Alternatives to Feed-in Tariffs

Solar panels are sprouting all over Germany and Spain as a result of feed-in tariff programs by their governments. When governments face the need to develop their solar energy, the question comes up if they should consider feed-in tariffs.  Feed-in tariffs is a policy of governments to pay grass-roots producers of solar electricity higher fees (than traditional electricity rates) for the electricity that they generate. This policy has been extremely successful in Spain and Germany, to the point that so many people are putting up solar panels, and have become a major drain on their governments’ budgets.

The Philippines has very recently instituted a system of Feed in Tariffs for Renewable Energy. I think it will not only not work, it will end up raising the price of electricity to consumers, and be an unacceptable burden to the national budget.

I think that a feed-in tariffs policy may have been a good idea in the past; but that we should now use other strategies for promoting solar power. Feed-in tariffs are potentially a big drain to national budgets; but the main reason for not using them now is that the price of solar panels have dropped sharply in recent years, to the point where the price for generating solar electricity is almost the same as ‘grey’ electricity in some times and places. This means that price is no longer the main obstacle to people shifting to solar. Government programs to promote solar energy should address these obstacles directly.

Solar Bank
The biggest obstacle that keeps households or businesses from installing solar panels is the need for a large expense up front. It is similar to having a mobile phone where you pay for 15-20 years worth of service at one time. The mobile phone industry would not have taken off if this was the case. There needs to be a way to ‘cut up’ the expense of solar power to convenient monthly portions.

The government should put up a ‘Solar Bank’ which would pay for the panels, and to which the buyer could make monthly payments. The bank could charge the household for electricity produced, at slightly below the prevailing price of  ‘grey’ electricity(and at a very low interest), until they are fully paid (which should be between 15 and 20 years (solar panels are expected to last at least 25 years) . Included in this contract should also be insurance coverage, so that people will not continue paying if the panels get destroyed or damaged.

Net Metering
Another measure would be to require electricity providers to offer net metering for a modest one-time fee. Net metering is when a user is allowed to sell (excess) electricity to the grid at the same price that he pays for getting electricity.  This is favorable for those who produce electricity themselves,  from solar, wind, biomass etc. Another advantage is that net metering also reduces the need for batteries, which are a significant part of the expense of solar systems.

In Europe, net metering arrangements mean that a household can ‘sell’ excess electricity to the grid, for the same price, but only as long as it does not exceed the household’s monthly consumption. Beyond that, the electricity provider will only pay the ‘generating cost price’ (i.e. excluding transport and taxes )

Business Incentives
Businesses should be stimulated to adopt solar energy.  In a previous blog, I pointed out that, for commercial and industrial users in Metro Manila, the cost of Meralco electricity is sometimes higher than the cost of solar electricity (Solar Cheaper than Meralco in April). This is especially so during the dry season, when cheap hydro-electric power is less abundant. But businessmen consider not only the cost of solar energy; they also have other concerns, which need to be addressed.

Reliability. Solar electricity depends on the presence of the sun; so the panels don’t produce energy at night and only a little during cloudy days. Companies should be able to combine grid and solar electricity to get a very reliable energy supply. And for this, they would need heavy-duty batteries. I propose that the government subsidize the batteries for solar installations of businesses. Perhaps a subsidy from 25% to 50% of the cost of the batteries would be appropriate.

Resale Value. The government could take measures to develop the secondary market for solar panels. This would stimulate businesses to buy and install solar panels. Some businesses may then opt to install second-hand panels that are cheaper. A secondary market would also stimulate businesses to upgrade their panels when technological improvements improve panel efficiency.

One measure to help stimulate the secondary market is to allow panels to be subject to accelerated depreciation. When the panels’ book value reaches zero, businesses may decide to sell them for a tidy profit, and then buy new panels.

Maintenance. Companies may be unwilling to install solar panels because of perceived maintenance costs and hassle. The government should provide them with technical support, and even training programs for building administrators or maintenance staff, to teach them how to maintain the panels properly.

Of course, businesses should also be able to avail of the loans/insurance from the Solar Bank, as well as benefit from net metering.

