Philippine Geothermal Update Presentation for UNU-GTP s 30 th Anniversary August, 2008 Iceland Alicia N. Reyes Department of Energy
OUTLINE Historical Accounts Sector Performance Developments Challenges Conclusions 2
HISTORICAL ACCOUNTS GEOLOGICAL INVESTIGATIONS 1964 The then Philippine Commission on Volcanology (COMVOL) did an inventory of hot springs in the country and investigated Tiwi, Albay to determine the country s capability to produce geothermal energy. 3
HISTORICAL ACCOUNTS PILOT PROJECTS 1967 - Philippine Government installed a 2.5kw pilot plant in Barangay Cale, Tiwi, Albay. 1977 - PNOC-EDC (Philippine National Oil Company Energy Development Corporation) installed a 3 Mw pilot plant in Tongonan, Leyte followed by another 1.5 Mw pilot plant in Palinpinon, Negros Occidental 4
The 1.5 Mw Pilot Plant at Negros Occidental installed in 1977 5
Geothermal Service Contracts 6
2007 Geothermal Performance Power Plant Installed Capacity (MWe) Dependable Capacity (MWe) Electricity Generation (GWh) Tiwi 344.00 289.00 910.15 Makban 458.53 445.80 2,613.61 Tongonan I 112.50 112.50 663.21 Unified Leyte 610.18 610.18 3,631.20 Palinpinon I 112.50 112.50 770.20 Palinpinon II 80.00 80.00 600.63 NNGPP 49.38 17.00 98.60 Bacman 150.00 75.00 110.74 Manito Lowland 1.50 0.00 0.00 Mindanao I 54.24 54.24 428.38 Mindanao II 54.24 54.24 429.74 TOTAL 2,027.07 1,850.46 10,256.46 7
Philippine Geothermal Fields 8
Geothermal Sector Performance 2007 Primary Energy Mix Imported Coal 10.3% Local Oil 1.6% Natural Gas 7.7% Local Coal 4.6% Imported Oil 34.0% Geothermal 22.3% Ethanol 0.0% CME 0.1% Biomass 14.1% Hydropower 5.4% Solar, Wind & Micro-hydro 0.0% Self Sufficiency Level = 55.7% 9
Geothermal Sector Performance Oil Based 23% Wind/Solar 0% Coal 26% Hydro 21% Geothermal 12% Natural Gas 18% 2007 Capacity Mix Rated Capacity 15,937 MW 10
Geothermal Sector Performance Power Generation Mix Geothermal 17.1% Hydro 14.4% Wind and Solar 0.1% Coal 28.3% Natural Gas 31.5% Oil Based 8.6% 11
Geothermal Sector Performance 2007 World Geothermal Installed Capacity in MW WORLD S LEADING GEOTHERMAL POWER PRODUCER 2007 Installed Capacity in MW USA Philippines New Zealand Mexico Japan Italy Indonesia Iceland El Salvador Costa Rica - 500 1,000 1,500 2,000 2,500 3,000 Running Capacity (MW) Installed Capacity (MW) Source: Geo-Heat Center Bulletin, September 2007 * DOE data 12
DEVELOPMENTS The Philippine Energy Contracting Round A system of contracting for the development of energy resources where development proposals are solicited from interested investors and evaluated against established criteria to determine the qualification of the bidder. Scheme started with the Petroleum Contracting Round undertaken with the assistance of Norway in 2003. Geothermal Contracting Round followed in March 11, 2004. Energy Contracting Round for Petroleum, Coal and Geothermal prospects followed in August 31, 2005 and December 21, 2006. 13
DEVELOPMENTS The Philippine Energy Contracting Round Year No. of Areas Offered Nature of Area Results 2004 10 5 areas for expansion/optimization of existing fields 5 new areas for exploration and development 2005 11 7 new areas for exploration and development and 4 new areas for direct application 2006 3 3 new areas for exploration and develop - - Awarded GSCs* to the 3 winning bidders * GSCs Geothermal Service Contracts 14
DEVELOPMENTS The Philippine Energy Contracting Round Three new geothermal service contracts awarded through the Philippine Energy Contracting Round: Mabini geothermal field to Basic Energy Corp. Amacan geothermal field to Guidance Management Corp Biliran geothermal field to Biliran Geothermal Inc. (a consortium comprising of FEDCO, Geysir Green and Reykjavik Energy) 15
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DEVELOPMENTS Privatization PNOC-EDC wholly privatized on November 2007 with First Gen Corp as the major stockholder. The firm is now known as Energy Development Corporation. Further, under the provisions of the Electric Power Industry Reform Act of 2001 (EPIRA), privatization of government-owned geothermal generating assets will be underway to improve retail competition and open access: Makban Asset in Laguna/Batangas (bidded) Tiwi Asset in Albay (bidded) Palinpinon Asset in Negros Oriental ( August 2008) Tongonan Asset in Leyte (September 2008) Bacman Asset in Albay (October 2008) 17
