New growth areas for renewable energy

By: Riza T. Olchondra 12:20 AM June 30th, 2016
http://business.inquirer.net/211490/new-growth-areas-for-renewable-energy

Under the National Renewable Energy Program, the Philippines is supposed to grow its renewable energy (RE) capacity by 22,000 MW to meet a target energy mix where RE will account for 35 percent of the total by 2030. Including geothermal and hydroelectric, RE now accounts for 26 percent of the mix.

Estimates show that more than one million households in Mindanao remain without electricity. Those with access to power supply do not always enjoy stable electricity services. Brownouts, particularly in the summer months, are prevalent.

Mindanao’s power woes

A regional trend has been developing in the power sector, where Mindanao is emerging as the new growth area for investments.

It is a power sellers’ market in Mindanao, which has been the case since 2010. The power situation worsened in 2013 when some key cities in Mindanao suffered three to six hours of rotating outages as old, state-run hydroelectric power plants were running below capacity due to inefficiency and lack of rainfall to replenish water reserves.

This situation caught the attention of investors and that started the inflow of power investments to the area despite the peace and order situation in some parts of Mindanao, according to Mindanao Development Authority (MinDA) director Romeo M. Montenegro.

The region needs to intensify its push for RE to reverse the 70 (fossil fuel)-30 (RE) by 2018 when new coal-fired plants start operating, Montenegro said during the recent Asia Clean Energy Forum at the Asian Development Bank headquarters. He said efforts would be strengthened to have green energy projects rolled out to meet the 60 (RE)-40 mix by 2030.

Speaking of Mindanao investors, top of mind is Mindanao-based Alsons Consolidated Resources Inc. (ACR) which, company chair and president Tomas I. Alcantara said, was in talks with long-time strategic partner Toyota Tsusho Corp. and other firms for a lineup of RE projects.

ACR is set to undertake the 15- to 16- megawatt (MW) Siguil hydroelectric power project in Maasim River in Sarangani. It would entail an investment of $40 million to $45 million.

The company is also seeking permits from the Department of Energy for a total of 70MW in additional hydropower projects. These may cost $140 million, or between $2 million and $4 million for every 1 MW capacity of a hydropower project.

ACR may also invest in about 150 MW of solar power projects “on an opportunistic basis,” said VP for business development Joseph Nocos.

The company is pursuing the projects under newly formed Alsons Renewable Energy Corp. Alcantara said ACR was keen on solar as Mindanao, its home region, has an abundance of sunlight.

“We’re looking ahead to what Mindanao grid will need. There are enough baseload power plants being built, so we think there will be adequate baseload in the next 10-15 years. We see opportunities in the RE space,” Nocos said.

Companies in Luzon and Visayas are also considering Mindanao for expansion.

Metro Pacific Investments Corp. chair Manuel V. Pangilinan recently said the group was keen on expanding its presence in the Visayas and even in the power sector in Mindanao through Global Business Power Corp., a power generation player in Visayas and some parts of Luzon.

Emerging RE provider Solar Philippines Power Project Holdings Inc. is also keen on Mindanao. Company CEO Leandro L. Leviste said Solar PH would put up an 18-MW facility in Cagayan de Oro, under a 228-MW rollout, this year or next.

The Mindanao Power Monitoring Committee or MPMC said the Mindanao grid needed at least 500 MW of new power capacity by 2016, another 500 MW by 2020, and 1,600 MW by 2030.

A total of 580 MW of power capacity is expected to go on stream this year, another 720 MW in 2016 and 550.6 MW in 2017. Most of these plants, however, still use coal. This means there is still a lot of room for RE, Montenegro said.

Committed projects (ready for construction or under construction) for 2016 include the 40-MW Green Power biomass project, the 25-MW Lake Mainit hydroelectric power, the 135-MW FDC coal-fired unit 1, 150-MW SMC Davao coal power unit 1, 100-MW Sarangani coal-fired unit 2, and FDC coal-fired unit 3.

