January 2021

This document was produced for review by the United States Agency for International Development (USAID). It was prepared by the Energy Secure Philippines (ESP) Activity implemented by RTI International for USAID Philippines.

This document is intended to comply with Section 508 Standard of the Federal Acquisition Regulation. If you have any difficulties accessing this document, please contact accessibility@rti.org.

Energy Secure Philippines (ESP) Activity

1st Quarterly Performance Report FY 2021

November 19 – December 31, 2020

Energy Secure Philippines (ESP) Activity

First Quarterly Report FY 2021 November 19 – December 31, 2020 Contract:

January 2021

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Table of Contents

Executive Summary 1

Section 1: Project Background 2

Section 2: Project Objectives 5

Theory of Change 8

Grants Under Contract Mechanism 9

Section 3: Rapid Mobilization Plan 10

Section 4: Co-Design Workshop 15

Section 5: Project Implementation Challenges 16

Section 6: Planned Activities For The Rest of FY 2021 17

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Acronyms

ARIA Asia Reassurance Initiative Act

ARO Asia Regional Office

CDCS Country Development Cooperation Strategies

COP Chief of Party

DCOP Deputy Chief of Party

DOE Department of Energy

DUs Distribution Utilities

EDGE Enhancing Development and Growth Through Energy

ERC Energy Regulatory Commission

ESP Energy Secure Philippines

EVOSS Energy Virtual One Stop Shop

FY Fiscal Year

GDP Gross Domestic Product

GUC Grants Under Contract

HR Human Resources

IT Information Technology

LGU Local Government Unit

MEL Monitoring, Evaluation and Learning

MW Megawatt

NREB National Renewable Energy Board

PMU Phasor Measurement Unit

PMU Project Management Unit

RE Renewable Energy

RSEC-WR Rules on Setting Electric Cooperatives’ Wheeling Rates

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ToC Theory of Change

USAID United States Agency for International Development

USG United States Government

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Executive Summary On November 19, 2020, the United States Agency for International Development (USAID) awarded the 5-year Energy Secure Philippines (ESP) Activity to RTI International. Contracted under Task Order , this Activity aims to enhance the security and reliability of the envisioned unified power system in the Philippines. The lead implementing government counterparts are the Department of Energy (DOE) and Energy Regulatory Commission (ERC), which are expected to collaborate closely with a host of national, subnational, and local government units. The USAID’s ESP Activity supports the Philippines Energy Sector Strategic Directions 2017-2040 and the goals of the United States Government’s Asia EDGE (Enhancing Development and Growth Through Energy) Initiative, particularly in pursuing enhanced energy security in Asia through a transparent, market-driven, and resilient energy sector. More specifically, Asia EDGE seeks to expand access to affordable and reliable energy, including highly efficient fossil fuels, nuclear, and renewables, to help reduce poverty, foster economic growth, and promote prosperity in Indo-Pacific partner countries. The overall objective of the ESP Activity is to mobilize at least $750 million worth of private sector investments for the country’s energy sector, and to support efforts leading to additional new generation capacity of at least 500 megawatts. ESP also envisions providing a total of

in grants to encourage private sector participation and/or collaboration with local non-governmental entities in the implementation of interventions.

Through its Grants Under Contract (GUC) mechanism, the ESP Activity will likewise support productive-use models to strengthen value chains and rural livelihoods, particularly in health, agri-businesses and agricultural processing, water, education, and information technology. In the face of the COVID-19 health crisis and the urgent need to ensure that applicable energy technologies and other strategic interventions are deployed to support the nationwide distribution of COVID-19 vaccines, the ESP Activity aims to provide a customized capacity building assistance and improve business solutions and investment climate on current grass root network, collaborate and leverage with USAID-funded projects, as well as other donors’ efforts, to ensure rapid deployment of these vaccines across the country. This intervention demonstrates that achieving resilience using energy as the resilience driver transcends the concept of climate change and cuts across sectors covering a broader spectrum that includes global pandemic. This aligns with the goals of ESP Activity’s Objective 2 that promotes the wide deployment of advanced energy systems and advanced energy technology.

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This first quarter performance report for FY2021 complies with Section F.8 of the Task Order. It covers tasks completed from November 19 through December 31, 2020.

