Prepared by Dr. Lilibeth Acosta and Elena Eugenio

The Philippine Energy Sector

The Philippine economy has been growing at an average annual rate of 4.5 percent, with Gross Domestic Product (GDP) increasing from 918.2 to 1,432.0 billion Pesos from 1999 to 2009 (NSCB 2009). The average annual growth rate of the population was 2.1 percent, increasing from 74.7 million to 92.2 million for the same period. Despite the increase in GDP and population, energy demand in the Philippines was growing at an average annual rate of negative 0.3 percent from 24.4 to 23.8 MTOE (i.e. Million Tons of Oil Equivalent) from 1999 to 2009 (DOE 2009). This negative growth is also reflected in the constant decline in energy, oil and electricity intensity over the same period. Energy intensity declined at an average annual rate of 4 percent, oil intensity 6.4 percent and electricity 0.4 percent. The declining trend in energy consumption and intensity has been mainly contributed to the decline in energy demand in residential applications and in agriculture, which showed an average annual growth rate of -2.8 and -2.1 percent, respectively.

The continuing increase in the prices of petroleum prompted the consumers to utilize energy in more prudent ways (Salire 2007). After the transport sector (36.5 percent), the residential sector (26 percent) accounted for the largest share in total domestic energy demand. Whilst energy demand declined, energy supply continued to increase, albeit at a slow rate of 0.4 percent per year from 38.1 to 39.6 MTOE. The self-sufficiency level in energy increased from 48.6 percent in 1999 to 59.2 percent in 2009 as a result of the increase in indigenously supplied energy. Renewable energy such as geothermal energy and biomass are important indigenous sources of energy in the Philippines (Figure 1). The energy from biomass is mainly derived from forest and agriculture residues, and bagasse. However, the biomass is mainly used for household cooking, so there is a potential for increasing household welfare through improvement in the use of biomass (Samson et al. 2001).

Figure 1 Energy Supply Philippines

Like in many other countries, the Philippines is implementing various bioenergy policies to reduce dependence on imported oil, enhance economic growth, increase energy efficiency and contribute to climate change mitigation. The most prominent policy is the Biofuels Act of 2006, which mandates a 2 percent blend of biodiesel into all diesel fuel in 2008 and 10 percent blend of bioethanol into all gasoline fuel in 2010. The Act also allows oil companies to import biofuels until 2010 to meet these policy targets. Moreover, biomass for bioenergy production is exempted from value added tax and biofuel companies with 60 percent local ownership are provided financial assistance (Zhou and Thomson 2009). Whilst there were no reported obstacles during the transition to a higher biodiesel blend due to adequate local supply (Corpuz 2009), the bioethanol situation was less stable. To comply with the bioethanol mandates, local companies have been importing bioethanol due to supply scarcity and price volatility.  In 2009 ethanol accounted for 0.30 percent of the total indigenous energy supply and 0.10 percent of the total domestic energy supply.

Despite concerns about the impacts of importing bioethanol on local production, the government approved further imports in 2011 to meet its biofuel blending targets (DA-BAR 2011). The local supply of biodiesel and bioethanol is largely produced from coconut and sugarcane; both are traditional crops in the Philippines. Other potential biomass for bioenergy production includes jathropa for biodiesel, and cassava and sweet sorghum for bioethanol. The ethanol yields per hectare per year are 4,550 liters for sugarcane, 1,395 liters for cassava, and 6,000 liters for sweet sorghum (SRA 2008).  The biodiesel yields per hectare are 630 liters for coconut and 1,892 liters for jatropha (DOE 2010). The government supports the production of jatropha for biodiesel because it is a non-staple crop and grows on marginal lands. Thus, the Philippines have the potential to develop a sustainable bioenergy sector using jatropha because this bioenergy crop does not compete with food crops and agricultural lands.

The Philippines and Bioenergy

The global production and use of biofuels has increased dramatically in the past few years, primarily due to intensifying concerns about national energy security, increasing oil prices, environmental considerations, and the efforts to revitalize rural communities. The question today is not whether biofuels will be a part of the energy mix, but rather what economic, social, and environmental implications they will have (APEC 2008; von Braun 2007).

