Asian Development Bank

ADB to help Philippines save US$100m yearly fuel cost by using energy-efficient lights


Source: Asian Development Bank

The Asian Development Bank (ADB) will fund an energy-efficiency project in the Philippines that will give away 13 million energy-saving lights to homeowners and businesses as part of a government push to cut the nation's power bills. The Project includes savings of about $100 million every year in fuel costs and a deferral of an investment of $450 million in power generation and associated network capacity.

ADB Board of Directors has approved a $31.1 million loan to the Philippines government to establish the project. The Philippine Energy Efficiency Project will distribute the compact fluorescent lamps (CFL) to customers nationwide in exchange for their incandescent bulbs. Each CFL is expected to save customers 400 pesos, around $8.50, each year for the next 7 to 10 years.

The Project will also retrofit government office buildings and public lighting systems with other efficient lighting options and establish an energy service company (ESCO) that will provide financial and technical support to companies planning to reduce energy consumption. ESCO will act as a one-stop-shop for energy efficiency for the public (hospitals, schools and government buildings) and private (industries, hotels, malls) enterprises.

Only 20% of the electricity used by an incandescent bulb produces light, with the remaining 80% wasted as heat. In contrast, a CFL uses all of its electricity input to produce light. While an average incandescent bulb's life is only about 800 hours, the CFLs used in the Project will have a life of 10,000 hours with 2-year warranty.

'CFL distribution program is like building 'virtual' power stations,' says Sohail Hasnie, Senior Energy Specialist in ADB's Southeast Asia Department. 'Put simply, if one million incandescent bulbs are replaced with CFLs at a cost of about $1.5 million, the electricity demand will be reduced by about 50 MW. The impact on the power system will be the same as building a new 50 MW power station, which costs at least $50 million, another $2 million–$3 million each year to operate, and 3–4 years for construction.'

As a result of lower greenhouse gas emissions, the Project will create carbon credits for the Philippines under the Clean Development Mechanism. The success of the Project will encourage private sector participation in energy-efficiency investment.

ADB is extending the loan from its ordinary capital resources to the Philippine government. The loan will have a 25-year repayment period and an interest rate determined in accordance with ADB's LIBOR-based lending facility. The Asian Clean Energy Fund, established by the Government of Japan, will provide a grant of $1.5 million under the Clean Energy Financing Partnership Facility. The government will provide $13.9 million to the Project.

The state-owned Philippine National Oil Co. will establish the energy service company (ESCO) using a $7.5 million loan provided by the Government, and under a subsidiary loan agreement approved by ADB.

In the past 30 years, ADB has provided about $2.9 billion in loans and around $15 million in technical assistance to the Philippines power sector.

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