Section 1: Project Background

Energy Secure Philippines (ESP) is a five-year project under the USAID Philippines mission that aims to help the Philippines mobilize investment, deploy modern energy technology, and support policy reforms for a more competitive energy sector that can drive future economic growth and social development. The ESP Activity supports the goals and objectives of the Asia Enhancing Development and Growth through Energy (EDGE) initiative of the United States Government (USG). Asia EDGE helps countries foster regional connectivity and market integration, advance market-based energy policies and market reforms, modernize energy infrastructure, and expand access to affordable, secure, and reliable energy supplies. These objectives were reinforced with the enactment of the Asia Reassurance Initiative Act (ARIA), which aligns closely with the Indo Pacific Vision and prioritizes energy sector programming in Asia.

ESP likewise directly responds to the USAID Mission’s new Philippines Country Development Cooperation Strategy 2019-2024 (CDCS), which supports US initiatives to advance the Indo-Pacific Vision and the Asia EDGE Initiative. The five-year CDCS prioritizes three key interrelated objectives: (a) enhancing democratic governance; (b) expanding inclusive, market-driven growth; and, (c) enhancing environmental and community resilience, which will contribute to the goal of achieving a well-governed and more self-reliant Indo-Pacific partner. Secure, reliable, and affordable access to energy is critical to sustain economic growth in the Philippines. Meeting this goal will become increasingly challenging, as decreasing domestic energy sources, such as Malampaya natural gas, are projected to affect the Philippines precisely at the point that more energy resources will be needed to support a growing population and sustain gross domestic product (GDP) growth rate. The ESP activity will promote the development and implementation of, as well as adherence to existing laws related to competitive and transparent processes, incentivizing private investment, boosting the utilization of new and advanced energy technologies, increasing resilience to natural and human-induced shocks, and promoting a secure, stable, diversified, and modern Philippine energy sector. The advent of COVID-19 has highlighted the need for innovative technology, flexibility in programming and implementation, and increasing the reliability and stability of the power system, so as to quickly respond to unanticipated challenges that impede the timely delivery of quality and reliable power service. USAID’s ESP Activity is implemented by a consortium of local and US-based international firms, led by RTI International. In support of the Journey to Self-Reliance, RTI is working

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primarily with locally-based firms, with international companies providing complementary niche technical advice.

Figure 1. RTI Consortium for the Energy Secure Philippines Activity

leads the ESP engineering interventions laid out under Objectives 1 and 3. Transaction advisory support and partnership with selected private companies will be carried out by ). contributes legal, financial, and management expertise, as well as project coordination with the

. The USAID ESP Activity will work with several local government units across the country guided by the Local Energy Code jointly issued by the Departments of Local Government and Energy and the full implementation of the Energy Virtual One Stop Shop (EVOSS) Act. This will be supported by the

.

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The Activity’s US-based companies will provide their respective expertise in various fields. will analyze and simulate the impact of the interconnection of Mindanao to

Luzon and Visayas Islands.

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Section 2: Project Objectives

The overall goal of USAID’s ESP Activity is to enhance energy security in the Philippines. The Activity focuses on advancing inclusive economic growth and resilient development through increased private investment, in order to promote advanced technology deployment and boost the energy sector’s resilience to shocks and stresses. To achieve this objective, ESP aims to mobilize $750 million in private sector investment that will stimulate 500 megawatts (MW) in additional generation capacity. ESP’s grants program aims to catalyze and encourage private sector engagement and collaboration with local non-governmental entities in the implementation of complementary and reinforcing energy interventions. The USAID’s ESP Activity will be implemented according to three major objectives, and organized under sub-objectives as described below:

1) Improve the performance of electric utilities a. Operational efficiencies of utilities increased b. Financial viability of utilities strengthened c. Resilience of energy systems to shocks and stresses increased

Objective 1 aims to improve the operational performance, financial standing, and system resilience of selected partner power utilities, based on existing codes and standards to provide quality, reliable and secure electricity services. Each utility partner will use advanced analytical and information technology (IT) tools to improve performance against benchmarks consistent with international standards for operational performance, financial standing, and system resilience, including cybersecurity.

2) Increase the deployment of advanced energy sources and systems a. Policy and regulatory environment for advanced energy systems improved b. Planning, procedures, financing, and tools for the development of advanced systems

facilitated c. In-country capacity for research, knowledge, and skills to expand the delivery of

advanced energy systems strengthened d. Private sector engagement to support deployment of advanced energy systems

facilitated By the end of the USAID’s ESP Activity, partner developers and DUs will have gained the technical and financial capacity to deploy advanced energy systems. The power sector will be sustained by new private investments facilitated by the ESP Activity, leading to increased investment in renewable and cleaner fuels. The ESP Activity will serve as the catalyst for an

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accelerated move toward smart grid systems and energy efficient technologies/systems/processes, as well as other innovative energy systems for improving delivery of electricity services. The expected outcome is a reduction in electricity costs for end-users, including manufacturers of goods for export, thus increasing the Philippines’ competitiveness in the world market.

