MANILA, Philippines : The Philippines is seen to save P13.5 billion annually if off-grid areas shift their power source from diesel to renewables, according to a report made by the Institute for Energy Economics and Financial Analysis (IEEFA).
The report said an additional P1.4 billion to P1.7 billion could be saved by electric cooperatives (ECs) over the next decade with the shift to clean energy.
IEEFA energy finance analyst Sara Jane Ahmed said diesel is no longer the only way to power up the off-grid market as “renewables can effectively supply off-grid markets, realizing significant savings for electric cooperatives burdened by a lack of financial reserves.”
Renewable solutions could be tailored to local grid characteristics, the report said.
In fact, solar and storage, wind, run-of-river hydro and biomass from coconut husks have prices well below diesel-power generation.
If the National Power Corporation-Small Power Utilities Group (NPC-SPUG) shifts away from diesel, it could realize savings of up to P13.5 billion per year.
This is because the government-owned and controlled NPC-SPUG can do without the cross-subsidy called the Universal Charge for Missionary Electrification (UCME), which is used to underwrite the cost of electricity for electric cooperatives in areas not connected to the main transmission system.
The country’s off-grid islands are powered by diesel plants, which provide expensive unreliable power despite the fact that these plants cost more than new high performance renewable units.
But in her analysis, Ahmed said solar PV plus lithium-ion batteries can now reliably deliver power at a significant discount to the price-performance potential of the current diesel-power fleet.
“With less transport costs due to importing diesel, electric cooperatives could see savings from a shift to decentralized, modular renewables ranging between P1.38 billion ($66 million) and P1.7 billion ($82 million) over the next decade,” she said.
“Renewable energy is now up to 60 percent cheaper than diesel-fired power but the isolated and island grids are dominated by diesel power. This is unsustainable from a financial viability and energy security standpoint,” Ahmed said.
Financial challenges facing small grids will require a policy response, the report said.
In the past six months, ECs incurred at least P3.16 billion in infrastructure damage due to climate-fueled disasters.