DEVELOPMENTS The WESM WESM means the Wholesale Electricity Spot Market Gross Pool All energy transactions are scheduled in the market Gross Dispatch Generators submit energy offers (price and Quantity) for central scheduling and dispatch Dispatch Schedule Based on particular offers/bids, transmission constraints and losses, reserve optimization Trading period 24 hours/day, 7 days per week Scheduling & Dispatch Timeline Hourly trading interval, hourly scheduling & dispatch, 2-hours ahead cut-off time for bids & offers Mandatory Market EPIRA mandates procurement of at least 10% from the market 18
How WESM Bidding Works Market Input Data: Energy offers and bids Reserve offers Trading Participant PEMC Market Clearing Results: MCPs and MCVs System Condition: Outages Contingencies Transmission limits Dispatch Instructions: Dispatch targets System TransCo Operator Billing & Settlement Charges and Payments Market Operator Revenue Meters: Metered values MSP Napocor Plant Napocor IPP Non-NPC IPP IPPs 19
Salient Features DEVELOPMENTS The Renewable Energy Bill A priority of the President, the Bill passed the Lower House on June 12, 2008 and is now in the amendment stage at the Senate FISCAL INCENTIVES Income tax exemption first 6 years Net Operating Loss Carryover (NOLCO) First 3 years Exemption from the universal charge VAT Zero-rated on the sale of power generated from RE resources Government share of at least 2% of the gross proceeds from the sale of geothermal steam 20
Salient Features DEVELOPMENTS The Renewable Energy Bill NON-FISCAL INCENTIVES Renewable Portfolio Standards Feed-in Tariff Green energy option Off-grid renewable energy development program 21
DEVELOPMENTS Statutes Amendment of the Department Circular 2006-12-014 on the Philippine Energy Contracting Round Aims to accommodate intentions to explore and develop energy resource prospects that were not offered in the DOE- initiated contracting round such that a special contracting round will be launched for a nominated area 22
DEVELOPMENTS Research and Promotion for direct use application Drafting of policy for non-power applications 23
2007-2014 2007-2014 INDICATIVE INDICATIVE GEOTHERMAL GEOTHERMAL CAPACITY CAPACITY ADDITIONS ADDITIONS Super Super Potential Year Plant Location Potential Year Region of Plant Location Region of Capacity Capacity (MW) (MW) Available Available North North Luzon Luzon Agribusiness Agribusiness Quadrangle Quadrangle Batong Batong Buhay Buhay Batong Batong Buhay, Buhay, Kalinga Kalinga 60 60 2013 2013 CAR CAR Buguias Buguias Tinoc Tinoc Buguias Buguias Tinoc, Tinoc, Ifugao Ifugao 60 60 2014 2014 Daklan Daklan Daklan, Daklan, Benguet Benguet 20 20 2014 2014 Region Region II II Baua Baua Baua, Baua, Cagayan Cagayan 20 20 2014 2014 Metro Metro Luzon Luzon Urban Urban Beltway Beltway Region Region III III Natib Natib Natib, Natib, Bataan Bataan 40 40 2012 2012 Region Region IV-A IV-A Mabini Mabini Mabini, Mabini, Batangas Batangas 20 20 2012 2012 Region Region IV-B IV-B Montelago Montelago Montelago, Montelago, Oriental Oriental Mindoro Mindoro 40 40 2012 2012 Central Central Philippines Philippines (Tourism (Tourism Center) Center) Tanawon Tanawon Albay Albay and and Sorsogon Sorsogon 40 40 2011 2011 Region Region V Rangas Rangas Albay Albay and and Sorsogon Sorsogon 40 40 2013 2013 Manito Manito Kayabon Kayabon Manito, Manito, Albay Albay 40 40 2013 2013 Northern Negros* Bago City, Negros Occidental 49.375 2007 Region VI Northern Negros* Bago City, Negros Occidental 49.375 2007 Region VI Mandalagan Mandalagan Mandalagan, Mandalagan, Negros Negros Occidental Occidental 20 20 2014 2014 Nasulo Nasulo Geothermal Geothermal Power Power Palinpinon, Palinpinon, Negros Negros Oriental Oriental 20 20 2010 2010 Region Region VII VII Project** Project** Dauin