Notes for Secretary Cusi on the Philippine Energy Plan

AT THE FORUM to update the Philippine Energy Plan (PEP), DoE Undersecretary Jesus Posadas conceded that the plan is just a set of scenarios. “Just” does not do justice to the effort, however, because dreams do have binding constraints, and dreaming requires a lot of energy.

The role of policy makers and planners is to identify rules private agents have to live by to get to the desired market outcomes.

Projections on the power market have to have firm basis in economic and population growth, technology cost trajectories, and likely regulatory innovations.

Our first concern on the updated PEP is the projected power capacity and energy mix. The plan calls for a 30-30-10 electricity mix for renewables, natural gas, and coal. Where did the 30% renewables target come from?

The Renewable Energy Act of 2008 listed the following policies: 1) Feed-in-tariff system (FiT); 2) Renewable portfolio standard; 3) Green energy option; and 4) Net metering.

Of the four measures, only FiT and net metering have been implemented. FiT suffered delays after birth pains including nontransparent process and overshot targets, especially for solar and wind. No solutions have yet been offered to resolve the tariff issue owing to the overshoot in capacity eligible for FiT, and the transmission problem in Negros. Biomass and run-of-river hydro have been undersubscribed because of regulatory and tariff issues.

In 2010, we raised these issues with then DoE Secretary Almendras. How were the variable renewable energy targets set? The issue with the current DoE Secretary Cusi is, how are you setting targets?

We support Secretary Cusi’s thinking that the next round of FiT allocations for wind and solar be undertaken through auctions via free open system and with a series of tenders. But biomass and