Biofuels or bioenergy are renewable energy and carbon neutral so that they are considered sustainable. As is generally known, there are two kinds of biofuels: biodiesel and bioethanol. Biodiesel is a fuel extracted typically from oils of coconut and oil palm. It is a natural hydrocarbon with little sulfur content, and can be used in diesel engines with very little or without any need for engine modification. Bioethanol, on the other hand, is a form of ethanol, a light alcohol, produced by fermenting carbohydrates, such as starch or sugar, in vegetable matter. Sources of bioethanol being explored are corn, sugarcane, cassava, and sweet sorghum (Maruyama et al. 2009).

Due to unstable and increasing energy prices as well as increasing worldwide energy demand, many countries has perceived bioenergy as an attractive alternative or addition to meet their current and future energy needs (ESCAP 2008). Interest in liquid biofuels production and use has increased worldwide as part of government policies to address the growing scarcity and riskiness of petroleum use, and, at least in theory, to help mitigate adverse global climate change. The existing biofuels markets are dominated by U.S. ethanol production based on cornstarch, Brazilian ethanol production based on sugarcane, and European biodiesel production based on rapeseed oil (Solomon 2010; Havlick et al 2010). Like in many other countries, the Philippines is implementing various bioenergy policies to reduce dependence on imported oil, enhance economic growth, increase energy efficiency and contribute to climate change mitigation (Acosta et al. 2013).

The Philippines has a large potential of energy crop production for bioenergy because crops that are used as feedstock for the production of bioenergy are indigenous or locally grown in the country. Production of biodiesel uses domestic raw materials from coconut, jatropha and other biomass sources. As for bioethanol or ethyl alcohol, it is produced from starches and sugars. In addition to sugarcane, other feedstocks under consideration are sweet sorghum, cassava and corn. However, corn as a biofuel feedtock has issues and threats on the supply of feeds for livestock. Currently, the Department of Agriculture is focused in using sugarcane as feedstock while the use of sweet sorghum and cassava as feedstock is considered to be in the R&D stage (DA 2011).

The Philippine bioenergy policies

The growing focus towards a cleaner and greener environment has directed the Philippine government to the search for more alternative renewable sources of fuel and energy. With the recent enactment into law of the RA 9367 otherwise known as the Biofuels Act of 2006 last January 12, 2007, the mandatory use of biofuels shall be enforced in support to the government’s goal in reducing dependence on imported fuels with due regard to the protection of public health, the environment and natural (DA 2011). The DOE likewise promulgated the Implementing Rules and Regulations (IRR) in 17 May 2007. The Biofuels Act is formally entitled “An act to direct the use of biofuels establishing for this purpose the biofuels program, appropriating funds therefore, and for other purposes.” The IRR covers the “production, blending, storage, handling, transportation, distribution, use, and sale of biofuels, biofuel-blends, and biofuel feedstock in the Philippines” (ESCAP 2008; JAO No. 2008-1).

According to the Department of Agriculture (DA), the objectives of Biofuels Act are as follows: (1) developing and utilizing indigenous renewable and sustainably-sourced clean energy sources to reduce dependence on imported oil; (2) mitigating toxic and greenhouse gas (GHG) emissions; (3) increasing rural employment and income; and (4) ensuring the availability of alternative and renewable clean energy without the detriment to the natural ecosystem, biodiversity and food reserves of the country. (Acosta 2013; DA 2011; DA-BAR 2011; JAO No. 2008-1; RA 9367_Biofuels act). The Biofuels Act also provides an incentive of a zero-rated specific tax on the biofuels component of blended gasoline or diesel. Other incentives include an exemption from value-added tax for the sale of raw materials in the production of biofuels, exemption from wastewater charges under the Clean Water Act, and the extension of financial assistance from government financial institutions for the production, storage, handling, and blending of biofuels (Corpuz USDA 2009).