As for the Autonomous Region in Muslim Mindanao, San Miguel Corp. recently signed a memorandum of understanding with the ARMM local government to develop a range of infrastructure from energy to ports and bulk water facilities. Under the MOU, SMC will build a power plant to help provide long-term solutions to Mindanao’s power crisis.

SMC president and COO Ramon S. Ang said ARMM was one of the most under-penetrated markets in the Philippines and was now “ripe” for investments. SMC has committed to build over the next two years a power plant that will serve the entire ARMM region.

The ARMM region has an estimated 573,446 households. An average household uses 200 kwh of power monthly, which means it would take a 115-MW power plant to serve this area alone.

Experts said that, at the rate projects were being approved, Mindanao would have more than enough power supply by late 2016. However, they said it was hard to tell how pent up the demand was in the area. If there is much pent up demand, consumption could surge and outpace supply soon after it becomes available.

MinDA, the lead government agency in Mindanao, set up in 2014 a one-stop facilitation and monitoring center for RE projects. It is an online portal that allows a company to monitor the process and approval of its application. The center is supported by the United States Agency for International Development’s Climate Change and Clean Energy Project.

Based on a 2012 MinDA study, the processing of RE applications, particularly hydroelectric, usually took about five years while construction took another two years. The center seeks to substantially cut this down. It has been tracking 284 RE proposals in Mindanao, with capacity of 3,773 MW to be made available by 2030.



Solar cafes

In terms of technology, solar power is the hottest thing these days with project applications expanding from ground-mounted solar farms to rooftop applications in malls, factories, stand-alone restaurants, schools, hospitals, office buildings, waiting sheds, parking spaces, and charging stations for e-vehicles. These are considered “distributed” power (generated at the site where it will be used).

Conglomerates SM Investments Corp., JG Summit, the Aboitiz Group, Ayala Group, EEI Corp. and Manila Electric Co. have started to venture into solar power projects. But most of their projects are in large solar farms (ground-mounted) or large rooftop-mounted space that give enough scale for recovering investments. There are, however, those that target the less-explored markets.

Japanese-Filipino firm Transnational Uyeno Corp. (TUSC) targets the commercial market with the rollout of 2 MW of solar power this year for the likes of Jollibee Foods Corp. and Starbucks.

It has so far built 18 projects with capacity of 1 MW, company general manager Jen S. Tablante said, with 10 more projects lined up to meet its 2-MW target.

One of its larger projects is a 103-kilowatt-hour (kWh) installation for the Keppel shipyard in Batangas, director Nicolas A Bivero said. Also lined up are solar rooftop installations for branches of TUSC’s existing clients, the Jollibee and Starbucks chains.

TUSC is a joint venture between Philippines-based Transnational Renewable Energy Corp. (TREC) and Japan-based Uyeno Green Solutions Ltd. (UGS).

“Of all our projects, we are particularly proud of those that are able to integrate solar energy into the daily lives of our consumers. Projects like our e-trike charging stations, and solar-powered Jollibee and Starbucks branches,” TDG president Rashid A. Delgado said.

TUSC serves the middle segment of the solar power market, focusing on commercial and industrial installations rather than small household (served by companies like Solaready Inc.) and “mega-sized” ground-mounted solar farms (served by companies like Solar PH).

He said this segment was expected to grow quickly over the next few years since more companies were becoming aware of the big savings from using their own solar power installations. Also, the cost of solar rooftop installations has gone down.

Solar power also jives well with eco-tourism. Salamangka Beach & Dive Resort in Siquijor has successfully adopted solar power. It completed the integration of solar panels in its design in March 2015 and was disconnected from the grid about two months later.



Hydro: Small but sustainable

The country has shown investment potential for mini-hydroelectric power projects, as large hydro projects may no longer be sustainable amid periods of drought.

