How to achieve energy security and restart industrialization

First of two parts

THERE IS a revolution under way through which China, India and Brazil are liberating themselves from the grip of fossil fuel dependence. They are doing so in the name of energy security as they build huge new industries around wind power, solar power and other renewable energies.

But in the Philippines, where there is already a Renewable Energy Law passed back in 2008 and supposedly implemented from 2011, the dominance of fossil fuels remains intact. Since the launch of the country’s National Renewable Energy Program (NREP) in 2011, the government has approved the construction of 21 coal-fired power projects.

This flies in the face of reason. In a country with such abundance of renewable energy from the sun, the wind and the earth, it is madness to keep importing fossil fuels like coal, oil and gas, and to delay the inevitable shift to renewables that is already under way.

Consider China. While the country continues to draw power from its vast fleet of coal-fired power stations, it is ramping up wind farms, solar farms and other renewables-powered projects to become the world’s largest builder and user of renewable power.

By 2013, China already generated power from renewable sources (hydro, wind, solar) at 378 GW—more than the United States, Germany, India and Spain combined.

China’s official goal for Wind Water and Solar (WWS) power by 2020 is 650 GW (ND&RC). Compare that with the target announced by the Philippine NREP of 15.3 GW by 2030. China’s target is 43 times larger, to be accomplished 10 years earlier.

In Brazil, the government’s official target for 2023 (as part of a rolling 10-year plan) is for 131 GW renewables capacity—largely made up from hydro but with wind and solar power growing rapidly. The 2013-2023 Plan calls for electric generation capacity to be raised from 103.2 GW in 2013 to 164 GW in 2023—keeping the proportion of renewables at 83 percent (by far the largest proportion of any major country with the exception only of Norway)—with the emphasis in investment shifting from hydro to wind and solar.

In India, there is a huge target for solar created by the National Solar Mission of 100 GW—now joined by a target of 60 GW for wind under a comparable National Wind Mission.

The targets announced by China, Brazil and India are all credible because they are backed by financial incentives and local content requirements (LCRs) attached to incoming foreign investment. These countries clearly understand that you don’t just leave it to the market to kick start a new industry—you need a strong policy and strong goals to bring the energy sector onto a new non-fossil fuel trajectory.

Why are China, India and Brazil all investing so much in their alternative energy pathways? Of course there are goals to do with climate change—but these are largely window dressing in the lead up to the Paris UN Climate Conference in December this year. These emerging industrial giants rightly regard climate change as a problem created by historical carbon emissions from the West.

In our view, the real drivers of these countries’ energy strategies are enhancing energy security and reducing local pollution. If the emerging industrial giants were to pin their standard to fossil fuel imports indefinitely, they would be exposed to endless geopolitical tensions—war and revolution. But by ramping up their dependence on renewables, they can manufacture their own energy security. And they can clear their skies. And they can reduce the grip of oil, gas and coal exporters over their economies.

What is there to lose?

Learning from neighbors

First, the renewable energy goals need to be made more ambitious—much more ambitious. For a country of the size of the Philippines, there should be a goal of 10 GW by 2020 and 100 GW by 2025 in renewables capacity. We would expect that these ambitious goals would kick-start an energy revolution that would then become unstoppable.

Next, the government should invite foreign companies to bid for power supply contracts—subject to stringent local content requirements that would kick start a real renewables manufacturing industry in the Philippines. This would help to meet developmental goals—creating manufacturing industries, employment and exports around new energy systems, and relieving the pressure of coal, oil and gas imports on the balance of payments.

Third, local communities should be encouraged to build their own locally owned and supplied power systems—to break the monopoly of National Power Corp. which has been such a dead hand on the electrification of the Philippines.

In this way the first hesitant steps taken so far, such as the Bangui and Mindoro wind farms, and the three-phase solar power project at Negros Occidental launched by San Carlos Solar Energy Inc., could be replicated and expanded. The Philippines has abundant renewable energy resources—but they need to be harvested using devices that are becoming central to global competition in the 21st century.

The renewable energy revolution offers countries like the Philippines a fresh start in achieving goals of industrial development and movement up the ladder of rising incomes. Energy security is a critical element in this process—as clearly understood by China, India and Brazil. While politics in the Philippines fiddles over feed-in tariffs, the rest of world powers ahead with a renewables revolution that promises independence from fossil fuels.

Alternative to PH’s NREP

As a program to facilitate and encourage foreign and domestic investments in renewable energies through the provision of fiscal and non-fiscal incentives, the NREP is geared toward attracting international technology transfers, particularly of RE technologies owned by multinational corporations or MNCs (mainly through foreign direct investments) without any policy and program of achieving self-reliance in these technologies.

As such, the NREP cannot achieve the country’s goal of national energy security inasmuch as this program will only replace one kind of energy dependence with another—that on imported fossil fuels to be replaced by dependence on MNC-supplied RE technologies such as wind turbines and solar panels.

To achieve genuine national energy security, what the country needs is an alternative NREP that is geared toward the attainment of national technological catch-up and self-reliance, if not leapfrog in RE technologies, particularly in solar panels and wind turbines.

The examples of China and India show that developing countries like the Philippines can catch up with and even leapfrog the advanced countries in RE technologies if their governments pursue industrial policy in renewable energies and implement technonationalist leapfrogging programs in RE technologies. 

In 2009, China adopted and implemented technonationalist leapfrogging policies and programs to catapult over the advanced countries and become the world’s largest manufacturer of solar panels. Then a year later, China overtook the advanced countries to become the world’s largest manufacturer of wind turbines. Similarly, India also adopted technonationalist policies and strategies to become a major global competitor in utility-scale (multi-KW) wind turbines.

John A. Mathews, Ph.D. (e-mail:john.mathews.mgsm.edu.au) is a professor of Strategic Management at Macquarie University in Sydney, Australia and Roger D. Posadas, Ph.D. (e-mail: r8dlrposadas.gmail.com) is executive director, research and  innovation center, Lyceum of the Philippines in Gen. Trias, Cavite, Philippines