Solar Power: The Case in Philippines

Nechoh A. Arbon
MS-ME, DLSU, Philippines

Introduction
Philippines is made up of 7,107 islands, and measures 308,000 sq. km. It is located in the
South China Sea and the West Pacific Ocean and has a population of more than 93 million
people. Over the past decade, the Philippines had been experiencing an average economic
growth of 5%. It is noteworthy that the Philippines had a growth rate of 7.6% in 2010, which was
the highest the country achieved in 30 years (World Bank, 2012). Economic growth is generally
tied up with increase in electricity demand. The countrys total primary energy supply slightly
increased from 39.29 million tonnes of oil equivalent in 2010 to 39.40 million tonnes of oil
equivalent in 2011. In the countrys energy supply mix, oil is the most prevailing energy source.
The countrys total generation from oil and coal based power plants increased by 25.2% and
11.5% respectively in 2011 to 2012 period (Department of Energy [DOE], 2012). As a net
energy importer of oil and coal, the Philippines is inevitably vulnerable to oil supply disruptions,
oil price fluctuations, and geopolitical dynamics shaping the energy exporting countries (Brahim,
2014). Also, dependence of fossil fuels will continue to contribute to GHG emissions in which
our country experiences the terrible effects of climate change. It is imperative that in meeting the
ever increasing demand of energy a sustainable path must be chosen by focusing on renewable
energy source.
An exhaustible source of energy that has not been fully tapped is solar. Solar energy
refers to sources of energy that can be directly attributed to the light of the sun or the
heat that sunlight generates which can be converted to electricity. The geographical location of
the Philippines enables it to harness solar energy because of high daily insolation, ranging from
4.2 to 6 kWh per square meter, and have low seasonal variation of solar radiation. The solar
potential is greatest during the summer months of May to July when the sun is positioned over
the Northern Hemisphere. Conversely, the months with the weakest sunlight are November to
January (SATMP, n.d.). There are two main types of energy conversion from solar to electricity.

Solar photovoltaic (PV) technology directly converts radiant energy into electrical energy using
PV cell made up of semiconductor material. PV market is mostly dominated by mono and poly
crystalline silicon but thin films are catching up. The other one is by concentrated solar power
CSP that uses solar heat to produce steam for electricity generation. Four types of CSP
technologies are currently available in the market: parabolic trough, fresnel mirror, power tower
and solar dish collector (Timilisina et al, 2012).
Applications for solar technology can be in small and large scale setup in a grid
connected or off-grid connected schemes. Since Philippines is an archipelago not all islands are
connected to grid. There are approximately 8000 barangays or small villages considered as unelectrified which comprised 10.6% of the population (DOE, 2006). Practical applications of PV
for small scale setup are solar home systems, street lighting system, battery charging stations and
solar pumps (SATMP, n.d.). A solar home system (SHS) is a modulated home lighting systems
which usuall contain one or two PV modules, a single battery with charge controller and one to
three energy efficient lamps (Brooks & Urmee, 2014). Building integrated PV can be also useful
in urbanized area where there are many commercial infrastructures in order to minimize
electricity bills. In 2004 the first grid connected large-scale 1 MW PV plant in the country
became operational composed of 6480 PV panels, south facing and tilted at 10 degrees from
horizontal. The project cost 5 million USD and financed by the Global Environment Facility
(USAID, 2009).

Barriers to the Development of Solar Technology

According to Timilsina et al (2011) and Faire (2006), there are hurdles in the deployment
of solar technologies for electricity generation and these are categorized in technical, economic,
social and political. Technical barriers for solar vary depending on the technology type. For PV
the main concern is on its low conversion efficiency and limitations of system components
performance like the batteries, inverters and other equipment. The issue on inadequate supply of
raw materials for PV manufacturing is not a main issue for the Philippines since it does not
mainly produce its own technology. In the case of CSP, general technical barriers are on the heat
carrying capacity of thermal fluids and thermal losses in energy storage system (IEA, 2006). As

mention earlier, Philippines have a high solar insolation on horizontal surface which make it a
good location for PV technology. The total solar insolation is the sum of direct, diffused and
reflected radiation. The viability of CSP in the Philippine is not that high because solar radiation
is mostly diffused. The downside of solar technology is that it does not produce power during
night and when there is a cloud that passes by during the day. It also to be noted that large
amount of land is required to produce electricity with the current PV technology in the market
(Fthenakis & Kim, 2009).

