Excerpts from "Financing Renewable Energy in the Philippines" by Maitet Diokno of the Center for Power Issues and Initiatives. Published by the CPI and Friedrich Ebert Stiftung Policy Paper Series #002
A broadened provision of financing for renewable energy could benefit a wide range of Filipinos. One group would of course be those consumers who are already connected to the grid and who would like a cheaper option, a green option, a smarter option, or all of the above. They range from the low-income to high-income households with varying degrees of knowledge and awareness about renewable energy and how it could change their lives and their way of life.
Another group consists of disenfranchised consumers who do not have electricity in their homes. Mainly because they live in isolated areas far away from the grid, and cannot pay for additional wires needed to connect them (beyond the utility-provided 30 meters); these families, while a minority in the Philippines, are still a significant number. They belong mainly to the poorer segments of our society, left behind because they are literally powerless and unconnected. They are also little, if at all, aware of the possibility of off-grid renewable energy powering their homes. This is primarily because the traditional response of the power planners and the distribution utilities is to provide diesel-fueled power barges (for island communities) or simply leave them in the dark, so to speak. With the United Nations calling for "sustainable energy for all" by the year 2030, a concerted effort to make available RE financing at highly concessional rates to these fellow citizens must be a necessary element of the country's development effort.
Who will most likely get financed
The broadest group of Filipino individuals who could obtain financing for solar panels consists of the employed Filipinos who contribute to the Pag-IBIG Fund. As of April 2015, there were 39 million employed Filipinos. According to a press statement of the Fund, there are 15 million Pag-IBIG members.
Because the major conduits of the funds available for RE development are being coursed through two big commercial banks and two government banks, it is reasonable to expect that the probability is slim for ordinary Filipino consumers to qualify for these loans. According to a survey commissioned by the Banko Sentral ng Pilipinas (BSP), only two percent of Filipinos borrow from a bank. Most of them -- 74 percent -- borrow from family, relatives, and friends; another 10 percent borrow from informal lenders.
Red lights and humps to financing RE in the Philippines
At present, financing renewable energy in the Philippines is primarily an exclusive privilege for the few who could tap the lending windows of government banks and a few large commercial banks. The development of RE itself faces numerous red lights and obstacles; likewise the financing of RE. The World Bank intervention to enable rural electric cooperatives to obtain commercial bank loans for RE appears to be a more welcome development for the more stable rural electric cooperatives.
Another red light is the national government's bias for coal. RE used to account for 45 percent of total electricity generation, but today its share has fallen by nearly half. A clear-cut policy for the development of RE is needed in order to make financing for RE tenable. "Secure, predictable policies " to quote from Greenpeace, are key to getting theRE. A government that pays lip service to RE but in reality pushes coal is in effect signaling to the banks not to lend to RE.
RE advocate Robert Verzola has argued that net metering is the key to the development of grid-connected, renewable energy (primarily solar power), especially considering the very high electricity rates in the Philippines. However, the regulators have also allowed the distribution utilities to shape the rules and procedures of net metering, resulting in highly unfavorable terms for prosumers. Net metering in its unadulterated shape and form must be practiced in the Philippines for RE to spread, especially among the unconnected and those with tight budgets.
The local experiences in various countries around the world show us that going RE is doable. and that there are many ways to finance this. A number of counties also provide subsidies and tax credits in support of RE. The Philippine government should take a long hard look at the implicit subsidies that it has been giving for coal.