Biomass Industry in the Philippines

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Op-ed by Bob Shead

This article will attempt to describe the economic advantages and environmental efficiencies of biomass power generation in the Philippines.  The biomass industry in the Philippines, while still far behind fossil fuel-based power generation, is rapidly advancing.  The term biomass normally refers to biological material that can be used as fuel.  It can be something as simple as a wooden log or more complex like alcohol.  Biomass for millennia has been the primary energy source on the planet. Although it is considered that all fossil fuels such as coal and oil originate from vegetation, they are excluded from the definition of biomass.

Sources of Biomass in the Philippines

The Philippines has large and abundant supplies of biomass resources, including agricultural crop residues, forest residues, animal waste, agro-industrial waste, municipal solid waste and aquatic biomass.  The most common agricultural waste are rice hull, bagasse, coconut shell husk and coconut coir.  This use of commercially produced agricultural residues converted into biofuels is increasing in the Philippines, as fossil fuel prices continue to rise.  Rice husks are perhaps the most important underdeveloped biomass resource that can be fully utilized in a renewable and sustainable manner for generation of electrical power.

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Currently, biomass technologies used in the Philippines include the use of bagasse as boiler fuel for cogeneration; rice and coconut husks dryers for crop drying; biomass gasifiers for mechanical and electrical applications; fuelwood and agricultural wastes for oven kilns; and furnaces and cooking stoves for cooking and heating purposes.  Biomass technology represents the largest installations in the Philippines in comparison with the other renewable energy or energy-efficient and greenhouse gas abating technologies.

Biomass energy has, and continues to play a vital role in the Philippines’ energy supply.  Nearly 30 percent of the energy for the 100 million plus people living in the Philippines comes from biomass, and is mainly used for household cooking by the rural population.  Biomass energy sources, account for approximately 15 percent of the primary energy use in the Philippines.  These resources that are available in the Philippines can generate biomass power projects with a potential capacity of more than 200 MW. It is estimated that about 70 percent of this biomass use can be traced to the cooking needs of the residential sector, as compared to the industrial and commercial applications that account for the remainder.   

It has been estimated that the volume of residues in the Philippines, from rice, coconut, palm oil, sugar and wood industries is 16 million tons per year.  Bagasse, coconut husks and shell can account for at least 12 percent of total national energy supply.  The World Bank-Energy Sector Management Assistance Program estimated that residues from sugar, rice and coconut could produce 90 MW, 40 MW, and 20 MW, respectively.

The development of agricultural residual recovery systems, the improvement of agro-forestry systems, the introduction of the latest energy conversion technologies, and development of biomass supply chains, will play a major role in biomass energy development in the Philippines.  The country is also amongst the nations most vulnerable to climatic change, and has experienced some of the largest crop losses due to climate change.  The country has demonstrated a strong self-interest in the advancement of clean energy technologies, and has the potential to become a role model for other developing nations on account of its broad portfolio of biomass energy resources.

Agriculture in the Philippines

The Philippines is primarily a country that relies on agricultural produce.  It has a land area of 30 million hectares, 47 percent of which is agricultural.  The total area devoted to agricultural crops is 13 million hectares distributed amongst food grains, food crops and non-food crops.  The crops grown in the Philippines include rice, coconut, bananas, pineapple and sugarcane, and these are the major contributors to biomass energy resources. The majority of agricultural waste in the Philippines is mainly made up of rice husk, rice straw, coconut husk, coconut shell, banana, pineapple and general bagasse.  The country has a very good potential for biomass power plants, as approximately one half of the country’s agricultural land produce includes rice, coconut and other tropical fruit products.  Consequently large volumes of rice straw, husks and the waste of tropical fruit produce are generated.

