The International Renewable Energy Agency (IRENA) issued a whitepaper analysing the adoption of mini-grids in the Philippines.The paper highlight factors impacting on the market, and provides recommendations to improve the mini-grid market.
According to IRENA, factors such as lack of funding and regulatory support are hindering the market growth.
According to the Philippines Department of Energy, 4.2 million people do not have access to electricity.
The country has set a target to electrify 90% of households by the end of 2017 from 80.9% in 2014.
However, electrifying households in rural areas will remain a challenge due to the remote nature of infrastructure in these areas.
Therefore, the development of mini-grids will have the government to achieve its target.
Low capacity of consumers to pay, logistical complexities and location remoteness has scared away investors.
Streamline administrative and permitting processes. This is necessary to remove repetitions and redundancies. It is advisable for the remaining processes to be improved to reduce costs and processing times.
Revise procurement rules for off-grid areas. Considering the difficulty faced in attracting investments in off-grid areas, the use of a competitive selection process is considered inappropriate and unnecessary.
Improve tariff determination procedures. Tariff determination for off-grid projects is more complex than on-grid projects, and the current practice of using on-grid feed-in tariffs (FITs) is not appropriate for off-grid projects.
Increase access to financing. Access to both equity and loan financing is key to advancing off-grid renewable energy development, especially if more small operators are to enter the market. Government can both provide this funding directly and stimulate investment from private-sector financial institutions.
Promote knowledge and understanding of renewable energy by all stakeholders. Thorough and continuing capacity building is required for all stakeholders to improve their knowledge and understanding of renewable energy and to facilitate information exchange, both internally and internationally.
Establish a clear policy approach for mini-grids. There is need to introduce a graduation policy for the Universal Charge for Missionary Electrification entitlement. A recommendation is made for this policy to return to the original intent of the Electric Power Industry Reform Act: to focus funds on unviable areas, and, as previously mentioned, to simplify the application process to facilitate access by smaller operators.
Prioritise renewable energy in small, remote off-grid areas. Where suitable renewable resources are available, the use of RETs – either in hybrid systems or standalone – must be prioritised.
Define clear strategies for differentiation between grid extension and off-grid development. Distance from existing grid infrastructure, population density and electricity demand are all factors to consider in establishing the electrification method and technology.
Coordinate between agencies. Apply the consistent use of key terminology and definitions to ensure that all stakeholders have a common understanding of all plans, their objectives and targets, and that regulations are applied in line with their originally intended purpose.
Revise the current Missionary Electrification Development Plan to focus on reliable energy electricity access to small, remote and isolated areas. This includes the provision of electricity to currently unserved areas and the improvement of service to areas with limited supply.
Prepare a definite plan for off-grid electrification
Prepare the Total Electrification Plan by the NEA as mandated. A comprehensive plan would cover clear electrification objectives and concrete strategies and programmes, with a specific section on the electrification of off-grid areas.
Define private-sector boundaries. In line with the Electric Power Industry Reform Act of 2001 (henceforth referred to as the “Electric Power Industry Reform Act”), areas for increased private-sector involvement should be identified, and a transition from government to private-sector control in these areas planned.
Acknowledge and initialise other stakeholders’ roles. The private sector, non-governmental organisations (NGOs) and local government units all play important roles.
Remove overlaps and properly delineate roles, functions and accountabilities. Clarification of roles and delineation among the DOE, the National Electrification Administration (NEA) and the Small Power Utilities Group (SPUG) are key to facilitating the effective implementation of the aforementioned plans, as well as the efficient use of government resources.