Update on Implementation of the Philippine Renewable Energy Law:

Milestones and Targets

Asian Development Bank Manila, Philippines June 7, 2012

JOSE M. LAYUG, JR. Undersecretary Department of Energy Republic of the Philippines

DISCUSSION OUTLINE
Background
Available RE Resources Power Supply Mix and Energy Production

Renewable Energy Act of 2008

Incentives and RE Mechanisms DOE, NREB, ERC

2010-2012: What Have We Done? 2012-2013: What Are Next Steps?

UPDATE ON RE IMPLEMENTATION

BACKGROUND

RENEWABLE ENERGY RESOURCES

BIomass (bagasse) total potential of 235.7 MW Geothermal Resource 1,200 MW Solar Energy Average potential 5kWh/m2/day Hydropower - 10,500 MW Ocean energy - 170,000 MW Wind resources 76,600 MW

COMPARATIVE RE UTILIZATION ; <=<(Q) # $(+, % . , J (G ' , I J (6 " 7 7 $J Y & Q! G( . > & (% (:

Share of RE and Non-RE

PRIMARY ENERGY SUPPLY MIX

2010
Oil, 2.3 Coal, 8.6 Natural Gas, 7.4 Hydro, 4.8

Imported Oil, 33.6

Indigenous Energy, 57.51 Geothermal, 21

Imported Coal, 8.6

Biomass, 13.1 Wind/Dolar, 0.01 CME/Ethanol, 0.3

Imported Ethanol, 0.3

POWER GENERATION MIX

Biomass, 0.02%

2009

2010
Natural Gas, 32.1%

Biomass, 0.04%

Geother mal, 16.7%

Hydro, 15.8%

Geothermal, 14.7% Natural Gas, 28.8%

Oil, 8.7% Wind, 0.1% Solar, 0.002% Coal, 26.6%

Hydro, 11.5%
Oil, 8.0% Wind, 0.09% Solar, 0.002% Coal, 34.4%

CRUDE OIL IMPORTATION 2010

Saudi Arabia, 45.3

Malaysia, 10.2
Middle East 81% Others, 8.2 UAE, 27 Qatar, 6.4 Iraq, 1.2

Indonesia, 0.7

Oman, 1

COMPARATIVE ENERGY DATA

Country
China (coal 70%) Vietnam (coal) Thailand (natural gas 66%) Indonesia (coal and oil)

Oil Production
3.99 mb/d (5th) 300 kb/d (35th) 380 kb/d (32nd) 1.09 mb/d (21st)

Gas Production
94 bcm (8th) 9.4 bcm (42nd) 30.8 bcm (25th) 82.8 bcm (12th)

Coal Production
3,240 Mt (1st) 44.1 Mt (17th) 17.9 Mt (25th) 305.9 Mt (6th)

RE Target
30% (2035) 5% (2020) 25% (2021)* (currently 2%) 25% (2025)* (currently 4%)

Malaysia (natural gas 60%)

Taiwan (nuclear, oil and natural gas) India (coal 53%) South Korea (oil, coal and nuclear)

693 kb/d (27th)

276 kb/d (37th) 878 kb/d (24th) 48 kb/d (65th)

58.6 bcm (16th)

310 m3 (71st) 120 bcm (5th) 532 m3 (66th)

78 Mt
N/A 569.9 Mt (3rd) 3 MMst (short tons)

17% (2030)* (currently 5%)

15% (2025)* (currently 8%) 15.9% (2022) (currently 11%) 10% (2022)

PHILIPPINES
(coal and gas)

9 kb/d (85th)

3.1 bcm (52nd)

7.2 Mt (31st)

50% (2030)
(currently 30%)

IMPLEMENTATION OF RE LAW

THE LAW

Accelerate the development of the countrys renewable energy resources by providing fiscal and non-fiscal incentives to private sector investors and equipment manufacturers / suppliers.

