PE2 Position Statement: Energy Efficiency Creates 45% More Jobs than Mainstreamed Infrastructure Development for the Same Amount of Investment or Stimulus

Date Published: 
June 2, 2020
  •  (Photo: Meralco Power Club, image not included in PE2 position statement)
    (Photo: Meralco Power Club, image not included in PE2 position statement)

(PE2 Note: PE2 circulated yesterday, 1 June 2020, the following position statement with relevant committees of the House/Senate, DOE, DOF, NEDA, DTI and BOI)

The Philippine Energy Efficiency Alliance (“PE2”) submits its views in aid of efforts of the 18th Congress and the Executive Branch of the Philippine Government to formulate national strategies, legislate, plan, allocate resources and implement economic recovery and stimulus programs as the country addresses the impact of the COVID-19 pandemic on the local economy.

On 23 April 2020, PE2 issued its position statement “Supporting the International Energy Agency’s Call to Include Energy Efficiency as Economic Stimulus,” which attaches the 8 April 2020 paper of the International Energy Agency (IEA) “Energy Efficiency and Economic Stimulus – IEA Strategic Considerations for Policy Makers.”

In the earlier position statement, PE2 used international data to demonstrate that energy efficiency is a cost-effective and swift job generator. In the US, the largest contributor of new jobs created in the energy sector in 2019 was energy efficiency. Energy efficiency contributed a hefty 45%-55% share of new jobs in the US energy sector in the last 3 years.  A survey of 35 energy efficiency programs and stimulus packages across the EU, UK, US, and Canada concludes that an average 19.3 jobs were created for every EUR 1 million invested in energy efficiency. 

The objective of this paper is to strengthen the previous position with job generation projections in the Philippine labor market.

In May 2020, PE2 conducted a survey of job generation impacts of actual energy efficiency projects from accredited energy service companies (ESCOs), energy efficiency service providers, energy efficiency technology supply chain players and other energy efficiency project developers. From the survey, the respondents confirmed that:

1.        Energy efficiency projects and investments create jobs across various components of project cycles and supply chains. These jobs are in the economic activities of:

  • Importation
  • Manufacture
  • Assembly
  • Warehousing
  • Product supply chain logistics
  • Wholesale and distribution
  • Retail, marketing and customer services
  • Fabrication
  • Inspection
  • Energy audits, measurement & verification
  • Engineering
  • Procurement
  • Contracting
  • Financing
  • Accounting
  • Installation
  • Construction
  • Testing
  • Operation
  • Maintenance
  • Asset management

of energy efficiency equipment and systems hosted by energy end-users in the government, commercial, industrial, transport, agricultural and residential sectors.

2.        Representing a significant share of ESCOs in the market today, survey respondents revealed that from a low of 18 jobs to a high of 200 jobs are created by energy efficiency investments ranging from PHP 50 million to PHP 200 million in project size. Gathered data shows a linear relationship between job generation and energy efficiency capital expenditures within the typical PHP 50 million to PHP 200 million project size range. See Figure 1.

Figure 1: linear relationship between job generation and energy efficiency capital expenditures within the typical PHP 50 million to PHP 200 million project size range

3.        Respondents have independently reported that previous energy efficiency projects were able to generate an average 37.42 direct jobs for every PHP 50 million in energy efficiency project capital expenditures in the Philippines. This average conservatively excludes direct and indirect jobs created from upstream activities such as importation, manufacture and assembly, for applicable technologies in the local market. See Figure 2.

Figure 2: Jobs created for every PHP 50 million in Energy Efficiency Investments (Source: PE2, June 1, 2020)

In an earlier PE2 study  prepared in relation to the Department of Energy’s approved 2017-2040 Energy Efficiency and Conservation Roadmap, the national economy will need to mobilize PHP 12.19 trillion in energy efficiency capital to be able to avoid at least 182 million tons of oil equivalent in final energy demand across all energy end-use sectors through 2040. Holding all labor intensities constant through time, and using the average 37.42 jobs for every PHP 50 million in energy efficiency investments, the economy will be able to create 9.123 million energy efficiency-related jobs in the next 20 years.

Carving out a proposed PHP 55 billion component of the proposed Philippine Economic Stimulus Act (PESA) for energy efficiency improvements by NGAs, GOCCs, SUCs, LGUs, water districts and MSMEs, PE2 estimates that 41,200 jobs can created from 2021-2023.

