The world faces major challenges. The financial crisis gripping us has affected various markets. Despite efforts of governments worldwide to resuscitate the financial industry, volatility prevails. However, this is only one aspect.

There is an uprising that is happening across the globe, brought about by increasing awareness that we are all both aggressors and victims at varying degrees, and therefore we are required to act accordingly to win this battle.

Inability to act and to act now undermines the many advances we have made in many decades. Our inaction today will surely jeopardize our security. It is failing the next generation, plundering them of the future that we so enjoyed today and should have passed on to them as an inheritance long after we are gone.

I am referring to our fight for clean environment, a green revolution to engage all sectors, including the financial sector, to take part in tackling a global challenge such as this.

The world has significantly changed. Estimates by the International Energy Agency (IEA) show that as the world economy expands, world energy needs would grow by 55% between 2005-2030 or about 17.7 billion tons of oil equivalent (toe) from 11.4 billion toe.

Economic growth and energy demand place increasing burden on natural resources and the environment. Carbon dioxide emissions are expected to go up to 42 gigatons (GT) in 2030 from only 27 GT in 2005, or up by 57%.

To sustain growth and manage the environmental impacts, it is imperative that we put in place an enabling environment to promote clean development including renewable energy.

Milestone

It has been remarkable years for renewable energy. Renewable energy marked historic milestone last year, reaching US$71 billion investments in new capacity. In terms of electricity generation capacity, a total of 240 gigawatts of electricity were produced from renewable energy in 2007.

Wind power dominated the capacity additions, growing by 28% to reach an estimated 95GW and recorded new investments of about US$37 billion.

Grid-connected solar photovoltaic was the fastest growing technology in the world with an estimated 7.7 GW or some 1.5 million homes with rooftops solar PV feeding into the grid. Biomass and geothermal energy were widely used for power and heating. Some more than 2 million ground-source heat pumps were used in 30 countries for building heating and cooling.

Biofuels as alternative fuels also exceeded production forecasts, reaching 53 billion liters in 2007.

Renewable energy growth was mainly driven by heightening concerns on climate change – people are now aware and better informed of climate change and its impact; persistently high oil prices, making renewable energy competitive with fossil fuel and growing regulatory support – for one, the European Union’s target of 20% of final energy from renewable energy by 2020 while China targets 15% of its primary energy from renewable energy by 2020. Other countries have also developed their respective policy measures to enhance renewable energy development and utilization.

Growing support by technology manufacturers and project developers to further improve technology also contributed to RE’s growth. Last year, Chinese wind turbine manufacturers, for the first time, penetrated the world’s wind market and became a major supplier. The Global Wind 2007 Report notes that Chinese wind manufacturers reached 5,000 MW of production capacity and is expected to increase to 10-12 GW by 2010.

Progress in Philippines    

As renewable energy enjoys worldwide growth, the Philippines RE sector has also progressed.

The Philippines targets a 60% energy self-sufficiency by 2010 in a bid to become more energy independent. As of 2007, self-sufficiency level improved to 57.20% from the 45% level in 2000. In the power generation sector, self- sufficiency level has reached 66% in 2006 as dependence on oil went down to 8.21% from 20.28%.

One way to achieve 60% energy self-sufficiency target is to enhance RE development. The Philippines is well endowed with RE sources. We are the second largest geothermal power producer in the world, the highest wind power potential in Southeast Asia, high solar penetration, abundant hydropower resource and biomass.

Under the Renewable Energy Policy Framework adopted in 2003, the Philippines aims to double RE capacity in 10 years. As of end 2007, RE capacity stood at 5,445 megawatts (MW).

The Philippine Energy Plan indicates additional capacity requirements of 5,393 MW for the period 2009-2012. In Luzon region a total of 3,711 MW additional capacity is needed; Visayas, 844 MW; and Mindanao, 838 MW.