3) Enhance competition in the power sector a. Implementation of policies/regulations that promote competition in the power sector

advanced b. Energy procurement practices and methodologies, including the application of tools

and technology to increase competition and improve the procurement process, adopted and/or expanded

c. Customer choice through retail competition improved Full implementation of the retail electricity market is the last phase in the power sector reform process that commenced with the passage of the Electric Power Industry Reform Act in the Philippines in 2001. Objective 3 aims to enhance the monitoring and implementation of the competitive selection process. The focus will be on best-value procurement promoting movement toward international standards for quality of equipment and service, at a reasonable and competitive price. As the Philippine power market enters a more competitive household level, it is important to effectively enforce and implement tighter rules on power market abuses and anti-competitive behavior. The ultimate outcome of the USAID’s ESP Activity will be the gift of choice to the lowest level of the consumer hierarchy – Philippine households. Pursuant to Section B.5 of the Task Order, Implementation of the USAID’s ESP Activity will be monitored by quantifiable/measurable performance objectives/outcomes classified under the following performance indicators:

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1 USAID’s ESP Activity will request for a replacement of this performance indicator since BARMM has been deleted as a geographic focus of

USAID’s ESP Activity.

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Theory of Change

The Theory of Change (ToC) in the next section graphically illustrates the key assumptions underlying the proposed menu of interventions, the implementation approaches, and the initial geographic focus of the USAID’s ESP Activity. The graphics likewise summarize the expected outputs and outcomes resulting from the effective implementation of tasks and interventions. The ToC may evolve as policy focus shifts and tasks and interventions are realigned to support policy changes over time.

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Figure 3. Theory of Change.

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Grants Under Contract Mechanism

The ESP Activity includes a Grants Under Contract (GUC) component of around . This mechanism will complement identified tasks and proposed interventions across the three objectives. It is also one of the foremost avenues to ensure that gains and benefits from the ESP Activity are shared by grassroots communities in selected local government units across the country. To operationalize the grants mechanism, the USAID’s ESP Activity will launch the Energy Evolution Challenge, designed to aid the evolution of policy and technology in the Philippine energy sector. The Challenge will help the Philippines energy sector evolve in two key areas: a) policy, and b) technology. Policy and technical research/studies. The USAID’s ESP Activity aims to contribute to existing legislative initiatives to create an independent energy institute in the Philippines, which can act as a “think tank.” The envisioned institute will provide objective and evidence-based analysis of policies to guide decision makers. The Activity plans to provide grants to select university or university-based organizations and other research institutions, as a sustainable pathway toward the Journey to Self-Reliance. The actual design of the grant mechanism, as well as the portfolio of the grants’ focus, will be finalized with USAID and key government agencies. Innovative energy technologies, systems, or applications. This category embraces a wide variety of innovations, including technology incubation, scaled-up and proven proofs of concepts, new energy pilots, and hybrid proven concepts. This second category will support projects in any of the following areas: energy efficiency, new/emerging energy sources, renewable energy (RE), energy business processes, demand-side management, consumer welfare, distributed energy resources, cybersecurity, cross-sectoral use of energy, and energy resilience, among others. The Energy Evolution Challenge will be governed and implemented in accordance with the provisions of the USAID-approved Grants Manual.

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Section 3: Rapid Mobilization Plan

In the face of mobility limitations stemming from COVID-19, RTI has successfully implemented a rapid start-up process as committed under its rapid mobilization plan. The plan uses a streamlined approach that will leverage RTI’s large footprint in the Philippines, in addition to RTI’s Asia Regional Office (ARO), for start-up and implementation. Below is a summarized timeline of high-level start-up coordination meetings conducted since November 18, 2020:

Figure 4. Key Mobilization Milestones, by week

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Meetings Conducted to Operationalize RTI’s Rapid Mobilization Plan

Tabulated hereunder is a summary of meetings held between RTI and USAID and internal meetings conducted with RTI’s business partners:

A. Meetings with USAID and within RTI

Activity Sequence Meeting Milestones (USAID, RTI) Date

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USAID ESP Kick Off Meetings USAID/Philippines met with RTI for the ESP Kick Off Meeting to highlight critical provisions of the Task Order, USAID’s expectations, and general approval process.