“Mainstreamed” infrastructure development in the Philippines is driven by the Duterte administration’s flagship “Build, Build, Build” (BBB) Program. So far, the Department of Labor and Employment (DOLE) reports an annual increase of 468,000 jobs arising from the implementation of BBB projects. Since the start of the BBB program, the Department of Public Works and Highways has built a total of 3,945 kilometers of roads, and 892 bridges. The department has also rehabilitated 939 bridges spanning 40,192 meters, and strengthened 642 bridges spanning 29,260 meters. The Department of Transportation  has completed the construction and rehabilitation of eight international and domestic airports (increasing to five the number of night-rated airports), completed the installation of 10 additional air traffic management radars, completed 129 commercial port projects and eight social/tourism port projects, and began the construction of two integrated transport terminals, two train system projects, and started pre-construction activities for the PNR North (Manila-Clark) system. The Bases Conversion and Development Authority has completed over 20% of construction works for the country’s first smart, resilient metropolis, New Clark City.

Through the remaining term of the Duterte administration, the Department of Budget and Management (DBM) estimates the cumulative size of the BBB program to be within PHP 8 trillion to PHP 9 trillion, creating an addition 1.1 million jobs for every year of the BBB program.

In comparison to the BBB program through the remaining term of the Duterte administration, energy efficiency projects are estimated to be 45% more labor-intensive than BBB infrastructure development activities, creating significantly more jobs for every PHP 50 million invested in long-term or stimulus programs. The BBB program is estimated to create 25.88 jobs/PHP 50 million in infrastructure investments, while energy efficiency is expected to generate 37.42 jobs/PHP 50 million in energy efficiency capital expenditures. See Table 1.

Table 1: Comparison of Labor Intensities between Build, Build, Build Program and Energy Efficiency Investments in the Philippines

Echoing the earlier PE2 position, energy efficiency has proven speed of delivering economic impacts of job generation and reducing operating expenditures of income generating activities compared to infrastructure projects. The BBB program, while an effective job generator, will need longer time horizons for the economy to benefit from its developmental returns. Energy efficiency projects, on the other hand, can be planned, designed and completed to deliver energy savings and job creation impacts in much shorter periods, typically 6-12 months for each commissioned project. The economic payback of energy efficiency projects would be among the shortest in the list of proposed economic stimulus interventions.

Compared to “mainstreamed” infrastructure development, energy efficiency projects have minimal environmental impacts and are still the least-cost means for the country to meet its energy security objectives and greenhouse gas emission reduction obligations.

Because of significant macroeconomic, energy security and job generation impacts, energy efficiency should be treated as infrastructure, as in other jurisdictions. The planning, budgeting, procurement, disbursements and implementation of energy efficiency projects are given similar treatment by a growing number of governments as infrastructure projects. Republic Act 11285 (2019) opens the door to more innovative government procurement of energy-savings based performance contracts, public-private partnership transactions, joint-venture agreements and other modalities.

For the reasons cited above, PE2 respectfully recommends:

1.        The inclusion of a PHP 55 billion energy efficiency component in the proposed Philippine Economic Stimulus Act of 2020, which includes PHP 15 billion in additional BBB appropriations for energy efficiency improvements in public sector facilities under the national government’s Government Energy Management Program (GEMP) and another PHP 40 billion in concessional energy efficiency loans to LGUs and MSMEs by the Development Bank of the Philippines and the Land Bank of the Philippines with funding sourced from Official Development Assistance; and,

2.        The incorporation of energy efficiency components in medium- and long-term economic development strategies, government procurement frameworks, investment priorities plans, climate change mitigation action plans, and energy infrastructure development plans of the country.

If needed, PE2 would be pleased to expound on this position statement and/or receive your comments at secretariat@pe2.org.

 

Alexander Ablaza
President, PE2

 

Copy by Electronic Circulation:

Speaker and Chairman, Defeat COVID-19 Committee (DCC), House of Representatives
Senate President, Senate of the Philippines
Joint Congressional Energy Commission (JCEC), 18th Congress
Economic Stimulus Response Package (ESRP) Cluster, DCC, House of Representatives
Committees on Economic Affairs, House of Representatives and Senate of the Philippines
Secretary, Department of Energy
Secretary, Department of Finance
Secretary, National Economic and Development Authority
Secretary, Department of Trade and Industry
Managing Head, Board of Investments

(Footnotes in the original document are omitted in this electronic circulation.)

About PE2

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

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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

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