Midterm review of the Development for Renewable Energy Applications Mainstreaming and Market Sustainability (DREAMS) Project

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Evaluation Plan:
2019-2023, Philippines
Evaluation Type:
Mid Term Project
Planned End Date:
08/2020
Completion Date:
06/2020
Status:
Completed
Management Response:
No
Evaluation Budget(US $):
42,000

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Title Midterm review of the Development for Renewable Energy Applications Mainstreaming and Market Sustainability (DREAMS) Project
Atlas Project Number: 88788
Evaluation Plan: 2019-2023, Philippines
Evaluation Type: Mid Term Project
Status: Completed
Completion Date: 06/2020
Planned End Date: 08/2020
Management Response: Yes
Corporate Outcome and Output (UNDP Strategic Plan 2018-2021)
  • 1. Output 1.1.1 Capacities developed across the whole of government to integrate the 2030 Agenda, the Paris Agreement and other international agreements in development plans and budgets, and to analyse progress towards the SDGs, using innovative and data-driven solutions
SDG Goal
  • Goal 7. Ensure access to affordable, reliable, sustainable and modern energy for all
SDG Target
  • 7.1 By 2030, ensure universal access to affordable, reliable and modern energy services
Evaluation Budget(US $): 42,000
Source of Funding: Project budget
Evaluation Expenditure(US $): 42,000
Joint Programme: No
Joint Evaluation: No
Evaluation Team members:
Name Title Email Nationality
Dinesh Aggarwal Evaluation Specialist dinesh.a@rediffmail.com INDIA
Jun David Evaluation Consultant jundavid@yahoo.com
GEF Evaluation: Yes
GEF Project Title: Development for Renewable Energy Applications Mainstreaming and Market Sustainability (DREAMS)
Evaluation Type: Mid-term Review
Focal Area: Climate Change
Project Type: FSP
GEF Phase: GEF-5
GEF Project ID: 5363
PIMS Number: 5194
Key Stakeholders: Department of Energy
Countries: PHILIPPINES
Lessons
1.

Lessons learned

• The global pandemic highlights the need for business continuity plans especially for NIM projects.


Findings
1.

In Philippines, from the year 2002 to 2010, GEF supported the project “Capacity Building to Remove Barriers to Renewable Energy Development (CBRED)”. This project resulted in the formulation of the RE Act including its ‘Implementing Rules and Regulations (IRR)’ and initial regulatory frameworks. To encourage and accelerate the participation of the private sector, provisions were provided in the Act, for fiscal and non-fiscal incentives (such as the Renewable Portfolio Standard or RPS, Net Metering and Green Energy Option, among others). The CBRED Project was also successful in enhancing awareness of the private sector, local governments and communities on various aspects of renewable energy resource development. As a result of CBRED, the DOE was able to initiate engagement with the private sector as well as with the grassroots communities in the pursuit of renewable energy technology for their livelihoods. Despite these efforts to catalyse RE development, the barriers still existed at the program and project levels that constrained RE development in the country, notably at the local level where the RE Act has not been effectively implemented. The DREAMS Project was designed to address issues related to RE development, primarily the process of regulatory approvals for RE projects in the Philippines at the national and the local levels. These are issues that have emerged with the Government of Philippine’s efforts to accelerate RE development since the completion of the CBRED Project in 2010. The DREAMS Project activities include building capacity of the local government and host communities, and the streamlining of the national approval process that will create an investmentfriendly environment, conducive to satisfying local permitting requirements and more widespread promotion of RE projects as intended under the NREP. This includes operationalization of the remaining implementation mechanisms under the RE Act that were introduced through CBRED including the establishment of the RE Market and Registrar, which are components of the Renewable Portfolio Standards (RPS), designed to accelerate development of RE resources in the country. The strategy of the project as discussed above was the result of consultations and background analysis during project design stage and relevance to Philippines’s development context.


2.

