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The Philippines: Wind Power Through Carbon Finance

MANILA, December 9, 2004 — The Philippines today took a major and innovative step into a new renewable energy era with the signing of the first greenhouse gas emission reductions purchase agreement (ERPA) for a wind farm project in the ASEAN region, under the Clean Development Mechanism (CDM) of the Kyoto Protocol. The wind farm project has a total cost of about US$35 million, with almost 90 percent funded by the Danish International Development Agency (DANIDA). The project is expected to be operational by mid 2005.

The NorthWind Bangui Bay Project will be located in the foreshore of Bangui Bay in Ilocos Norte Province at the northern tip of Luzon. It is being built at a remote part of the Luzon grid which is plagued by expensive but unreliable power supply, mainly due to the long-distance transmission of power from various generation sources. The project consists of 15 state-of-the-art wind turbines, totaling 24.75 megawatts. Annual energy production is estimated to be about 74.48 gigawatt hours. The project sponsor is a local private company, NorthWind Power Development Corporation.

The Philippines 2001 Electric Power Industry Reform Act (EPIRA) stressed the development and utilization of indigenous and renewable energy resources, to tackle the country’s dependence on imported oil and coal for power generation.

Energy Secretary Vincent Perez said, "Being situated on the fringes of the Asia Pacific monsoon belt, the Philippines has great potential for wind energy. Our long-term goal is to double the renewable energy-based capacity for power generation by 2013, thereby lessening our dependence on imported energy and broadening our resource base with an indigenous and environmentally desirable option."

The Kyoto Protocol—which, with Russia’s ratification, will now come into effect in February 2005—is the 1997 agreement to limit climate altering greenhouse gas emissions. The CDM, a flexible mechanism of the Protocol, allows industrialized countries to fulfill some of their greenhouse gas emission-reduction commitments through projects in the developing world. Reducing carbon dioxide and other greenhouse gas (GHG) emissions to the atmosphere from human activity, such as the operation of fossil-fueled power plants, is one of the key approaches to combating climate change.

According to Environment Secretary, Michael Defensor, "Projects such as this will help the Philippines achieve its commitment to reduce GHG emissions and benefit through its participation in the CDM under the Kyoto Protocol."

NorthWind will construct a 50-kilometer, 69 kilovolts overhead transmission line to deliver the power to the switchyard of the off-taker, in Laoag City. All power produced will be sold to the Ilocos Norte Electric Cooperative (INEC) which has the exclusive franchise to distribute electricity in the area.

Niels Jacobsen, NorthWind President and Chief Executive Officer said, "We are very happy to be a part of this groundbreaking endeavor. The first of its kind not just in the Philippines but in the whole ASEAN region as well, this priority project will not only provide clean, reliable, new and renewable energy to the communities covered but will also provide job opportunities for the locals, generate business from tourism, and attract industries to set up their business in the area."

The electricity produced by the Project will be exported to the Luzon grid and will displace highly polluting diesel-based power generation at the margin, thereby reducing emissions of GHG and other air pollutants. The certified emission reductions (CERs) generated by the project will be purchased by the Prototype Carbon Fund (PCF), a public/private partnership, made up of six governments and 17 private companies, which authorizes the World Bank, as Trustee, to purchase CERs from projects on behalf of the participants of the fund. Over 10 years of project life, the PCF will purchase a total amount of CERs targeted at 356,000 tons of carbon dioxide equivalent (CO2e).

Joachim von Amsberg, World Bank Philippines Country Director said, "This is a very special initiative, and a good example of how global partnerships on environment really come to life. It is also an exciting example of how the Philippines can be part of and benefit from a new dimension of new global opportunities. I am particularly pleased to be signing the first of what I hope to be a series of emission reductions purchase agreements in the Philippines."

This vote of confidence in wind power could not have come at a better time. In 2002, the World Bank published the Air Quality Monitor showing that air pollution in the Philippines is causing serious health problems and lower productivity, severely impacting the Filipinos’ quality of life. Moreover, there are global warming concerns arising from increasing greenhouse gas emissions. The shift from fossil fueled power generation to renewable energy like the NorthWind Bangui Bay Project is a key step to achieve greenhouse gas emission reductions, which would contribute to better air quality.

For more information on Carbon Finance, please visit www.carbonfinance.org
For more information on the World Bank’s activities in the Philippines,
please visit www.worldbank.org.ph


In Manila: Leonora Aquino-Gonzales (632) 917-3003
E-mail: [email protected]
Anissa Tria (632) 917-3013
E-mail: [email protected]
In Washington: Anita Gordon (202) 473-1799
E-mail: [email protected]

FACT SHEET

1-The Kyoto Protocol and the Clean Development Mechanism (CDM)

The Kyoto Protocol provides an unprecedented opportunity for the Organization for Economic Co-Operation and Development (OECD) countries to reduce greenhouse gas emissions and at the same time help developing countries and economies in transition invest in climate friendly technologies and infrastructure. The Protocol’s Clean Development Mechanism (CDM) and Joint Implementation (JI) provide an element of flexibility for the industrialized countries to meet their obligations under the Protocol to reduce greenhouse gas emissions by on average 5.2 percent below their 1990 levels by 2012. In so doing, the Protocol provides an unprecedented incentive for those seeking lower cost emission reductions, to leverage the flow of private capital and privately held clean technology from North to South.

2-The Carbon Finance Business

Carbon finance is the general term applied to financing seeking to purchase greenhouse gas emission reductions ("carbon" for short) to offset emissions in the OECD. Commitments of carbon finance for the purchase of carbon have grown rapidly since the first carbon purchases began less than nine years ago. The global market for greenhouse gas emission reductions is estimated at a cumulative 200 million tons of carbon dioxide equivalent since its inception in 1996. Nearly 70 million tons was originated in 2002 alone. Volumes are expected to continue to grow as countries that have already ratified the Kyoto Protocol work to meet their commitments, and as national and regional markets for emission reductions are put into place, notably in Canada and the European Union (where trading is to start formally in 2005).

3-The Wind Power Technology

Wind power is one of the most mature renewable energy technologies of relevance to the Philippines where the wind resource is estimated to have a generation potential of 70,000 megawatts. Considering only those areas of good-to-excellent wind resource, there are 47 provinces in the Philippines with at least 500 megawatts of wind potential and 25 provinces with at least 1,000 megawatts of wind potential.

The technology, the NM82 is a state of the art (2004) wind turbine, with power electronics that smooth cut-in to the grid and computer control that optimizes power production. Its hydraulically activated blade adjustment provides greatly improved power control, with the ability to quickly reduce wind loads during high wind speed events. In sustained high winds, the blades feather and the rotor freewheels to reduce loadings on the turbine and tower, making it suitable for use in an area frequently visited by typhoons.

 

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