Some of the additional capacity requirements would come from RE. A total of 2,469 MW are already in the pipeline. Many projects are either in the planning or construction phase. Early October this year, the first wind farm in Southeast Asia located in Bangui, Ilocos Norte commissioned another 8 MW of additional capacity to bring the total installed capacity to 33 MW.

Laws

What has made RE a growing sector in the Philippines?

Rather slowly but consistently over the years, the Philippine government has adopted several legislations to put in place a conducive environment that attracts and promotes RE, including Executive Order 232/462 – the Ocean, Solar and Wind Law; Presidential Decree 1441, an Act to Promote the Exploration and Development of Geothermal Resources; Republic Act No. 7156 on Mini-Hydro; Republic Act No. 9337 – the Reformed VAT Law and Executive Order 226 or the Board of Investments Incentive Act.

One major landmark legislation that was passed middle of this month is the Renewable Energy Bill, which lays down specific policies and measures to accelerate the development and utilization of RE.

As was the case with many countries that saw renewable energy as a mainstream energy with appropriate policies and incentives in place, the Philippines through the Renewable Energy Bill and the combination of policy instruments provided therein, hopes to speed up market development for RE. 

The approved RE Bill is now awaiting the President’s signature.

Among the features of the Bill include the Renewable Portfolio Standard which mandates energy suppliers to source a minimum percentage of their annual energy demand from RE-based sources.
   
It provides for a feed-in-tariff mechanism that sets a fixed price for electricity sourced from RE for 12 years.

It allows for a Green Energy Option that gives end-users freedom of choice to choose RE as their source of energy.

Incentives

Several fiscal incentives have also been approved to gain strong momentum for RE, such as income tax holiday for 7 years, longer than the previous 6 years, duty-free importation for RE equipment and materials, tax Credit on Domestic Capital Equipment and Services, and tax exemption of carbon credits.

Reaching the far flung areas of the Philippines is also given a priority under the approved RE Bill. Distributed generation using RE is one way to reach out to a number of people scattered across the archipelago and still living without any access to basic energy. The RE Bill provides for cash incentives for RE developers undertaking missionary electrification. This would make investments in these areas more viable and at the same time provide electricity for the people.

Setting targets through concrete policies and goals and enacting specific laws to lay down the mechanisms and strategies to make things happen are sure winners in keeping the momentum of RE, and clean development on a larger scale. The Philippines has set a 60% self sufficiency goal, with RE playing a major role, while Congress has passed the RE bill with the necessary measures and instruments to attract investments.

Climate change

Moody’s in July this year cited the Philippines efforts to move away from high oil prices and away from fossil fuels. It notes that Korea’s move to require only half of the government vehicle fleet to be used each day is too much of a short-term measure and will not put a dent in the demand for gasoline.

In contrast, the Philippines, as cited by Moody’s, moved a step in the right direction with long–term solution of passing a comprehensive renewable energy bill. I quote: “Longer-term solutions, based on providing incentives to innovate and conserve energy are needed to transition Asian economies away from their dependence on oil.”

But more importantly, it is a step towards sustainable growth, towards clean development. The Philippines stands to benefit by passing the Renewable Energy Bill from foreign exchange savings or fuel cost. Fossil fuels are imported and expensive compared to renewable energy which is free.

Avoided costs from harmful effects of conventional power plant emissions should also be considered. Climate change has costs. Estimate by the UNFCC Secretariat show that the cost of mitigating the impact of climate change runs to as high as US$200 billion. Economist Nicholas Stern notes that the cost of climate change is expected to rise even higher for every day of delay of action.

The Philippines finally passed the Renewable Energy Bill. Its passage could have not been any sweeter than now when calls are most urgent. We are very delighted to have achieved a significant inroad as our response to this challenge, to win our fight for a Green Revolution.

These are excerpts from the author’s speech at the Asia Pacific Finance and Development Center Biennial Forum in Shanghai, China delivered in October 2008.