has been created to facilitate the implementation of renewable energy projects. The law encourages the establishment of 4

7 Feed-in Tariffs (FiTs) FiTs set a fixed price for each KWh of electricity from a defined source of renewable energy. FiTs have the great advantage to be a technologyspecific approach, which is able to promote all RE technologies according to their stage of technological development. This way, it is possible to promote technologies that are still rather costly but have a large long-term potential. Mature technologies such as wind energy can be promoted in a cost-efficient manner. To achieve this, tariff digression and frequent assessments of tariff levels are necessary. FiTs are generally financed via a small top-up on the electricity price for final consumers as a national burden-sharing mechanism. Because the success of FiTs largely depends on the high degree of investment security, they are usually guaranteed for a long period of time to minimize investment risks. Source: Wilfried van Sark and Larry Kazmerski (eds.) 2012: Comprehensive Renewable Energy, Elsevier various incentive and supportive schemes in order to stimulate investments in renewable energies. The key policy mechanisms under the Renewable Energy Act are the feed-in tariff, renewable portfolio standard (RPS) and net metering. The simultaneous introduction and implementation of these mechanisms, however, represent a major challenge for the various institutions involved. By today, more than four years after the enactment of the Renewable Energy Act, the policy mechanisms are still not fully implemented. Net Metering Net metering is a support mechanism for renewables that enables independent power producers such as households to cover their own electricity demand and sell excess electricity to a local utility or grid operator. Net meters record both electricity consumption and electricity provision. If a consumer has produced more electricity than consumed, the local utility or grid operator has to pay for the net production at the end of a defined period of time. Net metering has a number of advantages especially for small-scale applications like solar photovoltaic, where consumers can provide valuable electricity during peak demand periods at daytime. Source: Wilfried van Sark and Larry Kazmerski (eds.) 2012: Comprehensive Renewable Energy, Elsevier Renewable Portfolio Standards (RPS) Renewable Portfolio Standards, or quota obligations, are a mechanism to oblige electric power industry participants to source or produce a specific amount of their electricity sales or generation capacity from eligible renewables. As a policy instrument, RPS forces greater production of electricity from energy sources with social and environmental benefits. By requiring market participants to deliver a minimum amount of electricity from specific fuels and/or technologies, the RPS is a quantity-based policy. Source: Mark Jaccard 2004: Encyclopedia of Energy 5

8 3 GIZ engagement in renewable energy development in the Philippines To assist partners in addressing these challenges, GIZ provides targeted advisory services and capacity development to support the deployment of renewables in the Philippines. GIZ s technical assistance builds on Germany s know-how and experience of over 20 years of developing and implementing renewable energy policies and technology. Since 2009, GIZ has provided technical assistance to the implementation of the Renewable Energy Act of 2008, including targeted advisory support to the Department of Energy (DOE) and the National Renewable Energy Board (NREB) on the development of the feed-in tariffs. The two pillars of GIZ that support renewable energy development in the Philippines at present are the Support to Climate Change Commission in the Implementation of the National Framework Strategy on Climate Change and the National Climate Change Action Plan (SupportCCC) Project, commissioned within the framework of the International Climate Initiative by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU); and Project Development Program Southeast Asia (PEP SOA) in the context of the renewables - Made in Germany initiative, commissioned by the German Federal Ministry of Economics and Technology (BMWi). The SupportCCC Project (March 2012 August 2015) aims to assist the Climate Change Commission, Department of Energy and other key stakeholders in implementing the National Framework Strategy on Climate Change and the corresponding climate change action plans effectively and efficiently. Specifically, Component 3 of the SupportCCC Project supports the implementation and further development of the framework conditions for the generation and feed-in of renewable energies. Thus, the project is closely working with key stakeholders of the Philippine energy sector, like the Energy Regulatory Commission (ERC), the National Renewable Energy Board (NREB) and the National Grid Corporation of the Philippines (NGCP). The PEP SOA project (April 2011 December 2014) is implemented in the context of the renewables - Made in Germany initiative in four Southeast Asian countries: Indonesia, Philippines, Thailand and Vietnam. In the Philippines, the initiative is jointly organized by GIZ, the European Chamber of Commerce in the Philippines (ECCP) and the German- Philippine Chamber of Commerce and Industry, Inc. (GPCCI ). GIZ s main partners in the project are the renewable energy industries and their associations, the distribution utilities, the civil sector and the regulatory and administrative bodies, such as NREB, ERC and DOE. The goal of renewables - Made in Germany is to foster market development for renewable technology, notably solar and biomass/biogas, through know-how transfer, partnership building between German and Philippine companies and business associations, and support of enabling framework conditions. Both projects are closely working together in a comprehensive approach: the SupportCCC Project focuses on the policy level, whereas the renewables - Made in Germany initiative is directed at the private sector. Striking issues, like administrative barriers of renewable energy, 6