Rice is the staple diet in the Philippines.  Filipinos are amongst the world’s biggest rice consumers. The average Filipino consumes about 100 kilograms of rice per year.  Though rice is produced throughout the country, Central Luzon and Cagayan Valley are the major rice growing regions, with more than 1.2 million hectares of rice producing areas.  The country produced about 16 million tons of rice in 2015. This rice production gives an estimated production of rice husks of more than 2 million tons per annum.  This is the equivalent of approximately 5 million barrels of oil in terms of energy.  Rice straw is another important biomass resource with a potential production of about 5 million tons per annum.

In 2006, the Philippines government passed the Biofuels Act.  This was aimed at the sugar industry in the Philippines, which is the major source of ethanol and domestic sugar, and a major agricultural industry. About 380,000 hectares of land is devoted to sugarcane cultivation, and it is estimated that 1.17m tons of sugarcane waste is recoverable as a biomass resource in the Philippines.  In addition, 6.4m tons of surplus bagasse is available from local sugar mills.  There are 29 operating sugar mills in the country with an average capacity of 6,900 tons of sugarcane waste per day.  The majority of these mills are located in Negros Province, which supplies about 46 percent of the country’s annual sugar production.

The Philippines has the largest number of coconut trees globally, and produces the majority of coconut oil and copra meal globally.  The majority of coconut waste includes coconut shell, coconut husks and coconut coir dust.  Coconut shell is the most widely utilized however the reported utilization rate is very low.   Approximately 500 million coconut trees in the Philippines produce very large amounts of biomass as husk, estimated at 6m tons annually.

Maize is also a major agricultural crop in the Philippines, and produces a large amount of agricultural waste.  It is estimated that 4m tons of grain maize and 1m tons of maize cobs are grown annually in the Philippines.  Maize cob burning is the main energy application of the crop, and is widely practiced by small farmers to supplement fuelwood for cooking.

The development and optimal use of the country’s renewable energy resources is central to the Philippine’s sustainable energy agenda.  Renewable energy is an essential part of the country’s low emissions development strategy, and is vital to addressing the challenges of climate change, energy security, and access to energy in the Philippines.

Philippines Department of Energy – National Renewable Energy Programme (NREP)

The National Renewable Energy Program (NREP) outlines the policy framework enshrined in Republic Act 9513. It sets the strategic building blocks that will help the country achieve the goals set forth in the Renewable Energy Act of 2008.  The NREP signals the country’s big leap from fragmented and halting renewable energy initiatives into a focused and sustained drive towards energy security and improved access to clean energy. The NREP sets out indicative interim targets for the delivery of renewable energy within the timeframe of 2011 to 2030.  Meeting the large targets up to 2020 will be challenging as detailed planning, financing, and building of renewable energy infrastructure will have to be undertaken at a scale, and within a time frame, never done before.

The NREP lays down the foundation for developing the country’s renewable energy resources, stimulating investments in the renewable energy sector, developing technologies, and providing the impetus for national and local renewable energy planning that will help identify the most feasible and least-cost renewable energy development options. The NREP proceeds from the assumption that certain activities can be taken right away, while others will take time to implement.  As a national program, it will require periodic review to ensure it conforms to the policy objectives set out in RA 9513.

Beyond the scale, however, are fundamental issues of transmission and grid integration for intermittent renewable energy resources.  Social and economic impacts cannot be overlooked.  These are issues that will be kept under close review, and action will be taken toward meeting the challenges of balancing the country’s energy security needs and the overriding goal of providing clean, affordable, and sustainable energy for all.

The NREP promises a continuing and well-coordinated effort to drive development in the renewable energy industry, promote technology advancements, and achieve economies of scale. It provides the basis for national and local renewable energy planning that will identify specific actions and times upon which outcomes will be generated.  Such plans will factor in cross-cutting issues and essential interventions in the areas of transmission development and integration, energy efficiency, off-grid electrification, climate change, technology transfer and development, local capacity building, and partnerships.

