Report: Energy diversity crucial to lowering prices

energy sector

A coal-independent energy sector is key to lowering electricity prices and securing a sustainable and stable power supply in the future, the Institute for Energy Economics and Financial Analytics (IEEFA) said.

According to IEEFA report, harnessing the potential of alternative sources like rooftop solar is a viable option to drive energy costs lower.

“The Philippine government can help break the logjam by adopting policies that inject more diversity—and more energy security—into the electricity system while helping lower consumer costs by enabling the uptake of cheaper, cleaner options such as rooftop solar,” the report said.

Should the country tap into solar rooftop energy, it could bring down electricity costs to P 2.50 per kWh without any financing expenses. In addition, it could bring investments worth $ 2.8 billion or P 1.5 trillion by 2030.

The report also revealed that the Philippines is one of the most expensive electricity rates in the Asean countries.

It also noted the slow progress of the country when it comes to modernizing its power sector in terms of technological advances in renewable energy (RE), energy deficiency, and distributed storage.

“The government is in a position to change the longstanding status quo, which disproportionately puts fuel-price and foreign-exchange risk on consumers, while utilities and power generators remain insulated from market changes,” IEEFA Energy Finance Analyst and author of the report Sara Jane Ahmed wrote in a statement.

“As a result, power suppliers have no incentive to transition away from coal and diesel or to hedge against price-change and currency risks,” she added.

The Philippine government had already approved eight solar projects of Philippine Board of Investments through the Solar Philippines Commercial Rooftop Projects Inc. worth P 85.96 billion. By 2030, there will be an estimated 8 GW solar installations, with 35 percent coming from rooftop solar.

“These trends present an enormous opportunity to replace imported-coal and imported-diesel models with indigenous alternatives,” Ahmed said. “Solar, wind, run-of-river hydro, geothermal, biogas and storage are competitive, viable domestic options that can be combined to create a cheaper, more diverse and secure energy system.”

Every kilowatt of installed rooftop solar means a reduction in the need for imported coal and diesel power, Ahmed added. This alone could save the Philippines up to $ 2.2 billion annually in its current account deficits as well as $ 200 million per year in diesel subsidies.

Rooftop solar is cheaper compared to coal-fired power generation. Coal-fire costs upwards around P 3.8 to P 5.5 per kWh, while true costs of imported diesel-fired power ranges from P 15 to P 28 per kWh. Meanwhile, rooftop solar is priced at P 2.50 per kWh, without financing expenses, and P 5.3 per kWh with financing expenses.

However, regulatory, administrative, and financial hurdles could affect the implementation of alternative energy sources such as solar rooftops.

Regulatory hurdle includes “unwieldy” requirements around “distribution impact studies” and distribution asset studies, assorted solar-permit rules, resistance to net billing that allows end-users to generate electricity from solar rooftop for their own use, and either sell any excess energy to the distribution utility at current wholesale prices or be fairly credited.

The administrative hurdle pertains to inadequate transparency around customer “load profiles” which show consumption patterns that are crucial to understanding usage and institutional resistance to net-metering.

Lastly, the financial hurdle is all about restricting affordability of and accessibility to rooftop solar.

“Development of all more affordable options is still hampered by costly and unnecessary red tape,” Ahmed said.

“More important, fossil fuel subsidies and electricity-sector losses are a growing drag on economic growth in the Philippines. Current plans for fossil fuel generation would instill a long-term dependence on fossil fuel imports, which would lead to more national debt, devaluation of the currency and an increase in inflation, all of which would destabilize the Philippine economy.”

 

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