Is renewable energy too expensive?

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There is a justifiable assumption that statements made by heads of state are correct, after all they have available to them the best information that government can provide, so they should be not only factually correct but also in the best interests of the people. The same should also hold for senior politicians whose mandate is to use their position in the best interest of those who voted for them.

It is opportune to set the record straight about the utilization of renewable energy in the Philippines and its further potential.

The first thing that needs to be addressed is just what is the renewable energy which has been getting so much negative political comment. In terms of the Philippines as yet still emerging regulatory environment it is; geothermal, wind, ocean, hydro, biomass and solar power. The Philippines already has about 28 percent of its electricity generated from geothermal and hydro power, and these energy sources have been in operation here for over 60 years. So those renewables are not something new. Renewable energy sources which are rather newer are solar, biomass, wind and ocean power. Solar power has been in commercial operation in many parts of the world since the 1970s.

Much has been said about the cost of renewables, specifically that they are too expensive and that their use would increase consumers electricity bills. This is simply not correct as a general statement, since hydro and geothermal are already cheaper than fossil fuel-fired power and given that the cost of solar cells were reduced by over 30 percent in the course of 2011 alone, such glib statements give an inaccurate picture. It is simply the wrong argument by those who may prefer the utilization of coal for Philippine power. Renewable power generation is more expensive to the investor than coal or diesel, but as renewables [other than biomass]have no fuel cost then consumers are not hostage to international fossil fuel markets for the cost of fuel, which can be up to 70 percent of the total generation cost to the consumer, or “consumers at large” and government in the case of the subsidized off-grid areas. The cost risk of fossil-fueled power is borne by the consumer, whereas the cost risk of renewables [again other than biomass]is borne by the developer. This should be a compelling policy argument in favor of renewables. The cost of electricity will actually be reduced provided that the Energy Regulatory Commission does the job it is supposed to do, thanks to the use of more conventional renewable power—it will not increase unless we are planning large-scale ocean power in the near future.


The right argument to defend the continuing use of coal is not cost, it is availability and efficiency. It is unrealistic to imagine that the whole of the Philippines energy needs of about 15,000 megawatts (MW) could be supplied by renewables. That just will not happen. There will be a continuing need for fossil fuel-fired power for a long time to come, it has the horsepower and capacity factor, or operating efficiency (around 85 percent for coal compared to 25 percent for solar, and about 30 percent for wind; hydro is about 50 percent] to generate national levels of power, and it is not dependant on nature for its operation. Could be some time before we see a 1,500-MW wind farm, solar facility, or even a single hydro or geothermal plant at that scale.

Where renewable power can be a real advantage is in the off-grid areas where generating costs are anything between P12 and P25 per kilowatt-hour, and diesel is the fuel of choice. Off-grid there are not the large capacity needs of the main grid, 10 MW to 30 MW is usually enough and at this level renewables in the form of small hydro, biomass, and even solar and wind are a real and considerably less costly alternative, provided that the natural resources exist and that investors can be found to develop them.

Utilization of renewable energy in off-grid areas is a low-cost alternative to diesel fuel. Unfortunately, off-grid power is subsidized with Philippine-wide consumers, National Power Corp./government paying for a large proportion of the fuel cost in order to protect off-grid consumers. In the long run, such subsidization is counterproductive—“who cares what the fuel cost is, we don’t have to pay it, let’s just keep using what is most convenient to us—diesel.” Removal of the subsidy would encourage greater efficiency in energy use off-grid, without a doubt. Let’s not foster the continuing utilization of diesel power in off-grid areas by making glib and ill informed statements that the use of renewables will make everybody’s electricity bills increase. Renewables cannot be dismissed so superficially because they really can reduce consumers electricity bills . . . Let’s just hope we can encourage some investors into this sector, they should be welcomed with open arms.

Mike can be contacted at mawootton@gmail.com

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2 Comments

  1. The issue with renewables is its low dependable capacity. Investors are unwilling to invest in a power plant whose rated capacity is say, 100 MW, but has a dependable capacity of only 30 to 40 MW. Their revenue depends on energy delivered hence resulting to a longer capital recovery period. The only way to encourage them is to offer a higher tariff (FIT) but this will result to a higher electricity price.

    According to projections, energy crisis is almost here. What we need at the moment are power plants that are dependable and we need it ASAP….

  2. Investing in renewable energy (wind, Solar, etc) is an investment that pays off at an ever increasing rate moving forward from the time of the initial investment. As fossil fuel-energy prices continue to rise, the ROI on renewables picks up speed.

    The cost of clean energy has dropped dramatically in recent years — even faster than experts expected. http://clmtr.lt/cb/vW70bJd