Biofuels are not the Answer

Biofuels have been hailed as our way out of the dependence on fossil fuels. In the US, massive amounts of government funds have gone into making ethanol from corn. In the Philippines, the 2006 Biofuels Act targets the mixing of 5% ethanol in gasoline and 1% biodiesel in petrodiesel.

Biofuels as the solution to the energy problem is a myth, especially if you look deeper into its real prospects. Experts have computed that, in order to supply enough fuel for US’ transportation needs, they would have to grow corn in 3x the current cropland of the US. In other words, it is impossible for corn to do the job.

But why is that the case? Well, plants are actually (contrary to the myth) very inefficient transformers of solar energy. Plants transform only about 1% of the energy from sunlight into plant material. And of this plant material, perhaps only 20% (or 0.2% of the total) gets into the corn cob, which is what is processed towards ethanol. Then, the processing uses up energy. The end result is that only about 0.1% (one-thousandth) of the sun’s energy is transformed into ethanol.

Contrast this with silicon solar panels, which transform 16% of sunlight into energy. This is 160 times the energy obtained from corn! Some solar panels can even achieve 30% efficiency; but these are made with expensive Gallium Arsenide, and are thus only used for things like space satellites.

The main ‘problem’ that silicon solar panels face is that they still cost too much to make, making it cheaper to rely on traditional sources of energy. But the cost of making solar panels is rapidly going down; even to the point where it has reached ‘grid parity’ (i.e. solar costs the same as ordinary electricity) for some places or applications.  Reaching grid parity is important because this means that subsidies will no longer be necessary for these applications.

Cellulose and Algae
There are efforts aimed at using cellulose or algae as the source of biofuels. Using cellulose would mean that the full 1% of sunlight that the plant transforms will be used. Algae transforms up to 3% of sunlight, but they require expensive glass containers (which need to be regularly cleaned) so that the net yield of algae would be something like 1.5%.  Another problem with algae is that it grows slowly when it is producing hydrocarbons.

Algae is only marginally better than cellulose. And there is still a long road ahead, in terms of bringing either cellulose or algae to even get to 1-1.5% efficiency. It is a terrible waste of money to spend so much on biofuels of any kind. At the same time, solar is already 16 times more productive than algae and cellulose will ever be. And with further research, it should be possible to raise solar’s efficiency even more.

Use Other Technologies
The logical conclusion to all this would be that governments should stop all subsidies for biofuels immediately, and to rechannel the funds to more promising technologies. I suggest that these be solar, geothermal and wind. With a relatively small amount of research on solar and wind, their efficiency stands to improve a lot. Geothermal needs relatively big investments, but pays off well. Geothermal costs much less than traditional sources of energy to generate.  At the same time, the use of electric cars should be stimulated, so that gasoline and diesel will be replaced by electricity.

The Philippines should rescind the 2006 Biofuels Act. It is already a failure. Both ethanol and biodiesel are suffering from “volatile prices and insufficient supply”.  This is a natural result of the inefficiency of their production; and this basic inefficiency means that prices and supply will never be satisfactory, even with subsidies. Instead of biofuels, the Philippines should stress more on geothermal and solar, which are a lot more cost effective, and for which future price developments are growing more favorable.

Filipinos Prefer Lighter Skin

The government is trying to crack down on skin whiteners which contain mercury, since these are poisonous for people. (Ban sought on Mercury-Laden Skin Whiteners) However, I think that most skin whiteners are (almost per definition)  harmful to our bodies, and thus should be discouraged or banned.

Why people would want to whiten their skin does not seem to be logical. But many Filipinos want to do it, and are willing to spend well-earned money to buy skin whiteners. They think that having fairer skin means that they become more beautiful and also more successful.

Always a Health Risk
Skin whitening almost always comes at a risk. And as shown by the present issue of mercury in skin whitening products, there are things that could go into these products that are quite harmful. Mercury, in the form of mercury chloride  or ammoniated mercury, as the active ingredient in some products could accumulate in the human body.  Mercury is a toxic substance, which could cause a lot of nasty diseases.

