NationalGeothermalAssociation of thePhilippinesGeothermal Exploration andDevelopment After thePassage of theRenewable Energy Act of 2008Atty. Fernando S. Peñarroyo21 November 20124th African Rift Geothermal ConferenceNairobi, Kenya
Discussion Outline§ RE Law§ Geothermal resource capacity§ Legal and regulatory framework§ Geothermal energy use, marketdevelopment and stimulation§ Constraints, issues and risk factorsData and illustrations courtesy of DOE Philippine EnergyProgram 2012-2030
Total Primary EnergyActual vs. Low Carbon Scenario (LCS)
20112010Primary Energy Mix 2010 2011 Total Energy (MTOE) 39.29 39.40 Self-‐suﬃciency 58.5 60.0 Shares (%) Renewable Energy (RE) 39.8 40.7 Green Energy (RE + Natural Gas) 47.8 48.7
20112010Fuel Input Mix Power Generation 2010 2011 Total Energy (MTOE) 19.97 20.63 Self-‐suﬃciency 67.12 68.11 Shares (%) Renewable Energy (RE) 52.61 53.07 Green Energy (RE + Natural Gas) 67.12 68.11
Renewable Energy Act of 2008§ Signed on 15 December 2008
Renewable Energy Act§ Implementing Rules and Regulationsissued by DOE Secretary on 23 May2009 (DOE Circular No.DC2009-05-0008)§ First open and competitive selectionprocess for awarding Geothermal REService Contracts on 23 Oct. 2009under DC2009-07-0011.
Important Features of RE Law§ Definition of geothermal as mineralresource paving the way for the entry of100% foreign ownership§ Promotes the purchase, grid connectionand transmission of electricity generatedfrom RE sources to ensure its market§ Provides incentives such as exemptionfrom various taxes and duties to REdevelopers to make investments moreattractive§ Provision allowing ECCs to be issued fromthe appropriate DENR regional office§ Institutionalize local government’s share
Support Initiatives and MarketStimulations§ Renewable Portfolio Standard§ Renewable Energy Purchase Agreement/Wholesale Electricity Spot Market§ Certified Emission Reduction Market§ High volume backbone system ofinterconnected transmission lines, sub-stations and related facilities§ Presidential Order directs localgovernments hosting power plants todevelop ecozones that will draw powerfrom geothermal
Contracts Awarded under the RELaw32 Geothermal RE Service/Operating Contracts§ 7 conversion of existing Geothermal ServiceContracts under PD 1442 into GeothermalRE Service Contracts under RA 9513§ 2 Geothermal RE Operating Contracts§ 8 Geothermal RE Service Contracts underthe Open and Competitive Selection Process§ 15 Geothermal RE Service Contracts underDirect Negotiation
Cost of Doing Business§ Capital costs: US$4-5M per installed MW§ Operating and maintenance cost: US$0.03to $0.05/kWh§ Tariff: no FIT rates & reflects costsincurred to obtain market-based financingprices (≈US$0.19/kWh); mainly contractedon Php/kWh; base rate escalated byinflation and forex indices§ Volume: plants are baseload with 90%capacity factor but will depend on thecontracted kilowatt hours§ Government share: 1.5% of gross income
Direct Use Applications§ limited to bathing and balneology and to alesser extent, agriculture-drying plantslocated in the Southern Negros GeothermalProduction Field in Palinpinon, NegrosOriental and in the Bacman Geothermal Fieldin Manito, Albay.§ Total installed thermal capacity is 3.30 MWtand thermal energy used is 1.25 MWt.Capacity factor stands at 0.39 while totalenergy used is 39.58 TJ/year.
Updates on RE Policy Mechanisms§ Launched the National Renewable Energy Program on14 June 2011 (9,931 MW)§ Renewable Portfolio Standard (RPS)ü Conducted seven (7) Regional Public Consultations(Luzon, Visayas, Mindanao) and Plenary PublicConsultation (Manila)ü RPS Rules for final review§ Feed-in-Tariff (FiT) Rates for solar, wind, biomass &hydro were issued by ERC§ Finalized the Guidelines on FIT-ALL Payment andCollection§ Finalized the Rules Enabling the Net Metering Programfor Renewable Energy
DOE Plans and Programs forGeothermal§ Encourage service contractors to undertake expansion andfull utilization /optimization of existing geothermal projects§ Develop non-power geothermal applications, as well asformulation of guidelines for non-power use§ Continue to promote the use of geothermal resourcesthrough Open and Competitive Selection Process (OCSP)§ Strengthen closer coordination efforts with other gov’tagencies and local governments to address environmentaland socio-cultural issues§ Develop a framework/methodology for the pricing ofgeothermal resource to determine true cost of steamproduction, as well as to facilitate formulation of realisticprice projections§ Intensify IEC campaign to increase level of awareness
Important Laws on Permitting§ Local Government Code of 1991§ Indigenous Peoples Rights Act (“IPRA”)§ Environmental Impact Statement(“EIS”) System§ National Integrated Protected AreasSystem
Investment Trends§ ODA loans from WB and JBIC for explorationto plant commissioning for state energy andpower companies§ BOT for power generation, EPIRA, privatizationof EDC§ Foreign equity under RE Law§ Traditional energy companies (EDC, Chevron,Aboitiz) and new greenfield developers§ Company equity and risk capital financing fornew developers§ Role of Philippine local banks§ Collaboration with civil society organizations(WWF Ring of Fire)
What Government Must Do§ Development of publicly availabledatabase protocols and tools forgeothermal resource assessments§ Inclusion of Enhanced geothermalsystems and Low enthalpy for Feed-inTariff Rates§ Public-private partnership must beencouraged in the field of research,development and demonstration fornew technologies in resourceexploration.
Potential Issues with LGU§ Law is silent on whether LGU consent isneeded for exploration§ Local government veto/moratorium ongeothermal exploration and development§ National government should develop atransparent system of accounting for andallocation of sharing of revenues and taxeswith LGUs.§ Expedite and streamline the release of LGUshare on revenues and taxes through asimplified process with timeframerequirements to lessen local opposition togeothermal projects.
Potential Issues with IPRA§ Lack of clear cut rules on how toarrive at a decision making process ofIPs§ Preferential rights of IPs; right of veto§ RE Law is silent on share of ICCs ongeothermal revenue
Development Constraints• Full foreign ownership• Availability of geo-scientific informationand professionals• Area status and clearance, conflict withother land use, surface/land ownership• Procedural efficiency and clarity betweengovernment agencies• Environmental issues - Judicial intervention• Tax issues• Cheap shale gas in the US and its wide usefor power generation - coal producers toexport more to Asia at cheaper prices.
Conclusion• Philippine government will continue toensure energy security by optimizing theuse of geothermal energy by investmentpromotions and identification andimplementation of sector reforms• BUT: Regulatory framework should be longterm, transparent, predictable andindependently administered• Need to address environmental and socialacceptability issues by harmonizing thepermitting process and intensifying effortsto increase the level of awareness forgeothermal energy
About the Speaker§ Director, International Geothermal Association(www.geothermal-energy.org)§ Trustee, National Geothermal Association ofthe Philippines (www.ngaphil.org)§ VP and Treasurer, Clean Rock RenewableEnergy Resources Corp. [Natib and Daklanareas]§ Managing Partner, Puno and Penarroyo Law(www.punopenalaw.com)§ Professorial Lecturer, UP National Institute ofGeological Sciences§ BS Geo, Bachelor of Laws (UP), Master of Laws(Univ. of Melbourne)
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