Energy efficiency, conservation remains a challenge for everyone

Date Published: 
October 29, 2020
  • (Image: BusinessMirror)
    (Image: BusinessMirror)

(PE2 note: DOE, PE2, DBP, Delta Dore and Engie Services were featured in this comprehensive report on EE&C by Lenie Lectura for the BusinessMirror.)

THE Department of Energy (DOE) has repeatedly spread the gospel that full compliance with the Energy Efficiency and Conservation (EE&C) Act would result in profits, savings and sustainable economic development. The challenge, however, is how to compel government agencies and private entities to reduce their electricity and fuel consumption.

The good thing is, government has Republic Act (RA) 11285. The law seeks to institutionalize energy efficiency and conservation, enhancing the efficient use of energy; and granting incentives to energy efficiency and conservation projects. It took effect 18 months ago.

“It is hereby declared the policy of the State to institutionalize energy efficiency and conservation as a national way of life geared towards the efficient and judicious utilization of energy by formulating, developing and implementing energy and conservation plans and programs,” the law read.

The implementing rules and regulations (IRR) was approved in just six months after the EE&C law was signed on May 24, 2019 and compliance is mandatory.

For now, implementation is done in stages.

“We are in a very good position at this point in time that we are not yet strictly enforcing. We are still in transition in terms of getting people understanding energy efficiency and conservation,” Patrick T. Aquino, director of the DOE’s Energy Utilization Management Bureau (EUMB), said.

Consultations       

TO keep everyone informed on how to make energy efficiency and conservation as a national way of life, the energy department has been in consultation with concerned government agencies, local government units, commercial, industrial, transport sectors and other relevant stakeholders since last year up to now.

“There [are] ongoing implementation policies but the focus now is on awareness and educating stakeholders on compliance mechanism,” Aquino emphasized.

The Philippine Energy Efficiency Alliance (PE2), nonetheless, said it is pleased that the DOE, through its EUMB, reached out to other government entities, civil society and the private sector, and that DOE found useful most of the group’s inputs through the consultations for the IRR.

The DOE initially conducted interagency consultations. It then expanded the consultations to include key stakeholders to gather public inputs from Luzon, Visayas and Mindanao.

PE2 President Alexander Ablaza said his group participated actively in all the stakeholder and public consultations.

He added that the approval of the IRR ensures that the EE&C Act, after 29 years of a voluntary energy efficiency market, is implemented responsively and without delay.

“PE2 stands ready to assist DOE enable subsequent policy actions to make the EE&C law responsive to the needs of the country,” Ablaza said.

Penalties

WHILE the agency currently strives for compliance rather than its imposition, the law has administrative fines and penalties.

“There are responsibilities. There are actually obligations here that will be backed up by penalties and fines,” Aquino said.

“What we would like to do really is not to focus on the carrot-and-stick approach but for businesses to really take a look at investments and opportunities in shifting to energy efficiency and conservation.”

The stick here means fines, which range from a minimum of P10,000 to a maximum of P1 million.

Violators could also be jailed to discourage them from just absorbing the cost of penalties instead of complying.

Section 33 of the law states that responsible officers and employees of any establishment or organization who willfully commits any prohibited acts would be criminally liable. Violators could be imprisoned for a year up to five years, or be meted out with a hefty fine ranging from a minimum of P100,000 to P100 million, or twice the amount of costs avoided for noncompliance, whichever is higher, or both, upon the discretion of the court.

“Make no mistake, there are fines and penalties under non-compliance,” Aquino warned.

Key points

ONE of the salient points of the law is the Minimum Energy Performance (MEP) standard for the commercial, industrial and transport sectors, and energy-consuming products including appliances, lighting, electrical equipment, machinery and transport vehicles.

A label on energy requirement and consumption efficiency must be displayed on the packaging and on the products.

“No manufacturer, importer, distributor, and retailer shall sell, lease, or import any energy-consuming product, unless the product complies with the MEP and the product or its package is labeled in accordance with this Act,” the law stated.

The DOE and the Department of Trade and Industry (DTI) are working closely on this.

The same labeling requirements also apply to vehicle manufacturers, importers and dealers to determine the vehicle’s fuel economy performance. This allows consumers to make an informed decision in choosing their preferred vehicles.

Transportation, buildings

THE DOE is being assisted by the Department of Environment and Natural Resources (DENR) and Department of Transportation (DOTr) to ensure fuel efficiency for transport.