Skin whitening, in its essence, means that something is done to lower the skin’s production of melanin. There are inherent dangers when you artificially inhibit melanin. Reducing the skin’s natural production of melanin may result in the thinning of the skin, distorting the production of protective oils in the skin, and may even cause skin cancer. Some products have been shown to cause leukemia in animal tests. There is also the danger that using these products would reduce melanin production in spots on the skin, and result in an uneven skin coloration.

If evolution was allowed to fully take its course, people in the Philippines “should” be darker skinned, on the average. Skin tone evolves to fit the amount of sunlight that strikes a place, and this is mainly dependent on a country’s latitude (i.e. how far north, or south, it is). It is a balance between having too dark skin (which inhibits Vitamin D production) and too light skin (which limits folic acid production). Because of this, people with either too light or too dark skin will be less healthy, making them produce less offspring. But nowadays, cultural forces are a greater influence in skin coloration: people could stay more indoors, put on more clothing,  use skin whiteners or take Vitamins.

Filipinos are not simply divided into light-skinned and dark-skinned. There is a whole range of skin tones, and there are many people of intermediate shades, and whose skin tone is variable depending on exposure to sunlight. Some people would be considered by some people to be light-skinned, but by others to be dark skinned. The border is rather arbitrary. So, in a sense, people could conceivably move from being dark skinned to light skinned by using skin whiteners, and by avoiding exposure to sunlight.

Role Models
Lighter skinned people seem to be more successful in the Philippines. Just take a look at the lighter skins of the country’s lawmakers and movie stars.  All the country’s presidents were light skinned; Jose Rizal was light skinned, as were most of the country’s heroes.

The whitening drive does not necessarily stem from a colonial mentality. People are not trying to look Caucasian. If they did, there would be a run to have blond hair, and to have Caucasian eyes, but we see little or none of this. There are enough light skinned Filipinos with Chinese blood; so the thing is to be light-skinned, and not necessarily Western looking.

The problem is the role models in the country itself. Being light skinned seems to be one of the ingredients to success; and that is why people will do their best to become lighter-skinned. This light-skin bias is bad for a number of reasons. First, it makes it more difficult for dark-skinned Filipinos to succeed. Venus Raj and Nora Aunor are the exceptions, but they are too few of them. Even for men: take the jokes aimed against VP Binay, because of his dark skin; it is as if Binay doesn’t deserve the post because of his skin.

Light-Skin Bias
Historically, richer people of Spanish or Chinese descent chose light skinned partners. Other members of the elite also did so. Thus, there are a lot of light skinned rich people. Thus, the natural bias, becomes (in a sense) “natural selection”, with lighter skin being selected.Light-skin bias happens when companies hire new people. If two candidates are equally qualified, the company will probably select the lighter skinned one, who would be said to be more “presentable”.  And this slight bias continues upwards the corporate ladder; so that only the best-qualified dark skinned employees get promoted, while a lot of less qualified lighter skinned ones go through. The light skin bias becomes a self-fulfilling prophecy.

There is a light-skin bias even as early as when students are in school. Light skinned students are expected to perform better; and since many of the richer students are light-skinned to begin with, this bias reinforces itself. Thus, even though there are probably more dark skinned Filipinos, they make up a minority when they go to college.
My nephew, who is dark-skinned, noted that 40 out of 142 students (or about 28%) in his batch of Medicine students are dark skinned.  I suspect that this pattern would be similar in other courses. And this is even before the students enter the job market.

While not everything can be attributed to the color of the skin – class pays also a big part – skin color does matter. But all this is not reflective of the talent pool of the Philippines. There are a lot of talented darker skinned people, and if the Philippines were “color blind”, it would be able to utilize more of its population optimally. As it is, a lot of people end up under-utilized.

Another bad result of the light-skin bias is that people do unhealthy things just to have lighter skin. In addition to using skin whiteners, they also exercise less outdoors, and even use umbrellas to protect themselves from the sun. Luckily, there are vitamin supplements which can compensate for any Vitamin D deficiencies. But avoiding outdoor exercise leads to other problems like obesity, high blood pressure, etc.

What to Do
Skin Whiteners. The first thing is to “crack down” on skin whiteners. There should be a strict ban of whiteners with mercury. Pharmacies or other stores selling these should be punished, up to the point of closing them.

