The policy advice from experts will be for markets to strive for "all-of-the-above energy strategy" - if they want to thrive and reliably supply the needs of consumers.

The parochial debate pitting coal versus renewable energy could then be a useless tussle, because realistically, both technologies must co-exist in a prudently-planned electricity system.

Truth is – unless you’re a journalist, no one wins a war by fighting with incisive words. So it’s about time for project developers to step into the battlefield and prove not only the viability of their investments, but also the sustainability of their sponsored technologies. 

Major changes in the energy industry don’t happen on a whim. Short-term motivations, we should remember, will hurt us all in the long run. That is, if our technology choices will eventually push power grids into breaking points – not just rob our wallets.

What is the firm policy of the government really as far as diversifying the power mix? The answers have been varied, but one chief executive of a hydropower company commented: “policy or fallacy?” and even wryly suggested a slight tweak to it: “the fallacy of the policy.” 

Technology preferences

Expect array of justifications as well as ideas bubbling up as developers push for market acceptability of their projects.

It will be up to the country’s energy planners to efficiently and sustainably integrate them into the country’s power mix – expectedly, in a manner that they will not strain the electricity grid.

Filipino investors – the likes of the Energy Development Corporation, Aboitiz Power, Ayala Energy Holdings, Trans-Asia Oil and Energy Development Corporation as well as their smaller firm-counterparts, have varied development preferences across technologies. Their RE service contracts would reveal interests in hydro, wind, solar and biomass projects, among others.

German companies, on one hand, have signified keen interest on biomass and biogas ventures; while British firms are targeting ocean thermal energy conversion (OTEC) as well as offshore wind projects.

Foreign investors, primarily European firms, can also count on having default advantage when it comes to supplying turbines and other equipment for RE-based power projects. As a matter of fact, an earlier German investment mission showcased prospective technology offers that Philippine RE developers can lean on.

Mr. Martial Beck of the European Chamber added that “off-grid market is very interesting because the electricity prices are high there.” German firms are particularly looking at solar as alternative to powering these grid-detached areas.

For biomass and biogas, he reckoned that these technologies can be very competitive with conventional sources. Biomass power facilities can run on baseload, hence, worries of intermittency (such as in the case of wind and solar) would not be the case here.

Additionally, Mr. Beck explained that “biomass has higher efficiency and better control of the process,” thus resulting in a relatively “clean combustion which reduces the greenhouse gas emissions (GHG) as well as pollutants.”

The UK firms can’t also be left out in the contest when it comes to technology offers as well as project track record and demonstration projects for offshore and ocean-harnessed energy.

“On ocean technology, one of the issues is that, there is no FIT. For wind, I think the UK has more offshore wind capacity than the rest of the world put together,” British Ambassador Stephen Lillie said.

Biogas is another important addition to the growing interest of British firms in the domestic RE sector. “One of the companies here is Aseagas, which is a joint venture between a British company and Aboitiz…that’s a good example of the potential that there is – to have partnerships in the RE sector,” he stressed.

Merit order

To where the Philippine electricity grid stands today, it is apparent that it needs infrastructure upgrade – not only in the physical sense, but in catering to the right technology mix.

The spotlight obviously is on the Mindanao power crisis. The experts’ prescription has been that: it badly needs capacity diversification because its traditional baseload source of power – the Agus and Pulangui hydro plants – can no longer meet the electricity needs of the area on a “reliable and sustainable pace.”

Two main reasons were cited: the generation of hydro cyclically plummets during summer months or at the strike of El Niño phenomenon; and that the ‘ageing’ facilities are now badly in need of rehabilitation to ramp up their capacities. The trap is: government budgeting and procurement processes cannot just seamlessly call on their immediate rehabilitation – it takes years just to secure approvals.

The Mindanao crisis is a tangled web of missed solutions and un-addressed policy issues – ranging from lack of entry of investments in the past, as well as the consumers’ reluctance to pay for market-level electricity costs with proposed technology diversification in the grid.

It’s a tough case to make. But the most viable baseload capacity option presented for Mindanao is still coal – and even for other grids, like Luzon and Visayas. That’s because nuclear’s acceptability backpedaled again after Japan’s Fukushima disaster; while natural gas’ higher upfront cost may still ignite consumer anxieties – coupled with the fact that policymakers and developers still struggle on supply sourcing as well as on planned scale of developments. Nevertheless, it is aligned as a technology option for the medium term or from 2017 onwards.

Many also propounded renewable energy to become part of the immediate to medium-term solutions. Some reasoned that other RE technologies, can also run baseload like coal. However, in the game of scale and feedstock sustainability, how can they measure up with the big capacities that can be installed just for a single generating unit of coal?

It has to be understood also, that in an electricity system, there is what they call “merit order dispatch” of capacities. Meaning, it is dispatching the lowest-cost generation first, followed by the next cheapest and so on.

So far, based on policies set forth for RE, they are “must-take capacity” for the grid. It just entails then that they can displace some generation in the dispatch order, hence, disrupting the conventional economic merit order.

Now, this is the tricky part. When the capacity of wind or solar goes out of the system, there should be a back-up capacity to instantly plug the supply gap. Until now, the issue of back-up capacity is a concern that policy framers cannot give a straight answer to. And how much are we paying for this really?

The “on-and-off generation” of intermittent RE technologies is also a pressing concern for the grid; because there are plants that cannot just be cranked up and down, otherwise, they will result in equipment damage and worst, they may trigger blackouts in the system.

All these concerns need serious re-thinking – not only by the government but similarly for all stakeholders in the energy sector.

Climate change

Circling back to the “dirty coal versus clean RE debate,” there are some fundamental facts that investors and industry watchers must come to terms with. Compared to the less efficient coal plants of the 1990s, technology providers have been constantly innovating and improving pollution-control equipment for coal technologies, thus, the birth of clean coal tech genre.

Still, even with clean coal technologies in the marketplace, these can just control carbon dioxide (CO2) emissions to a certain degree and may not help a great deal in reversing global warming.

The clincher: renewables are needed to pare the country’s carbon footprints.

It is also a sentiment echoed in Mindanao, since most of the grid’s forthcoming capacity additions will be from coal. Mindanao Development Authority (MinDA) director Romeo Montenegro enthused that future developments must be ‘tidied up’ with renewable energy to pare the sector’s toxic emissions.

British Embassy’s climate change attaché Roslyn Arayata particularly raised “the urgent need to keep global warming temperature rise below 2 degrees” by cutting down GHG emissions. Renewables, she concurred, will help on that sphere.

From the Kyoto Protocol on to the next chapter of climate change diplomacy, the focus is on cutting down heat-trapping emissions, with much emphasis on carbon dioxide, primarily those coming from energy installations.

Yet for a country that is still growing its ‘clean technology alternatives’, it might take deeper understanding that greening the grid cannot just be done at niches. This early then, the country’s energy planners must seriously re-think a balancing act wherein the RE business model will not end up in a cycle of long-standing dependence on subsidies and not being able to compete at scale with conventional energy. (MMV)

Source: Manila Bulletin; Business Bulletin; 6 April 2013