OBG talks to Jose Rene Almendras, Secretary, Department of Energy

Interview: Jose Rene Almendras

What is your outlook for the evolution of the power mix in the Philippines in the coming years?

JOSE RENE ALMENDRAS: For many years, the Philippines took a short-term approach to addressing its power needs. However, power is always a long-term concern. The current administration is working to put the Philippines back on the correct path towards sustainable energy development through proper planning. This includes addressing the country’s shifting power mix, not only at the present time but also five, 20 or even 30 years into the future. Therefore, when evaluating investment priorities, the Philippines must not only consider its immediate power needs, but also address the demands of the future. This requires flexibility, because technology and the global energy industry are dynamic and constantly changing. Currently, the Philippines has a need for base-load generation, which is most easily fulfilled by coal and natural gas plants. That being said, the overall trend in the Philippines will be towards green and renewable technologies. The Philippines already generates over 50% of its power from renewable sources, and this figure is expected to continue to grow over the long term. To support this, the department is pushing for the implementation of the Renewable Energy Law, including the establishment of appropriate feed-in tariffs and renewable portfolio standards (RPS).

There are qualities that the Philippines is blessed with, and qualities it is not. We need to focus on the development of energy that is economically viable in the Philippines, taking into account both the maturity of the various technologies as well as the natural resources of the country. Geothermal energy, for example, is already widely developed and will continue to play a major role in the sector. There is substantial opportunity in the Philippines to develop both large and small-scale hydropower. There is also plenty of potential in biomass, given that the Philippines is still an agricultural country that produces ample agricultural waste. However, the constant evolution of these technologies, makes predicting the energy mix of the future difficult.

What can be done to ensure the adequate supply and affordable price of power in the Philippines?

ALMENDRAS: The economy and the population of the Philippines are both growing, and this will bring increased demand for power. To address this future need, we are seeing many large-scale developments in additional power generation capacity, which are being led entirely by the private sector.

The key to lowering energy prices is to make the country an attractive place to bring in new technology that makes power generation cheaper. This will also create a dynamic and competitive market that rewards efficiencies and attracts additional players. It is essential to eliminate the financial risks in distribution, which will encourage generators to provide at a lower price.

How is the Philippines working to achieve self-sufficiency for its energy needs?

ALMENDRAS: Developing self-sufficiency in energy is one of the primary goals of the Department of Energy, and this entails developing indigenous sources as fast and as efficiently as possible. In terms of oil and gas resources, the Philippines is holding the fourth Philippines Energy Contracting Round (PECR 4). PECR 4 features 15 service contract areas for the private sector to study and explore in terms of feasibility of development. The launch of the PECR 4 was attended by 140 different companies, both domestic and foreign, which we see as a testament to the improved business and investment atmosphere in the country.

Indeed, this administration is working to support a level playing field and to favour developers that are best qualified to move this country forward in its development. We also intend to offer additional coal contracts by early 2012, and hold a new PECR for hydrocarbons resources every two years. Compared to other countries in the region, including Vietnam, the resource development potential of the Philippines remains largely unexplored. With more exploration comes a higher probability of discovering economically viable resources.