A 10 year grant project of the World Bank and the Global Environment Facility (GEF) starting this year in the Philippines, will provide financial incentives to accelerate the replacement of some 375 inefficient chillers with non-CFC based models, such as hydrocarbon based ones. Early July 2011, the country’s Environment Secretary outlined the benefits of the project and called on industries to shift to new energy-efficient chillers.

To accelerate the conversion to new technologies, chiller owners will be able to choose from two financial incentive options under the project when replacing their old inefficient chillers with new non-CFC-based energy efficient chillers:

• Up-front subsidy of 15% of the cost of the new chiller on condition that the chiller owner must agree to relinquish future carbon finance revenues under the programme.
• Benefit from 75-80% of the Clean Development Mechanism (CDM) revenues that will be obtained from selling carbon emission reductions (CERs) under the project. The remaining 20-25% of the CDM revenues must be surrendered and will be used to cover the cost of administration, financial management, reporting, marketing and other CDM related costs.

A chiller is defined as an industrial- and commercial-grade refrigerating system used in cooling applications for buildings, raw materials, chemicals, medical equipment and industrial equipment.

Eligible new chillers under the programme would need to encompass refrigerants with low or non-ozone depleting potential including natural refrigerants like hydrocarbons (propane and isobutene) and ammonia, water and air, hydrochlorofluorocarbons (HCFC123), and hydrofluorocarbons (HFC-134a).

Cutting energy bills and greenhouse gas emissions

It is hoped that the project will cut energy bills and greenhouse gases emitted in the atmosphere by as much as 560,000 tons in the next 10 years.

“Given today’s technologies which are not only energy efficient but are also using non-CFC alternative refrigerants, we can assure the private sector that replacing their old chillers with new ones makes good business sense,” said Environment and Natural Resources Secretary Ramon J. P. Paje on 3 July 2011.

The different components of the US$47.9 million (€34.2m) project

The provision of financial incentives is the first of four components of the ‘Philippine Chillers Energy Efficiency Project’ (PCEEP), the other three being:

• Measurement, monitoring and verification: The program is required to measure and monitor data related to the power-output function of the inefficient chiller to be replaced, the electrical consumption of the new chiller, as well as the cooling output. For this purpose, a database will have to be established that will keep track of all the data generated from the individual replacement activities and to be used to generate the reports that would support the Certified Emission Reduction (CER) claims under the Clean Development Mechanism (CDM).
• Performance standards and technical assistance aimed at enhancing the knowledge and building capacity of project participants, including chiller owners, government regulators, chiller manufacturers/ suppliers/contractors.
• Project management.

Background

The Philippines ratified the Montreal Protocol in March 1991 and committed to gradually reduce and eventually eliminate the use of ozone-depleting substances such as chlorofluorocarbons (CFCs).

According to Paje, “over the last 10 years, or starting in 1999, the Philippines has made great progress in phasing out the use of CFCs as refrigerants in the household and mobile air conditioning systems. Then in 2010, [the Phillipines] have totally banned the entry of CFCs, commonly known as Freon, into the country, in accordance with our commitment to the Montreal Protocol”. The DENR chief said, however, that the chiller subsector continues to rely heavily on CFCs, which besides being ozone-depleting require more energy to run them and thereby put unnecessary burden on the country’s energy supply.