“With the timelines on energy labels being agreed with the industry, consumers will see the new energy labels starting 2021,” Aquino assured.

Also, new buildings and those that will undergo renovations must comply with energy-conserving design. This includes sourcing at least one percent of the total power demand from renewable sources. A popular choice is the installation of solar photovoltaic (PV) panels.

Aquino said the DOE is coordinating with the Department of Public Works and Highways (DPWH) to have the Philippine Green Building Code updated.

“Work is being undertaken and is now required under this law that new and existing buildings used for commercial and industrial use as well as the retrofit of the existing buildings would have to meet the energy conserving design for buildings,” Aquino said.

Deadline extended

ESTABLISHMENTS with an annual energy consumption of 500,000 to 4,000,000 kilowatt hours are mandated to employ a Certified Conservation Officer (Ceco).

Those with an annual energy consumption of more than 4 million kilowatt hours, meanwhile, would need to employ a Certified Energy Manager (CEM).

The Ceco and the CEM are responsible for submitting the Energy Consumption and Conservation reports (ECCR) to the DOE.

The DOE has rescheduled the deadline of ECCR submissions from the original June 30, 2020, to the new timeline of April 15, 2021.

The extra time provided by the DOE would hopefully allow the small companies and medium-sized establishments to understand and prepare for their reportorial obligations under the EE&C Act. Reportorial obligations include documenting and submitting their annual energy consumption data.

“We are starting to see the larger energy end-users in the private sector preparing for their first obligation under the EE&C Act the submission of their annual energy consumption reports,” said Ablaza.

Once designated establishments comply with this, Ablaza said the awareness of their energy consumption baseline would now provide the quantifiable basis for them to fulfill their other obligations, such as the design of their energy management systems, EE&C programs and targeted efficiency improvements, as well as the hiring of a CEM or Ceco.

Incentives, assistance

ONE way to assure compliance is by providing incentives.

On fiscal incentives, energy efficiency projects will be included in the annual investment priorities plan of the Board of Investments (BOI) for at least 10 years.

“There are fiscal incentives provided under the Omnibus Investment Code of the Philippines. These would include income tax holiday, duty free importations, among others,” Aquino said.

Non-fiscal incentives, meanwhile, include awards and recognition for innovations in energy efficiency. There will also be technical assistance from government agencies in the development and promotion of energy-efficient technologies.

Government financial institutions may also provide concessional financial packages for the development and use of renewable energy and energy efficiency projects.

Development Bank of the Philippines (DBP) President and CEO Emmanuel G. Herbosa said concessional financing is available to support EE&C projects.

“We’re really looking at project merits. Collaterals would not weigh as much. We’d want to see the certainty on revenues.

“The advantage of DBP is that we can extend tenor. We’d probably have that flexibility to respond better,” Herbosa said during a recent forum. “Concession could also mean longer-term loans or even grace period so we can stretch your requirements to meet your cash flow and also enable you to meet up usual term loan provisions.”

Mobilizing investments

THE DBP’s total energy portfolio loan is at least P16 billion. Herbosa said the state-owned bank is well positioned to support small-scale and medium-scale enterprises (SMEs).

PE2 member-companies also shared during the forum that their respective expertise aimed at assisting establishments and organizations on accessing financing and technologies to help them comply with their obligations under the EE&C Act.

One of these is Delta Dore Inc., which provides solutions to control energy consumption. The company presented innovations that could help establishments and organizations comply with the EE&C law. These include the internet-of-things platform solutions, building management system solutions, multi-site platform and continuous optimization support.

Engie Services Philippines, meanwhile, said energy efficiency solutions could help address concerns in the sector including high electricity costs as well as low carbon energy supply. The company showcased its district cooling system and other energy efficiency projects that can help clients transition to a more sustainable use of energy.

Delta Dore and Engie Services are energy service companies, or entities that offer multi-technology products and services that guarantee energy savings.

Recently, the DOE passed its guidelines for the certification of energy service companies.

“With the recent issuance of the guidelines [for energy service companies], we are mobilizing private sector in investments for EEC projects,” Aquino said.

Audit

THE DOE is hoping that a combination of incentives, assistance and audit might soon pave the way for full compliance of the law.

“Expect us to do regular audit by next year. An audit is forthcoming whether physical or virtual,” Aquino said.

