Electrifying the Speed of Economic Growth: Reducing Barriers to Building Infrastructure in the Philippines
One might expect the most difficult aspect of building a new power plant and connecting it to the grid to be the lengthy process of transporting and assembling the myriad components that go into its construction.
In fact, the actual construction process is fairly predictable: it takes, on average, between 5 and 24 months to build and commission a new power plant, depending on technologies and site conditions. What is far more difficult than a new plant’s construction is the paperwork that precedes it: the permitting process can often take just as long, if not longer. In the course of seeking authorization to build a new plant, the average project developer is typically forced to acquire permits and clearances from six to ten different authorities. They must submit thousands of pages of documentation and pay fees that can soar into the millions of dollars, while simultaneously maintaining payroll for a full staff of project managers, engineers, and energy specialists to respond to all the demands of various ministries, local authorities, financiers, and regulators. These costs are all eventually passed on to the consumer in the form of higher-cost electricity, as project developers and their financial backers recoup the costs they incurred in developing the new power plant.
It is the resulting soaring cost of electricity that makes the simplification of the permitting process a necessary, high-impact way of making electricity more affordable for consumers.
In the Philippines, electricity can easily cost seven times what it does in the U.S. Through the USAID-funded Building Low Emission Alternatives to Develop Economic Resilience and Sustainability (B-LEADERS) project, we have helped usher in a new era of simplified permitting, bringing about a new, exciting wave of project development in the Philippines. At the heart of this new mechanism is the Energy Virtual One Shared System (EVOSS), a web-based portal, monitoring system, and repository of project-related information and permits that offers shared access to project information to all Philippine institutions involved in the permitting process.
EVOSS eliminates the common challenge developers face with different institutions each having partial or differing information when evaluating and licensing a new energy project, and the system allows multiple Philippine stakeholders to collaborate throughout the permitting process. It offers two other advantages over business-as-usual: not only does EVOSS provide the project developer a one-stop shop for requesting and receiving all necessary project permits, it offers the Philippine authorities a one-stop shop for monitoring the progress of all current projects. EVOSS also increases the transparency of the whole permitting process by ensuring all steps of the permitting process are conducted in the open, increasing accountability among all actors involved in the permitting process.
But the benefits of EVOSS aren’t just in the mechanics of developing a project: the gains in accountability and transparency for permitting help reinforce that the Philippines is a business-friendly energy sector. These improvements attract more projects that compete for licenses by driving down costs and leveraging improved technologies. These improvements are also fundamental to the challenge of making electricity more reliable, cleaner, and less expensive across the country. The changes are integral to the gradual shift away from more expensive petroleum fuels and coal toward renewable energy technologies that are helping reduce emissions caused by generation of electricity.
Happily, we expect the success of EVOSS to benefit the Philippine people for the foreseeable future. In December 2018, the Philippine government enacted into law Senate Bill 1439, the “Energy Virtual One-Stop Shop Act,” which not only officially establishes EVOSS as the single government interface for permitting energy projects, but also establishes strict timelines for each step of the process. This important milestone ensures project developers’ faster – and therefore less expensive – responses on proposed projects. In fact, the senate bill stipulates that the failure of an agency to respond within its allotted timeframe will result in automatic approval of that part of the application. EVOSS is now at the center of the Philippines’ energy future and offers a straightforward path to project approval without sacrificing the very real need for the Philippine authorities to ensure proper environmental, financial, and technical safeguards are respected at all times.
Passing this measure is quite timely, especially when inflation continues to hover around 6 percent. We are optimistic that this bill is poised to drive down electricity costs and provide significant savings to power consumers by modernizing and streamlining the permitting process behind power infrastructure projects. The elimination of red tape in the permitting process will go a long way toward rejuvenating our energy sector. It will remove a formidable barrier to entry that has often discouraged foreign firms from entering the generation market. The greater efficiency under the EVOSS system will result in a welcome bump in disposable income for the average Filipino family.
--Philippine Senator Win Gatchalian, who chairs the Philippine Senate Committee on Energy
As energy specialists committed to supporting energy sector reform worldwide, we see an additional benefit that extends beyond the national boundaries of the Philippines: EVOSS serves as a robust example of the financial and environmental benefits that come from concerted political will and the technical support of experts in legal and regulatory reform. Let EVOSS serve as a shining example for all.