Financing Renewable Energy

Beyond Micro-Enterprise Financing:

Innovations in Microfinance

Apo View Hotel Davao City

30 July 2010

By: Ronnie N. Sargento

Department of Energy
 ENERGY SECTOR AGENDA
I. Energy Security
 Increase indigenous oil and gas reserves development
 Strengthen and enhance energy efficiency and
conservation program
 Aggressively develop renewable energy potential
such as geothermal biomass, hydropower, solar, wind
and ocean energy resources
 Increase use of alternative fuels
 Form strategic alliance with other countries

II.Power Sector Reforms

 Create a transparent privatization process
 Create an investment climate attractive to investors
 The 2009 RE Policy Framework
 Increase RE-based capacity by 100% within the next
10 years (2008-2020)
 Increase non-power contribution of RE to the energy
mix by 10 MMBFOE in the next ten years
 Be the number one geothermal energy producer in
the world (additional 1,070 MW)
 Be the number one wind energy producer in
Southeast Asia (additional 515 MW)
 Double hydro capacity by 2018 (add’l 3,400 MW)
 Expand contribution of:
 biomass 200 MW
 solar 30 MW
 ocean energy 120 MW
 A Quick Look at RE : (2008 – 2030)
Moving Towards Accelerated Development

Approval of RE Bill
2008 2010 2015 2020 2030
Policy is in place; salient Small capacity RE
Emergence of ocean Commercialization
provision of the law will projects are added to
energy projects, e.g. of ocean energy
spur Interest; activities on the grid; big RE
OTEC, wave, marine project options
RE development is projects are in the
and tidal
Current expected to accelerate pipeline
RE
activities
4.8% 1 2 3 4 5
demand 2-year development of RE 5-year continuing RE Diversification of RE
growth rate database and Development
project packaging and resources; database
enhancement of tech’l Intensive promotional Of ocean energy
preparation and
expertise of RE activities projects
Project packaging of
stakeholders
emerging technologies

Double RE capacity (4.8% growth rate) Optimization of

RE Resources
- 8,072.3 MW capacity available in Luzon
- 2,442.6 MW capacity available in Visayas
- 2,963.6 MW capacity available in Mindanao
 Summary of Resources
 Geothermal Resource – 1,200 MW
 Hydropower - 10,500 MW
 Wind resources – 76,600 MW
 Solar Energy – untapped vast potential as
a tropical country
 Ocean energy - 170,000 MW
 Biomass (bagasse) total potential of 235.7
MW
The 2009 RE Policy Framework
EXISTING TARGET
CAPACITY Capacity
TOTAL Investment
RESOURCE
08 (MW) (MW)
in 2030 ($Bn/MW)
Geothermal 2,027 1,070 3,097 2.14
Hydro 3,367 3,400 6,767 6.80
Wind 33 515 548 1.29
Solar 5 30 35 0.09
Biomass 57.2 200 268 0.40
Ocean 0 120 120 0.42
Total 5,489.2 5,355 10,835 10.88

 USD 2.0 M/MW (Hydro, Geothermal & Biomass) Source: DOE REPF
 USD 2.5 M/MW (Wind);
 USD 3.5 M/MW (solar & ocean);
 The Impact of the RE Law
As of July 2010

EXISTING TARGET Awarded Estimated

RESOURCE CAPACITY Capacity Contracts Capacity of
2008 (MW) 2030 (MW) to date the Contract
Geothermal 2,027 1,070 20 2,388
Hydro 3,367 3,400 122 850
Wind 33 515 44 1,000
Solar 5 30 1 1
Biomass 57.2 200 11 131.9
Ocean 0 120 2 5
Total 5,489.2 5,355 218 4,375.9
Why RE is key to Development?
 Energy Security
 Power is a vital element for
development;
 Reduce oil importation
 Philippines is an
archipelagic country;
 200,000 MW of
estimated RE potential
 RE can be develop through
grid and off-grid
 Limitations of Renewables
1. Hydropower is dependent on availability of
water; a severe drought will reduce power
generations;
2. Wind energy is unpredictable, the
unpredictability makes it expensive to power
generation and transmission line
maintenance;
3. Biomass is seasonal, no harvests no biomass;
4. Ocean and solar energy needs to prove its
economic viability to be competitive;
5. Geothermal exploration is a high risks in
investments.
 Challenges
 Establishments of the following methodology under
RA 9513;
− Feed-in-Tariff
− Renewable Portfolio Standards
 Financing RE Projects
− Perceived investment risks are still an issue
 Technical Expertise Available to do technical studies
− Limited engineers and technical consultants to conduct
feasibility studies
 Social Acceptability
− Price
− Environmental Effects
− Safety
− Sustainability
 How Much is RE?
Type of Plant Investment Generation Cost
(in USD per kW) (PhP per kWh)

Oil 991 7.8

Mini-hydro 2,000 4.8
Geothermal 2,000 6.4
Biomass 1,900 6.2
Wind 2,000 5.8
Source: CBRED Policy Study - 2003
Report Card of the DOE

Programs and Accomplishments

 DOE-UNDP Project on Capacity Building
THE SIX (6) BARRIERS TO BE ADDRESSED
COMPONENTS Policy, Institutional, Financial, Technical, Market,
1. Policy, Planning & Information and Training
Institutional EXPECTED OUTCOMES
Capacity Building
•Passage of enhanced RE Bill
2. Market Services •Implementation of innovative RE programs and
Institutionalization activities
3. Information and •Establishment of sustainable Market Service Center
Promotion •Accessible and updated RE-related information
Program
•Financing windows accessible to project developers
4. Delivery &
Financing •Enhanced capacity of RE sector in policy making,
planning, project implementation, and technology
Mechanisms extension.
5. RE Training •Enhanced services to RE end-users.
Program
PROJECT IMPACTS
6. RE Technology • Increased Utilization of RE from 2002 levels
Support Program
• 29.6 MMT Equivalent GHG Emission Reduction
 RA 9513:
Renewable Energy Act of 2008

Accelerate the development of the country’s renewable energy

resources by providing fiscal and non-fiscal incentives to private
sector investors and equipment manufacturers / suppliers.
One-Stop-Shop Framework
 Innovative Financing Mechanisms

 Introduced fiscal and non-fiscal incentives

through RA 9513

 Implement CBRED Project

Project Preparatory Fund
● USD 0.321 Million
Loan Guarantee fund
●USD 2.6 Million
Micro-finance Fund
●USD 0.536 Million
The Role of Microfinancing for RE
 Decentralized Application
 Communal Projects
 Barangay, Sitio and Household
Electrification
 Equipment and supply Financing
 Technical Services
 Livelihood Component

 Private Sector initiatives

 Own-use
 ESCO