Roberto Verzola’s rebuttal to my BWorld article on renewables

This is published in BusinessWorld today.

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100% renewable — is it possible?

By Roberto Verzola
Executive Director, Center for Renewable Electricity Strategies (CREST)

(This was written in response to Mr. Bienvenido S. Oplas, Jr.’s piece, “Can renewables only power the Philippines and emerging Asian markets?”, published June 8, 2016 on BusinessWorld’s print and online editions. The same can be accessed by visiting the link http://goo.gl/VyE2Jw.)

I thank Bienvenido Oplas, Jr. for initiating a public debate on the role of renewables in Philippine energy planning. In his June 8 piece, Mr. Oplas took issue with the briefing paper “The Energy Road Not Taken” of the Center for Renewable Electricity Strategies (CREST), which we circulated among all presidential and vice-presidential candidates before the May 9 elections. “Urban legend,” he says.

In brief, the CREST paper 1) took the country’s mix of existing and committed power plants as given, 2) looked only at future demand as projected by the Department of Energy (DoE), and 3) discovered that the DoE’s existing energy efficiency and renewable energy plans alone were enough to meet all future demand up to 2030. This meant that there was no more need to include coal and other fossil-fuelled power plants in energy planning for the future.

Many important details — not mentioned in Mr. Oplas’ piece — support the CREST conclusion, and we urge BusinessWorld readers to read our 8-page briefing paper in full, so that they can understand the solid reasoning behind our conclusion.

(The CREST paper can be downloaded by visiting this link https://goo.gl/tsM3sm.)

Let me emphasize that we used the statistics, figures and targets found in the official DoE Philippine Energy Plan 2012-2030. We started with the DoE business-as-usual demand projections (23,158 MW by 2030). We reduced this by the DoE’s own energy efficiency target savings of 200 MW per year (or 19,558 by 2030). Based on these lower projections, we used the DoE’s own formula for reserve requirements to arrive at the new target supply capacity (21,634 MW by 2030). We deducted from this target the DoE’s own total of existing dependable capacity as well as committed capacity (16,244 MW as of 2011). This left only 5,390 MW of new capacity that needed to be built starting 2012, to reach the full target of 21,634 MW by 2030.

The DoE’s own National Renewable Energy Plan (NREP) in fact targeted a total of 9,525 MW by 2030. To be very conservative about it, we excluded the DoE’s solar targets (which were small anyway), and derated the DoE’s own wind targets by 70%, retaining only 30%, reflecting the typical capacity factor of wind turbines in the country. This left mostly hydro, geothermal, and some wind in the derated NREP targets, totaling 7,729 MW by 2030. That’s still more than enough to cover the 5,390 MW of capacity that needed to be built. Under this scenario, renewables (mostly hydro and geothermal) would have provided 52% of the country’s electricity mix by 2030.

All these are from the DoE’s plans. How could have DoE officials themselves missed this conclusion? Apparently, they never looked at the combined impact of their own energy efficiency and renewable energy plans, if these — together — sufficed to meet new demand.

Instead, these DoE plans have not materialized. The hydro and geothermal plans are badly under-target, while the coal plans have gone far over-target. As a tragic result, we are now locked in — for the next 30 or more years — to more than 40 coal plants (17 existing plus some 29 committed) which are not only major threats to people’s health and the environment, but will also become increasingly expensive in the future, compared to renewables. Let us just hope that incoming energy officials will this time look at the combined impact of their energy efficiency and renewable energy programs to check whether their synergy is enough to cover all new demand.

In our study, we chose not include the country’s solar potential, to show how easy it was to meet all new demand with a renewables-only mix of mostly hydro, geothermal, and some wind.

Adding solar photovoltaics (PV) — especially rooftop solar — to the mix makes our conclusion even more compelling. Mr. Oplas did not seem to realize it, but the statistics he cited confirm our paper’s conclusion and the major role that rooftop solar will soon play in our energy mix.

Noting that the Levelized Cost of Electricity (LCOE) is a good measure of the competitiveness of various technologies, Mr. Oplas lists in his Table 2 the LCOE of solar PV as $0.1253/kWh (P6.01), broken down as follows: $0.1098 (P5.27) capital cost; $0.0114 (P0.55) operating & maintenance cost; $0.0041 (P0.20) transmission cost. Like the DoE, he was focused on utility-scale solar farms. Rooftop solar incurs no transmission and distribution costs, resulting in electricity costs per kWh in the P5 to P6 range — far lower than the P8-P12 range of retail electricity prices in the Philippines today. If Mr. Oplas statistics are true, that the solar rooftop LCOE will go below P6 per kWh by 2020, then we can anticipate a solar PV LCOE below P4 or possibly even P3 within 10 years. Woe to utilities and big industrial consumers who have contractually bound themselves to coal power plants through long-term power purchase or power supply agreements, especially if these contain escalation clauses.

Too many officials and opinion writers still cling to the old conventional wisdom that coal is our cheapest source of electricity. Not anymore!

Since 2014, in the case of Metro Manila, electricity from solar panels on one’s rooftop has been the cheapest, because it avoids transmission and distribution charges, meter reading fees, provisions for system losses, universal charges, and all those other add-ons to the basic generation charge. And because solar PV prices will continue to decline, following similar long-term trends in all electronic equipment — while the cost of non-renewable fuels is bound to increase in the long-term — we can expect solar PV’s role to become even more important in the future. Indeed, according to Mr. Oplas’ own Table 2 statistics, hydro, geothermal, and wind all have lower LCOE than coal.

Mr. Oplas very kindly forewarned me about his BusinessWorld piece when we met at the Asian Clean Energy Forum 2016, held at the Asian Development Bank from June 6-10, 2016. This major ADB event highlights the progress made and lessons learned so far in the ongoing global transition to renewables. Anyone who attends the ADB event and hears the success stories, the more efficient and more affordable technologies on the threshold of commercialization, and those still in the research pipeline, cannot help but feel supremely confident that cleaner, lower cost and renewable energy sources will soon dominate our electricity supply. I wish President-elect Rodrigo Duterte had been informed of the ADB Forum, so that he could have required his incoming energy officials and all senior planners of the DoE and Napocor to attend it.

Since up to seven parallel sessions were simultaneously going on in the ADB Forum, Mr. Oplas can be forgiven if he missed some key sessions.

In the June 7 afternoon session entitled “Scaling Up Clean Energy: Early Actions to Facilitate Integration of Variable Renewable Energy into Existing Power Systems,” energy experts from the US and Germany emphatically agreed that renewables alone could eventually power a country 100%. It was just a matter of time. Sooner if the policies and market conditions were favorable, later if otherwise.

Given our own bountiful sources of renewable energy, how could it not be true in the Philippines? Indeed, as a proper interpretation of the Philippine Energy Plan 2012-2030 shows, we can already exclude all fossil-fueled power plants in our future energy plans.

I thank Mr. Oplas and BusinessWorld for this exchange. Let us by all means have more discussion on our country’s energy future.
———–

My quick response re LCOE of solar photo voltaic (PV): The $110/MWh is for large-scale solar power in the US. The cost of rooftop or retail solar, because they have no economies of scale, can be double or more. Factor in the low capacity factor, projected to rise to 25% by 2020 in the US, currently only about 18% in the Philippines and many other countries, the cost effectiveness of solar power will remain very low. If it is true that solar is already attaining grid parity with coal, nat gas, then there should be zero need to ask for FIT (high, guaranteed price for 20 years) to make large solar farms “viable.”

I will respond to his other points in my column in BWorld next week.

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