Why is there a need to take out a loan when the Philippine Government can very well afford to invest resources for this EE Project?

While the projects benefits are enough to justify investments in the projects without the loan from ADB, to secure the benefits involvement of ADB is essential. ADB not only bringing in financing in the process it is bringing in the technical expertise (international best practice) for capturing the CDM credits and implementation of the CFL program. Although, it is common now in many developed countries, the CFL program and the Super ESCO is first of its kinds in the ASEAN region, where Philippines is leading the process with ADB’s technical support.

In addition, the Asian Clean Energy Fund, will forward the Government 50% of the value of the CDM credit (about $5 million) even before the project is implemented.

The PEEP is a project that will pay for itself through savings in terms of reduced energy consumption, reduced fuel importation, deferred power capacity addition and additional earnings due to trading of carbon reduction emissions. Government resources can very well be allocated to other priority programs of government.

Why is there a component on Government Lighting Retrofit when there is already an Administrative Order 183 mandating lighting retrofit for all government offices, government--owned and controlled corporations, state universities and colleges as well as all government-funded projects such as schools and housing?

A detailed survey of about 60 government offices shows that compliance to A.O. 183 is very low because no additional funding support on top of agency budgets has been provided and retrofitting is done as savings from Maintenance and Other Operating Expenses (MOOE) are realized.

As a result of a project lead by the Government and supported by ADB, this will be fast tracked. An investment of $3 million in this sub-component, will bring savings about $1.7 million each year for the next 7 years.

What are the benefits of the Project?

- Reduce peak demand by about 450 MW
- Reduce oil imports by about $120 million each year
- Defer power generation of 1,300 MW or – $1.3 billion
- Clean Development Mechanism (CDM) revenue – about $10 million for 2010-2012 (the Kyoto Protocol)
- CDM revenue beyond 2012 – maybe another $10 million
- Create energy efficiency market
(public sector: about $30, private - $5 million per year)

What is the payment arrangement for the loan? Interest rates?

The Loan will be paid over next 25 years with a 5-year grace period.

What is a Super ESCO?

A Super ESCO support activities of other ESCOs and brings financing for projects. It helps develop the ESCO sector with capacity building, knowledge management and market development.

An ESCO is an Energy Service Company, a private business that engages in a performance based contract with a client to identify and implement energy efficiency measures to reduce the client’s energy consumption at client’s premises.

Examples of ESCO Performance Contracting: (Philippine Setting)

The Project, through the Super ESCO, will stimulate the growth of the local ESCO industry to provide a sustainable instrument for energy efficiency implementation in the government and the private sector.

In this Project, the Super ESCO will act as an ESCO to the government sector and as a financier/guarantor for ESCOs doing projects in the private sector.

Why was PNOC chosen as the host of the subsidiary?

PNOC was chosen to establish the Super ESCO because its charter allows it to invest in projects that will generate income to the company and at the same time fulfill its mandate to ensure efficient use of energy resources.

Why is there a need to do the project when it is going to happen anyway? (This is Cong. Guingona’s question)

The Project will enable the government to defer capacity additions to meet projected demand where the critical periods have been identified as 2009 for Luzon and 2008 for Visayas and Mindanao. The Project will accelerate the enjoyment of benefits through the implementation of lighting efficiency in a massive scale. New power plants need a gestation period of at least 5 years before it can be put on stream, assuming that an investor has already be identified.

It is also necessary to address the need for a Lamp Waste Management facility for the “cradle to grave” treatment of toxic substances emanating from the use of fluorescent lamps. There is none in the country presently.

Super ESCO is the sustainability component for energy efficiency in the country and will not happen unless intervention from government is done to address the present barriers for the industry to grow.


How will the distribution affect the lighting industry in the Philippines?

First, there are no local manufacturers of CFLs in the country. The supply comes primarily from China. Second, the Philippine Lighting Industry Association issued a position paper saying that there are about 68 million incandescent lamps in the country today. The Project opted to make a conservative assumption of the existence of about 40 million lamps in the country at present. The free CFLs to be given away are only 13 million units which will leave enough market for the lighting industry.

Why undertake the Project?

CFL supply in the market are diluted with many poor quality lamps and despite the 3-months pay back period, consumer are not buying them. A project like this can improve the credibility by supplying 10,000 hours lamps and “capture” the avoided emissions where carbon credits (CER) can be sold to international market. Without the project, carbon credits will not be generated. The project will also create competition in the wholesale market so that the purchase price of the CFL will be much lower than the usual wholesale price in the market.

This is a policy measure to establish “virtual power generation” for the Philippines energy sector. The project will create about 450 MW virtual generation costing about $20 million only. This project will save about $100 million in avoided fuel cost, creating a national savings. DOE, as a policy maker, taking this initiative, which is common amongst Department of Energy’s in the world.