Three trends shaking up the Philippines energy market

By Medha Basu

Director of the Philippines Senate Energy Commission discusses how digital permits, electric vehicles and microgrids will reshape the country’s energy sector.

Much of the Philippines’ main island of Luzon is powered by natural gas from an offshore field called Malampaya. The gas field was discovered in 1989, but government estimates show that it is running out.

“The depletion of Malampaya is expected by 2024,” says Teresa Ira Maris P. Guanzon, Director of the Energy Commission in the Senate of the Philippines. This is one of the reasons the Philippines is pushing for more renewable energy generation, she says. It is targeting for 35% of its energy to be generated from renewable sources by 2030.

Guanzon is pushing through legislation that will tackle a number of other related challenges - including energy security, access to electricity, and complex red tape for permits. On the sidelines of the PowerGen Asia conference last week, she discusses upcoming areas of reform to tackle these.

Electric vehicles and energy security

The first key challenge is energy security. The Philippines imports 96% of its oil and all of the coal for its power plants, which provide 50% of the country’s power. Most of its oil comes from the Middle East, and majority of the coal is from Indonesia. “These are very high risk scenarios for the Philippines,” Guanzon says. “We’re not saying that imported fuel should be zero, but we don’t want importing from one specific country to dominate the mix.”

The Philippines could cut its foreign dependence by moving to electric vehicles, she says. “We have an internal estimate in the office that states that if we electrify all our transport vehicles we will be saving about $9 billion from oil imports.”

Her office has proposed a bill to push for electric vehicles in the Philippines, starting from public transport. “It will identify green routes for electrified public utility vehicles,” she says. The bills also provides a framework to support the growth of the entire electric vehicle industry, including battery manufacturing and charging stations.

The bill mandates buildings and gas stations to have dedicated electric charging areas and allow third-party service providers to install charging stations. “We also want to provide non-fiscal incentives for users, such as an exemption from the motor vehicle users charge and priority when it comes to vehicle registration,” she adds.

Battery costs are falling exponentially, and will continue to drop over the next few years, she says. “We want to make sure that by the time the price is very competitive, the Philippines will have a framework for EVs to come in.”

Microgrids and access to electricity

2.7 million households in the Philippines don’t have any access to electricity and a further 200,000 receive intermittent and unreliable supply. In many cases, these households are not connected to the national grid or rely on diesel-powered generators.

Guanzon and her team have proposed a bill to expand the use of microgrids in parts of the country without reliable access. Microgrids are powered by small-scale electricity generating plants located close to the consumers. In general, these decentralised grids are quicker to build than waiting for an expansion of the national grid, and can generate electricity from renewable sources like solar or wind.

The microgrids bill is pushing for three key changes. The first is to allow the use microgrids in any area without proper access to electricity. Suppliers are currently restricted to parts of the country which are not connected to the national grid or are powered by other sources like diesel generators. “We want to be able to expand the use of microgrids beyond these very specific definitions,” she says. For instance, microgrids could improve access even in areas that are connected to the grid but don’t receive reliable service.

The second is to simplify the process to get permits for microgrids. Companies currently have to get permission from incumbent utilities to be allowed to set up infrastructure. In one case, it took one company six years to build a microgrid of less than one megawatt, Guanzon says. “This bill will streamline the process for microgrid systems in the Philippines”, she adds. For instance, companies will not be required to get permission from incumbent utilities.

Third is to shorten internal approval processes for contracts. It can currently take up to two years for the Energy Regulatory Commission to act on microgrid contracts, she says. The bill proposes that microgrid systems below a certain capacity will not require approvals from the commission. “It provides standardised contracts so that it doesn’t have to go through the regulator,” she says.

Digital permits and red tape

It takes more than three years to get a permit to build a hydro power project in the Philippines. That involves getting 300 signatures, working with 74 agencies, complying with 20 different laws, and getting 43 contracts and certificates, Guanzon says. This incredibly complex and lengthy process for energy permits has led to delays in the country’s power projects, she adds, and will add to the costs of future renewable projects.

In March, the President signed a new law that will require agencies to issue digital permits, allowing the government to track and cut approval times. “We are hoping that through this law, the permitting process will be cut down to less than one year,” Guanzon says.

Companies will be able to review requirements, and submit, pay for, and track applications online. If agencies don’t process applications within mandated timelines, the projects will be automatically approved, she adds. “And the platform will issue your certification or your permit.” The Department of Energy has tendered for contractors to build the platform, which has to be ready for use by March 2020.

As the Philippines runs out of gas, it is quickly turning to new sources of energy, building innovative infrastructure to power the country, and cutting red tape to attract more investment.