The defined objective of the Project is to reduce GHG emissions through the promotion and facilitation of the commercialization of renewable energy (RE) markets by removing the barriers towards investments in RE-based power generation projects. One of the barriers which is to be removed is the lack of demonstration of RE projects, established using the de-risking mechanisms (Renewable Portfolio Standards, establishment of RE markets for trading of RE certificates) that are provided in the RE Act. The action for this is being carried out under Outcome 3 of the project. With good progress towards implementation of ‘Philippine RE Market System (PREMS)’, the progress towards results for Outcome of the project is Satisfactory. One of the other barriers which the DREAMS project is addressing is the lack of co-ordination and lack of clarity regarding the roles and responsibilities in the overall development of a RE project. Particularly, regarding the provisions in the RE Act. The DREAMS project was to support selected RE projects in the overall approval process leading to creation of RE capacity of about 75 MW, which was supposed to lead to the direct GHG emission reductions of 205 ktonnes CO2e within the implementation timelines of the DREAMS project. As the work on this from is lagging, the RE capacity would get created towards to end of the implementation timelines of the project, leading to direct GHG emission reductions. However, such direct GHG emission reductions would happen after the end of the DREAMS project. The DREAMS project is targeting enhancing the capacity of the institutions at the local level to increase investment in the RE projects at local level (Outcome 2). Under the ‘Local RE Planning Capacity Building Program (LREP Cap Build)’ being implemented by the project, the activities to achieve this objective are being undertaken successfully. However, when it comes to creating longer term impacts by way of creation of knowledge platforms, the progress is still lagging behind.The DREAMS project has provision to support development of the RE projects using the ‘Project Preparation Fund (PPF)’. Creation of PPF is one of the provisions in the project design. Utilisation of the funds provided for PPF is still to be carried out in an effective manner.


3.

This Outcome of the project pertains to enforcement of the supportive policy and regulatory environment that will leverage increased investment in RE development and application at the local level. This was to be achieved within the first year of the project implementation, so these policies and regulations can support achievement of the other outcomes of the project. Although, the objective of creation of conducive conditions for investment in RE is likely to be achieved, there would a time lag. One of the other objectives within this Outcome was the promotion of manufacturing, fabrication and supply of locally produced components for RE applications. Till the time of MTR, the project could not make much progress towards achievement of this objective.


4.

Under Outcome 2 of the project, it is intended to address the barriers associated with the need for improved capacity in the Philippines, mainly at the local level on RE issues and the development, operation and management of RE projects. The project is doing this under its ‘Local RE Planning Capacity Building Program (LREP Cap Build)’. The activities to achieve this objective are being undertaken successfully. In order to facilitate large-scale implementation of the RE projects, there is a provision of a knowledge sharing platform. The activities towards this are yet to implemented. At the time of MTR, the project was in the process of procuring the services to implement the hardware and software part of the knowledge platform.


5.

Outcome 3 of the project addresses the barrier relating to the absence of a functional RE Market that represents tangible government measures to ensure compliance with the mandated utilization of RE generation and spur the growth of the RE industry. The outcome resulting from the outputs from this component will be a “capitalized” RE Market and an accompanying RE registrar that will contribute to an increased share of RE based power capacity, and an increased number of RE project developers at the local level. There is good progress towards implementation of ‘Philippine RE Market System (PREMS)’.


6.

The Outcome 4a of the project is to address the barriers related to the lack of successful RE projects in the country. The project has provision to support development of the RE projects using the ‘Project Preparation Fund (PPF)’. Creation of PPF is one of the provisions in the project design. Utilisation of the funds provided for PPF is still to be carried out in an effective manner. Under this Outcome the DREAMS project is also to support creation of bankable RE plans for the LGUs. Under its ‘Localized RE Planning (LREP)’ the project is discussing preparation of bankable RE plans, with five LGUs in the province of Palawan and three LGUs in Iloilo. One of the other objectives for the activities under Outcome 4a is to ensure availability of certified technicians for RE technologies at the local level. The project plans to deliver this by providing local training to community based RE technicians and LGU engineers for micro-hydro power maintenance and management.


7.

This Outcome of the DREAMS project is to address the barriers of lack of coordination and lack of clarity regarding the roles and responsibilities in the overall development of a RE project. Particularly, regarding the provisions in the RE Act. Towards this the DREAMS project was to support selected RE projects in the overall approval process leading to creation of RE capacity of about 75 MW. Outcome 4b is expected to lead to increased number of RE projects using proven and emerging RE technologies thus boosting successful replication. Somehow, these selected RE projects did not go ahead with implementation. The DREAMS project is identifying another set of RE projects, which would need support in the process of clearances and would eventually provide the required support.


8.

