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Philippine Geothermal Energy Country Update Presented at the ARGeo 4 2012 Conference in Kenya

Philippine Geothermal Energy Country Update Presented at the ARGeo 4 2012 Conference in Kenya

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    Penarroyo ARGeo 4 Presentation Penarroyo ARGeo 4 Presentation Presentation Transcript

    • 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
    • Production Contract Areas
    • Exploration Contract Areas
    • 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
    • Installed Capacity, 2009-2011
    • Power Generation MixTotal Generation: 68,279.07 GWh20112010Total Generation: 67,743 GWh
    • Committed Projects
    • 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
    • Expected Milestones 2011-2030
    • NREP Targets 2011-2030
    • On-grid Capacity InstallationTargets
    • 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
    • Asante!
    • 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)