9 support of framework conditions, development of technical standards and renewable energy supply in off-grid areas, are tackled jointly by both projects. In addition, GIZ is implementing the Renewable Energy Support Program for ASEAN (ASEAN-RESP) in partnership with the ASEAN Center for Energy (ACE). ASEAN- RESP aims to improve preconditions for the use of renewable energy in the ASEAN region. The project also contributes to the realization of the ASEAN Plan of Action for Energy Cooperation (APAEC) and encourages ACE and the ASEAN member states in working toward a greener region. In the context of these projects, GIZ s main areas of support are: Policy advice Through advisory services, targeted workshops and support to consultations, GIZ is supporting the implementation of the Renewable Energy Act of Knowledge is provided to DOE and other key stakeholders of the Philippine energy sector on how to integrate predictable renewable energies such as solar and wind into on-grid and off-grid systems, and how to define the feed-in tariff rates, and the net metering rules and interconnection standards, thus creating the right framework conditions that promote the development of the renewable energy market in the Philippines. Capacity development and technical trainings GIZ supports DOE, the Climate Change Commission as well as other relevant institutions in strengthening their capacities to address climate change and promote renewable energy. Emphasis is given on the implementation of the NCCAP and the Renewable Energy Act. During the 1st German Solar Training Week in October 2012 in Manila, more than 200 participants attended technical trainings for solar rooftop installations and project development and finance workshops. With trainings like this, GIZ provides technical know-how that is crucial for engineers and in the management of solar firms and distribution utilities to be able to accommodate solar rooftop installations and comply with the net metering scheme. Awareness raising With activities such as the study tours to Germany in October 2012 or the Philippine- German Policy Dialogue on Renewable Energy in February 2013, GIZ is supporting the dialogue and information exchange between high-level representatives and decision makers of the Philippine government and the energy sector in Germany and the Philippines, thus addressing the challenges in the implementation of the Renewable Energy Act and stimulating the public debate on renewables. To further increase the awareness of the opportunities that renewable energies offer, Showcase Projects are developed highlighting German renewable energy technology. Business matchmaking The private sector plays a key role in the development of renewable energies. renewables Made in Germany is linking up German companies with Philippine companies for business partnerships and investment opportunities. Information about technologies and market potentials is provided during business trips to Germany for Philippine entrepreneurs and to the Philippines for German technology providers. Targeted workshops and visits to renewable energy trade fairs complement matchmaking activities of business partners. 7

10 4 Outlook Beyond the current technical assistance to the Philippine energy sector, GIZ is working in developing countries worldwide to support the transition to a sustainable energy supply. The main areas of assistance in the energy sector are: Basic energy supply GIZ promotes efficient cooking energy, develops the market for small-scale power systems (solar home systems, solar lanterns) and works to expand grid-based rural electrification schemes. This requires GIZ to advise governmental institutions on the design of appropriate framework conditions. Renewable energy GIZ assists our partner countries to build up and expand the use of renewables, specifically wind energy, water power, bioenergy (especially biogas and biomass) and solar energy. GIZ s activities in this field are technologically state of the art and include grid feed-in options. Energy efficiency GIZ counsels partners on energy efficiency in thermal power plants, buildings, a wide range of different industrial applications, households, municipalities and the transport sector. Energy and climate protection strategy GIZ provides sideline support for national processes and networks, and delivers advice on general energy policy. This includes mechanisms to support and finance renewable energy, energy efficiency and emissions trading. GIZ also supports regional, national and municipal energy plans. As a trusted partner of excellence, GIZ is committed to further accompany the Philippines on the road toward a sustainable energy supply. 8

11 GIZ Philippines: GIZ Sustainable Infrastructure: International Climate Initiative of the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU): renewables - Made in Germany Initiative of the Federal Ministry of Economics and Technology (BMWi):

12 Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Registered offices Bonn and Eschborn, Germany 9th Floor PDCP Bank Centre, V.A. Rufino corner L.P. Leviste Sts. Salcedo Village, Makati City, Philippines Tel Fax

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