Guido Alfredo Delgado, President and CEO, Emerging Power Incorporated: Interview

Interview: Guido Alfredo Delgado

To what extent is renewable energy cost competitive compared to conventional energy?

GUIDO ALFREDO DELGADO: Together with other sources of renewable power, wind provides a clean source of energy on a 24/7 basis. Albeit intermittent, combined with solar or even natural gas, wind may be designed in some hybrid fashion to provide the stable power that the system needs. Similarly, the sun is the planet’s single greatest source of energy as the solar power that is emitted to the earth in a year is twice the amount produced by fossil and nuclear energy around the world.

A major impediment to the development of wind and solar power in the past was the misconception that a higher use of renewable energy in the country’s energy mix will increase the cost of power generation. This is because energy planners prefer to use the least-cost method, which only considers the fact that the standalone cost of building wind and solar power plants is higher compared to the cost of building fossil fuel or coal-based plants. Such a method only considers current prices and ignores existing risks like the diminishing supply of coal and oil worldwide, changing policies of coal-producing nations and the peso value falling against the dollar, making these sources much more expensive in the future. On the other hand, adding more renewable energy can reduce the variable system cost of electricity in the long term, even as the price of other sources of conventional power shoot up.

What challenges does the transmission grid pose for renewable energy development?

DELGADO: The role of the National Grid Corporation of the Philippines (NGCP) is to balance the demand and supply of energy by finding the correct mix of high-voltage generating power plants to transmit the generated electricity to distribution utilities, which in turn distribute the electricity to end-users. With a constant power supply from conventional energy sources, the operator merely matches the level of frequency, voltage and demand, and adjusts the level of supply accordingly to ensure the system’s security and stability. However, this process becomes more complicated when intermittent energy like solar and wind is included as part of the supply. This will require the operator to scrutinise both demand and supply more carefully to ensure that the system is stable and secure. To facilitate the adoption of more renewable energy into the system, one would need to reconcile the challenges of intermittency with NGCP’s financial objectives. Otherwise, the operator would not see an incentive in managing a more complex system without an adjusted fee to compensate for it. A possible alternative would be to spin off the system operations function to an independent system operator.

How can further geothermal power generation be encouraged in the Philippines?

DELGADO: There is a high inherent risk in geothermal power generation. Geothermal exploration is very expensive from the feasibility study to the drilling stage, while success rates are unpredictable. Many of the drilling projects across the country are being done on concessions awarded by the government and where previous drilling has occurred; therefore, they put the investor in a better position to minimise risk and save on costs. In the case of greenfield exploration projects, the investment is much riskier, and thus it would benefit from government support. The establishment of a fund to support geothermal exploration, like in the form of an award guarantee, is a way to make it more competitive. For example, the government can work with insurance companies and put up a fund to guarantee the recovery of up to 80% of exploration costs. The absence of such a mechanism would make this type of investment prohibitive. Of course, there are regulatory hurdles given the need for numerous permits and environmental clearances, but the major barrier to entry in this segment is the risk of exploration.