Philippines a Symbol for Local Geothermal

Jakarta Globe, Dion Bisara, November 6, 2013

The geothermal power power plants in Mount Apo in Mindanao, Philippines,
help to reduce the nation’s reliance on fossil fuels. (JG Photo/Dion Bisara)

Indonesia does not have to look very far to find the best way to tap geothermal energy, which potentially is located in protected, remote forests.

As Indonesia struggles to find a balance between the development of geothermal resources, forest conservation, and development, the Philippines has shown how that can be achieved.

The Philippines gets 14 percent of its electricity supply from geothermal power plants and the nation is the second-largest producer in the world of such energy by capacity, after the United States.

Indonesia can only tap 1.4 percent of its estimated 28,994 megawatts in reserves — the largest in the world — as the country is yet to resolve issues such as conflicting laws that forbid geothermal exploitation in conservation areas, pricing, and opposition from indigenous people.

Agnes de Jesus, senior vice president for environment and external relations at the Energy Development Corporation — the Philippines’ largest geothermal power producer — recalled similar challenges in 1988 when the Philippine government decided to build geothermal power plants in the middle of Mount Apo Natural Park following the El Nino weather phenomenon that reduced hydropower generation.

The plan was highly controversial at that time, de Jesus said, citing the lack of legal basis to establish plants in a conservation area, which is also an ancestral domain for indigenous people.

“We conducted scientific surveys on the site to asses the environmental impact and held many consultations with stakeholders to explain about the project,” she said. It took four years for the project to start after securing approval from indigenous people and a presidential decree that granted exploitation permits in the forested area.

The EDC currently operates two generators in Mount Apo — a dormant volcano on Mindanao island, which is in the southern Philippines — with total capacity at 106 megawatts. The power plants use about 15,000 metric tons of steam tapped from underground reservoirs to power the generators, and as much as 40 percent of the steam escapes to the air because of evaporation.

Steam generation

The steam is captured through pipes that go through the turbines, and the steam then goes through a series of pipes that condense the vapor into water, which is then cycled back into the underground reservoir to produce more steam.

That steam loss cannot be converted back into water through this process, so conservation remains critical for the Mount Apo geothermal project because the forest captures rainwater and replenishes the reservoir, de Jesus said.

“The key to Mount Apo’s geothermal coexistence with the protected area or park was to locate it in less critical sites of the forest — in the openings or amongst secondary vegetation,” she said.

The company’s conservation efforts range from forest patrols to reforestation using native species of plants, de Jesus said.

Mount Apo is considered to be one of the richest botanical mountains in Southeast Asia, hosting hundreds of rare, endemic and threatened species of flora. It is being proposed as a world heritage site by Unesco.

Since the geothermal project commenced in Mount Apo, the national park was better protected from encroachment, thanks to increasing efforts from the EDC and the government in securing the geothermal plant site, said Eduardo Ragaza, chief of protected areas and wildlife division at the Philippines’ Department of Environment and Natural Resources.

The geothermal project also benefits indigenous people.

Samuel Asicam Sr., chairman of the Cotabato Consultative Tribal Council, which represents some indigenous people in Mount Apo, remembered the days when the natives’ houses were only made by wood, bamboo splits and banana leaves.

“Now we have good houses, many have refrigerators,” Asicam said. “But the best thing is we can have access to education, and we believe it will change our lives.”

The EDC projects provide support for indigenous people, including scholarships, free electricity, emergency health care and assistance in developing livelihoods for them.

Divina Sillador, manager at Lake Agco Hot Spring, which is the only resort within the park, said the arrival of EDC provided jobs. She also said the indigenous Ilomavis tribe benefited from the subsidy on their electricity bills — meaning that the cost for electricity at less than 650 pesos ($15) was free. Divina is an Ilomavis.

All children go to school now, she said, and most of them return to work with the EDC project. Last year, 259 people worked at the facility.

“I hope some day the indigenous people can lead the project,” she said.

Mario C. Marasigan, a renewable energy management director at the Philippine Department of Energy, said success at Mount Apo provided a platform for the country to continue tapping its geothermal potential. The Philippines aims to be the world’s largest producer of geothermal energy by 2030, increasing its installed capacity from 1,848 MW to 3,293 MW, Marasigan said.

“We want to achieve energy self-reliance,” Marasigan said, “Unlike Indonesia, which has coal and fuel, we have very [little] of it.”

Investment incentives

In order to achieve its goal, the Philippines provides generous incentives for companies to develop geothermal in the country, including an income tax holiday lasting seven years; a 10-year duty-free import period on machinery, equipment and materials; and a 10 percent corporate tax after the end of the seven-year tax holiday, which is lower than the normal 30 percent corporate tax, Marasigan said.

And thanks to a market-driven electricity pricing policy in the Philippines, companies like EDC are able to take risks in exploring for new resources while having sound assurance on profitability, Marasigan said.

Such incentives may be small compared to the 17 million barrels of fuel-oil-equivalent — valued at $1.6 billion at current rates — that the country saves annually from having geothermal power plants.

Only 5 percent of the Philippines’ energy sources comes from fuel — which is mostly imported — and that has helped keep the country’s current account balance in the surplus for the last 15 quarters.

By comparison, Indonesia’s current account reached a record deficit of 4.4 percent of the nation’s gross domestic product in the second quarter, after seven consecutive quarters being in the red as reliance of fuel imports grows amid its declining oil production.

Indra Sari Wardani, WWF-Indonesia Ring of Fire coordinator, said EDC’s geothermal project in Mount Apo shows that engagement with indigenous people and forest conservation can be achieved.

“As one of the geothermal projects located within in conservation forest, EDC has one of the best practices,” Sari said.

Ring of Fire is a WWF program launched in 2011 to promote sustainable production and use of geothermal energy in the Philippines and Indonesia. WWF identified challenges in Indonesia’s geothermal energy, including a subsidy policy that distorts the market price for electricity, and the law on conservation forests that prohibits mining activities — under which geothermal energy is categorized.

The Ministry of Energy and Mineral Resources has estimated that 42 percent of the country’s geothermal resources are located in protected forest areas.

Bambang Purbiyantoro, head of preparation and evaluation for geothermal work area division at the energy ministry, said the government is now working on revising the geothermal law to resolve the issues.

“In the end the main challenge is the politics,” Bambang said.

The Jakarta Globe was invited by the WWF’s Ring of Fire project to observe the Mount Apo geothermal project in the Philippines last week.

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