December 1 and 9, 2020

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RTI Internal Kick Off Meeting The ESP Project Management Unit (PMU) team met with RTI’s internal business partners (e.g., contracts, Human Resources (HR), billing, global tax, Asia Regional Office, Subcontracts, Legal, Communications, Procurement and Grants, Finance, and Accounting to brief them about the ESP contract, technical activities, partners, and staffing.

December 4, 2020

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ESP Weekly Coordination with Asia Regional Office (ARO) The ARO office provides support to RTI’s Asia-based projects and is integral in operational support for ESP’s start-up. The ESP PMU leverages the expertise of its ARO HR, Grants and Procurement, IT, Finance, and Security points of contacts to ensure start-up operations are aligned with RTI best practices.

December 16, 2020

B. Meetings with RTI’s Subcontractors As part of its rapid mobilization strategy, the ESP Activity team met with subcontractors to formally introduce the home office project-management unit, which will provide the support needed to mobilize the Activity, particularly given the challenges of COVID-19. The team also provided an overview of the RTI process, as well as the mandated approvals required to fully operationalize the subcontracts. Participants also summarized committed deliverables under Year 1, pursuant to the Task Order. For the performance period under review, RTI International met with the two largest subcontractors under the ESP Activity.

. The COP, DCOP, Program Manager and Senior Program Coordinator met with

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to identify priority actions for the next three months of the Task Order, and to define challenges in meeting Year 1 performance indicators and preparatory actions leading to the co-design workshop.

RTI held a similar short briefing with , which leads the Activity’s private sector partnerships through a selective transaction advisory strategy. The focus of the meeting was primarily on the documents needs to submit in order for RTI to formally request approval for the team’s Statement of Work. The RTI team also reminded that USAID approval is needed before can officially mobilize its team.

ESP Meeting with subcontractor via Zoom December 21, 2020.

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C. Meetings with RTI’s Project Team The USAID’s ESP Activity Chief of Party (COP) and Deputy Chief of Party (DCOP) also met with non-key personnel named in the RTI proposal to serve in the project field office team. The purpose of the meeting was to determine the period of availability of the team, status of hiring, and any potential bottlenecks in the employment process. This inventory allowed senior field leadership to determine the equitable distribution of responsibilities and the sequential actions needed to meet the Task Order deadlines, pursuant to Section F.8 of the Task Order.

Meeting with the field office project team on November 21, 2020.

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By the end of December 2020, the ESP project office team comprised the COP, DCOP, Objective 2 Lead, Operations Manager, Monitoring, Evaluation and Learning (MEL) Manager, and Grants and Accounting Analyst. This group discussed the deadlines for the following mandated reports, pursuant to Section F.8 of the Task Order, and the steps leading to the co-design workshop scheduled for January 13-15, 2021. The team committed to ensure delivery of the reports within the timeline dictated by the Task Order.

Mandated Reports Contract Provision

(effective date of November 19, 2020)

Deadline of Submission to USAID or Conduct of

Activity (on or before deadline)

Submitted to USAID

1 Rapid Mobilization Plan 90 days 02/15/2021

2 Branding Strategy and Marking Plan 45 days 01/03/2021 12/22/2020

3 Monitoring, Evaluation, and Learning Plan 90 days 02/15/2021

4 Year 1 Work Plan 90 days 02/15/2021

5 1st Quarter FY 21 Performance Report

30 days post @quarter 01/30/2021 01/28/2021

6 Grants Manual 120 days 02/28/2021

7 Sustainability Plan 180 days 05/30/2021

8 EMMP/CRM 90 days 02/15/2021

Meeting (December 28, 2020) with the field office project team for tasking and deliverables.

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Section 4: Co-Design Workshop

Pursuant to the Task Order, the USAID’s ESP Activity team started preparation for the hosting of the multi-stakeholder co-design planning workshop, which should be conducted within 60 days of the Task Order award. The co-design workshop is an integral part of the ESP Activity that aims to validate proposed tasks/interventions and identify priority directions for key government partners, the private sector, and other government agencies. The co-design workshop is a participatory undertaking that promotes a mutually shared set of interventions and a joint decision- making process between the Philippine and US governments.

