La Suerte Rice Mill Cogeneration Project: A PILOT Case for the Philippines

Abstract

The Philippines lags behind its brother ASEAN neighbors when it comes to theinstitutionalization of cogeneration policies and activities. The country is still in the process ofdeveloping a national cogeneration policy for inclusion into the overall Renewable Energy policyframework. For years, much of the installed cogeneration capacity is in industries where cogensystems are inherent in their operations, such as the sugar, pulp and paper, chemicals and coconutoil industries.1995 figures account for 345MW of installed cogeneration capacity in 11 industrial sectorsconsisting of 63 firms. The sugar industry accounted for 57% of the total. It is quite interesting tonote that none of the hundreds of rice mills in the country practice cogeneration.Several barriers have been identified to the implementation of cogeneration in the country.These can be divided into 2 major issues: technical and economic.During the celebration of the ASEAN Cogeneration Week in the Philippines in June 2003,a high ranking Department of Energy official admitted that the decision makers, the policy makersin the government themselves do not have the necessary information on the benefits of cogenerationsystems. If ever there should be, industry owners have very limited expertise and skills in practicingsmall-scale cogeneration techniques.The other technical problem faced by end-users is the often mismatching of equipment tothe type and nature of their plant operations.On the other side, to be economically viable, an industrial plant with a cogenerationfacility should initially realize significant savings on electricity purchases through lower investments,operations and maintenance and fuel costs per kilowatt hour of produced electricity throughcogeneration.Beyond electricity cost considerations, investors and end-users are not attracted on thevery high cost of financing cogeneration projects adding to it, the considerably long-term returnson capital investments. At some point in time, energy prices may dictate the viability of cogen plants.Company owners are also divided whether to indeed ?go? cogen or to compete with otherinvestment opportunities and priorities of the plant. A classic case in the Philippines is the CORFARMProject which has always been part of the adjudication procedures of the EC-ASEAN COGENProgramme each time it launches its Call for Full Scale Demonstration Projects or FSDPs. CORFARMnormally rates high in scores but somewhere along the way, the project always FAILS to materializebecause of the indecisiveness of the plant owners to invest its resources on plant expansions ratherthan in cogeneration technologies, primarily because going cogen is just not in line with corporateobjectives of industrial expansion.Finally, and this is indeed a difficult barrier to hurdle: the non-existence of a successfulcogeneration plant in the Philippines dampens the mood of potential projects. There is this inherenttrait in us Filipinos that unless we see something working well within the country?s system, investors,mostly industry owners will not dare take the risk into a new venture.