As and when needed, the project team has responded to changing conditions and risks, to take advantage of opportunities for partnerships and actions that support the overall project objective. Overall, the management of the project is rated as SatisfactoryQuarterly progress reports and the annual progress reports are prepared and shared in accordance with UNDP / GEF requirements. The monitoring reports do not cover the co-financing aspects. The reporting aspect of the project management has been rated as Satisfactory At the time of MTR, the project did not have a website of its own. No mechanism was in place to disseminate the information about the work carried out under the project. The project is regularly disseminating the information about the project and the results through the news channels (both online and print media). Apart from this the project is making the effective use of the capacity building, training, and awareness creation activities for targeted stakeholders, under different components of the project as a means of communication. The communications aspect of the project management has been rated as Moderately Satisfactory.The main formal platform for engaging the stakeholders is the Steering Committee (SC). The project in addition to the engagement of the government stakeholders at PSC level managed to bring on-board many other beneficiaries and decision-makers, including provincial governments of Palawan, Iloilo, and the LGUs in the two provinces of Palawan and Iloilo. Although, the PSC has representatives from different concerned ministries and departments, it doesn’t have members from civil society, NGOs, research institutions, development agencies, trade & industry bodies or academia. In the absence of formal communication channels, the participation of the larger stakeholders is not there. Stakeholder engagement at an aggregate level has been rated as Moderately Satisfactory. There is significant co-financing which was committed at the time of project design. Apart from Government departments, co-financing was to come from the private sector by way of their investment in the RE projects which were to be supported by the DREAMS project. The private sector RE projects which were identified for support at the time of PPG, got scraped on a later date due to a variety of reasons. The DREAMS project is in the process of identifying and supporting another set of RE projects, which would require such a support. Once the investment in the newly identified RE set of projects get implemented, the cofinancing part of the private sector would get realised.


9.

At an aggregate level, technical risks to sustainability of the project are considered low. The financial sustainability of the project is assessed to be likely. At this mid-point in project implementation, socioeconomic sustainability is considered as likely. From the view point of institutional framework and governance risks, the sustainability of the project is Moderately Likely. From the view point of environmental risk, sustainability of the project is Likely.


Recommendations
1

MTR recommendation 1: In the results framework of the project,include direct GHG emission reductions (total GHG emission reduction over the lifetime of the RE capacity created) as one of the Indicator. It is recommended that the projected direct reduction in the emission of GHG, due to the project be taken in the results framework of the project as an additional Indicator (Indicator D) with its corresponding Target. The figures of the projected direct GHG emissions due to the project are already provided in the project document, but it has not been taken to the results framework as an indicator and the target. As most of the direct GHG emission reduction would happen beyond the implementation timelines of the project, it would not be possible to monitor the achievement by measurement of the RE power generated. The monitoring of the achievement in this case may be done by estimating the 'Capacity Utilization Factor (CUF)' of the RE capacity created.

