HYDROELECTRIC POWER

GLOBAL
Hydropower is the most flexible and consistent of the renewable energy resources,
capable of meeting base load electricity requirements as well as, with pumped
storage technology, meeting peak and unexpected demand due to shortages or the
use of intermittent power sources. It has been conservatively estimated that only a
third of the total world hydropower capacity has been developed, with most of this
development and growth occurring in Europe.

At the end of 2011, over 160 countries had hydropower resources capacity, with a
total capacity of 936 GW across 11,000 hydropower stations. The leading
generating countries were China, Canada, Brazil and the USA respectively, although
it is worth noting that Norway and India both have significant hydropower
generation, particularly relative to their size and total electricity supply.

Hydropower capacity is often categorised as gross theoretical capacity, the

capacity of hydropower generation possible if all natural water flows contained as
many 100% efficient turbines as possible; technically exploitable capacity, the
amount of gross theoretical capacity possible within the limits of current
technology; and economically exploitable capacity, the capacity possible within
the constraints of current technology and local economic conditions.

There are three types of hydropower stations: run of river, where the electricity is
generated through the flow of a river; reservoir, where power is generated
through the release of stored water; and pumped storage, where stored water is
recycled by pumping it back up to a higher reservoir in order to be released again.
LOCAL
Given the country's vast hydropower potential, more than 10 percent of electricity
requirements will be supplied by hydropower generation. To meet the expected
increase in demand for power over the planning period, a total of 2,950 MW of
hydropower capacity will be available within both grid and off-grid areas. Committed
and indicative capacity additions will increase overall hydropower available capacity
to 5,468 MW from the current installed capacity of 2,518 MW (Table 5). Eighteen
(18) large hydropower potentials are estimated to account for more than 90 percent
of the possible additional capacity while the remainder will be supplied by minihydro potentials. In addition, 490 kW of micro-hydro power plants are targeted for
installation for the planning horizon. These micro-hydropower plants will be tapped
to support the government's rural electrification program targeting 100 percent
barangay (or village) electrification by 2006. The committed capacity addition is
expected to provide 7.7 TWh of electricity per year equivalent to a fuel oil
displacement of 12.9 MMBFOE.

Hydro plants are classified based on their capacities, as follows: (i) micro-hydro - 1
to 100 kW; (ii) mini-hydro - 101 kW to 10 MW; and (iii) large hydro - more than 10
MW. The total untapped hydropower resource potential of the country is estimated
at 13,097 MW, of which 85 percent are considered large and small hydros (11,223
MW), 14 percent (1,847 MW) are classified as mini-hydros while less than 1 percent
(27 MW) are considered micro-hydros. Some projects in Luzon are available for
private financing, while 20 are undergoing feasibility studies and 82 are in the prefeasibility stage.

Potential sites for mini and micro-hydro projects are evenly distributed in all the
regions. The National Electrification Administration (NEA), National Power
Corporation (NPC) and the DOE have studied specific mini-hydro potential sites and
have lined them up as indicative projects. The NEA has identified about 1,000 minihydro potential sites for development based on its mini-hydro program which began
in the 1980s. Likewise, NPC has identified potential sites for mini-hydro
development. In 1995, the DOE conducted a water resource inventory study to
validate NEA's and NPC's identified potential sites for promotion to private investors.
Meanwhile, a study conducted by United States National Renewable Energy
Laboratory (US-NREL) likewise revealed that micro-hydro potential sites are well
distributed all over the regions (Figure 7). Local government units (LGUs), nongovernment organizations (NGOs), electric cooperatives (ECs), and DOE's Affiliated
Non-Conventional Energy Centers (ANECs) supported the study by conducting local
identification projects. Another study entitled "Micro-hydropower Development
Study for Unenergized Barangays" is a Japanese-funded project which aims to
identify at least 40 micro-hydro sites for development in Regions I, II, III and
Cordillera Autonomous Region (CAR).

Challenges and Gaps

The capital-intensive nature, long gestation period (average of seven years) and
accompanying issues of social acceptability of large hydropower projects remain to
be the sector's biggest challenges. On the other hand, micro-hydro development for
off-grid electrification is hindered by high upfront costs and the need for
government intervention and subsidy.

Socio-environmental concerns

There is considerable resistance to the further development of large hydropower

projects due to the potential for upstream flooding, destruction of agricultural areas

and animal habitat and disruption of communities in the affected areas. These
factors have affected the attractiveness of large hydropower projects.

Shift in type of development

Given the many issues plaguing large hydropower projects, the logical next step
would be to focus on smaller, more manageable run-of-river projects. However, such
a shift will not come without considerable challenges such as a decrease in new
capacity given the smaller scale of the projects, intermittent supply of power and
considerable decrease in power generation during the summer months.

