The wind blows stronger in the north

Recently, the Northwind Power Development Corp., operator of the Bangui Bay wind farm in Ilocos Norte, has announced that it has completed the expansion of its project to 33 MW. Initially, the project started in 2005 with a capacity of 24.75 MW. The wind source provides 40% of the requirement of the local distributor, the Ilocos Norte Electric Cooperative (INEC).

On top of this, the Company will also put up a new 40-MW wind farm project in Aparri, Cagayan this year which costs up to $95 million. This was announced by Northwind chairman Fernando Dumlao who also said that the expansion program will be undertaken by a recently created subsidiary.

“We are pursuing our expansion plans because wind is a renewable form of energy and it is very timely because of the passage of the Renewable Energy Bill,” he said.

We can only heap praises for Northwind for undertaking this initiative to develop aggressively clean energy sources despite the lack of implementing rules and regulations (IRR) in the newly passed Renewable Energy (RE) Law.

As it is, a wind development such as the Bangui Bay project cannot hope to compete with traditional sources such as coal or natural gas-fired power plants without incentives such as those embodied in the RE Law. The project only came to fruition because it was registered under the Clean Development Mechanism (CDM) of the Kyoto Protocol. Under the mechanism, the project has been able to generate so-called carbon or emission reduction (ER) credits which can be traded in a carbon market. The carbon credits represent the amount of avoided carbon dioxide emissions--which totals 356,000 tons over the project life of 10 years--if it were a fossil-fuel based project.

It helps that financing was provided by essentially zero-interest loan from the Danish Development Agency (DANIDA) which contributed to the viability of the project. The covenant of course requires that the project source its wind turbines from Danish manufacturers. Other projects won’t likely have these incentives.

For the case of Bangui Bay project, the ERs generated are purchased by the Prototype Carbon Fund (PCF), a consortium of six governments and 17 private companies, which authorizes the World Bank, as Trustee, to purchase ERs in behalf of the fund. Because the prices of the tradable certificates which represent the ERs generated have escalated rapidly since the start of the project, the Fund (and its investors) would already have profited much from the project. These profits should have gone directly to Northwind and its investors if the ER credits were directly traded by them.

But the CDM has a sunset clause; which means that one could only avail of its benefits within a time span, which I believe, will end in 2012. Beyond that, the project will be on its own, financially.

It would be too risky to put money to a clean energy project where its viability comes solely from the CDM, or through generous governmental loans, as in the case of Bangui Bay. This is where the RE Law should come into the picture.

Two of the major provisions of the RE Law (excepting the usual financial incentives such as tax breaks) that should impact greatly to wind (and solar) energy projects are: the renewable portfolio standards (RPS) wherein electricity distributors are compelled to source a percentage of their supply from renewable energy, and feed-in tariff, which puts a premium on the electricity price from renewable sources.

It is important that the detailed provisions of the RPS would now be established so that a potential developer could now input the effect on the viability of the project. One cannot just pluck a “nice” percentage number out of thin air; the concerns of all the stakeholders—energy producer, distributor, consumers and even the local government units—must be taken into account by those who are tasked to write the provisions.

Determining the feed-in tariff is not straightforward. An in-depth study needs to be made to come up with an amount acceptable to all stakeholders. At present, the tariff paid by INEC to Northwind is set by an electricity supply agreement (ESA). The feed-in tariff is on top of this price.

The Bangui Bay project, being the first wind farm to be established in the country, should be considered the prototype of similar renewable energy projects in the future. It has provided the necessary numbers and insights which could fine tune the new RE Law.

With the trailblazing work of Northwind and the RE Law, we have high hopes that wind power would blow stronger not only in the North but throughout the archipelago as well.

The answer is, blowing in the wind?

By J R Ruaya

Energy and Chemistry Consultant

Recently, the PNOC-Energy Development Corp. (PNOC-EDC), majority-owned by the Lopez family, announced that it will push through with the development of wind power projects having a combined capacity of 140 megawatts (MW).

PNOC-EDC director and former Energy Secretary Vincent Perez said the new owner (Lopez group) of the company is “reviewing the feasibility of the wind power projects”.

This was confirmed by Department of Energy (DOE) director Mario Marasigan, saying that PNOC-EDC’s wind power projects form part of the indicative power project of DOE.

As proposed, the project will be done in three phases: 42 MW for Phase I, 40-60 MW for Phase 2 and 10-20 MW for the third phase. Another 20-MW of wind power project is also being eyed by the company in Ilocos Norte and elsewhere in the country.

PNOC-EDC' s project is not the first wind energy project in this country.

The first commercial wind energy project is the Bangui Bay 24.75 MW project in Pagudpud, Ilocos Norte which was commissioned in May 2005 and run by Northwind Power Development Corporation. It consists of 15 turbines, and at peak load can supply up to 40 % of the electricity requirements of Ilocos Norte.

The power generated is dispatched through a 57-km 69 kV transmission lines, also owned by Northwind, for distribution by the Ilocos Norte Electric Cooperative (INEC).

So, what prompts the flurry of activities in this renewable resource-- which is a prime choice of green energy advocates, but which is deemed economically uncompetitive against traditional sources of electric power?

What has changed, aside from $120 a-barrel-oil and pressures from environmental activists, since the man from La Mancha stopped chasing windmills?

