The economics of greening the grid

By BusinessMirror Editorial - July 23, 2018

https://businessmirror.com.ph/the-economics-of-greening-the-grid/

Consistent with the country’s commitment to the Paris Agreement, greening our electricity grid would have considerable benefits other than lowering our carbon emission.

In a recent speech during the symposium “Convergence for 100% Renewable Energy Philippines,” Sen. Loren B. Legarda said if we ignore climate-change science and the contribution of fossil fuels to global warming, we cannot ignore the economics, which shows renewable energy (RE) has become a cheaper, long-term power source.

Citing a report of the International Renewable Energy Agency (Irena), the senator said all renewable-energy technologies should be competitive on price with fossil fuels by 2020.

The Irena report said the cost of generating power from onshore wind has fallen by around 23 percent since 2010, while the cost of solar photovoltaic (PV) electricity has fallen by 73 percent. Other estimates indicated that solar-powered electricity cost has declined by 90 percent, while the cost of wind-powered generation has fallen 50 percent since 2009.

Price comparisons by Irenaand recent results of Philippine auctions showed that onshore wind schemes now cost $0.06 per kilowatt hour on average, solar at a range of $0.05 to $0.10 per kWh, while electricity generated by fossil fuels falls in the range of $0.05 to $0.17 per kWh.

If the primary motivation is to save on cost or turn a better profit for businesses, RE seems the way to go, simply because technical innovation around its generation has seen costs plummet.

This is somewhat corroborated by a Bloomberg New Energy Finance report—“Fossil fuels squeezed by plunge in cost of renewables,” published on March 28—which said in most places, wind and solar will work cheaper than coal by 2023, based on rationalized cost of energy, a measure that takes into account the expenses from buying equipment, servicing debt and operating power plants using each technology.

At this point, solar seems to stand out from the rest of the renewables, particularly in the Philippines. Leandro Leviste, founder of Solar Philippines (and Senator Legarda’s son), had offered 24/7 power at P2.99 per kWh to Manila Electric Co. (Meralco) in January this year, a price that he claimed would allow the distribution utility to save an average of 30 percent, thanks to advances in solar energy and battery storage.

Leviste said the cost of solar energy, based on current trends, should drop to P1.25 per kWh by 2020. Even with current battery prices, he said solar can replace all gas, oil, and diesel power in the Philippines, saving the Filipino consumer almost P100 billion a year and lowering our generation costs by up to 20 percent.

In an exclusive interview with ANC’s The Boss last Friday, Francis Giles Puno, president and COO of First Gen, the country’s largest producer of natural gas-fired power, said solar power’s share in their portfolio will increase as costs of producing it go down.

“Solar is a small component of our business today, but because of the reduction of cost of solar, we see that becoming more part of our business moving forward,” Puno said in the ANC interview.

“When you look at the exponential drop of costs of solar, and then moving forward the exponential drop in cost of battery storage. That would really be a game changer,” Puno said. “Once a solar plant is set up, the cost of operating it is practically zero.”

Looking at the information available, even with the supposed reliability that coal-fired and other fossil fuel-fired power plants can guarantee today, it is hard not to see how power utilities and consumers would eventually turn to RE sources such as solar and wind in the near future, not just to lower emissions and fight climate change, but because of RE’s lower prices, better (battery and storage) technology and increasing reliability.

In this regard, it also makes little sense for the Philippine government to keep approving more long-term power plants that use fossil fuels (on top of those already existing), when in a few years’ time the power they sell will not only be more expensive but more likely obsolete.

You have to wonder why we are so intent on bucking the global trend and fighting an inevitable fate.