Cost competitiveness is key for renewable energy

Renewable energy – or energy that comes from renewable sources like the sun, wind, and water – is slowly being acknowledged in the world as a viable and realistic source of power to fuel modern day lives.

We’re seeing breakthroughs in sustainable alternative energy technologies that had been dreams two decades ago. Transportation and power generation had in the past been largely dependent on fossil fuels, but are now being slowly weaned away from gasoline, diesel and coal, fuel sources that have increasingly been regarded as threats to the environment.

In recent studies, renewables now account for almost a third of global energy generation. With the shift of personal mobility vehicles away from fossil fuels, we should be seeing this share grow even bigger and at a faster rate.

Geographically, with growing awareness on the need to shift to sustainable energy sources, developed economies that consume the bulk of fossil fuels had early on committed and started with the development of alternative energy sources and technologies.

Thus, we are seeing developed economies now taking the lion’s share in the growth of global renewable energy sources. On the other hand, developing economies – like China, India, and many countries in Southeast Asia – have been slower in committing and adopting to this shift.

Cost considerations

The Philippines is among those developing economies that still struggle with the idea of abandoning fossil fuel sources to sustain economic growth. Manila Electric Co. (Meralco), which is the biggest utility company operating in the country, largely relies on coal for its baseload power source.

Meralco has justified the use of coal for power generation with high-efficiency, low-emission technologies, and more importantly, the lower cost for bringing electricity to a country that is already burdened by high rates.

Even with all the emerging cheaper renewable energy technologies, studies have at best proclaimed that competitive pricing, minus the cost to the environment is within reach, the time frame given to be within the next decade until 2050.

But if one includes the cost to the environment, many studies show that renewables, notably wind and solar, are now cheaper. The Philippines’ continued use of fossil fuels, according to international research group Climate Analytics, contributes to air pollution that could run to billions of pesos.

More importantly, the research group added that imports of fossil fuels were already at 3.5 percent of the country’s gross domestic product, at $11 billion in 2017. By depending less on imported fuel sources and shifting to renewables, the Philippines could improve its energy self-sufficiency and reduce its supply-related risks.

This reasoning is also perhaps one of the reasons why the Meralco group of companies is the latest to join the renewable energy sector. It has committed to 1,000 megawatts of renewable energy projects over the next five to seven years, mainly solar, wind, and run-of-river hydro.

Mini-grids and investments

Not surprisingly, local environmentalists are predicting that the renewable energy sector will see more investments in the coming years, not just because of new technologies and lower costs, but because the country’s archipelagic nature is suitable for mini-grids.

Currently, about 2.78 million households or 88.3 percent of the country are not connected to the main grids. Most are located in small islands or remote areas that make connection to cooperatives of electric utility operators uneconomical.

These off-grid areas can now tap renewable energy sources like solar, wind, hydro, biomass, or waves for power generation round the clock, assuring residents of a more dependent and cheaper source of electricity.

Whereas renewable energy projects decades ago were tedious and expensive to operate, today’s systems have become scalable and more diverse, and have been proven sustainable for electricity end-users, especially in remote, isolated, and off-grid areas.

One of the latest hybrid mini-grid systems recently set up is located in the outskirts of Puerto Princesa City where the popular and tourist-frequented underground river is located. It is run on a 1.4-megawatt solar photovoltaic system with a 1.2-MW diesel-fired generator, enough for now to provide electricity to commercial establishments and households.

While the economic viability of mini-grids has yet to be proven sustainable over the longer term, the fact is that the Department of Energy is now preparing the rules that would define the conduct of small-scale renewable energy projects in areas outside the main grids.

Supporting renewable energy

The draft guidelines include requirements for off-grid and on-grid renewable energy companies to be not more than one megawatt in capacity. Qualified applicants will be assured of a permit to operate for 25 years, and more importantly, the exclusive right to explore, develop, and utilize the renewable energy source in its registered area.

The DOE has been developing other renewable energy policies, including requiring distribution utilities to draw a portion of their power supply from renewable energy producers and allowing net metering for independent establishments and households that have their own renewable energy systems.

Net metering is gaining acceptance among business operations that can tap sunlight for solar photovoltaic systems. As long as their installations do not go beyond 100 kW, excess generated power can be delivered to a distribution utility, and offset from their metered electricity supply.

We should see more innovations and initiatives from both the government and the private sector in the area of renewable energy development and promotion.

As long as competitiveness is assured in the market place, which means that the cost of consumers will be within the cost of what the main grid can provide, then we can expect the use of renewable energy to increase.

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