PE2 proposes EE as post-COVID economic stimulus to DOE, NEDA, Congress

MAKATI CITY, 23 April 2020 – The Philippine Energy Efficiency Alliance (PE2) issued earlier today a position statement in aid of efforts of the 18th Congress and the Executive Branch of the Philippine Government to legislate, plan, allocate and implement economic recovery and stimulus programs as the country addresses the impact of the COVID-19 pandemic on the local economy. Submitted by PE2 president Alexander Ablaza, the position statement entitled “Supporting the International Energy Agency’s Call to Include Energy Efficiency as Economic Stimulus” was shared with officials and staff of the House of Representatives, Senate of the Philippines, Department of Energy and the National Economic and Development Authority. Even the Chairpersons of the Committees on Energy and Economic Affairs of both chambers of the 18th Congress were included in the circulation.

PE2 reported that the International Energy Agency (IEA) released on 8 April 2020 its paper “Energy Efficiency and Economic Stimulus – IEA Strategic Considerations for Policy Makers” (https://www.iea.org/articles/energy-efficiency-and-economic-stimulus). The Alliance was pleased to announce that Energy Secretary Alfonso G. Cusi was drafted as the 23rd high-profile member of the IEA-created Global Commission for Urgent Action on Energy Efficiency in November 2019.

In the position statement, PE2 fully supports the IEA recommendation that governments include energy efficiency as a major pillar of proposed economic stimulus packages as countries plan their recovery pathways from the COVID-19 impacts. Believing that the IEA policy recommendations are best suited for the policy and market conditions in the Philippines, PE2 endorses the IEA position for the following reasons:

1. 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% share of the 120,300 new jobs in the US energy sector last year. Total energy efficiency jobs in the US now stands at 2,380,000, which represents 1.6% of the total US workforce.  A survey of 35 energy efficiency programs and stimulus packages across the globe concludes that an average 19.3 jobs were created for every EUR 1 million invested in energy efficiency.  The same study estimates that, in relation to the specific measures for public buildings proposed by the European Commission in the Energy Efficiency Directive in June 2011, some 29,000 full-time new direct jobs will be created each year.
2. Compared to other stimulus interventions, energy efficiency has proven speed of delivering economic impacts of job generation and reducing operating expenditures of income-generating activities. Infrastructure and large construction projects, while effective job generators, 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.
3. 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. Compared to other stimulus activities, a vast majority of energy efficiency projects pose little or no negative impacts to the local environment. On the contrary, energy efficiency projects harvest waste energy from every energy end-use sector and convert such waste into useful energy. Both IEA and PE2 call energy efficiency the “first fuel” because it will continue to be the cheapest, fastest and most untapped energy resource that can be quickly deployed to bridge short-, medium- and long-term energy security gaps as well as comply with Paris climate agreement obligations.
4. Public buildings used by NGAs, GOCCs, GFIs, SUCs, and LGUs across the country are estimated to need at least PHP 66 billion in energy efficiency capital through 2030 to shave off some 1.6 TWh/yr in energy savings across the next 10 years. Accelerating the investment of PHP 66 billion to improve energy efficiency in government buildings within the next 2-3 years will certainly distribute the immediate economic stimulus impacts across the countryside. Separate capital requirements will be needed to improve energy efficiency in the delivery of public services such as street lighting, water source/distribution pumping, and electricity distribution. On top of this amount, the public sector agencies and LGUs will need to fund energy efficiency project development activities (e.g. investment-grade energy audits, and innovative procurement planning).
5. The Philippines can leverage previous experience in large-scale energy efficiency replacement and market transformation programs in the design of larger energy efficiency programs, especially for sectors with poorer access to finance, know-how, technologies, and services. Having mobilized technical assistance grant funding from development partners to accelerate the adoption of energy-efficient technologies, energy efficiency practices, standards and policies in the last 20 years, the Philippines is now well-positioned to build on the legacy impacts of the previous programs and design larger, more inclusive, and more transformational energy efficiency programs. Stimulus funding can be used to programmatically wash out low-efficiency technologies, practices and standards with the bulk procurement and distribution of energy-efficient technologies. This would also ensure that such large-scale programs properly dispose of the retired technologies that were forced into market obsolescence.
6. Energy efficiency financing is already in the radar screen of both government financial institutions (DBP and LandBank) but both GFIs will need to de-risk, grow and scale-up exposure to energy efficiency projects with lower-costing and longer-term funds. Stimulus and development assistance capital injections will help GFIs fix lower lending interest rates and offer longer loan tenors to a wider range of borrower classes in the public and private sectors.
7. The country will need to jumpstart public and private sector capital flows to bridge the PHP 12 trillion capital gap to meet the country’s energy efficiency roadmap targets by 2040. Stimulus and development assistance in the next 2-3 years would be effective in priming the pump of sustained capital flows toward energy efficiency projects by absorbing risks associated with pioneer adoption of innovative technologies, procurement, financial modalities, and business models among energy end-users and other market players.
8. With the Republic Act 11285 now in place to mainstream energy efficiency in all energy end-use sectors of the economy, the country has the appropriate policy framework to flow concessional funds and fiscal incentives toward energy efficiency adoption. NGAs, GOCCs, LGUs and all designated establishments consuming at least 500,000 kWh/yr now have obligations under the new Energy Efficiency & Conservation (EE&C) Act, which creates a policy-driven incremental demand for energy efficiency project investments. A significant portion of the PHP 12 trillion energy efficiency capital gap will be bridged by third-party investments that will need to made viable through fiscal incentives and the mobilization of concessional funds. Stimulus and development assistance for this intervention can readily benefit from the enabling features of the new EE&C law.
9. 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, especially because of the massive macroeconomic, energy and environmental impacts of energy efficiency that can potentially surpass those of renewable energy and other energy infrastructure developments. RA 11285 opens the door to more innovative government procurement of energy-savings based performance contracts, public-private partnership transactions, joint-venture agreements, and other modalities. Stimulus and development assistance can serve to de-risk and accelerate the mainstreaming of these innovative practices in the scaled-up implementation of energy efficiency projects across the economy.

PE2 Note:

The IEA publication was attached to the PE2 position statement:
Energy efficiency and economic stimulus: IEA strategic considerations for policy makers
(Posted by the International Energy Agency, 8 April 2020)
Read it here: https://www.iea.org/articles/energy-efficiency-and-economic-stimulus