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INCENTIVES UNDER RE ACT

Renewable Energy Act (RA 9513)

Fiscal Incentives

Non-Fiscal Incentives

Renewable Portfolio Std

FIT Scheme
12

NetMetering

Green Energy Option

FISCAL INCENTIVES
Incentives
7-Year Income Tax Holiday Duty-free Importation VAT-free Importation Special Realty Tax Rate = 1.5 % Net Operating Loss Carryover 10% Corporate Tax Rate after ITH Accelerated Depreciation Zero Percent VAT on RE Sales & Purchases Cash Incentive = 50% of UC for Missionary Electrification Tax Exemption on Carbon Credits Tax Credit on Domestic Capital Equipment & Services
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RE Developers
Yes Yes No Tax Credit

Local RE Suppliers
Yes Yes Yes

Yes
Yes Yes Yes Yes Yes Yes Yes Yes

Yes
Yes Yes

NON-FISCAL INCENTIVES
Incentives
Renewable Portfolio Standards Feed-In Tariff on Emerging Technologies Renewable Energy Market & Certificates Green Energy Options Net Metering Government waives share of proceeds on RE micro-scale Projects <= 100 kW Exemption from Universal Charge Tax Rebate for RE Components Financial Assistance Program Incentives for Host Communities
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RE Developers
Yes

Electricity Suppliers

End-users

Yes
Yes (for Non-FIT)

Yes
Yes Yes Yes

Yes Yes Yes Yes Yes

INCENTIVES UNDER RE LAW

Renewable Energy Law (RA 9513)

Fiscal Incentives

Non-Fiscal Incentives

Renewable Portfolio Std

FIT Scheme
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NetMetering

Green Energy Option

IMPLEMENTATION OF RE LAW

WHAT HAVE WE DONE IN 2010-2012?

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DOE SPECIFIC ACTIONS

National Renewable Energy Program (NREP) Signals big leap from fragmented initiatives into a focused and sustained drive towards energy security and improved access to clean energy and sets indicative interim targets for delivery of RE within timeframe of 2011-2030 a Living Document Renewable Portfolio Standards (RPS)

The RPS is an important component of the implementation of the RE Act. The NREB shall set the minimum percentage of generation from eligible RE resources and determine to which sector RPS shall be imposed on a per grid basis. The electricity suppliers are required to source this minimum percentage i.e. RPS from eligible RE generation facilities.
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DOE SPECIFIC ACTIONS

Renewable Portfolio Standards (RPS) Conducted seven Regional Public Consultation (Luzon, Visayas, Mindanao), Round Table discussion (RTD) at DOE and Plenary Public Consultation at PICC on Feb. 16-25, 2010, March 25, 2011 and November 14, 2011 respectively. RPS Rules pending approval by DOE Secretary. Feed-in Tariff A fair FIT would encourage investments without unduly burdening the consumers. The FIT also guarantees payment of a fixed tariff for RE generation for a mandated number of years.

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RE AWARDED CONTRACTS
Resource Hydro Ocean Geothermal Wind Solar Biomass TOTAL Awarded Contracts (Own-Use) 138 3 35 53 (1) 17 (1) 24 (19) 291 Potential Capacity (MW) 2,450.16 5.00 806.00 1,708 (0.06) 271 (0.08) 164.30 (40.0) 5,444.76

RE PENDING APPLICATIONS

Resource Hydro Ocean Geothermal Wind

Awarded Contracts (Own-Use) 157 2 1 19

Potential Capacity (MW) 1,848.65 60.00 286.00

Solar Biomass TOTAL

24 (1) 6 (3) 213

117.83 (0.02) 51.20 (1.36) 2,365.06

LUZON GRID
Northpoint - Aparri (20 MW) Alternergy Pililia, Sta. Praxedes, Kalayaan, Ballesteros (120 MW) TAREC Ballesteros, Sibunag, Nueva Valencia (90 MW) UPC Pagudpud (80 MW) EDC Burgos , Pagudpud (166 MW) TAREC Lorenzo (54 MW) ELPI Pasuguin (120 MW) PERC Sual (30 MW) Nabas (30 MW) HEDCOR Benguet , Mt. Province (17 MW)

