Energy Development Corp., the biggest producer of geothermal steam, is conducting feasibility studies on new technologies to improve and increase the output from its power plants.
“We are first looking at our existing areas, we are doing sort of recycling of heat. So instead of heating 160 degrees centigrade, we harness the heat further and inject the fluids at 120 degrees,” EDC assistant vice president Noel Salonga said over the weekend.
Salonga said the feasibilities could be completed within the year.
“We will conclude (the study) within the year, then next year, look for proper technologies to make that happen,” Salonga said.
He said EDC could harness “roughly 100 MW more if we could put up all these technologies.”
Salonga said the most available geothermal projects today were of lower generation capacity of 20 megawatts to 40 MW and required deeper drilling compared with previous discoveries, which had bigger output of 200 MW and were more economical to develop.
EDC, an affiliate of First Gen Corp. and part of the Lopez Group, is the largest producer of geothermal energy and one of the leading renewable energy companies in the country.
EDC operates five geothermal service contracts areas. The company, through its subsidiaries, has also secured three geothermal operating contracts covering power plant operations.
EDC is a member of the National Geothermal Association of the Philippines and has joined calls for the exemption of the Renewable Energy Law from the Proposed Comprehensive Tax Reform Package 2, citing its adverse effect on the competitiveness of the industry.
“We are appealing that the incentives we had previously in the RE Law will be retained,” Salonga, who is also NGAP president, said.
He said with untapped geothermal resources becoming smaller in size and difficult to develop, the industry should maintain its incentives under the RE Law.
“So we need more incentives than ever so we can move forward geothermal development,” Salonga said.
The Philippines ranked third globally last year in terms of installed geothermal capacirty with Indonesia now at second place and the US at the top slot.
Indonesia has overtaken the Philippines as the second geothermal leader worldwide starting last year, dislodging the country’s from the position it help for over 30 years.
“Reclaiming the second spot will be a tougher challenge if TRAIN 2, as proposed, is passed by Congress. The risks involved in geothermal energy development with the high costs and uncertainties of exploratory drilling and associated works, plus the long gestation period from exploration to commissioning, make it difficult to attract and retain capable investors,” NGAP said in its position paper.
NGAP said government should strike a balance between revenue generation and the long-term outlook for the development of a vital industry that powers the economy.
“Success of geothermal energy development is intricately linked with effective government energy policies, predictable rules and regulations, simple and coordinated permitting process, and a competitive set of incentives that promote geothermal investments,” it said.
“A sudden change in the existing fiscal incentives regime for the geothermal energy industry will affect investor confidence since investors seek consistency, predictability, and transparency,” NGAP said.
NGAP said the benefits derived from a flourishing geothermal industry cannot be quantified by economic figures alone as its impact extends to energy security, countryside development, reduced reliance on fuel imports, foreign exchange savings, and environmental benefits such as reduction in greenhouse gas emissions.
“These benefits to society can only be sustained if government continues to support the geothermal industry, which accounts for 14 percent of the country’s gross power generation,” the group said.
NGAP expressed its reservation on the implementation of a unified menu of fiscal incentives that runs contrary to the purpose of the RE Law to accelerate the development of renewable energy resources such as geothermal energy.
“TRAIN 2 will further decrease the competitiveness of the Philippines in attracting investors in geothermal energy due to the current proposal to apply a single menu of incentives that may not be responsive to the needs of the industry,” it said.
Among the incentives package proposed under TRAIN 2 are as follows: income tax holiday applicable only for the first five years of commercial operations and for a period not exceeding three years, reduced Corporate Income Tax (“CIT”) rate of 15 percent based on net taxable income which is proposed to replace the 5 percent gross income earned (GIE) tax in lieu of all taxes; duty-free importation on raw materials and capital equipment will be made to apply only to initial investments for the first five years; removal of the VAT incentives and special realty tax rates; and repeal of the Net Operating Loss Carry-Over, Accelerated Depreciation, Tax Exemption on Carbon Credits, Tax Credit on Domestic Capital Equipment and Cash Incentives for Missionary Electrification
“NGAP urges Congress to reconsider the blanket approval in rationalizing the fiscal incentives and exempt the RE Law from the coverage of TRAIN 2 since the survival and growth of the geothermal industry depends on this landmark legislation,” the group said.
It said geothermal is a location-based energy resource that puts the Philippines on the map of the global energy industry.
“The geothermal industry is highly regulated and controlled, high-risk, capital-intensive, and requires long-term commitment,” NGAP said.
“NGAP seeks the support of Congress in allowing the RE Law and its existing package of incentives to take their course and deliver the projected energy security for the Philippine economy,” it added.