The output from the co-design workshop will be a vital input to the development of the USAID’s ESP Activity work plan. The co-design workshop likewise aims to identify potential areas of overlap among donors working in similar energy spaces, possible opportunities for collaboration, and high- level niche expertise that USAID can lead within the Philippines energy sector. By the end of December 2020, the USAID’s ESP Activity team accomplished the following in preparation for the co-design workshop, which was scheduled from January 13 to 15, 2021:

● Identified relevant potential target participants in the workshop ● Issued a “Save the Date” notification ● Assisted in the finalization and release of invitation letters to high-level government

agencies, such as the DOE and ERC ● Finalized the one-pager for the USAID ESP Activity

The co-creation workshop will be conducted via a virtual platform, considering the limitations and restrictions stemming from COVID-19. The communication infrastructure of the Philippines poses steep challenges to the team to ensure a continuous and smooth 3-hour workshop. In preparation for this, the project team met and established contingency plans in anticipation of potential disruptions to connectivity.

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Section 5: Project Implementation Challenges

The USAID’s ESP Activity team conducted a cursory assessment of possible challenges that can significantly delay the achievement of the Activity’s performance indicators. The list below is not exhaustive, and it may grow as implementation gains momentum over time.

1) Mobility limitations in view of COVID-19 restrictions. Due to spike of COVID-19 cases, the Philippine government has imposed limited mobility in selected parts of the country. Local government units also require additional travel requirements and quarantine time when crossing boundaries. Year 1 implementation of ESP will likely be carried out virtually, with intermittent on-the-ground interventions for tasks that require site visits. For tasks that require site visits, the ESP team will ensure that all health protocols including documents required from the LGU will be prepared and strictly complied with.

2) Connectivity concerns. The Philippines’ weak communication infrastructure may potentially seriously disrupt or impede the smooth and orderly process of service delivery and workshops. The lack of adequate internet connection in local government units may possibly deter local governments, power plants, or indigenous natural resources to actively participate in workshops or conferences led by the ESP Activity. In view of this, ESP Activity will develop self- training videos that will cater quick facts and/or possible Q&As and form part of the project’s capacity building strategies. Further, a link (either via email or an integrated platform) will be developed for LGUs and partners to send additional questions and conduct follow-through discussions.

3) Shifts in policy direction. The US Government recently elected a new President, who has announced full support for policies, such as rejoining the Paris Agreement on climate change, that are viewed to be sharply different from those of the previous US government administration. Similarly, the Philippines is expected to hold its national elections in mid-2022. These political changes may slow the implementation of the Activity or break the momentum of its continuous implementation.

4) Delays in incremental USAID funding. ESP’s current obligated funding of is anticipated to support tasks and interventions for the period ending September 2021. If incremental funding is not provided in a timely manner, implementation of the Activity may be adversely impacted.

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Section 6: Planned Activities for the Rest of FY 2021

The focus of the USAID’s ESP Activity team for the first two months of Q2 FY2021 is the submission of all mandated reports under Section F.8 of Task Order

, within the stipulated deadlines. The team is also scheduled to conduct briefings with the USAID officials on Branding and Marking guidelines, critical MEL performance indicators, and environmental compliance. In addition, FY 2021 activities will cover:

1) Contractual obligations. The project team will inform the home office project management team about areas for any modifications of the Task Order, which if ignored will have an adverse impact on how RTI effectively implements the Task Order.

2) Conduct of co-design workshop. A key deliverable that will shape the focus and manner by which the ESP Activity is implemented is the co-design workshop. The team will maximize opportunities to lead high-level priority and high-value impact of policy directions identified by implementing government partners such as the DOE and ERC.

3) Focused group discussions (FGDs) post workshop. Following the co-design workshop, the ESP Activity will schedule separate meetings with the Philippine government, ranked by priority, as determined by the committed deliverables for the first 18 months of the Activity. The combined output of the co-design workshop and the FGDs will be the core inputs to the Activity’s first-year work plan.

4) Identification of tasks/interventions for Year 1 performance indicators. ESP will ramp up efforts to ensure that the team can roll out applicable interventions, as mutually agreed upon with government counterparts. The focus will be on tasks that result in utility improvement, reliability plans, energy management portal, local energy codes, compendium of suppliers, and RES scorecard.

5) Targeted Y2 activities. FY2021 will serve as a launching platform for tasks and interventions that concretely translate into Activity performance indicators. The ESP team will assess year 1 implementation to institute improvements in quality and delivery, and correct identified weaknesses in the ESP implementation approach and strategy.