At the same time, there should be a tax on skin whitening products. These have no real added value, and people could very well live without them. They should be subject to a “sin tax” of sorts.

Anti-bias measures. Companies and schools should be instructed to correct for the light-skin bias. When a candidate who is turned down has darker skin, the company should take a critical look to ensure that it is not due to light-skin bias.

There could be an advertising campaign to push through the idea that dark skinned people are beautiful, and “presentable”. Casting agencies for models and movies etc should be required to have a minimum percentage of dark skinned models/actors.

Outdoor Exercise. Outdoor exercise should be encouraged. Ordinary people should be encouraged to take a stroll every now and then. Cycling and jogging should be promoted. And people should learn to walk more, instead of riding a jeepney for a journey of 100-200 meters.

EVs Are Good for the Environment

I came across a comment in FB where the writer said that EVs are not really good for the environment. He said that we are in effect generating energy at a distance, and that could not be good, since there are inefficiencies in energy transport. Then, he said that EVs only transfer the source of pollution from gasoline to coal, and the latter is worse.

Well, I disagree with these positions, and here’s why:

Generation at a Distance
True, there is energy lost while transporting electricity from the power plant to your home or car, but we should also look at the energy savings we get from not having the energy source at every home or car. It is like the case where each home will have a diesel generator. This is not efficient, even though the transport cost for the electricity will be zero. Why? Because, for one, fuel needs to be brought to each and every house (and that costs energy). And also, the generator will be one which will produce electricity for your peak capacity; meaning that when you use less electricity, your generator will be running below its capacity, and will be quite inefficient.

With a car, it gets even worse. The car has to carry itself, and when the motor is set for your maximum power needs, it will be quite heavy. And this means that more power will be needed to carry both the rest of the car plus the engine. A hybrid or an electric vehicle has a much lighter engine. Even a hybrid will be lighter than an ordinary car because its engine is smaller – it will be built to provide the average power needed.  The battery will provide the necessary boost to power at times, but the rest of the time, the battery will be loading up, and the car will run using a lot less power. And since the engine of a hybrid will continue running at a steady speed, it will be quite efficient – any extra electricity produced will simply be stored. And using the engine always at its most efficient means that there will be less soot output due to unburned gasoline.

And then, there is the regenerative braking which only hybrids and EVs have. When you brake, using a normal car, the kinetic energy is merely turned to heat. When braking with a hybrid or EV, the kinetic energy is stored as electricity, which you could use later.

From Gasoline to Coal?
With regards to the accusation that we will be mainly using electricity from coal to run EVs, well he has more of a point. But the objection here is that this is quite a static way of looking at things.

The first wave of EV owners will not overload electricity systems, they will merely “level it out”. They will mostly recharge their cars at night, when the rest of the grid doesn’t use too much electricity; thus, they will not cause the electricity utility to build new capacity just yet. However, as time goes on and there are more EVs, then daytime electricity will be used more often, with people recharging at work or while shopping. This will be the time when extra generating capacity will be needed. But then, the question will be: what will be the source for this new electricity? Well, chances are it will not be coal. It will most likely be something like a natural gas or fuel oil plant, which are faster to set up, and with less delays due to environmental hassles.

Grid electricity is a combination from all kinds of sources: from solar and wind, to hydro, nuclear, geothermal, natural gas, fuel oil, and then coal. The question is not whether an individual EV will use up more coal or alternative energy.  But rather if the coming of EVs in general will lead to more coal plants or to more wind, solar, hydro or geothermal plants. I think the latter will be true.

And then there’s the battery which EVs use are also used for solar installations. It’s the same technology. This means that as EVs get manufactured in scale, the price of batteries will go down, and that lower price will affect both the price of cars and the price of solar power. Thus, EVs will indirectly cause the price of solar electricity to go down. And of course, lower prices for solar power will mean that more people will install solar panels.

And there is also the matter of having a smart grid. By smart grid, I mean having software and regulators that optimize the flow of electricity, that is capable of delaying some uses when there are peaks, that is capable of storing excess capacity when needed.  An economy with many EVs will really need a smart grid to cope with the varying loads caused by the charging of autos. The same smart grid will also be needed to handle alternative energy – where the variability will not only be on the use of electricity, but also on its generation. This is the same technology, which I suspect will be put in place first to handle EVs, but which will serve both EVs and alternative energy management.