Dauin Dauin, Dauin, Negros Negros Oriental Oriental 40 40 2011 2011 Region Region VIII VIII Biliran Biliran Biliran, Biliran, Biliran Biliran 20 20 2012 2012 Mindanao Mindanao Super Super Region Region (Agribusiness) (Agribusiness) Region Region IX IX Lakewood Lakewood Lakewood, Lakewood, Zamboanga Zamboanga del del Sur Sur 40 40 2012 2012 SE Apo SE Apo (Kapatagan), Davao del Sur 40 2014 Region XI SE Apo SE Apo (Kapatagan), Davao del Sur 40 2014 Region XI Amacan Amacan Amacan, Amacan, North North Davao Davao 20 20 2013 2013 NW Apo NW Apo (Tiko), North Cotabato 20 2012 Region XII NW Apo NW Apo (Tiko), North Cotabato 20 2012 Region XII Mindanao Mindanao III** III** Mt. Mt. Apo, Apo, North North Cotabato Cotabato 50 50 2010 2010 TOTAL TOTAL 699.38 699.38 commissioned last February 2007 * * commissioned last last February 2007 2007 ** committed projects ** ** committed projects projects 24
DEVELOPMENTS Technical Expertise Total UNU-GTP fellows = 31 16 retired but some still remained in the industry as consultants or as co-investors 12 stays with EDC (now private) including two who took masteral courses of the UNU-GTP 3 stays with DOE 25
DEVELOPMENTS The National Geothermal Association of the Philippines (NGAP) Membership at 311 Registered with the Securities Exchange Commission (SEC) on June 19, 2003 Affiliated with the International Geothermal Association (IGA) on June 2003 Affiliated with the Western Pacific Regional Branch (WPRB) in May 2006 Officers (June 2006-2009) headed by Mr. Larry Bayrante of the Energy Development Corporation 26
CHALLENGES Technology Development technology that can tap acidic or young geothermal systems Lack of permeability in prospect areas Optimization of geothermal resource utilization through cascade and nonpower use, and development of small-scale and low enthalpy systems 27
CHALLENGES Environmental/Social Exploitation of geothermal resources located inside protected areas and ancestral domains Technical Expertise New fields will be developed in the mid-term and more players are coming into the sector therefore the country needs to have sufficient local expertise to back up the projects 28
CONCLUSIONS The Philippines had been consistent with its thrust to prioritize geothermal development branding it as a reliable, environmentally benign and cost effective energy alternative to oil The resource is gaining popularity among investors in view of the aggressive stance on the preservation of the environment and of the soaring oil price such that new players come in and more are inquiring about promising areas for the renewable geothermal resource 29
CONCLUSIONS The contracting round proved to be an effective system to attract new investors to provide not only investments but also advanced technology Geothermal projects are generally socially acceptable. However, there are cases when geothermal resources are located within protected areas and ancestral domains such that it becomes difficult to get the consent to operate the resource A new pool of geothermal specialists need to be developed soon 30
Thank You! 31
HISTORICAL ACCOUNTS Policy GEOTHERMAL SERVICE CONTRACT SYSTEM PRESIDENTIAL DECREE 1442 June 11, 1978 An act to promote the exploration and development of geothermal resources 32
HISTORICAL ACCOUNTS Policy Terms and Conditions of PD 1442 Exploration period is maximum of 10 years Development and exploitation period of 25 years extendible for an additional of 15 years Posting of a performance guaranty equivalent to the first year of financial commitment 33
HISTORICAL ACCOUNTS Policy Incentives under PD 1442 Recovery of operating expenses not exceeding 90% of the gross value in any year with carry-forward of cost still not recovered Service fee of up to 40% of net proceeds Exemption from all taxes except income tax Income tax obligation paid out of government s share Exemption from payment of tariff duties and compensating tax on the importation of machinery, equipment, spare parts and all materials for geothermal operations Depreciation of capital equipment over a ten (10) year period 34