Figure 1: Levelized cost of electricity generation by technology in 2008 USD/MWh (Timilsina et al 2012)

The economic barriers mainly pertain to initial system costs. Although the costs of solar
energy have come down considerably and continue to fall, the levelized costs of solar energy are
still much higher compared to conventional technologies as can be seen in Figure 1. Looking
only at the capital cost, for solar technology it accounts for more than 80% of the levelized cost
while capital cost for fossil fuel based technology is only 60%. Financing is another aspect of
economic barrier because investors considered it as a high risk form of investment due to the fact
that solar energy projects have a shorter history. Aside from track record of solar projects;
lengthy payback periods and small revenue stream is a challenge to invest. An estimated payback
period for PV systems will reached approximately 10 years (Zhang, Shen, and Chan, 2012). A
framework was done to take account in the LCOE the environmental damage costs of fossil fuels

using sensitivity analysis. Even if a climate change damage of 100 USD/tCO2 to fossil fuel
technologies, still solar technologies are economically unattractive. Among renewable energy
technologies, wind and hydropower are far more competitive with conventional technologies
(Timilisina et al, 2012).
In line with technical and economic challenges, social aspect is also important.
Awareness of the community on the benefits such as electricity, help to the environment and
employment that can be derived from solar energy is a common problem to countries with much
solar potential (Ohunakin et al, 2014). It may specifically refer to issues on technology transfer
mainly to end users. There is a need for capacity development in the community both individual
and organizations to achieve sustainability, this includes the transfer of experience, knowledge,
skills and practices (Hong & Abe, 2012). The idea to provide rural households and small
communities with solar energy projects in the Philippines started since 1970. Philippines had
already applied this technology for a small scale rural energy projects by the help of international
aids from many donor organizations for the pass 20 to 30 years. Sadly, many of these projects
failed and around 20% to 25% are due to inappropriate social preparation (Brooks & Urmee,
2014). These projects lacked a comprehensive implementation plan and badly underestimated the
need for repair and maintenance, thinking that untrained local residents can maintain without
external support. However if systems owners, operators and installers are well equipped and
knowledgeable there is a great probability that projects failures would be eliminated and increase
the lifespan of the technology. The most basic requirements for successful training or capacity
enhancement are that the training reaches to the right people at the right time and delivers the
right content.
Government plays an important role in promulgating the use of the technology because of
the fact that it requires a high upfront cost, thus interventions is needed through policies that will
attract investors. Political barriers that can be considered are procedural problems such as the
need to secure financing from multiple sources and approvals from several agencies In
Philippines, securing legal permits for renewable energy development is difficult for investors
because the system of getting an approval is very complicated and sometimes require under-thetable transaction . No support is given for local manufacturing of solar technology that is why
most of solar projects equipment are imported. Incentive must be given in import duties and

subsidies for further exploitation of the technology. A study made by Gaur (2013) tells that
majority of off-grid electrification projects in the country are by diesel generator set. The
government is giving subsidies to these diesel mini grids under NPC SPUG (National Power
Corporation Small Power Utilities Group) and existing policies for off-grid renewable energy
electrification is unclear that is why solar PV is set aside. As discussed earlier solar energy
technologies are not yet cost-competitive with conventional energy sources, hence it is
imperative to have major policy incentives to be introduced to support the development of solar
energy (Timilisina et al, 2012).