SUWECO Cagayan (6MW) Epower Ifugao (4.5 MW) - Nueva Ecija (8MW)

Green Power - Nueva Ecija (17.5 MW) - Pangasinan (17.5 MW)

Clean&Green Camsur (1.5 MW)

Legend: 136 887

HEP Geothermal

Aboitiz Makban (458 MW) Tanawon Geo (40 MW)=2013 Rangas Geo (40 MW)=2015 Manito-Kayabon Geo (40MW)=2016 EDC BacMan (150 MW) Aboitiz Tiwi (289 MW)

Biomass
Wind

VISAYAS GRID
SUWECO Panay etc. (31 MW) HEDCOR Aklan (18 MW) Century Peak Iloilo (5MW)

Green Power Panay (35 MW)

P A N A Y

Legend:

EDC Nasulo Geothermal (20 MW) Southern Leyte Geo (40 MW) - 2019 Green Core Leyte (112 MW) EDC Tongonan, Leyte (722 MW)

HEP Geothermal Biomass

Dauin Geo (40 MW) - 2017 Green Core Panlinpinon (192 MW) EDC Negros (49 MW)

MINDANAO GRID
CEPALCO Cabulig HEP (8 MW)=June 2011

AGUS 3 HEP (225 MW)=2011 HEDCOR Bukidnon (38.2MW)

HEDCOR Sibulan Inc. (42.5 MW)

Legend:

HEP Geothermal Biomass

EDC - Mindanao Geothermal 3 (50 MW)=2014 - Mt. Apo (108 MW)

HEDCOR Davao (25.1 MW)

NATIONAL RENEWABLE ENERGY PROGRAM

RE-based On-Grid Capacity Installation Targets

NREB SPECIFIC ACTIONS

Feed-in Tariff Filed a petition to initiate rule-making for the adoption of the FIT for electricity generated from biomass, ocean, run-of-river hydropower, solar and wind energy resources last May 16, 2011. Net -Metering Interconnection Standards Approved the Rules Enabling the Net Metering Program for RE on April 11, 2012 and subsequently endorsed to ERC on April 20, 2012. The Rules seek only to establish the net-metering interconnection standards for RE while the pricing methodology will be addressed in another set of rules and will be endorsed to the ERC in due course.

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NREB SPECIFIC ACTIONS

Renewable Portfolio Standards (RPS) for Missionary Areas To contribute to the growth of the renewable energy industry by diversify energy supply, spur socio-economic development, and help address environmental concerns in missionary areas. Technical Working Groups on Off-Grids is finalizing draft RPS for presentation to NREB.

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ERC SPECIFIC ACTIONS

Feed-in Tariff Approved FIT Rules on July 12, 2010 which took effect on August 12, 2010. The NREB FIT petition was subjected to a series of continuous public hearings and presentation of evidence. On March 20, 2012 the ERC declared the hearing terminated. To date, the DOE, NREB and all interested parties are awaiting for the FIT rates to be determined by the ERC.

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IMPLEMENTATION OF RE LAW

WHAT ARE NEXT STEPS IN 2010-2012?

2012-2013 NEXT STEPS

Feed-in Tariff Implementation RE Trust Fund RE Resource Inventory and Assessments RPS Issuance and Setting Eligibility Criteria Rules Grid Impact Studies and Interconnection Agreements Green Energy Option Processing of RE Applications Mainstreaming RE: Information and Education Campaigns, Regional and Area-based Development
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RENEWABLE ENERGY PLANS AND PROGRAMS

RE-based On-Grid Capacity Installation Targets

[1]

Based on existing RE Service/Operating Contracts awarded and being evaluated by the DOE. The aspirational target of 1,528 MW solar power capacity will still be pursued.

THE ROAD STARTS HERE

Update on Implementation of the Philippine Renewable Energy Law:

Milestones and Targets
Asian Development Bank Manila, Philippines June 7, 2012

JOSE M. LAYUG, JR. Undersecretary Department of Energy Republic of the Philippines