Renewables offer savings for Philippine small islands

[MANILA] Shifting to renewables in small islands and isolated areas can provide cheap, reliable energy to more than half of the Philippine population or around 50 million people, says a new report by the US-based Institute for Energy Economics and Financial Analysis (IEEFA).

“Access to reliable electricity is an important input to ensure healthcare and food supply through cold storage of medication and food produce or fish,” Sara Ahmed, author of the report, tells SciDev.Net.

“It’s time for the energy regulatory commission to abolish automatic pass-through provisions in power supply agreements that allow fossil generators to bid ultra-cheap in the first year then automatically pass on price and forex fluctuation risks to the consumer, which distorts the market”

Renato Redentor Constantino, Institute for Climate and Sustainable Cities

According to the report, published this month, if the government-owned National Power Corporation’s Small Power Utilities Group (NPC-SPUG) shifts away from subsidised diesel power — widely used in remote areas and isolated islands — the savings could reach US$275 million per year.

“It is important to note that the repeated argument of limited absorptive capacity versus renewable energy sources do not apply to hybrid power systems, where diesel and PV (photovoltaic) or wind power are designed to complement each other,” said the report. “Ongoing cost and efficiency improvements for renewables will mean that renewable energy cost deflation will enable the government to reach its goal of 100 per cent electrification by 2022,” it also said.

Bangui Windfarm in Ilocos Norte, Philippines. Image credit: John Ryan Cordova (CC BY-SA 2.0).

Ahmed says that “the expertise of the Department of Finance, whose secretary is the chair-designate of the Climate Change Commission, the ex-officio chairman of NPC, can help the NPC-SPUG provide not only clean, but also reliable, secure and affordable power for residents of small island grids”.

The secretary of the Philippine Department of Finance did not respond to SciDev.Net‘s request for a comment.

Instead, his assistant secretary referred us to the secretary of the Philippine Department of Energy, who could not be reached for a comment.

Renato Redentor Constantino, executive director of the Institute for Climate and Sustainable Cities, a climate and energy policy group based in the Philippines, suggests mandatory clauses in power contracts that are weighted in favour of renewables.

“It’s time for the energy regulatory commission to abolish automatic pass-through provisions in power supply agreements that allow fossil generators to bid ultra-cheap in the first year then automatically pass on price and forex fluctuation risks to the consumer, which distorts the market,” Constantino tells SciDev.Net.

As customers gain from reduced subsidies to small island grids, the electric cooperatives should receive a share of the proceeds so that they can upgrade their systems and train workers to embrace the new, climate-friendly economy, says Constantino. “Doing so saves a fortune in avoiding more importations of expensive diesel.”

The report provided several recommendations. One is to halt new diesel power investments immediately and accelerate hybridisation — where diesel generators work in tandem with renewable energy sources.

Another important recommendation is to redirect electrification subsidies towards investments in renewable energy rather than to diesel-generated power.

“These recommendations are not only realistic, they need to be implemented with speed and a greater sense of inclusivity and urgency,” says Constantino.

This piece was produced by SciDev.Net’s Asia & Pacific desk.