There are already ongoing audits for government under the Government Energy Management Program (GEMP). Regular audit, which involves physical site inspections, are scheduled to start next year.

“As of the moment, our energy audits are conducted virtually,” Aquino said. “The regular audit will take place if quarantine restrictions are lifted.”

The GEMP is intended to reduce the government’s monthly consumption of electricity and petroleum products by at least 10 percent. It shall cover all government agencies, including all departments, bureaus, offices, agencies, branches and instrumentalities or political subdivisions, GOCCs including its subsidiaries or other self-governing board or commission of the government local government units, state universities and colleges.

Prior to RA 11285, GEMP only covered national government agencies. Aquino said last year’s savings from 19 agencies stood at P54 million.

“With RA 11285 in full effect this year, we are expecting higher compliance and reported savings,” he said.

Assist DOE

THERE are at least 23 government agencies and state-owned schools that have voluntarily complied with the law, latest data from the DOE showed.

These entities include the following: the Department of Budget and Management (DBM) Regional Office (RO) XIII; DBM RO V; DBM RO IV-A; Department of Public Works and Highways (DPWH) Davao City II; DPWH Davao del Sur; DPWH Davao Oriental; TESDA-Carmelo De los Cientos Sr.; Wangan National Agriculture School; Southern Philippines Medical Center; Compostela Valley State College; Davao Oriental State College of Science; University of Southeastern Philippines; DOLE XII-North Cotabato Field Office; Davao del Norte State College; Davao Oriental Polytechnic Institute; Technical Education and Skills Development Authority (Tesda)-Davao RO; the Department of Labor and Employment-Mimaropa (Mindoro, Marinduque, Romblon and Palawan); Department of Education- Region VII; Professional Regulation Commission (PRC) Region XII; DBM-Mimaropa; National Wages and Productivity Commission; Quirino State University; and, the Professional Regulation Commission (PRC)-Manila.

PRC-Manila’s electricity savings stood the highest at P3,650,237.06, representing 374,761.96 kilowatt hours (kWh).

The compliance rate of these firms reached 12 percent, Aquino said.

“Twenty-three firms out of the 192 is equivalent to 11.9 percent compliance rate. That is up to May 30, 2020,” Aquino said, adding that the figures would be updated soon.

Aquino appealed to other industry stakeholders, academe and nongovernment organizations to assist the DOE. “We can’t do the audit alone. The goal here is to bring in all partners to pursue this.”

Pandemic effect

THE Covid-19 pandemic has made it more difficult to implement energy efficiency programs. Most private entities spend their money in keeping their businesses afloat rather than utilize this to comply with the law.

“Given this time of pandemic, most would rather hold on to their cash and use it on their core business,” observed Paulo Palencia, Engie Services head of energy efficiency and district cooling system.

But there are other financing options—those that will not negatively impact their cash flow—to explore.

“There are financing institutions and potential partners, like Engie, which can help finance the projects on behalf of the clients. So, if more businesses will be aware of several options on the table, then I guess we would see more and more energy efficiency projects coming in later on,” added Palencia.

Ablaza agrees.

‘It’s the plumbing’

ACCORDING to Ablaza, if businesses lack in-house capital resources to implement energy efficiency projects brought about by the pandemic then this only strengthens the case for off-balance sheet financing, an accounting practice whereby a company does not include a liability on its balance sheet.

“The pandemic is a crisis. There’s a saying that in every crisis there is silver lining,” he said. “Cash is not the problem. It’s the plumbing.”

Ablaza said they can engage an escrow to put up energy financing projects, scout for a public-private partnership proponent to bundle street lightings in public building retrofits, explore district-cooling systems and long-term energy source solutions providers to provide service outside the balance sheet of end user.

“As long as we are able to mobilize debt finance from financial institutions in a more responsive way, as long as we’re able to flow equity and capital through corporate shareholders in new equity structures, as long as we allow government to procure Esco performance contracts then own capital financial constraints should not be a problem,” Ablaza said.

‘Embrace paradigm shift’

WITH only a few months left before the law is fully implemented, PE2 observed the need to raise awareness of energy end-users on their obligations, especially for the SMEs and middle market companies.

Ablaza said civil society and business groups should step up their partnerships with DOE to raise the awareness among the smaller energy consumers.