Commercialization of local micro-hydropower technology

There is also a need to develop and commercialize suitable micro-hydro technology

in the Philippines even as hydropower technology for large and small projects is
proven and mature. The Philippines remains to be dependent on imported electromechanical equipment for micro-hydro projects. The costs of these equipment vary
based on kilowatt capacity. For instance, a 5-kW equipment with controls and
metering devices cost US$11,000 while a 100-kW equipment costs US$64,500.

Existing Incentives

Republic Act No. 7156 or the Mini-Hydro Law provides the following rights and
privileges of mini-hydro developers, as follows:

Special privilege tax rates - Tax payable by developers/grantees to develop

potential sites for hydroelectric power and to generate, transmit and sell electric
power shall be 2 percent of their gross receipts
Income tax holiday for seven (7) years from start of commercial operations
Tax and duty free importation of machinery, equipment and materials- Exemption
from payment of tariff duties and value-added tax (VAT) on importation of
machinery and equipment (within seven (7) years from date of awarding of
contract)
Tax credit on domestic capital equipment - For developers who buy machinery,
equipment, materials and parts from a local manufacturers, tax credit is given
equivalent to 100 percent of value of VAT and custom duties that would have been
paid to import said machinery, equipment, etc.

Special realty tax rates on equipment and machinery - Realty and other taxes on
civil works, equipment, machinery and other improvements of a registered minihydroelectric power developer shall not exceed 2.5 percent of their original cost
VAT Exemption - Exemption from payment of 10 percent VAT on gross receipts
derived from sale of electric power whether wheeled via the NPC grid or electric
utility lines
Programs and Projects

To address the three major challenges for this sector, the DOE will pro-actively
monitor existing hydropower plants in the Philippines.

Enhanced public acceptance

The DOE shall involve all stakeholders in the decision-making processes prior to the
implementation of hydropower projects. This would ensure protection of the rights
of communities which may be affected by specific projects. At the same time,
project risks will be easier to ascertain through consultations and social assessment
activities conducted jointly with all affected stakeholders.

Promotion of alternative hydro development

The run-of-river schemes of construction will allow for a balance of river ecosystems
while providing communities dependent on the river for their livelihood to co-exist
with hydropower projects. In addition, the government would place greater
emphasis on projects which are encountering social and environmental problems by
treating these issues as an integral element, along with economic and financial
concerns, in the decision making process.

Commercialization of hydropower technology

With additional incentives as stipulated in the proposed Renewable Energy Bill, the
commercialization of locally made hydropower equipment can be attained. The
following measures are proposed to hasten its commercialization:

Creation of hydropower database

The DOE is envisioned to be the central repository for a database of large, small,
mini- and micro-hydropower projects and prospects. This database shall be made
available to interested developers. Furthermore, the DOE will conduct annual
seminars and workshops on hydropower development in strategic locations to
promote attractive hydropower projects to private investors.

Pursuit of technical cooperation with other countries

For small-scale hydropower development, the basic strategy for commercialization

is to encourage electro-mechanical manufacturers to set up facilities in the
Philippines and reduce the cost of importation of turbine equipment. There are
several local turbine fabricators in the country that can be trained to enhance their
capability to manufacture turbine equipment. The DOE is pursuing a technical
experts' dispatch program with the Japan International Cooperation Agency (JICA) to
assist these local fabricators. In coordination with the De La Salle University, the
DOE through JICA established the Micro-Hydro Testing Center in April 2003 to help
improve the output and efficiency of these equipment.

The DOE will likewise continue to seek technical and bilateral cooperation with other
countries that offer the latest expertise and technical transfer of hydropower
technology to replicate the successful Mahagnao micro-hydro demonstration
project. The 65-kW demonstration project in Burauen, Leyte showcases the
reliability of the hydropower system to supply electricity in remote barangays
located outside the grid. It is designed to supply power to 300 households in the
three barangays of Burauen namely, Cansiboy, Logsongan and Mahagnao. The
achievement of this project will be replicated in other suitable sites in the country.
The said demonstration project was successful in terms of seeking bilateral
cooperation with the Japanese government and a successful collaboration with other
government agencies in the country which were the key to the project's
implementation.

Rehabilitation program for existing hydropower plants

The DOE shall encourage investors to rehabilitate inefficient and non-operating but
viable plants to increase their generation capacities. Nationwide promotional
activities such as seminars and investment clinics will be conducted towards this
end. One such seminar was conducted in December 2002 in Tacloban City in
cooperation with JICA to promote the rehabilitation of existing mini-hydro plants in
Samar and Leyte to interested investors. The rehabilitation plans for hydropower
plants are spread over the ten-year period.

