The development and utilization of clean energy systems and technologies as well as the judicious and efficient utilization of energy are part of the current energy policy objectives of the Government to: (a) promote further use of clean and indigenous energy sources to attain its energy self-sufficiency target; (b) accelerate rural electrification in order to enhance the quality of life of the Filipino; and (c) continue deregulation, liberalization and privatization of the energy sector for efficiency.
Power Development Program
About 9,000 MW of new generating capacities are projected in the next ten years. On the other hand, 1,868 MW of oil-based thermal plants will be retired, although some of them are potential candidates for rehabilitation and conversion to gas-fired power plants. The power projects of about 2,700 MW taking the Malampaya gas and 1,505 MW from hydro are among the committed projects while an additional 670 MW are planned to come from new coal-based plants.
The window for new generating capacity is seen after 2005 and could be filled up by 1,600 MW of baseload capacity, 1,170 MW of midrange and about 1850 MW of peaking power plants. Geothermal energy potential could be tapped to fuel the remaining 1,600 MW baseload capacity requirements. In off-grid areas, a total of 26 MW of generating facilities using NRE sources will be installed.
Natural Gas Industry Development
The discovery of the Malampaya gas field and the government decision to use the gas for power generation has laid the foundation for a natural gas industry in the Philippines. Prior to the Malampaya discovery, gas production was limited to a 3 MW-equivalent of gas from a small gas field in Isabela. Development of the 2.5-3 TCF confirmed reserves off the coast of Palawan Island is now in progress and work on the various downstream infrastructures is also underway which include the drilling of 6 wells totaling 18,174 meters, construction of a shallow-water production platform and a 500-kilometer, 24-inch submarine pipeline running from the offshore gas field to the gas delivery point in Tabangao, Batangas on the main island of Luzon. Commissioning of the production facility and initial gas flow is scheduled in October 2001 and full commercial operation in January 2002. The Government and the key industry players are now exploring the possible opportunities for expanding the gas market. Preliminary studies of potential demand indicate the viability of constructing an approximately 100-km transmission pipeline from Tabangao to Metro Manila.
Plans to build the Trans-ASEAN gas pipeline (TAGP) network will connect the Philippines to gas-rich countries. A study conducted by Asia-Pacific Energy Research Center initially concluded that the Philippines would only consider importing natural gas pipeline from the proposed TAGP in 2015 at an initial capacity of 1,800 MW and up to 7600 MW by 2018. The Malampaya gas field is strategically located to serve as a link to the TAGP. It is very close to Sabah, Malaysia, which has estimated reserves of 6-8 TCF and has currently no immediate market.
Rural Electrification
As of end of 1999, all of the country’s 1,607 municipalities and cities are energized. 32,281 out of the country’s 41,995 villages or barangays (76.9%) have access to electricity while 9.8 million of the 12.8 million connections have been completed.
The Government aims to complete the electrification of all barangays by the year 2004. Estimates show that up to 45% of the remaining 9,714 unenergized barangays can be connected to the grid while the rest (55%) can utilize hybrid and/or new and renewable energy systems and technologies.
New and Renewable Energy (NRE)
NRE has gone a long way from its purely research and development status in the 70’s to the pilot and demonstration efforts in the 80’s. Today NRE is considered both clean sources of energy and a viable alternative to providing electricity to off-grid barangays. It is therefore also an option that coincides with the country’s program to protect the environment while providing electricity to rural areas. Of the remaining unenergized barangays, about 4,000 are better served using NRE sources. Thus, the electrification program offers vast market opportunities for those involved in NRE development.
While some countries still consider NREs as exotic, the Philippines is already a major user of NREs. In fact, NREs as a group represent the country’s single energy source contributing about 28% of the total energy requirements. Demand for NRE systems is seen to go up from 72.1 MMBFOE in 2000 to 92.3 MMBFOE in 2009. Biomass fuels such as fuelwood (56%), bagasse, charcoal, and agriwastes will account for the bulk of total NRE supply.
Various NRE projects are also being pursued for implementation, which are geared specifically for livelihood generation in coastal, lowland, and upland barangays. These involve the provision of heat, mechanical energy and electricity to increase economic productivity in rural communities. On the other hand, hybrid power systems using a combination of diesel and NRE are also being considered for small island villages.
152,000 NRE systems shall be installed in areas not connected to the main electricity grid. The recently completed wind mapping study of the Philippines shows that there are about 76,000 MW of potential capacity from wind energy sources. Micro-hydro sites, on the other hand, have power potential of about 28 MW. There are 51 existing mini-hydro installations with aggregate capacity of more than 82 MW and potential capacity of 1,780 MW from 888 sites.
Institutional Reforms
At the outset, President Estrada’s Administration pledged to continue the economic liberalization, deregulation, and privatization programs initiated by its two predecessors. Implementing reforms in the energy sector, however, did not prove to be an easy task. After almost two years of implementation, the oil industry deregulation program is still going through a great deal of teething troubles, aggravated by the recent increase in international oil prices. On the other hand, Congress has yet to pass the enabling law for the power sector restructuring.
Power Sector Restructuring
The proposed power sector reforms are envisioned to address the chronic problems in the industry particularly electricity tariffs that are among the highest in the Asian region, affecting the country’s industrial competitiveness and hurting low-income consumers. This is attributed mainly to structural and administrative deficiencies both in the generation and distribution sector. The Department believes that restructuring the power sector will foster more competitive and efficient operations that would eventually lower rates. At the same time, the National Power Corporation (NPC) privatization will shift the burden of capital investments from the Government to the private sector.
Under the proposed scheme, NPC’s generation assets will be sold to new generating companies to introduce competition in the generation sub-sector. A natural monopoly, transmission operations will be initially managed by NPC. Encouraging consolidation and merger of small utilities through market-based incentives will carry out streamlining of the distribution sector. Supply will be a new sector in the industry. It is a non-wire business involving the financial aspects of the sale of electricity at the wholesale or retail level.
Oil Industry Deregulation
After only two years of implementation, 53 new firms have entered the industry erstwhile dominated by the three major oil companies: Shell, Caltex, and the partly state-owned Petron. Most of the new players, however, are into bulk fuels marketing which involves less sunk costs (and thus entry and exit are easier) compared to say, refining and retailing.
The new players were able to secure 8.1% of the total petroleum sales mix starting the first half of 1999. Despite recent crude-related price increases, petroleum prices are still lower than regulated (APM-based) prices and are still the lowest in the Asian region.