To support and comply with the provisions of the Biofuels Act, the DA has been pursuing the Biofuel Feedstock Program, which provides (1) production support services, (2) extension support, education and training services, (3) credit facilitation, (4) research and development, (5) irrigation support services, other infrastructure and postharvest & development services, and (6) marketing development to promote the use of coconut and jathropa for biodiesel and sugarcane, cassava, and sweet sorghum for bioethanol (Acosta 2013).

The biofuel Acts emphasized the use of coconut as the major feedstock for biodiesel production. Its product Coconut Methyl Ester (CME), derived from coconut oil (CNO), possesses characteristics of superior quality and of competitive standards. Biodiesel is the name given to these esters when they are intended for use as transportation fuel (APEC Biofuels 2008). The Philippines success in biodiesel is primarily due to its being the world’s top coconut oil (CNO) producer (Phils Biofuels 2013; Corpuz USDA 2009). Out of the 79 provinces which comprise the country, 68 provinces produce coconuts, thus, there are more than 340 million nut-bearing trees in the Philippines (USDA GAIN: Biofuels). The total area planted to coconut in 2005 was 3.243 million hectares, employing 2.6 million farmers and 1.9 million farm workers. About one-third of the country’s population depends directly or indirectly on the coconut industry as a source of income and a means of employment and livelihood (DA 2011).

The government also supports the cultivation of jatropha, a second generation bioenergy crop, for the production of biodiesel. Thus, the Philippines have the potential to develop a sustainable bioenergy sector using bioenergy crops that does not compete with food crops and agricultural lands (Acosta 2013). The government has also announced its plan to launch massive propagation and cultivation of jathropa seeds covering around 2 million hectares of unproductive, marginal and idle public and private lands all over the country. This effort will produce about 5,600 million liters of biofuel in the next 10 to 12 years. There are few pilot plantations growing oil palm (APEC Biofuels 2008; Corpuz 2009). Jathropa can be planted in any soil types, even in marginal lands, and grows well under tropical and subtropical climate and is found throughout the country (DA-BAR 2007). However, cultivation of jathropa for bioenergy production is currently in the Research and Development (R&D) stage.

The National Biofuels Program recognizes the vital role of the sugarcane industry as the major supplier of feedstock for the production of bioethanol. The sugar industry is currently producing more than 10% surplus sugar that could very well supply a good portion of the country’s initial needs for bioethanol. Sugarcane provides the highest yield of ethanol per hectare compared to other crops (with the possible exception of sweet sorghum, the worth as feedstock of which remains to be proven locally). According to Sugar Regulatory Administration (2008), sugarcane industry will have to grow from the 398,872 hectare cropped for sugar on year 2007-08, which is about 18% in excess of the area needed for domestic sugar self-sufficiency, to an aggregate hectare that will supply feedstock for both sugar and bioethanol starting crop year 2008-09 as needed, without affecting sugar self-sufficiency. Sugarcane farmers in the Philippines are approximately 58,996 and around 5 million people are employed in the industry and other sugar-related activities (Padilla and Nuthall 2009)

The government consider it as the most reliable feedstock due to its well-established farming technologies and the highest yield per hectare compared to other feedstock (corn, cassava, and sweet sorghum). The Sugar Regulatory Administration (SRA) already identified 237,748 hectares of new sugar fields, mostly in Mindanao, that can be tapped to produce fuel ethanol. Additional ethanol feedstocks considered by the government are sweet sorghum and cassava (APEC Biofuels 2008).

Other benefits that can be achieved by growing traditional crops as bioenergy is that, increase utilization of agricultural land, promote investment, and create jobs. Biofuels will give the otherwise traditional crops a boost towards value added processing. It will encourage investments, create jobs, and increase farmgate prices although production should be established (DA 2011).

Acosta L.A., D.B. Magcale-Macandog, W. Lucht, K.G. Engay, M.N.Q. Herrera, O.B.S. Nicopior, M.I.V. Sumilang, and V. Espaldon, 2011, Assessment of Trade-off Decisions for Sustainable Bioenergy Development in the Philippines: An Application of Conjoint Analysis, Potsdam : Potsdam-Institut für Klimafolgenforschung  PIK-Report 124, 30 p. (Download Report)

To be updated!