Putting Philippines' Rural Renewable Energy Projects Back on Track

MANILA, PHILIPPINES (17 October 2003) - ADB has approved a technical assistance (TA) grant of US$450,000 to put, on a pilot basis, failing new and renewable energy (NRE) projects back on track.

With up to one quarter of new and renewable energy projects in the Philippines found to be less than successful, the TA aims to find out why -- and design remedies.

NRE schemes play a vital role in delivering energy to rural communities in remote areas and islands of the Philippines.

The grant, from ADB's Danish Cooperation Fund for Renewable Energy and Energy Efficiency in Rural Areas and Market Towns, will fund an analysis of NRE projects and make recommendations for correcting failures. These recommendations will be put into action in two or three demonstration projects in selected regions.

About 5,400, or 18%, of almost 42,000 barangays (village level local government units) still had no electricity as of February 2003 and 1,671 (30%) of these are beyond the reach of grid electrification.

To meet its target of complete electrification at barangay level by 2006, the Government is promoting NRE as a viable and competitive option for off-grid rural areas. The long-term goal of the Department of Energy is to double its NRE-based capacity by 2012. The Government, which is contributing $200,000 toward the TA, also aims to be the top geothermal producer in the world and top wind energy producer in Southeast Asia. Its other major goal is to expand the contribution of biomass, solar, micro-hydro, and ocean power by 250 megawatts.

Supported by various funding agencies, many NRE projects have been carried out since 1970 in the public and private sectors, with a total investment of about $100 million.

From 1999 to 2001, about 1,000 barangays were electrified using NRE technologies, including solar, micro-hydro, and hybrid systems. At the end of 2001, the Philippines had 5,120 solar and 380 wind installations, contributing about 300,000 barrels of fuel equivalent.

The areas identified in past NRE projects that need attention include:

• Lack of stakeholder mobilization and beneficiary participation
• Institutional problems, including unsuitable management schemes
• Technical problems, including lack of spare parts for operation and maintenance and use of obsolete technologies
• Financial problems, such as high initial and maintenance costs, or high tariffs for consumers.

"Feedback from stakeholders, including NGOs, local government units, and beneficiaries, will play a crucial role in identifying the reasons for failure," says Yongping Zhai, an ADB Senior Energy Specialist.

"During the process, which will last about 18 months to June 2005, the TA will also consider the impacts on poverty alleviation and gender issues. The exercise will be of value not only to the Philippines but other developing countries facing similar issues."

As NRE technology has matured over the last decade, the key factors affecting the success of the projects mostly involve institutional and social issues.

Among the increasing number of NRE projects that have been successfully carried out in recent years, beneficiary and stakeholder cooperation and consultation throughout the process have been cited as important factors.

"To ensure installed NRE systems are sustainable in the longer term, it is important to also develop renewable energy-based livelihood opportunities," says Mr. Zhai.

These might include the installation of rice mills to increase the value from rice production; mini-ice plants for cold storage of fish products; and provision of skills and training to operate the systems and identify potential markets and market products for these projects.

"Selected NRE projects can be rehabilitated by reforming the institutional setup and taking a more participatory and livelihood-oriented approach. This will secure the invested capital and contribute to achieving the Government's NRE goals."

Read the full TA paper.