EVs in use in Europe can be set to only use “clean energy”.  Here, consumers have a choice of electricity suppliers. I expect that buyers of EVs will also choose to tap electricity that is “green”, for their household use. Since most EVs will probably be charged at home (at the beginning, at least), this means that most EVs will be running on green electricity also from the beginning. Of course, in the US or in developing countries, you may not have the chance to choose for green electricity. But perhaps this is something that your electricity net should also do.

EVs will promote and stimulate the growth of alternative energy. We won’t see this right away, or in such a dramatic way, but it will happen. Look from it from another way: how else will society shift from “dirty” gasoline to alternatives, except through EVs? It will happen, and that is going to be good for the environment.

Solar Cheaper than Meralco in April

Don’t look now: with the astronomisch prices for electricity in the Philippines,  solar became cheaper than electricity for commercial or industrial applications (in comparison with Meralco rates) in April. This is what is called “grid parity”, when solar costs the same as electricity from the grid. In May, the Meralco prices dipped a bit, making it cheaper again for commercial applications. So far, Meralco prices are still cheaper than solar for residential applications; but the difference there is also closing.

Let us go into this a bit more.

We’ll use a measure for Solar Energy Prices in the US to come up with the cost of solar power in $cents/KwH. The index is based on a monthly survey of US solar energy installation companies, with an assumption of 5.5 hours of average sunlight, a US location, and 5% interest over 20 years. The price for solar for Residential includes batteries; but the price for solar for Commercial and Industrial do not include batteries (and are thus grid connected).
The index is a good indicator for solar installation prices in the Philippines. The cost of the solar equipment may be a bit higher in the Philippines, but at the same time we have more sunlight than the US and the cost of labor is lower. So all in all, US prices would either be the same or a bit higher than that of the Philippines.

Using the index, and computing for a Php 45: $1 exchange rate, the figures for April are:

• Residential: Php15.68/KwH
• Commercial: Php 11.16/KwH (for 50+ KWs)
• Industrial: Php 8.70/KwH (for 500 + KWs)

Let us compare to this with the prices for electricity from Meralco:

• February: Php 10.20/KwH
• April: Php 13.28/KwH

Meralco says that their prices for May will go down to the level of February.
From this, we could see that Solar for Industrial uses is cheaper than Meralco power even in February. And, that Solar for Commercial use is cheaper than Meralco power in April, but not in February. But since these prices are for grid connected electricity (thus, no batteries), the companies that decide to install solar will continue to receive electricity from the grid.

The trend is clear, though. The cost of solar installations keep falling, from month to month; while Meralco prices keep rising, though not in a continuous straight line. The difference between the two, even for Residential consumers, will surely close as the months go on.

So there is good news that comes out of the bad news over the high cost of electricity in Manila. The electricity price is so high that it has reached grid parity for solar. But what does this mean? Well, not much immediately. Companies will not go out immediately on the basis of this, and buy solar panels. Why not? First of all, they are not sure if the high prices of April will be repeated. Perhaps the government will do something to lower prices. Or something like that. Then, there is also that installing solar panels cost so much money up front. It is as if you buy 20 years worth of telephone load all at once – not too many people will do that. And the third reason is that most companies will not have enough roof space for all the solar panels that they would need to cover their needs. So, most companies will opt to wait. But for companies who are more daring, solar energy will not really cost them more than grid electricity, so they could actually shift without suffering increased costs.
But the prices are getting more and more in favor of those who will install solar panels. If the government would like to help things along, it does not need to implement feed-in tariffs like other countries. What it  would need to do would be to : first, offer a partial rebate on the cost of installing solar panels. The partial rebate could be as low as 20% of the cost of installing solar panels – and with this, even Commercial applications will be cheaper than grid electricity.
And, the government can also help to provide loans for alternative energy projects. One way of doing this will be by requiring banks to have a minimum portion of their loan portfolio (say, 5%) for alternative energy projects.

These steps will surely encourage some companies to install solar panels, and perhaps help the country go through its “shortages” of electricity, especially during the dry season.