The new normal: doing more with less through energy efficiency

(Published in the ECCP Business Review, July 2012)

LIKE A BEAM OF LED light reaching out farther as it becomes more powerful, the 3rd Philippine Energy Efficiency Forum (PEEF) this July ranged wider and partnered with more companies, financial institutions and government agencies to attain the common aim of institutionalizing the practice of energy efficiency.

Energy efficiency or using less energy remains the cheapest form of power available to business firms. It also serves as the foundation of a grand design crafted by the government and the private sector to increase the Philippines' use of renewable or sustainable energy as a hedge against future power crises.

The expanded breadth of today energy efficiency campaign was reflected in the theme of the 3rd PEEF: “Driving Efficiency and Competitiveness Across the Power Sector Value Chain.”

PEEF’s major goal over the past three years has been to promote the national effort towards energy supply security, increased competitiveness and low carbon economic growth through energy efficiency.

Unlike its predecessors, however, the 3rd PEEF focused on energy efficiency from the perspective of business firms (who are huge energy users) along the energy value chain, from generation through transmission and distribution to the plug. New to this year’s PEEF were the separate Technical Briefings where sponsors, energy technology companies and exhibitors presented their unique energy efficiency solutions. The new business matching sessions were a success, as was the widely visited product exhibition.

As noted by Hubert D'Aboville, outgoing President of the European Chamber of Commerce of the Philippines (ECCP) in his welcoming remarks, the forum reaffirms that energy efficiency has the potential for ". . . huge savings in total power use and large reductions in greenhouse gas emissions."

"The return on investment from energy efficiency will benefit the whole country," he said.

He added that the private sector and the government are able to do more and operate more efficiently with limited resources through energy efficiency.

D'Aboville acknowledged the firms and institutions that have partnered with ECCP in promoting PEEF since the start of the chamber's energy efficiency campaign three years ago.

PEEF is the first forum in the Philippines that focuses exclusively on energy efficiency.  It supports the Energy Smart Program that aims to encourage the greater application of resources for energy efficiency among business enterprises and to maximize the full potential of energy efficiency for business.

The five Founding Sponsors are Philips Electronics & Lighting Inc., Philippines, First Gen Corporation, Meralco, Schneider Electric Philippines, Inc., and Pilipinas Shell Petroleum Corporation.

The founding Energy Smart Program Partners are Paris Manila Technology Corporation; First Gen Corporation; Schneider Electric Philippines, Inc.; Philips Electronics & Lighting Inc., Philippines; Pilipinas Shell Petroleum Corporation; Sofitel Philippine Plaza Hotel; Jardine Energy Control, Inc.; Royal Cargo Combined Logistics, Inc.; Theuer Eurolighting Consultancy Corporation and Maschinen & Technik, Inc.

“Energy efficiency is key to enhancing business competitiveness,” Schumacher pointed out during the 1^st PEEF in 2010. That bold statement has been made all the more urgent by current realities that include steadily rising electricity prices and the unstable world economy.

To attain the goals of PEEF, companies must indeed “Think energy efficiency.”

D’Aboville made special mention of the International Finance Corporation (IFC) that hascooperated with ECCP on advancing energy efficiency in the Philippines from the beginning and is expected to continue working with ECCP (at least) until 2015.

Henry Schumacher, ECCP Executive Vice President, said the issues driving PEEF today remain similar to those when the first forum was held in 2010: expensive electricity; the threat of roving blackouts; the phasing out of power subsidies for PEZA locators in Luzon and how businesses can cut power costs.

"All these issues lead us to see the importance of energy efficiency," he pointed out. "Energy efficiency is as important today and tomorrow as it was yesterday."

Public sector leadership

Undersecretary Loreta Ayson of the Department of Energy(DoE), representing Energy Secretary Rene Almendras, had some good news – somewhat -- for price-battered consumers of Asia's most expensive electricity.

The proposed Energy Conservation Law long championed by the ECCP has been presented to Congress but returned to DoE for “some tweaking” since it was “too detailed.”Once the revised bill is submitted to both Houses of Congress, she expects the law to be enacted soon, but indicated no specific time frame. The law’s implementing rules and regulations have been completed.

The law, which was first proposed in 2005, promotes energy efficiency and energy conservation initiatives. DoE said the proposed regulatory framework for both energy efficiency and energy conservation will be the policy pathway for abating the Philippines’ emissions ofgreenhouse gas (GhG), a major cause of global warming.