A recent development in the small hydro sector is the opening of the micro-hydro power plant funded by the Japan International Cooperation Agency (Jica). The 820-kilowatt, JPY 922-million (about P460 million) project was built to help supply electricity in Asipulo, Ifugao and raise revenue for the Rice Terraces Conservation Fund.

Investors show signs of serious interest in small hydropower projects mainly due to the feed-in tariff (FIT) system. The Energy Regulatory Commission-approved FIT rates for this segment as of July 2012 were as follow: run-of-river hydro (P5.90 per kilowatt-hour or kWh) for an installation target of 250 MW; biomass (P6.63/kWh) for 250 MW; solar (P9.68/kWh) for 50 MW, and wind (P8.53/kWh) for 200 MW.

However, investors noted there was need to give greater importance to small-scale hydropower projects. With improved technology, hydro turbines could last for 100 years, experts said, describing the long asset life of hydropower technology. The appeal comes as the DOE bared its plan to legislate the fuel mix policy and current incentives for the development of renewable energy under Republic Act 9513 or the RE Act of 2008.

ACR is among those most bullish about mini-hydro with a lineup of run-of-river power projects with capacity of 700 MW, likely to be undertaken with partner Toyota Tsusho.

Also gearing to ride the flood of mini-hydro developments is Cleantech Global Renewables Inc. Its president and CEO, Salvador Antonio Castro Jr., said the company was set to spend $400 million on hydroelectric power projects to expand its RE portfolio.

The Aboitiz Group is also ramping up hydro projects. Aboitiz Power Corp. completed the construction of the 14-MW Sabangan run-of-river project in 2015 and expects to complete the 68-MW Manolo Fortich hydroelectric power plant in Bukidnon in 2017. Through SN Aboitiz Power-Magat, the group completed on June 1 the upgrade of the Magat River Integrated Irrigation System Reservoir at the boundary of Isabela and Ifugao.



Small geothermal

When it comes to geothermal power, the Lopez Group is top of mind. Lopez-led Energy Development Corp. is even pushing for a FIT for geothermal power to boost investment in the sector and expand capacity to 3,000 MW.

“It (geothermal sector) needs to be supported because the economics just doesn’t work today,” company president and COO Richard B. Tantoco told reporters. Since other RE technologies with intermittent power production such as wind and solar get FIT incentives, he said it made sense to also give incentives to clean technology such as geothermal which could provide consistent energy output.

According to DOE data, the Philippines has 1,900 MW of installed geothermal capacity. There are studies that show a potential of up to 3,400 MW. That did not include national parks that could host geothermal power facilities, Tantoco said.

With incentives, the country’s geothermal capacity could grow by another 1,100MW to 1,500MW. This will help the Philippines meet its goal of curbing carbon emissions while providing stable and affordable power to Filipinos, Tantoco said.

“It takes time to develop geothermal projects, but many will invest in it if they are offered a FIT of P5.50 to P6 per kwh.”

EDC executive vice president Ernesto Pantangco said that under the National Renewable Energy Program, the Philippines was supposed to grow RE by 22,000 MW to meet the goal of RE accounting for 35 percent of the country’s energy mix by 2030.

“How can you expect geothermal to fill in that gap when we have difficulty in competing,” Tantoco said. “Geothermal has the biggest contribution because of its baseload (24/7) operation, but again, how realistic will this be unless there is an incentive to promote geothermal.”

The Aboitiz Group supported calls for a FIT rate for small geothermal projects. AboitizPower COO Antonio Moraza said small geothermal projects lacked the scale of older facilities such as the Tiwi and Mak-Ban power plants but entailed nearly as much development work and therefore needing government support.

AboitizPower owns the 692-MW Tiwi and Mak-Ban geothermal power plants. It is also considering acquiring Chevron Corp.’s geothermal assets in the Philippines to expand its portfolio.

