The Philippines: Wind Power Through Carbon Finance

In Manila: Leonora Aquino-Gonzales (632) 917-3003

E-mail: lgonzales@worldbank.org

Anissa Tria (632) 917-3013

E-mail: atria2@worldbank.org

In Washington: Anita Gordon (202) 473-1799

E-mail: agordon@worldbank.org      

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.