• Too much democracy for renewables

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    MIKE WOOTTON

    MIKE WOOTTON

    Let’s just, for the sake of example, say that it takes 3,000 signatures to start generating electricity from a renewable energy resource; the sun, the wind, a river. Not only are such a large number of signatures needed but also there are rounds of bidding to go through, as well as regulatory examination, which itself involves further awareness-making activities of the public at large. That the approval process necessitated is for renewable energy —which carries considerably less risk for the consumer than say coal or oil, which are hostage to volatile international markets—it may be thought it would be easier. It’s not; the approval process for a renewable energy project is considerably more torturous than for a conventional fossil fuel fired project.

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    If the Philippines wants to utilise more renewable energy, and there are lots of sources available, the process that investors are subjected to has to be made easier and less open to mischievous abuse than the rigorous procedures which govern its development currently allow, or even facilitate. Commercial scale renewable energy projects invariably require investment to the tune of billions rather than millions of pesos, but their size in the range of 5-20MW, cannot command the sort of political support that a fossil plant of, say, 6 or 800MW can attract. Renewable energy investors and developers can so easily become hostage to unethical business practices purely by virtue of the extensive permitting requirements set by the regulations.

    If I were inclined to invest in and develop off-grid power generation, then the fuel of choice would be oil. I could buy and install second-hand diesel generating sets for about P20,000,000 a MW and be up and operating in six to nine months knowing that I would not be exposed to the risk of rising fuel prices, which would be covered by the Universal Charge Missionary Electrification Fund, a.k.a all the electricity consumers in the Philippines. I would need some land but not much, and, of course, I would need an ECC. The technology is well understood by electricity cooperatives—it is the accepted norm—the cooperatives don’t take the fuel cost risk.

    If, however, I were to invest in and develop, say, run of river hydropower, then I’d be looking at an investment of P200,000,000 a MW without any chance of a subsidy from the Universal Charge Missionary Electrification Fund and a predevelopment period of five to six years before I could start commercial operation. During those five to six years, I would need a service contract from the Department of Energy, for which I would need to bid. I would need to obtain water rights, a process which could itself take three years. I would need to convince the buyer of the power to be produced that it would be compatible with his distribution system and be sold at a tariff that would reduce overall the cost of power to the cooperatives consumers. I’d need quite a lot of land, about 70-100 hectares, wherein I may need to cut down some trees and build quite long roads and I’d need lots of LGU and DENR approvals and rights.

    So which of the two options would a businesslike investor choose? Oh, and just to complete the comparison if I happened to be a foreign investor, I could own 100 percent of the fossil fuel generating business, but only 40 percent of the renewable option.

    Anybody whose interest was in making money would choose the fossil fuel option. But despite all this, there are people who do opt for renewable development, but nothing like the numbers that the Philippines could actually fully benefit from. Perhaps, they have a social conscience, perhaps they just like renewables or see it as the most viable source for future power needs, or often I think they start the process before full realization of the challenges, which actually increase as time goes on. Whatever their reasoning for opting for renewables, their activities need support from the bureaucratic and political system. Their working lives need to be made easier than for fossil fuel development, not compounded with additional difficulties. Even more so, they should not be encouraged because of the difficulties [not to mention the 3,000 or so signatures which may be needed]to embark on yet more politicking of the energy sector, for this is just a route to the ruination of further renewables development and the further deterioration of the Philippine business environment turning the overegged democratic requirements into nothing but a farce.

    Mike can be contacted at mawootton@gmail.com

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