The law’s energy efficiency measures help diminish the need for more and expensive power plants while also encouraging investors into developing renewable energy sources such as solar, wind, hydro and geothermal energy in return for a guaranteed Feed-in Tariff (FIT).

Ayson also said the very long-awaited FIT is close to implementation.

“The FIT rules are being refined to boost the development and production of renewable energy,” she said.

Two weeks after 3rd PEEF, the government issued the approved FIT tariffs, but at rates much lower than that needed by renewable energy developers.

The Energy Regulatory Commission approved these FITs: P9.68 per kilowatt hour for solar (lower than the P17.95 per kWh applied for); P8.53 per kWh for wind (from P10.37 per kWh) P6.63 per kWh for biomass (from P7.00 per kWh) and P5.90 per kWh for hydro (from P6.15 per kWh).

She pointed out that increasing the share of renewable energy in the country’s energy mix was one of the government’s three major initiatives in its energy strategy.

“If we have no access to sustainable energy, there is no economic development,” she said.

Sustainable energy will play a key role in the government’s plans to “electrify” 90% of Filipino households by 2017 and 100% of households by 2025.She made reference to the DOE’s SPUG program and added that the supply of energy to SPUG areas would eventually be privatized.

“Energy access is the foundation for addressing poverty alleviation,” she emphasized.

Energy management a must

They’re among the biggest users and wasters of electricity, and count among the top emitters of GhG. Paradoxically, these culprits are quite suitable targets for a proven energy efficiency solution: energy management. Buildings are both the bane and boon to energy efficiency efforts. 

Philippe Reveilhac, Country President of Schneider Electric Phils., Inc., noted that buildings occupy a fifth of the Earth’s surface but account for 80% of CO2 emissions. They are mostly inefficient users of electricity.

Reveilhac revealed that out of 100 units of power generated by fossil fuels, buildings only use 22% efficiently. The rest of the energy is wasted.

“This is the energy efficiency dilemma,” he said. “The solution is either to produce more electricity or consume less.”

Given the inefficiency of the power generation and distribution networks, the former option is unacceptable. For the latter to contribute meaningfully to energy efficiency, however, means that energy use has to be managed throughout the entire building.

Energy management solutions such as Schneider Electric’s “EcoStruxure” have proven capable of efficiently managing power and significantly cutting costs. He noted that Schneider Electric’s world headquarters in Paris, the first ISO50001 certified building in the world, has reduced its final energy consumption by a fourth by using EcoStruxure.

“EcoStruxure is a single backbone that controls and monitors energy use in a building, including renewable energy,” he said. “The basis of a successful energy efficiency program is to implement an energy management system.”

Implementing an energy management system such as EcoStruxure can significantly minimize a building’s operating costs, which account for some 75% of the life cycle cost of a building. It also does away with uncoordinated energy efficiency solutions thatare not as effective as a single solution.

He said energy management systems will also enable high performance green buildings and smart cities.

Turbines and LNG

Emmanuel Gesmundo, Vice President, Energy of Siemens, Inc., presented his company’s various turbine products as solutions for enhancing the efficiency of power plants.

He noted that four megatrends are shaping the future of the planet: urbanization, demographic change, climate change and globalization. Taken together, these megatrends are increasing the demands for energy that must be met by building more energy efficient power plants.

Among Siemens’ energy efficiency innovations for power plants are the H-class gas turbine, Direct Drive 6 MW, gas turbine upgrades and smart grids.

Edgar Chua, Country Chairman, Shell companies in the Philippines, argued we need all the energy we can get because of the booming world population (seven billion as of 2011) andrising affluence (more demand for computers, cars and household appliances).

These factors will contribute to energy demand doubling by 2050, but there will also be the seemingly impossible demand to halve CO2 levels at the same time.

Shell’s answer to this conundrum:  smarter energy and cleaner energy.

Shell is one of the world’s largest distributors of biofuels, which Shell sees as the most practical, commercial solution to reduce CO2 emissions over the next 20 years from road transport fuels. Chua said fuel efficiency is key to savings since fuel constitutes some 20% to 25% of operating costs for transport companies.

Shell is pushing liquefied natural gas (LNG) as a transportation fuel since this is cleaner energy and can provide energy security through flexibility and diversification.

“We power the country’s future,” Chua said in referring to Shell’s Malampaya Deepwater Gas-to-Power Project.

Malampaya, the Philippines’ first major domestic upstream hydrocarbon production project, meets up to 45% of Luzon’s power generation requirements or a total of 2,700 megawatts.

