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Enhancing the Resilience of Off-Grid Areas through Grid Modernization and Hybridization – From Proof of Concept to Pilot Program

Enhancing the Resilience of Off-Grid Areas through Grid Modernization and Hybridization – From Proof of Concept to Pilot Program

Picture of Nian Sayoc, Associate

Nian Sayoc, Associate

Picture of Ivan Galura, Senior Associate

Ivan Galura, Senior Associate

Picture of Nian Sayoc, Associate

Nian Sayoc, Associate

Picture of Ivan Galura, Senior Associate

Ivan Galura, Senior Associate

Photo from left to right: Rene Fajilagutan (General Manager, Romblon Electric Cooperative), Maris Cardenas (Executive Director, CentRE), Grace Yeneza (Managing Director, Preferred Energy Incorporated), Hon. Sergio Dagooc (Representative - Association of Philippine Electric Cooperatives House of Representatives), Jhun Escobar (Grid Modernization Advisor, ICSC), Silver Navarro (Principal Advisor, CSV), Matthew Carpio (Head of Transaction Advisory, CSV) in the Public Launch of the Grid Modernization and Hybridization Guidebook for Off-grid Electric Cooperatives
Household electrification rates in off-grid areas of the Philippines are approximately 76%, significantly below the national average of 95%1. Currently, 281 off-grid areas provide electricity to over one million households across the country. In these regions, 89% rely on diesel power plants (DPPs) for their electricity2. This raises several challenges – for example, DPPs are prone to unscheduled shutdowns, degrade the local community’s air quality, contribute to greenhouse gas (GHG) emissions, and expose consumers to the price volatility of imported diesel fuel3. As a result, off-grid consumers frequently experience power interruptions, high electricity costs, and subpar service.

Energy Generation Mix in Philippine Off-Grid Areas

Source: Philippines Department of Energy
Accelerating the energy transition in off-grid areas would enhance electricity delivery and improve the standard of living for consumers. One effective approach is “hybridizing” DPPs in these regions. This involves integrating renewable energy (RE) and battery energy storage with the existing diesel infrastructure. Implementing such a hybrid renewable energy system (HRES) has been shown to improve power services and decrease the frequency and duration of power interruptions4. It also has the potential to reduce electricity costs by an estimated 20% compared to the previously diesel-only systems5. 

Comparison Pricing Between Diesel-only Versus Hybridized RE Systems

Source: Asian Development Bank

Full RE and battery energy storage systems (BESS) are still generally expensive even for off-grid areas. While it would be ideal to fully displace diesel, currently in even the more advanced off-grid areas with high RE + BESS penetration rates, there are still DPPs on standby as backup or to help smoothen operations.

Energy transition program for off-grid areas

To address off-grid energy transition challenges in the Philippines, Climate Smart Ventures (CSV) is currently rolling out a multi-year program on Enhancing the Resilience of Off-Grid Areas in the Philippines through Grid Modernization and Hybridization. This project is designed to accelerate the energy transition in off-grid electric cooperatives (ECs) and facilitate the modernization of specific off-grid areas served by the ECs. Electric cooperatives in the Philippines operate as membership-based nonprofit electricity providers, and they play a significant role in energy infrastructure development for remote areas of the 7,000+ island country.

Another goal of the project is to enhance the innovation capabilities of EC personnel by providing access to extensive global technology and financing trends, which can fast-track EC energy transition ambitions and plans.

CSV’s project partners include the Center for Empowerment, Innovation, and Training on Renewable Energy (CentRE), the Institute for Climate and Sustainable Cities (ICSC), and Mott MacDonald, while the Tara Climate Foundation supports the project.

Positive developments in the program

Since its launch in April 2023, the project has received positive engagement from the Philippine public sector. The National Electrification Administration (NEA) has been pivotal to the project by contributing its input, guidance, and support in facilitating communications with ECs. CSV has also directly interacted with and received positive feedback from the Department of Energy, the Energy Regulatory Commission, and key representatives from the House of Representatives.

CSV has received formal expressions of interest from select ECs with off-grid franchise areas to collaborate and participate in the program. Building on this momentum, CSV aims to deepen its efforts in engaging off-grid ECs by hosting regional workshops. These workshops will address technical aspects through an HRES Development Program and financial aspects through a Capital Planning and Fundraising Capability Program, facilitating ECs’ progress in hybridization and grid modernization.

Furthermore, CSV, in collaboration with Mott MacDonald as the engineering advisor, has initiated the project’s Technical Assistance Program (the “Pilot Program”). Through this program, CSV will work with two pilot ECs to design HRES solutions tailored to their current and future needs. The Pilot Program will also offer recommendations for potential modernization and upgrades to support the energy transition in the applicable off-grid franchise areas.

In another key development, CSV earlier this year released a comprehensive and publicly available Grid Modernization and Hybridization Guidebook (the “Guidebook”).

The Guidebook: 

  • Discusses the HRES development process (i.e., feasibility, development considerations, sizing and optimization, system upgrade planning, and permitting and regulatory approvals),
  • Highlights the three primary business models to incorporate renewable energy into EC franchise areas (e.g., developing their own embedded HRES, contracting a third-party supplier, or via strategic partnerships), and
  • Identifies additional policy and industry support to ensure the sustainability and scalability of HRES projects.

Next steps and shared learnings

Alongside project partners CentRE and ICSC, CSV will continue to collaborate with its public sector partners while exploring more strategic partnerships with private power developers and financial institutions to accelerate initiatives in the off-grid energy transition.

Findings from the capacity-building workshops and technical assistance provided through the pilot program will be shared with key stakeholders from the government and the power sector. This will help ensure the sustainability of technical and financial initiatives beyond the project period, further accelerating the off-grid energy transition and promoting the wider adoption of HRES by ECs.To learn more or participate in the project, please contact Nian Sayoc (nian@climatesmartventures.com).

Notes

1 Department of Energy, 39th Electric Power Industry Reform Act (EPIRA) Implementation Status Report (2021), https://doe.gov.ph/sites/default/files/pdf/electric_power/39th-EPIRA-Status_Report-2021.pdf

2 Department of Energy, 2021-2025 Missionary Electrification Development Plan (MEDP), https://doe.gov.ph/sites/default/files/pdf/electric_power/Approved_2021-2025%20MEDP.pdf.

3 UNDP and Arup, Off-grid Power Supply Carbon Footprint and Sustainable Energy Planning of Primary Health Facilities (2015), https://www.undp.org/sites/g/files/zskgke326/files/publications/UNDP%20Briefing_OffgridPower96.pdf.

4 Dincer, Ibrahim and Abu-Rayash, Azzam, Energy Sustainability (2020), p. 106, Elsevier Inc., https://www.sciencedirect.com/book/9780128195567/energy-sustainability#book-info.

5 Asian Development Bank, Technical Assistance Consultant’s Report: Promoting Sustainable Energy for All in Asia and the Pacific – Renewable Energy Mini-grids and Distributed Power Generation (Subproject A) (2020), https://www.adb.org/sites/default/files/project-documents/48435/48435-002-tacr-en_1.pdf.

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