Pantabangan-Masiway Hydroelectric Power Plant

The 132-MW Pantabangan-Masiway hydroelectric power plant complex (PMHEP)

located in Nueva Ecija is owned and operated by First Gen Hydro Power Corporation
(FG Hydro). The complex has two components: the then 112-MW Pantabangan
hydroelectric plant (PHEP) component that was commissioned in 1977 and the 12MW Masiway hydroelectric plant portion that was commissioned in 1981. Both
plants are part of a multipurpose hydro complex that supplies irrigation water for
the vast rice fields of Nueva Ecija, approximately 180 kilometers northeast of Metro
Manila.

At the time of the PMHEPs transfer to First Gen, it had a total installed capacity of
112 MW. PHEP underwent a major rehabilitation that was completed at the end of
2010. After which, the total capacity of PHEP increased to 120 MW, which increased
the total capacity of the PMHEP complex to 132 MW.

PMHEP draws water from the Pantabangan reservoir that can hold up to three billion
cubic meters of water. Of this amount of water, 1,753 million cubic meters can be
used for both irrigation and power production purposes. To maximize the hydraulic
potential of water for power generation, PMHEP cascades the water resource from
the Pantabangan reservoir initially through its two 60-MW units of Pantabangan
upstream, and then through the smaller 12-MW Masiway plant downstream.

PMHEPs privatization represented the first major generating asset of National

Power Corporation (NPC) to be successfully transferred to the private sector.
PMHEPs generated output of energy is subject to and limited by the Irrigation
Diversion Requirement (IDR) set by the National Irrigation Administration (NIA).
Generally, the output energy of each plant is high during planting seasons, which
occur during the months of December to March (dry planting season) and July to
September (wet planting season). The volume of water released from the dam,
which directly correlates with the amount of power generated by the hydroelectric
plants, is much higher during the dry planting season due to the absence of rain. To
date, FG Hydro sells its generated electricity to five customers under PSAs.
Electricity generated by PMHEP in excess of its contracted levels is sold to the
WESM. Furthermore, FG Hydro optimizes uncontracted capacity by providing
ancillary services to the grid. FG Hydro has been able to generate additional
revenues through its offering of contingency reserve, dispatchable reserve, reactive
power support and black start service.

FG Hydro is owned 40.0% by First Gen and 60.0% by Energy Development

Corporation (EDC), by virtue of a sale approved by the respective First Gen Board of
Directors and EDC Board of Directors on October 15, 2008.

Agusan Mini-Hydroelectric Plant

Commissioned and constructed by NPC in 1957, the Agusan mini-hydro plant is

located in Damilag, Manolo Fortich, Bukidnon, 36 kilometers southeast of Cagayan
de Oro City in Northern Mindanao. The run-of-river plant covers a land area of
approximately 14 hectares and consists of two 800-kW turbine generators that use
water from the Agusan River through a six-kilometer headrace and a 2.83-hectare
forebay to generate electricity. The 1.6-MW Agusan sells all electricity output from
its mini-hydro plant to the Cagayan Electric Power and Light Company, Inc., through
a PSA that is effective until March 2025.

First Gen won the bidding for the 1.6-MW Agusan mini-hydro plant when it was
auctioned by the Philippine government via the Power Sector Assets and Liabilities
Management Company (PSALM) in June 2004. It was officially turned over in March
2005. Eventually, the asset was transferred to a special purpose vehicle named FG
Bukidnon Power Corporation (FGBPC or FG Bukidnon), a wholly-owned subsidiary of
First Gen Renewables, IncCommissioned and constructed by NPC in 1957, the
Agusan mini-hydro plant is located in Damilag, Manolo Fortich, Bukidnon, 36
kilometers southeast of Cagayan de Oro City in Northern Mindanao. The run-of-river
plant covers a land area of approximately 14 hectares and consists of two 800-kW
turbine generators that use water from the Agusan River through a six-kilometer
headrace and a 2.83-hectare forebay to generate electricity. The 1.6-MW Agusan
sells all electricity output from its mini-hydro plant to the Cagayan Electric Power
and Light Company, Inc., through a PSA that is effective until March 2025.

First Gen won the bidding for the 1.6-MW Agusan mini-hydro plant when it was
auctioned by the Philippine government via the Power Sector Assets and Liabilities
Management Company (PSALM) in June 2004. It was officially turned over in March
2005. Eventually, the asset was transferred to a special purpose vehicle named FG
Bukidnon Power Corporation (FGBPC or FG Bukidnon), a wholly-owned subsidiary of
First Gen Renewables, Inc.

REFERENCES

https://www.doe.gov.ph/hydropower
http://www.firstgen.com.ph/our-business/our-power-plants/#Hydro
http://www.power-technology.com/features/feature-the-10-biggest-hydroelectricpower-plants-in-the-world/
https://www.worldenergy.org/data/resources/resource/hydropower/