Renewable energy

ANY economy depends on competition. Any burgeoning economy depends on competing effectively.

The Asean decision, of which the Philippines is a signatory, to create an Asean free trade area (Afta) by 2015 should be regarded as an opportunity for economic development in Negros. We should not approach Afta defensively. When aspiring Congressmen and Senators talk in terms of “we shall fight for the sugar industry,” it is incumbent on them, by providing specifies, to say what they mean.

Sugar is a product which has tremendous scope for combining with other products and with chemical processes to obtain high added-value outcomes. The sugar industry should be buoyant in tone and not defensive. It is a substantial industry contributing approximately 1% of GDP. In contrast, remittances from Filipinos abroad amount to eight times as much. The sugar industry needs to put its significance in perspective.

Furthermore, it is unattractive for elected representatives, and those aspiring to be such, to complain about the unfairness of tariff reductions. If there is unfairness anywhere, it is with those who instituted tariffs in the first place.

We support those candidates who regard Afta as an opportunity. Again, specifics provided by candidates as to how we may benefit from our Asean membership are extremely welcome.

I drafted the above before last week's visit to Bacolod of John Gokongwei Jr., Chairman of JG Summit Holdings so I am delighted that he reminded us: “In life, there is always competition, competition is good. We have to live by the rules of Asean, we have to be ready, and we have to be very efficient.”

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Conglomerates live or die by the success or failure of their investments. Risk evaluation is of crucial importance. It is not appropriate, therefore, for the government to unnecessarily introduce uncertainty. Unfortunately, this is what is happening in the fledgling renewal energy (RE) sector. For years, there have been discussions about the feed-in tariff concept, which, in principle, is designed to encourage investment. But discussions have not led to a solid policy. Private sector investors choose other projects and foreign investors disappear.

The current state of play is follows:

1. Feed-in tariffs (FIT) relate to electricity generated from renewable energy sources.

2. The Nation needs around 10,000 MW of electricity.

3. Feed-in tariffs if and when implemented, will apply to a target of 760 MW.

4. Of the 760 MW, the allocation is 250 MW for hydropower, 250MW for biomass, 50 MW for solar power, 200MW for wind power, 10MW for ocean power.

5. In July 2010, the ERC approved the following FIT rates per kilowatt hour: Hydro P5.90, Biomass P6.63, wind P8.53, solar P9.68. These rates are a significant reduction, especially for solar, on previously announced rates.

6. The FIT allowance will be revised upwards with inflation and will apply for a fixed period of 20 years from approval.

7. Although FIT has been discussed for the past five years, no entity has been awarded a FIT contract.

8. No decision will be made by the government on a FIT application until the electricity from renewable energy sources is actually being produced. Investors, therefore, do not know whether their investments will be viable or not.

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Consequently, we will see many 'expected to,' 'planned to' 'scheduled to' news reports for renewable energy projects which are later quietly aborted. This is because the economic viability of the projects is never confirmed due to government indecisiveness.

Soon after PNoy came into office in July 2010, Finance Sec Cesar Purisima indicated that Public Private Partnerships would be a major plank in the government's economic growth policy. Our evaluation of PNoy's mid-term report on PPP and related issues is: 'could do much better.'

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"ENERGY IS ETERNAL DELIGHT" - William Blake (1757-1827) - The Marriage of Heaven and Hell (1790-3)