“Natural gas is the cleanest and most efficient fossil fuel with least amounts of CO2,” Chua noted.

Smart grids

The National Grid Corporation of the Philippines (NGCP) reported on major developments in the country’s power grid and on its initiatives to improve the efficiency of power transmission and distribution systems.

Redi Remoroza, Head, Luzon System Planning Division, said major developments in the Luzon Grid include a 230 kV backbone extension and line reinforcements in Northern Luzon for completion by 2015 and the installation by 2013of new transformers in the Dasmariñas and Tayabas 500/230 kV substations for increased reliability.

In the Visayas Grid, a major project is the Cebu-Negros-Panay 230 kV backbone development to accommodate bulk capacity additions in Panay. The project, however, is still subject to regulatory approval and will be implemented in stages involving initial energization to 138 kV.There are also line reinforcements in Cebu to exploit the full capacity of new coal-fired plants.

A primary project in the Mindanao Grid being studied is the interconnection with the Visayas Grid for power exchange. A feasibility study is ongoing and should be completed by March 2013.

Meralco’s efforts to improve energy efficiency on the customer side involve identifying opportunities to achieve this goal. Alfredo Panlilio, Senior Vice-President and Head, Customer Retail Services and Corporate Communications, said this includeswider adoption of the time-of-use method (particularly advantageous for business firms, manufacturing plants and BPO companies); the Smart Grid that improves a customer’s ability to manage his power consumption and “prepaid electricity,” which is similar in concept to prepaid phone cards.

“Good power quality equals higher energy efficiency,” said Panlilio.

Another of Meralco’s energy efficiency advocacies is encouraging the use of more electric vehicles by building charging stations, the first of which will become operational this year for electric tricycles.

Meralco’s continuing push for energy efficiency is also being driven by the massive size of its customer base: 5 million customers, half of which belong to the “C” market.

What Meralco has undertaken is a “. . . 360 degree turn in the use of energy efficiency and conservation. We have not only one but multiple solutions to the challenge of energy efficiency and these solutions are persistent, consistent and unwavering.”

Giving customers a choice

Iloilo Electric Cooprrative-1 (ILECO-1) supplies power to 109,000 in 15towns in Southern Iloilo. It is a consistent “Category A+” electric cooperative and was recently awarded the “Diamond Award” by the National Electrification Administration for its outstanding performance.

General Manager Wilfred Billenanoted that retail competition and open access once declared will bring the power of choice to consumers, moving from a sellers’ market to a buyers’ market.ILECO-1 has partnered with one of its electricity providers, Green Core Geothermal, Inc., to pass on to consumers the benefits resulting from the new buyer’s market.

“Competition at the wholesale level gives ILECO-l increased value,” said Billena.

He noted that competition began with the privatization of the power generation sector by EPIRA and is continuing with the entry of new technologies such as smart grid monitoring systems which will be implemented in 2013.

The pass on benefits to end consumers caused by competition include clean energy that is competitively priced, stable and VAT free. Prices will also be kept in check since ILECO-l has one of the lowest system loss figures in the Philippines.

Distributed generation

The rise of renewable energy sources such as solar and wind energy has given rise to distributed generation (DG), which, in turn, can also benefit from energy efficiency.

DG is a way to produce power with a small-scale generator on the customer’s site or at the site of a local distribution utility, and then supply power to the local distribution network directly.

Jessie Todoc, Program Manager, Energy Access & Alternative Energy of the International Copper Association-Southeast Asia, said the ICA seeks partnerships for clean energy programs.

It supports clean energy policies, standards, regulations; develops clean energy technologies and

Disseminates clean energy solutions.

Copper is a key contributor to sustainable energy and is a reference conductor, hence its importance to distributed generation or to other forms of electricity generation.

“Distributed generation is now driven by climate change and smart grids,” he said.

He pointed out that the benefits of distributed generation include cost reductions; reduction of losses in the distribution system; GHG emissions reductions and deferral of transmission and distribution systems upgrades.

There is, however, a need for an attractive pricing policy and interconnection policies and standards to realize these benefits.

Funding energy efficiency

Yes, there is funding available for companies that go for energy efficiency projects, and this thanks to the confidence shown in the Philippines by the International Finance Corporation (IFC).

Jesse Ang, Resident Representative, IFC Philippines, said IFC has financed energy efficiency and renewable energy projects here worth over P7 billion.