Policies and Issues

Based on the share of the renewable energy in the Philippines, it can be observed that
there is a gradual drop of percentage of renewables in the total energy mix. From year 2000,
share of renewable is 47.63% but it decreases to 42.73% in 2008. In December 16, 2008 the
country enacted RA No. 9513 or the Renewable Energy Act of 2008 to accelerate the
exploration, development and utilization of renewable energy resources which includes solar in
order to enhance the countrys energy security which lessens dependence of fossil fuels and
reduce electricity rates (Senate of the Philippines [SOTP], 2014). It provides fiscal and non-fiscal
incentives in promoting commercial application of renewable energy systems. Fiscal incentives
includes income tax holiday, duty-free importation, special realty tax, net operating loss carryover, tax exemption of carbon credits and other cash incentives. Meanwhile, non-fiscal
incentives are feed-in-tariff (FIT), net-metering, renewable portfolio standard (RPS), green
energy option and renewable energy mark. In order to further stir the country in achieving the
goal laid down under the RA 9513, the DOE launched the National Renewable Energy Program
(NREP) on June 14, 2011. As a framework it provides the overall strategic policy directions in
the RE industry of the country and aims to address issues related to transmission, grid integration
for intermittent RE resources and socio-economic impacts. It targets to more than triple the
renewable energy-based installed capacity by 2030. For solar, NREP seeks to have 284 MW
additional capacities (Brahim, 2014). In the legislative level there are new bills proposed to
support existing RE policies. Senate Bill Nos. 1332 seeks to support R & D for the utilization of
diverse sources of energy. SBN 566 and 647 propose the creation of a Solar Initiative
Commission / Development Authority.

In the 2013 report jointly conducted by the World Wide Fund for Nature and the World
Resources Institute, it was stated that several details and rules pertaining to the policy
mechanisms of RA 9513 have been delayed and un-clarified. Among the non-fiscal incentive
mechanisms, only FIT and net-metering have been finalized and approved (SOTP, 2014). The
rules for net-metering by ERC were finalized on July 1, 2013. For the FIT policy, it was only in
July 2012, almost four years after the enactment of the RE Act that the FIT rates were issued.
The rate for solar is Php9.68 per kilowatt-hour. The approved rates were lower than what the
National Renewable Energy Board proposed which is Php17.95 per kilowatt-hour a reduction
of 46%. Current FIT Cap for Solar is only 50 MW. As of first quarter of 2014, 22 MW PV plant
of SaCaSol qualified for FIT, leaving less than 30 MW remaining for a list of more than 1 GW
proposed solar projects (CleanBiz Asia, 2014). Though the cap is low for FIT, the reason why
there is an increase in awarded solar projects as show in Table 1 is that other incentives is still
attractive for private investors.
Potential Capacity (MW)
Luzon

765.906

Visayas

319.000

Mindanao

269.250

Total

1354.156

Installed Capacity (MW)

22.00

22.00

Table 1: Awarded Solar Projects as of September 30 (DOE, 2014)

Conclusion
There is a vast potential for solar energy as a source of generating electricity in the
Philippines. Solar energy will reduce the countrys dependence on fossil fuel and also mitigate
environmental impacts. Though there is a trend of decreasing price of solar technology, still
investment cost is relatively higher compared to other technologies. At a global level, installation
of solar energy technologies was observed to grow exponentially with an average annual growth

rate of around 49%. On 2010, global installed capacity for PV had reached 40 GW, 15% off-grid
and 85% grid connected. The rapid expansion of the solar energy market can be attributed to
sustained policy support in countries such as Germany, Italy, US, Japan and China (Timilisina et
al, 2012). The Philippines can catch up to the global community of solar energy users if it can
fast track the implementation of renewable energy policies by finalizing the rules and regulations
for each incentive mechanisms.
The government has to enhance its information, education, and communication campaign
to encourage greater citizens participation. Capacity building is important for individuals
involved in rural electrification in the community to be successful and not repeat the previous
scenarios of solar projects.

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