Ramping Up Renewables Across Regions
The need to inhibit climate change by promoting renewables and reducing carbon emissions challenges governments the world over, who must balance their economic goals to produce more energy against costly yet crucial environmental objectives. These challenges are making headlines in countries around the world.
Mexico: Coal on the Way Out
While all around the world trends point to efforts to reduce dependence on pollutant coal energy – in Mexico, CFE announced the purchase of 330,000 tons of coal to reinforce the existing three power facilities in anticipation of the peak demand that will take place in summer. After controversy regarding the purchase, the utility aims to reinforce its existing three coal-fired power plants and claims that CFE will not return to the coal era. “We are not opting for coal as the fuel to develop the electricity industry or the CFE in its generation,” said company CEO Manuel Bartlett at a press conference. Nevertheless, CFE loudly protested unfair electricity rates, schemes and subsidies that publicly claim that Renewable Energy (RE) is the cheapest, when in fact it is only cheap at certain hours. Because its supply is intermittent, total RE consumption necessarily also includes electricity at much higher rates during hours when solar and wind are not available, affecting net billing. The state-owned utility has a tough balancing act to meet expanding energy requirements while in parallel minimizing consumer prices and carbon emissions.
At MIREC WEEK 2019, Mexico’s leading clean energy congress and exhibition, Mexico experiences a time of dynamic energy policies and new business opportunities in the Renewables sector as a result of the new government administration assuming office in late 2018. After the cancellation of the 4th Long-Term Auction and large transmission projects, the new Mexican regime is expected to announce its plans to continue development of both RE and the country’s energy transmission infrastructure.
Philippines: Seeking to Deliver a Sustainable Energy Mix
Perhaps the market will suffer from the regulators’ decision to reduce the FIT tariff that was an incentive driving RE development projects in the country; according to the country’s Department of Energy, total PV development potential in the Philippines is far higher than the government’s targets through 2030.
With low domestic energy supply and a cost of electricity that is among the highest in Asia, the insufficient capacity of power to meet demand in the Philippines hinders investment. The government is therefore aiming to create incentives to deliver a sustainable energy mix that will protect energy consumers from price hikes. While facing energy security, accessibility and pricing issues, the Philippines has been the world leader in the use of renewable and low-carbon sources, ranking first for environmental sustainability on the WEC index. Seeking to reduce fuel prices and dependence on imports, the government is in fact encouraging growth of domestic carbon-based fuel reserves of oil, gas and coal, although the Tax Reform for Acceleration and Inclusion (TRAIN) Act was signed at the end of 2017 in a bid to reduce carbon emissions, which resulted in a tariff increase on the import of coal. Of the total 22.7 GW of installed generating capacity in 2017, RE accounted for about 31%, only slightly behind coal with 35%.
Containing over 7600 islands, the Philippines has difficulty ensuring a stable, nationwide power supply, and access to stable electricity is still scarce in remote areas. The high costs of diesel generation, not to mention the negative environmental impacts of diesel emissions, makes rural electrification even more challenging. According to the Philippines DoE, as of December 2017, 2.4m households, or 16% of homes, were not connected to the grid and 19,740 sitios (rural territorial enclaves) had no access to electricity.
One opportunity to overcome supply gaps lies in the modernization of small island power systems through adopting renewable sources such as micro-grid and battery energy storage solutions, which will lead to cheaper and cleaner power; a study was carried out by the International Renewable Energy Agency to assist the country in offsetting diesel usage. With demand for energy continuously growing, scaling up decentralized power systems is a top priority of the government, and with the increasing adoption of renewable technologies, the goal of total electrification by 2022 is well within reach. (Source: “Long-term policies aim to address concerns over energy sustainability in the Philippines”, Philippines Energy Report, Oxford Business Group)
South Africa: Long-awaited carbon tax to take effect in June 2019
South Africa, the world’s 14th largest emitter of carbon dioxide, is taking steps to curb carbon pollution, as seen by the National Assembly passing a long-awaited Carbon Tax Bill . Although delayed and scaled down from 10% to 2% above inflation, starting at 120 rand ($8) per ton of carbon dioxide, the tax aims to reduce the impact of climate change. As historically both the energy and labor infrastructure in South Africa have been strongly dependent on coal, healthy transition to RE will involve financial support for the former coal laborers, as well as restructuring of the debt-ridden coal-based state-owned energy monopoly Eskom. By ratifying the Paris Agreement on Climate Change in 2016, South Africa committed to work against climate change, which means reducing the country’s greenhouse gas emissions by up to 42% by 2025, cutting emissions by almost half within the next six years. The carbon tax should incentivize energy producers to reduce emissions; some say the watered-down tax bill that was passed is too little, too late.
Showing his commitment to renewables, Energy Minister Jeff Radebe said in his February 7th State of the Nation address “Big centralized power generation plants will disappear and be replaced by distributed generation, mini-grids and batteries;” agreements have been signed with 27 independent power producers. Within eight years, the Renewable Energy Independent Power Producer Procurement Programme (REIPPP) has attracted R209.4 billion in committed private sector investment, resulting in much-needed alleviation of fiscal pressure. The renewable IPPs have created new jobs and reduced carbon emission by about 33.2 million tons of carbon dioxide. To encourage and support businesses looking to green their offices and buildings, two tax incentives have been added to the Income Tax Act. The incentive allows 100% asset accelerated depreciation in the first financial year that a renewable asset is brought online, equating to a 28% deduction on the business’ income tax. The combined effect of the carbon tax together with the incentives to invest in RE should work together to carry out the needed changes to the South African energy economy.
In Conclusion: Conscious Cut in Carbon Emissions; Consideration for Consumers’ Energy Concerns
With the impact of climate change causing more frequent, more severe weather conditions around the globe, policymakers and regulators in countries around the world are proactively legislating energy policies, putting in place incentives and projects aimed at investing in RE and reducing carbon emissions to limit the impacts of climate change and global warming.
It is encouraging to see that policymakers, utilities and other commercial players in the energy sector are thinking out of the box and collaborating more closely to accelerate the transition to RE. Technologies from 5G for telecom to imaging systems for medical equipment to increasingly sophisticated computer hardware needed for data-driven AI and machine learning solutions are innovative yet power-hungry. The need grows for new yet eco-friendly ways to increase energy production to meet the growing demand for power that is fundamental to spurring economic growth across markets and sectors.
By factoring in the importance of energy efficiency and environmental protection from the outset, as well as concerns for equal economic opportunity, community outreach and social welfare, local governments and civic decision-makers around the world allow us a cautious yet optimistic outlook for a clean, green future. #SayNoToDiesel
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