“There are several billion pesos worth of projects under preparation and this number is growing,” he said.

These projects range from small building retrofits (lighting + HVAC) to new green buildings and RE projects. IFC clients for its energy efficiency funds include commercial buildings, industrial facilities, ESCOs and captive and independent power/energy producers.

There is a considerable focus on financing on converting non-energy efficient buildings sincethey are enormous wasters of electricity. If faced with a choice between an energy efficiency retrofit with a short payback period or a long-term investment in a total energy efficiency solution, however, IFC recommends builders take the latter option.

Office buildings in the Philippines generally show a higher power consumption of up to 22 percent compared to similar countries because of insufficient energy efficiency installations.

“Ideally the best solution . . . is to make your building energy efficient from the very beginning,” Ang said. “In general, you should build buildings for energy efficiency.”

Ang sees huge local potential for energy efficiency and renewable energy projects that can be financed through the bank’s Sustainable Energy Finance (SEF) portfolio.IFC has extended its network of partner banks providing financing to energy efficiency investors to include Bank of the Philippine Islands (BPI), BPI BanKo Savings Bank, Banco de Oro and China Banking Corporation.

Addressing climate change and environmental and social sustainability activities is one of IFC’s five strategic priorities for maximizing its sustainable development.

Another IFC manager, Noel Verdote, Operations Officer, Sustainable Energy Finance (SEF) Phils., Inc. said commercial buildings accounted for 29% of the 50.9GW of powerconsumed by the Philippines. Malls were the largest electricity users followed by hospitals, hotels and office buildings.

Verdote said malls and office buildings have highest potential for energy efficiency investment requirements, which is placed at some P9.8 billion.

The average potential savings are estimated at 20% and while the requirement per GWh to be saved on lighting retrofits, air conditioning upgrades, insulation improvements and better control systems comes to P15 million.

Energy efficiency opportunities in the commercial sector are estimated at 2,950 GWh/yr (out of the 14,746GWh) and the required minimum investment stands atP44 billion.

Industrial companies can save considerable sums from their energy efficiency projects by the simple expedient of using more energy efficient motors and drives.

William Beloe, Program Manager, China Energy Efficiency Finance Program for the IFC, compared energy efficiency in the Philippines, China and India.

He revealed that energy efficiency in Philippines is two times more efficient than China. Both the Philippines and India, however, rely heavily on energy imports for domestic energy use. The Philippines is four times more dependent on energy imports than China, while India three times more reliant than China.

A key factor that makes energy efficiency more urgent for the Philippines is that the Philippines in 2011 overtook Japan for the dubious honor of having the most expensive electricity in Asia.

Unfortunately for the Philippines, “. . . energy efficiency isn’t a sector. It’s a window on the market,” said Beloe.

This lower status might complicate efforts to give energy efficiency the prominence it deserves.

IFC, a subsidiary of the World Bank, is the only global multilateral institution focused exclusively on the private sector and bills itself as the global leader in private sector development finance. It provides equity, loans, guarantees and other investments.

Energy efficient drives

Jojo Mendoza, Senior Manager for Country Business Development of ABB, Inc., said his company’s variable frequency drives help its customers increase industrial productivity and lower environmental impact in a sustainable way.

The savings generated by variable frequency drives is considerable since industries account for around 1/3 of world’s final energy demand and 60% of industrial demand in developing countries. And there seems to be a clear recognition among industrial companies of the advantages to be had by being more energy efficient.

He cited a survey in which 53% of respondents agreed strongly that energy efficiency will be critical factor in the profitability of manufacturers. A further 33% agree energy efficiency will be critical success factor for manufacturers.

“The installed base of ABB Drives saved 310 million megawatt hours in 2011, equivalent to the yearly consumption of about 75 million EU households,” Mendoza said. “In terms of CO2 reduction, these savings equate to 260 million tons, more than the yearly emissions of over 65 million cars.”

More than lighting

Gilbert Ong, Manager Lighting Applications Support, Philips Electronics and Lighting, Inc. surprisingly identified Philips as a “well-being and health company.” And he then explained why.

“Light is not enough especially for a workplace,” Ong explained. “We spend a third of our lives and ordinary light will not do.”

To prevent eyestrain and promote well-being, Ong recommends combining high-performance luminaires such as those made by his company and good lighting design practices. Philips believes in using the right lighting in both the office & industrial environment.

“Light is productivity,” he said. “Effective lighting not only keeps people alert and focused, it also lights up their tasks and helps improve performance, productivity and output. It also minimizes the strain on the eyes of employees.”

