Interview: Alfonso Cusi
What do you consider necessary to spur the growth of renewables in the country’s energy mix?
ALFONSO CUSI: The Philippines has a strong commitment to renewables. This is why the ASEAN target for 2025 of 23% renewable energy generation has been surpassed by the country with, 27% as of the first half of 2017, placing us in the top spot regionally. We now have the lowest carbon emissions in the region – six times lower than the global average – and the Philippines has ranked first in the World Energy Council’s Energy Trilemma Index for three consecutive years.
With renewables already a prominent part of the mix, the question is now how to make it viable. This is important, especially because most fossil fuels still have a cost advantage, and because the country has one of the highest electricity rates in the region. We believe the way forward is through market-based incentives that nudge existing renewables towards commercial viability. This is why we are phasing out the feed-in-tariff regime for power sources that are oversubscribed in favour of renewable portfolio standards. We are the only country with such standards in the region, with 1% of contracted energy set to be sourced from renewables. Ultimately, the Philippines is technology neutral and will not favour specific energy sources; rather, they must compete on their own merits.
Could the Philippines become a major liquefied natural gas (LNG) centre in the Asia-Pacific region?
CUSI: Natural gas is important to us, it makes up at least 15% of our energy mix and 25% of our generated electricity. However, there are reports that the Malampaya gas fields could be depleted by as soon as 2024. This is why we want to open an LNG terminal in southern Luzon. The Philippines wants to play a role as a trading and storage centre in the region, and fully capitalise on the opportunities offered by the changing dynamics of the regional LNG trade. Demand from Asia is always rising and most of us will become net importers, with more imports set to come in, especially from the US. The Philippine National Oil Company has received strong interest from the private sector for this project, and we anticipate groundwork will begin in 2018.
To what extent will placing the wholesale electricity spot market (WESM) under the management of an independent operator improve the market?
CUSI: A cornerstone of the Electric Power Industry Reform Act (EPIRA) of 2001, the WESM has provided transparency in the transaction, supply and purchase Prices on the WESM have fallen annually: average prices in 2014 were P5.12 ($0.10) per KWh, in 2015 they were P3.83 ($0.08) per KWh and in 2016 they were P2.92 ($0.06) per KWh. However, it must be stressed that under the EPIRA, it was stipulated that the WESM should be managed by an independent market operator – which the Philippine Electricity Market Corporation (PEMC) is not. Therefore, in order for the WESM to comply with these legal requirements before the end of 2018, we are going to split the PEMC’s functions and establish an independent market operator.
What improvements can we expect in the approvals process for large-scale energy projects?
CUSI: For projects worth a capital investment of at least P3.5bn ($69.1m), the president has issued Executive Order No. 30 to shorten the processing time for permits. This will streamline all the agencies, ensuring Prior to the issuance of the order, permits took as long as two or three years to be approved. Now, if a project is declared to be of national significance, all agencies are mandated to process permits in less than 30 days. If these agencies fail to respond within the allotted time period, the project will be deemed approved. This will ensure delays issues do not deter investors from pursuing projects in the Philippines.
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