Equally important is for government to recognize energy efficiency as a first fuel of the economy a primary resource in the energy mix for which up to P 12 trillion in project capital will need to be mobilized by 2040, either by accelerating public spending or incentivizing private sector investments through innovative financing modalities.

“We are pleased that the DOE shares this thinking, but we would need other agencies, especially in the economic cluster and investment promotion agencies, to embrace this paradigm shift. Without the de-risking response from government, private capital mobilization will not reach the scale needed for the country to meet the 2040 EE&C roadmap targets set by the DOE,” Ablaza said.

The National Energy Efficiency and Conservation Program

THE Department of Energy (DOE) is mandated to provide adequate, reliable and affordable energy to industries to enable them to provide continuous employment and low cost of goods and services, and to the ordinary citizento enable them to achieve a decent lifestyle. Energy should not only be produced and used in a manner that will promote sustainable development and utilization of the country’s natural resources but at the same time contribute to the country’s overall economic competitiveness and minimize negative environmental impacts.

President Gloria Macapagal Arroyo unveiled her energy independence and savings reform package that aims to achieve a 60-percent self-sufficiency level by 2010 and thus shield the country from the adverse effects of imported energy.

The energy independence and savings program includes increasing indigenous oil and gas reserves, developing renewable energy, increasing the use of alternative fuels, forging strategic alliances with other countries and implementing strong efficiency and conservation program.

Our Objective:

  • To make energy efficiency and conservation a way of life

Our Goals:

  • To improve utilization of all users through energy efficiency and conservation programs.
  • To achieve an average annual energy savings of 23 million barrels of fuel oil equivalent (MMBFOE) and 5.086 gigagram carbon dioxide (CO2) equivalent emissions avoidance.

Policy, goal and strategy

IT is declared policy of the government to promote the judicious conservation and efficient utilization of energy resources through adoption of the cost-effective options toward the efficient use of energy to minimize environmental impact.

The primary goal of the government towards energy efficiency and conservation is to make it a way of life, increase awareness and the attainment of 229 MMBFOE total energy savings from the implementation of energy efficiency and alternative fuels programs for the period 2005-2014. It is projected that about 50.9-million tons C02 equivalent greenhouse gas emissions will be avoided for the same period.

The strategies to achieve these goals include: the aggressive promotion of energy conservation and energy efficient technology to effect higher energy savings both for the consumer and producer through information, education and communication campaigns; intensify collaboration effort with the private sector in implementing energy efficiency programs through voluntary agreements; continuous implementation and expansion of the appliance and equipment energy standards and labeling implementation of building energy usage standards; integration of energy efficiency concepts in the procurement practices of the government; the provision of technical assistance in identifying, implementing and evaluating effective measures to improve energy use efficiency; the use of alternative fuel to reduce dependence on imported oil; and periodic program monitoring and evaluation to assess the effectiveness of the energy efficiency and conservation plan.

Department of Energy: https://www.doe.gov.ph/national-energy-efficiency-and-conservation-program

Written/Posted by: 
Lenie Lectura

About PE2

Philippine Energy Efficiency Alliance Inc. (PE2), is a non-stock, non-profit organization of energy efficiency market stakeholders.

Learn More

Republic Act 11285

R.A. 11285 - An Act Institutionalizing Energy Efficiency and Conservation, Enhancing the Efficient Use of Energy, and Granting Incentives to Energy Efficiency and Conservation Projects

RA 11285 - Text

RA 11285 - Signed

IRR - Signed

Beyond COVID-19: How governments, ESCOs and innovative financial modalities can mobilize energy efficiency capital through 2040

Working Together to Bridge an Energy Efficiency Financing Gap

Infographics

PE2 Infographics on Energy Efficiency and Conservation Roadmap Targets

Infographics on Roadmap Targets for Energy Efficiency and Conservation

» View | Download

Join PE2 Now!

We would love to have you on board

The Philippine Energy Efficiency Alliance, Inc. (PE2) is a non-stock, non-profit organization of energy efficiency market stakeholders.

Learn More

PE2 Secretariat

  • Philippine Energy Efficiency Alliance, Inc. (PE2)
    19/F Philippine AXA Life Centre 
    Senator Gil Puyat Avenue 
    corner Tindalo Street 
    Makati City, Metro Manila 
    Philippines 1200
  • +63 2 7989 3007 
  • secretariat@pe2.org 
Signup to our newsletter:

To prevent automated spam submissions leave this field empty.