part 1: overview of cogeneration and its status in asia - Fire

60 Part II: Cogeneration experiences in Asia and elsewhere
Sugar sub-sector alone accounts for about 60 per cent of the total generation capacity of 346
MW. Other sub-sectors having important cogeneration capacities are the pulp and paper,
wood and petrochemical industries.
1.6.1 Policy and institutional framework for supporting cogeneration 7
Studies conducted by the Department of Energy (DOE) place the cogeneration potential at
around 400 MW. The government has manifested a growing interest to promote industrial
cogeneration, with the following rationale:
1. development policy: recognizing that adequate power supply is one of the basic prerequisites
for sustained economic growth, decision was taken to allow private sector
participation in the power sector;
2. additional resources: the private sector can be expected to bring additional resources or
equity funds;
3. efficiency improvement: many industries with continuous demand for low quality steam
can install power generation units and use the waste steam for industrial process needs,
thus high fuel use efficiency can be achieved;
4. environmental benefits: cogeneration offers substantial reductions in exhaust gas
emissions.
Government has therefore instituted policies, incentives and programs for supporting
cogeneration along with renewable energy technologies. The Executive Order No. 215, which
took effect in July 1987, allows for private sector participation in power generation, including
cogeneration. It applies to those intending to sell the generated electricity to the utility or to
third parties. Those wishing to qualify as a cogenerator have to satisfy certain technical,
efficiency, and financial criteria.
Fiscal incentives extended to the cogenerators include income tax holiday for six years,
reduced duty of only 3 per cent on imported capital equipment and spare parts, tax credit on
domestic capital equipment and spare parts and tax deduction for labour expenses.
For purchase of power from cogenerators having less than 10 MW capacity, standard power
purchase rates are adopted which reflect the structure of capacity and energy costs of the
national utility for varying levels of power availability and dispatchability. The electric utility shall
sell power to the cogenerator upon request. The back-up power provided by the utility will be
at a rate approved by the Energy Regulatory Board.
The host utility is obliged to interconnect and wheel the electricity generated to a third party;
for cogeneration with less than 10 MW capacity, the utility will shoulder all the costs. For
cogeneration facility of any size, maintenance cost of the interconnection facility shall be
borne by the electric utility.
In September 1997, the National Power Corporation signed a power purchase agreement for
the biggest cogeneration facility that will add 304 MW of power to the Luzon grid and at the
same time, supply quality steam to an oil refinery and a chemical plant.
7 A. M. Nabong, “Status of cogeneration development in the Philippines”, ESCAP South-East Asia
Sub-regional Seminar on Promotion of Energy Efficiency and Pollution Control through Cogeneration,
Hanoi, 10-11 November 1998.