“We are always on the lookout for opportunities in the Philippines and Asia,” AboitizPower CEO Erramon Aboitiz said.

Chevron plans to sell its Asean geothermal assets. It has a 40-percent interest in Philippine Geothermal Production Co. Inc., which produces steam for the Tiwi and Mak-Ban geothermal power plants. It also has interest in the Kalinga geothermal prospect in Luzon that could support 100 MW of capacity.



Biomass

An abundant but untapped energy resource in the Philippines is biomass. The country has abundant supply of biomass resources—farm wastes, forest residues, animal wastes, agro-industrial wastes, municipal solid wastes and aquatic biomass. The most common agricultural wastes are rice hull, bagasse, coconut shell/husk and coconut coir.

Rice farmers and millers have started to warm up to biomass power. A consortium of rice millers, Isabela Biomass Energy Corp. (IBEC), is building a 20-MW rice-husk-fired power plant in Alicia, Isabela, and is keen on getting FIT incentives.

IBEC has tapped local bank Banco de Oro for a credit line of P1.8 billion to help finance the power project and its link to the national grid.

Biomass power generation can rejuvenate agri-focused businesses as well. Victorias Milling Co. Inc. is energizing its way to financial health with a P1.1-billion, 40-MW biomass power project that is being applied for FIT incentives. It is set to put up a cogeneration facility using bagasse (leftover sugarcane fiber or sapal) at the VMC agro-industrial complex in Victorias City, Negros Occidental.

VMC’s usage of 3.1 million to 3.3 million tons of cane is seen to provide enough raw materials for the facility. When the biomass power station starts transmitting power to the Visayas grid, VMC will be able to collect on the FIT incentive.

VMC has formed subsidiary Victorias Green Energy Corp. (VGEC) to undertake its power-related projects.

One of the biggest suppliers of refined sugar in the Philippines, VMC supplies about 30 percent of the country’s daily need for refined sugar. It sources its raw materials from district and non-district planters as well as through cane and raw sugar purchases.

A prominent biomass development announced recently is that of Bronzeoak Philippines, which is run by sugarcane farming Zabaleta family. Bronzeoak subsidiary South Negros BioPower developed, in partnership with ThomasLloyd and funded by Cleantech Infrastructure Fund, a 25-MW Biomass Power Plant that would deliver about 175,000,000 kWh of electricity per year. I

Foreign investors have also started to notice the Philippines’ potential for biomass power. Scottish firm MacKay Green Energy Inc. (MGE) is investing $100 million in a biomass power plant and plantation for feedstock in Mindanao. Company chair James R. Mackay said MGE would construct three biomass power stations with capacity of 32 MW.

The Aboitiz Group is also into biomass, with its 8.8-MW biomass plant in Batangas (under Aboitiz Renewables) nearing completion.

Biomass power is also being considered for the transport industry. Aboitiz-led AseaGas Corp.’s 8.8 MW Lian biomass power plant in Batangas is keen on exporting power to the Luzon grid and is considering prospects in powering modern commercial trucks with gas, Aseagas president and CEO Sabin M. Aboitiz said.

Oil firm Eastern Petroleum Group is also diversifying into biomass power and has been seeking funding for a P4-billion biomass plant.



Ocean energy

Compared to wind energy, ocean energy is still in its infancy but investors have started taking notice of the Philippines’ potential for various forms of ocean power—tidal wave energy (a form of hydropower that converts the up-and-down kinetic energy from tides into electricity), ocean wave energy (converts multi-directional kinetic energy from wind-driven ocean waves into power) and thermal energy (using temperature differences between cooler deep and warmer shallow seawaters to make electricity).

Investors from France and the United Kingdom have said the Philippines had a big potential for ocean energy production.

Bell Prie Power (Philippines) CEO Lourdesiree Latimer said there was so much potential for ocean energy production in the country, especially in western Luzon.

“That is the Silicon Valley of ocean energy,” she said.