He said that Philips believes that providing the right illumination should be complemented by high performance luminaires, daylight integration and controls and appropriate light levels.

Together, these will promote a healthy working environment; increase productivity and significantly save energy.

He also batted for increasing energy savings by using LEDs that last longer and are low maintenance. Using LEDs also allow flexibility by providing controls in lighting and daylight controls.

Power quality counts

The problem of poor power quality, while threatening, largely goes unnoticed.  In the USA, wastage caused by the range of PQ phenomena resulted in losses estimated at US$188 billion in 2000, said Raymond Marquez, Chairman, Steering Committee of the Asian Power Quality Initiative Philippines. The PQ problem has since worsened.

To combat this, there is the “Leonardo Power Quality Initiative” and its regional counterpart, the “Asian Power Quality Initiative (APQI).”

Marquez said APQI is currently conducting a Philippine-wide PQ loss survey to determine the extent of the PQ problem. The survey is collecting data on the economic implications of PQ parameters: voltage dips, short interruptions and voltage waveform quality. It is also gathering

data on the methods of assessing these costs.

The survey includes companies in the semiconductor, glass manufacturing, food manufacturing and plastics industries. It is expected to be completed this August.

PEZA: all out for energy efficiency

The Philippine Economic Zone Authority (PEZA) plans to expand the PEP to include energy efficiency, said Tereso Panga, PEZA Deputy Director General.

“Energy management is no longer an option, but should now be a vital component of every business undertaking in response to the continued energy and environmental challenges that lie ahead,” he said.

He added that PEZA is promoting energy efficiency to rationalize costs forits 2,625 locators companies and make its 252 ecozones across the country more competitive. Investments in PEZA ecozones amounted to P1.995 trillion from 1995 to 2011.

PEZA believes energy efficiency is a component of eco-industrial development. In this context, energy efficiency means the optimum procurement and utilization of energy by minimizing energy costs and waste without affecting production and quality while minimizing environmental effects.

PEZA’s energy management initiatives include a scheme on retail competition and open access; a proposed ecozone solar facility in public ecozones and an energy management program in cooperation with ECCP’s Energy SMART Program, which foresees that PEZA will ‘encourage’ locators to invest in energy efficiency with the assistance of Energy SMART service providers.

Energy efficiency in government

The national government has much good news to report in its own energy efficiency initiatives. Evelyn Reyes, Director, Energy Utilization & Management Bureau under the DoE said the government is upgrading energy efficiency of government buildings under the Government Energy Management Program (GEMP).

The program aims to reduce annual consumption of electricity and transport petroleum products by at least 10%.

From September 2005 to December 2011, Reyes said the government was able to save

P1.6 Billion in electricity and P259 million in transport fuel through Energy Conservation Programs by each government entity and the formation of Energy Audit Teams.

She also noted the government had a second program, the Philippine Energy Efficiency Project (PEEP), which consists of an efficient lighting initiative that includes a retrofit of government office buildings and a green building initiative.

Standard required

Institutionalizing an energy management system such as ISO 50001 faces many challenges, said Richard Saing, UNIDO Project Coordinator, Philippine Industrial Energy Efficiency Project.

“The biggest problem is that energy efficiency is not integrated into daily management practices,” he noted.

The solution, he believes, is that top management needs to be engaged in the management of energy on a continual basis, and the employment of Energy Managers. Hence, the need for a standard such as ISO 50001.

“UNIDO is introducing the ISO 50001 energy management system along with system optimization approach for the improvement of industrial energy efficiency in the Philippines,” he revealed.

Among other key objectives, the project will integrate energy efficiency into management systems of industrial enterprises through energy management standards to accelerate adoption of energy efficient best practices on continuous basis.

The project’s expected national environmental benefits during its 10-year life include steam savings of 6,071,000 Gigajoules and energy savings equivalent to 2,057,755 MWh.

It also expects electricity savings equivalent to 969,203 tCO2e and fuel savings equivalent to 489,930 tCO2e.

“In the end, an energy management system is about continual improvement. It’s all about reducing energy costs,” he said.

In conclusion, the 3rd PEEF was a great success, raising the awareness of what energy efficiency can do for the competitiveness of companies and the country.

It became obvious that more stakeholders in the energy value chain are willing to invest in energy efficiency, But it was also clear that government should provide ‘carrots and sticks’ in driving energy efficiency and energy conservation.