2 MTR recommendation 2: In the results framework for the project,revlew the target value of the indicator "% share of RE in the power generation mix of the Philippines". The target value (35%) for the Indicator "% share of RE in the power generation mix of the Philippines" is a bit over ambitious. As per the workings provided in the 'Project Document', in order to achieve the target, the total RE capacity addition required during the implementation timelines of the project would be 4866 MW. This is against the required total power generation capacity addition of 4275 MW during the same period. Thus,the entire electricity generation capacity addition required during the implementation period of the project would need to be essentially from renewable sources. This is not a practical thing to do,particularly considering that generally speaking RE is an intermittent source of power and needs to be supported by non-RE sources of supply to ensure continuous supply of electricity. The project document itself has suggested (footnote 66 of project document) that this target should be reviewed during the project, to ensure it is commensurate with DOE's targets which are revicwed annually, It is recommended that the target value for this Indicator be reviewed and if needed revised.
3 MTR recommendation 3: Extent the project implementation timelines by one year. Actual implementation of the project started late (by about one year). Although,the implementation is happening as required, it would not be possible to complete some of the important activities within the remaining project implementation timelines,hampering the achievements of the project (e.g. Creation of the RE capacities). It is recommended that a no cost extension of one year be provided to the project.
4 MTR recommendation 4: Expedite the use of resources of the project for the creation of financial instruments. Under outcome 4a,there is a provision for US$1 million to design financial instruments to facilitate funding of RE projects by the banks. Somehow,this provision could not be implemented till the time of MTR. It is recommended that the available funds may be utilized in an expeditious manner. Some of the ways which are in line with the overall project objectives and outcomes in this regard are as follows: a. Grant part capital subsidy for RE projects in non-viable/difficult areas established by private sector parties on competitive bidding basis invited by LGUs or Electric cooperatives b. Provide part grants to LGUs (balance coming from LGUs) for establishing community managed small RE projects c. Provide 'interest rate drawdown support' to the RE projects being established in difficult areas d. Provide performance-based incentives (in terms of P/kWh) for RE based projects.The selection of projects to be supported maybe done while inviting the parties to establish RE based power projects e. Available resources may also be used for some of the other appropriate measures to support overall objective of the project recommended under recommendations
5 Support creation of financial models and also studies to determine the cost of generation of electricity out of different RE resources. Project document already has provision for these activities under Outcome 3 (Output 3.1,activity 3. 1. 3) . The project team already has plans to carry out these activities. It is recommended that these activities may be carried out in expeditious manner to realize the benefits towards achieving the objective of the project. One of the models which may be examined is the possibility of conversion of existing diesel-based standalone generators to RE-Diesel Hybrid. Financial feasibility study in this case would consider CAPEX as the cost of RE component, OPEX as 1% to 2. 5% of CAPEX and Revenue is the Diesel Saved due to introduction of the RE component. Project may support development of standard simple Excel based financial model to support this.
6 MTR recommendation 6: Develop and enforce performance standards for RE equipment (Solar PV,Wind turbines etc.)and components like inverters,meters, control systems. Support this initiative with the establishment of accredited testing facilities. Enforcement of performance of standards will ensure that only equipment of good quality gets imported in the country. This over a period of time will increase the confidence level of the investors in the RE technology. Project already have some provisions towards such activities under Outcome 1. 5 (activities 1. 5. 2,1. 5. 3, 1. 5. 4) . It is recommended that implementation of these activities be expedited. For the additional suggestion to support creation of an accredited testing facility some of the funds under recommendation 4 may also be utilized. Accredited lab may be established within an appropriate government/institution owned facility.
7 MTR recommendation 7: For work plan pick activities from the project document Some of the activities provided in the project design has not been taken up in the workplans. MTR team is of the view that one of the reasons for this is that while preparing the workplans, the activities mentioned in the 'Project Document' are not referred. Thus, implementation of many activities which are required as per 'Project Document' don't get included in the work plan and hence doesn't get carried out. It is recommended that while preparing the workplans and budget, a reference from the activities provided in the Project Design maybe drawn. This will ensure that any activity specified in the Project Design does not get missed out due to oversight.
8 MTR recommendation 8: Communication regarding the upcoming policy instrument for RE promotion. It is recommended that in order to increase the awareness amongst stakeholders,the project may come out with simple communication products (e.g. newspaper articles, communication in magazine of trade associations, online media) informing the changing landscape for doing business in the power sector in general and in the RE space in particular.
9 MTR recommendation 9: Study regarding the potential demand for RE under the RE portfolio standards and the corresponding supply of RE for the compliance market to see the gap in demand and supply over a period of time. The study may include an exercise to determine the likely price band for Green Energy Certificates. Examine the possibility to come out with regulations regarding 'Floor Price' and a 'Cap Price' for Green Energy Certificates.
10 MTR recommendation 10: Capacity building of private sector investors, RE equipment manufacturers and banks regarding the opportunities available under the RE portfolio standards and RE Certificates regime. Utilize the results of recommendation 5 and recommendation 9 to inform the prospective private sector investors regarding the opportunities available for the RE business under the new policy regime for the RE sector.
11 MTR recommendation 11: In the guidelines by DOE for competitive bidding there should be directive to procure separate quantities for RE and for fossil-fuel based power. With the RPS in force,the electric co-operative/distribution utilities would need to attempt procuring a part of the electricity from RE sources. From time to time depending upon the expected demand for electricity,the electric co- operatives invite the competitive bids for procurement of power. It is recommended that while inviting the bids there should be separate quantity mentioned for RE sources and the evaluation of bids for RE part of the quantity should be done separately.
12 MTR recommendation 12: Introduce training modules on RE in the Industrial training institutes. Under outcome 4a, one of the targets is to ensure sufficient availability of certified technicians for RE. It is recommended that a RE specific training module be introduced in a some of the existing modules of TESDA and be available as a regularly course offered.
13 MTR recommendation 13: Facilitate the capacity building assistance to the LGUs in harmonizing the energy components(with RE applications) of Local Development plans (Comprehensive Development Plans,Annual Investment Plans and Comprehensive Land Use Plans) . The local development plans of provinces (lloilo and Palawan) and municipal level LGUs lacks details in the energy sector application of renewable energy. The local planning process feeds into the Regional Development Plan that incorporates the local energy plans. Technical Assistance inputs needs to be mobilized to assist the LGUs (provincial and municipal) through a participatory approach in developing their local energy plans. Review and streamline the process and develop guidelines on the local energy planning that will be incorporated the HLURB local planning guidelines.
14 MTR recommendation 14: Capacity building of regulatory authorities Study tour based on opportunities to participate in international workshops (separately for higher official and for managerial level officials) Consultancy for International Best Practices and case studies provided under dedicated sessions by the consultants

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