The current scenario

Consider the current situation:

* Wind power is the fastest growing energy source on a percentage basis over the past five years at 29% annually from 2001-2005 with solar a very close second;

* The amount of electricity generated from wind power has tripled in the past five years;

* Total installed wind power capacity in the United States, the largest wind developer in absolute terms in the world stood at 11,603 MW at the end of 2006, or enough to power more than 2.9 million U.S. households.

* Denmark, the pioneer in harnessing the wind, gets 18.5% of its electricity from wind sources.

* More and more countries are getting into the bandwagon, with India, China and the United Kingdom being the most aggressive.

* New, larger wind turbines (from 1 to 3 megawatts per turbine) generate 120 times as much electricity as 1980s models at one-sixth the cost.

* The cost of wind-generated electricity has fallen dramatically from 38 cents per kilowatt in the 1980s to only 4 -6 cents today.

Despite the dramatic strides attained by the industry on the economics of wind generation, it has failed to fire up the imagination of local entrepreneurs.

Benign to the environment

The overriding attraction of wind energy is of course, its negligible effect to the environment.

For example, Northwind claims that its project displaces greenhouse gases such as carbon dioxide at 46,960 tons/yr; sulfur dioxide , 802 tons/yr; and suspended particulates , 1602 tons/yr which would otherwise have been emitted from a typical fossil-fueled generating plant.

But for the hard-nosed investor on the ground, it is economics. A quick glance of comparative tables would show that wind-generated electricity cannot hope to compete in terms of cost per unit generation against the established conventional sources of energy. But like any other product, wind energy may find its proper niche given the correct circumstances.

Our archipelagic country may be the right circumstance. The grand plan of linking the major islands into a national grid is still a pipe dream. The National Transmission Corp. has only linked, via direct current submarine cables, a few major islands like Luzon, Samar, Leyte, Cebu, Bohol, Negros, Panay, Mindoro and Mindanao. That leaves other major island provinces and many other important island provinces out of the grid circulation: Palawan, Masbate, Catanduanes, Batanes, Romblon, Camiguin, Siquijor, Basilan, Sulu, Tawi-tawi - you complete the list. Other major island or groups out of the loop are Camotes, Dinagat, Coron (Palawan), Polilio, and of course Boracay, and many others.

Is there a correlation between the incidence of poverty in many of these islands and the lack of affordable power?

A blessing from a curse

The first question that pop up in the mind of a potential investor is: do we have the resource?

We are cursed by the wind of the destructive kind: an average of twenty typhoons a year. But this is not we want. The ideal site for a wind project would be where the wind blows at an accepted strength for most of the time.

The Department of Energy has already made an inventory of the wind resources of the country while the National Renewable Energy Laboratory (NREL) of the U.S.' Department of Energy has published a comprehensive wind atlas for the whole archipelago. These studies identify wind availability, wind circulation patterns, velocities, areas suitable for wind projects and other data for investors and other interested parties.

According to a study by Prof. Rowaldo del Mundo of the UP National Engineering Center (NEC), NREL puts the country's wind potential at 76,600 MW. NEC's own study, after inputting a screening criteria of (1) a wind power density of at least 500 W/m2 and (2) a transmission line cost component of a maximum 25 % of the total project cost, came up with a harnessable 7,404 MW equivalent to an estimated annual generation of 23,047 GWh/yr. This potential could come from the following number of sites: Luzon, 686 site; Visayas, 302 sites and Mindanao, 47.

More studies needed

Like any other struggling technology, wind energy still requires a lot of scientific and technological groundwork for it to become more viable.

To increase value and reduce uncertainties in wind power production, del Mundo suggests more research and development (R & D) in forecasting power performance, in "reducing uncertainties related to engineering integrity " , in "improvements and validation of standards" and on storage techniques.

At first glance, wind energy cannot be stored because if the wind stops blowing, there is no power. But this has not deterred inventive scientists and engineers from pursuing the idea.

To effect cost reduction, del Mundo would focus on (1) improving site assessments and on finding new locations (2) coming up with better models for aerodynamics, (3) developing new intelligent structures and materials (4) designing more efficient generators and converters, (5) finding novel concepts in load reduction, and (6) improving performance of stand-alone and hybrid systems. A hybrid system consists of a standard wind turbine and a back-up facility which takes over at times when the wind simply dies down.

More incentives needed

It can be done, as Northwind has shown. However, there are market and financial hurdles to overcome, as Northwind Vice President Marlon Centeno pointed out, foremost of which is the inability of the electricity from the project to compete at the wholesale electricity spot market once the wheeling charges of Transco is factored in. Northwind's project is connected directly to INEC, as earlier noted.

The upfront high cost of putting up a wind facility could be mitigated by granting more tax incentives and low- finance credit facilities not only from the government but from institutional lenders like Asian Development Bank and the World Bank.

Carbon credits and additional so-called environmental credits also helps.

Many of the incentives to make a wind and other renewable energy projects viable are already embodied in the renewable energy bill now pending in Congress. Hastening its passage would be a major step in the right direction.

Wind energy may not become mainstream in the foreseeable future, but for many of our fellow Filipinos living in smaller islands , the best hope to taste the benefits of electricity coming from a non-polluting source might just be blowing in the wind.