August 18, 2022
Gab is a clean energy analyst at Allotrope Philippines. He has supported a nationally recognized tool to facilitate renewable energy procurement mapping of distribution utilities in the country.
In this feature, Gab underscored that renewable energy solutions support the sustainable development of vulnerable and underprivileged communities.
The latest data from the National Electrification Administration (NEA) indicates that there are still 1,054,948 households, or 4% of the total households in the country, that do not have electricity service. Seventy percent (70%) of these unserved households are located in Mindanao. Unserved areas refer to areas with no electricity access, distribution system lines, individual home systems, or connection to any microgrid system. The provinces of Tawi-tawi, Sulu, Basilan and Maguindanao have more than half of their province’s households unserved.
A larger population is located in underserved areas or areas where electricity services are less than twenty-four (24) hours daily. These underserved off-grid areas are mostly powered by expensive, unreliable diesel and bunker-fired power plants. Of the 494.785 MW installed off-grid capacity, 402.405 MW (81%) are oil-based.
Diesel and bunker-fired power plants cost an average of 14.92 PHP/kWh and range from 9.69 to as high as 154.88 PHP/kWh (Dec 2020). In comparison, during the same year, the average generation rate paid by Meralco consumers was only 4.3577 PHP/kWh. Fortunately, households in off-grid areas served by electric cooperatives and LGUs would only have to pay the Subsidized Approved Generation Rate (SAGR) which is now between 5.5313 to 7.0898 PHP/kWh. This subsidy is paid for by households in the main grid as a component of the Universal Charge for Missionary Electrification (UCME) which is currently at 0.1989 PHP/kWh.
Research shows that providing affordable and reliable electricity has a positive impact on access to education, information, health services, and perceived safety in off-grid communities. Electrification also broadens economic opportunities and income generation for off-grid households.
Shifting to renewable energy should not be an issue as the cost of renewable energy technology over its lifetime is already below the cost of electricity produced by existing diesel power plants.
Renewable energy is already cheap, as demonstrated by the results of the recently concluded Green Energy Auctions, where we saw a drastic decrease in renewable energy rates. For solar, the lowest bid rate from the latest auction was only 3.40 Php/kWh, 61% lower than the solar rate deemed profitable in 2015. Wind technology costs have also decreased with bid prices ranging from just 3.86 Php/kWh to 4.64 Php/kWh. In contrast, these are much cheaper than the current Meralco generation rate of 6.55 Php/kWh. It should be noted that Meralco sources 97% of its electricity from fossil fuel power plants.
Despite not benefiting from the economies-of-scale advantage of on-grid renewable energy, off-grid renewable energy installations have been demonstrated to provide cheaper electricity compared to diesel.
A range of renewable energy technologies can be installed to fit the varying needs of off-grid communities. Solar Home Systems (SHS) provides a quick and affordable solution for unserved households, specifically for very small communities. Prepaid SHS with batteries are already being rolled out in the country which may be paid monthly (222 Php/month). There are also startups ready to provide prepaid SHS. One such startup is PiSolar, a grant recipient from the Department of Science and Technology, which allows SHS recipients to pay through an assigned local entrepreneur who is also the lead contact to the technology provider.
Renewable energy may be used to decrease the use of existing diesel generators through hybridization. This allows island communities to import less fossil fuel to their community further reducing their power costs. Hybridization of existing diesel with renewable energy plus batteries has also been demonstrated to further reduce electricity costs for off-grid households. By storing the renewable energy produced during the day, the batteries can supply electricity at night further and displace the use of expensive diesel/bunker fuel.
Having a source of cheap electricity allows off-grid communities to operate livelihood-enhancing facilities. Cheaper electricity through renewable energy was used to produce ice at a lower price and improve the livelihood of its fishers in a 50-household community in Palawan.
Renewable energy may also be used to power post-harvest facilities to increase productivity in off-grid communities. Renewable energy-powered rice winnowers, rice mills, corn shellers, corn mills, solar/biomass dryers, and abaca spindle machines are already being implemented in parts of the country.
To ensure the lowest costs for consumers, the design and the configuration of renewable energy technologies for off-grid areas should be tailor fit. The capacity of Local Government Units (LGUs) and Electric Cooperatives (ECs) to identify communities that will benefit from the use of renewable energy should be increased.
Additionally, LGUs should be empowered to identify how renewable energy can be used productively in their communities. These may be done by allocating resources to implement the Energy Code or the Department of Energy (DOE)-Department of Interior and Local Government (DILG) Joint Memorandum Circular No. 2020-01. After these communities have been identified, areas that LGUs and ECs cannot immediately address should be opened to the developers through the Competitive Selection Process (CSP) and Qualified Third Party (QTP) process. The lack of unserved areas undeclared in the latest DOE data indicates that there are still a lot of areas yet to be identified.
Despite providing long-term benefits, the use of renewable energy still requires huge upfront investments. Ensuring the transition of communities to renewable energy would require increasing the access of developers to low capital costs. Development loans should be put in place with lower interest rates and lower revenue expectations.
The faster we start using 100% renewable energy for unserved areas and hybridizing diesel in underserved areas, the faster we can support the sustainable development of our underprivileged communities by increasing socio-economic productivity.