Given the dynamic nature of the country’s energy sector, the NREP is an active document.  Forecasts and targets will be updated periodically as key developments in the energy sector emerge.  Programs will be reviewed, and deployment of renewable energy projects will be monitored to ensure that stakeholders make good on their promise to deliver.  Above all, partnerships will be enhanced to ensure a country-wide approach in developing the country’s renewable energy resources.

Investments in Philippine Biomass Industry

Rice farmers and millers have started to warm up to biomass power.  A consortium of rice millers, Isabela Biomass Energy Corp. (IBEC), is building a 20-MW rice-husk-fired power plant in Alicia, Isabela. IBEC has tapped local bank Banco de Oro for a credit line of P1.8 billion to help finance the power project and its link to the national grid. Biomass power generation can rejuvenate agri-focused businesses as well.   Victorias Milling Co. Inc. is energizing its way to financial health with a P1.1 billion 40MW biomass power project.   It is set to put up a cogeneration facility using bagasse (leftover sugarcane fiber or sapal) at the VMC agro-industrial complex in Victorias City, Negros Occidental province.

VMC’s usage of 3.1m to 3.3m tons of sugarcane is seen to provide enough raw materials for the facility.  When the biomass power station starts transmitting power to the Visayas grid, VMC will be able to collect on the feed-in-tariff (FIT) incentive. VMC has formed a subsidiary, Victorias Green Energy Corp. (VGEC) to undertake its power related projects. One of the biggest suppliers of refined sugar in the Philippines, VMC supplies about 30 percent of the country’s daily need for refined sugar.   It sources its raw materials from district and non-district planters as well as through cane and raw sugar purchases. 

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The International Finance Corp. (IFC), with support from the Government of Canada and Clean Technology Fund, announced in August 2016, a US$161 million investment in three Biomass power plants in Negros Occidental.  It was also announced recently that Bronzeoak Philippines, owned by the sugarcane farming Zabaleta family will develop these three projects in Negros Occidental to support the country’s clean renewable energy initiatives. IFC will be joined by the Canadian government and the Clean Technology Fund in funding the specified renewable energy projects being developed by the Zabaleta-based Bronzeoak Philippines in the towns of Manapla, San Carlos and La Carlota in the Visayas grid.  IFC has stated that the project is expected to generate 70MW of clean renewable energy for the country.   Bronzeoak subsidiary South Negros BioPower developed, in partnership with ThomasLloyd and funded by Cleantech Infrastructure Fund, a 25MW Biomass Power Plant that would deliver about 175MW of electricity per year.

Amongst the foreign investors who have also started to take notice of the Philippines’ potential for biomass power, is the British company MacKay Green Energy (MGE).  MGE is discussing the investment of US$100 million in a biomass power plant and plantation for feedstock in Mindanao.  The Company Chairman James R. Mackay has said that MGE would construct three Biomass power stations with a capacity of 32 MW. The Aboitiz Group is also into biomass, with its 9MW biomass plant in Batangas, under Aboitiz Renewables nearing completion. Biomass power is also being considered for the transport industry.   Aboitiz’s company AseaGas Corp 9MW Lian Biomass power plant in Batangas is keen on exporting power to the Luzon grid and is considering prospects in powering modern commercial trucks with gas. Oil firm Eastern Petroleum Group is also diversifying into biomass power and has been seeking funding for a P4 billion biomass plant.

About Us
 
Bob Shead is ASEAN Briefing’s Philippines Correspondent and is based in Manila. He has 25 years experience as a diplomat in Asia.
 
ASEAN Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Asia, including China, India, Indonesia, Russia, the Silk Road & Vietnam. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.
 
Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the ASEAN and Asia. We maintain offices in Singapore, as well as Hanoi & Ho Chi Minh City, and maintain Alliance offices in Bangkok, Jakarta, Kuala Lumpur and Manila as well as throughout China, South-East Asia, India and Russia. For assistance with ASEAN investments into any of the featured countries, please contact us at asean@dezshira.com or visit us at www.dezshira.com

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