Renewable Energy versus Perpetual Motion Machines

Viking Logarta is a partner in Asian Energy Advisors and advises electric cooperatives, other distribution utilities, and RE developers)This piece was published in the December 26, 2011 edition of the BusinessWorld, pages S1/4 to S1/5.


Sadly, whether we go by the Gregorian or Julian calendars, the implementation of the Renewable Energy Act (RA) of the Philippines  is long delayed, and not just by ten or eleven days  but by at least two years. Why?  First, there is bureaucratic inertia. This applies to all branches of government, but since we are talking about implementation, we focus here on the executive and also the judiciary and quasi-judiciary.

Let us narrow it down further to just the feed-in-tariff provision. The executive (both under detained ex-President Gloria Arroyo and President Aquino) took a long time to constitute the National Renewable Energy Board and the Energy Regulatory Commission took a long time to promulgate the implementing rules and regulations.

The most determined and formidable opposition has come from the Foundation for Economic Freedom and the Philippine Chamber of Commerce and Industry. The distribution utilities have also been participating on behalf of ratepayers but their tack has been more constructive.

The FEF in particular has prosecuted its opposition with a missionary zeal, identifying the FIT issue as one where it could make a real difference. I have to admit that the FEF has raised critical issues on the FIT, especially on the timing of solar and wind power installations, and the resulting tariff impact. Its advocates cite a figure of P8 billion a year in incremental costs for the (five emerging renewable energy technologies—the other three being run-of river hydro, biomass, and ocean energy) next 20 years. This is an outrageous figure however and members of the Renewable Energy Developers Caucus (RedC) have emphasized to the FEF that the so-called installation targets are still indicative and that the tariff impact would be known only after the ERC would have decided on both the rates and the FIT-allowance  petitions. It is the latter petition and proceeding where the installation targets, and therefore tariff impact, would finally be estimated.

When the FEF guys were asked whether they had any projections on fossil fuel prices to underpin their estimate of projected incremental costs, one of them said it was inappropriate to make such projections. How is that again?

Since the evidentiary hearings started December 5, I could see that the ERC was trying its best to be fair to all parties. It has difficult issues to resolve, and these include the points from both the FEF and the PCCI. The cold demeanor and rulings of Commissioner Teresa Castañeda, with her equal-opportunity sarcasm have been business-like.

On December 6, the FEF sought relief from the Court of Appeals, praying for a temporary restraining order/preliminary injunction to stop the ERC hearings. This, after its petitions to dismiss the NREB, had been dismissed with finality.

Last December 19, the FEF filed yet another motion before the ERC to suspend the evidentiary hearings altogether until after the CA would have resolved its petition. Its representative was absent and the FEF should already have been ruled to have waived its right to cross-examine the main NREB witness. But the ERC again bent over backwards and ruled that s/he may still cross the witness when the hearings resume next year.

That day, a witness for the solar sector was set to testify to the effect that since the FIT petition was filed in May this year, solar panel costs had gone down by 30 percent, and since these constitute about 60 percent of total costs, the rate in the NREB petition could be slashed to P15 per kwh. If the ERC would make projections on its own, this could be reduced even further. Unfortunately, Celio Sumaoy, operations manager of Cepalco, was unable to fly to Manila because he lost almost everything when his house was completely inundated by “Ondoy”  in Cagayan de Oro the previous Saturday. He barely managed to rescue his five kids and the wife 15 minutes before the water engulfed his rooftop. Anyway, had he heroically managed to attend the hearing, his effort would have been for naught because the evidence presentation was reset, again owing to the intervention of the FEF, and it seems it is not even ready to hear any good news.

We’re not trying to make any emotional case here on the link between climate change, fossil fuel use, and the role of renewables, aware that no single natural disaster can be linked directly to global warming. But the general tendency remains. What I find befuddling is the FEF argument that since the country already has a much higher renewable power capacity than the world average, and that we account for less than half a percent of the world’s greenhouse gas emissions, the country has no moral obligation to reduce these emissions. Really?

The coal, bunker, and natural gas plants in the country continue to emit local and regional air pollutants that have real local morbidity and mortality effects, and because electricity prices from these plants do not reflect these costs, it is these technologies that are being subsidized.  There is also an equity argument here. It is the poor in the sites of these power plants that suffer the consequences of electricity consumption of the relatively rich in the urban areas.

On the matter of GHG emissions, the NREB has argued that if all the similarly situated countries in the world adopted the FEF’s attitude, no useful agreement can be reached because their emissions, in the aggregate, are significant. Although the Durban meeting ended well below expectations, a significant breakthrough was reached in that China and India finally agreed that they would have to reduce emissions at some point, as did the rest of the non-Annex A countries.

If the FEF is so sure about its case, it would be better for it to wait for the ERC to render final decisions on the FIT rate and FIT allowance petitions and see whether their fears are indeed borne out by the resulting numbers. In the continuation of the hearings, its lawyers can examine the evidence presented and ask all sorts of questions pertaining to such evidence.  Then it can proceed to the Supreme Court for a final ruling on the merits.

In parallel, it can also ask its PhDs in economics to help the ERC resolve the issues of timing and how much in so-called “subsidies” can be allowed through substantive economics briefs. In addition, it can lobby with the DoE for the competition innovations they are espousing and with Congress for other amendments in the RE Act. I know they have the sympathetic and critical ears of Secretary Almendras and Senator Serge Osmeña.

Allowing its lawyers to file motion after motion to simply delay the ERC proceedings is not efficient.  The energy from the perpetual motion machine that is its legal team can be put to better use.

(Yesterday, by the way, was the 369th birth anniversary of Sir Isaac Newton (Julian) and I know he would have scoffed at the persistent notions of the PPM).

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