UNDP-GEF-DOE PHI/01/G33UNDP-GEF-DOE PHI/01/G33Philippines: Capacity Building to Remove BarriersPhilippines: Capacity Building to Remove Barriers

totoRenewable Energy DevelopmentRenewable Energy Development

TECHNICAL ASSISTANCE TOTECHNICAL ASSISTANCE TO MANUFACTURERS OF REMANUFACTURERS OF RE

EQUIPMENT SUBCONTRACTEQUIPMENT SUBCONTRACT

THIRD INTERIM REPORTTHIRD INTERIM REPORT(REVISED)(REVISED)

JULY 2006JULY 2006

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RENEWABLE ENERGY EQUIPMENT

MANUFACTURERSPRODUCT CERTIFICATION

PROGRAM (REEMPCP)

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TABLE OF CONTENTS

Executive Summary …………………………………………………… iii

1. Introduction …………………………………………………………….... 1

1.1. Guiding Principles in the Program Design ……………………. 11.2. Rationale of the RE Product Certification Program …………. 21.3. Objectives of the RE Product Certification Program …………. 31.4. Benefits of the RE Product Certification Program …………. 3

1.4.1. RE Equipment Manufacturers ……………………. 31.4.2. Customers and Other Stakeholders …………. 4

2. The RE Equipment Manufacturers Product Certification Program …………. 4

2.1. Definitions ……………………………………………………. 42.1.1. RE Equipment …………………………………………. 42.1.2. RE Equipment Manufacturer ……………………. 5

2.2. Quality Seal for RE Systems ………………………………. 52.3. Quality Mark for Components and Parts ……………………. 62.4. The Product Certification Process ……………………. 6

2.4.1. Application for Product Certification ……………………. 72.4.2. Product Certification Metrics ……………………. 8

2.4.2.1. Philippine National RE Standards …………. 82.4.2.2. Quality Control System ……………………. 92.4.2.3. Best Practices in RE Product Manufacturing ….... 10

2.4.3. Certification Levels ………………………………. 102.5. Certifying Organization …………………………………………. 11

2.5.1. DOE as Interim Certifying Organization …………. 122.5.2. Towards Self-regulation of the RE Industry …………. 13

3. Implementation ……………………………………………………. 14

3.1. Voluntary Participation …………………………………………. 143.2. Evaluation ……………………………………………………. 143.3. Incentives ……………………………………………………. 153.4. Phased Implementation …………………………………………. 153.5. Potential Problems and Pitfalls ………………………………. 153.6. Pilot Testing the Cerification Program ……………………. 16

4. Capacity Building Program for Local RE Manufacturers …………. 16

4.1. The Capacity Building Program Development Process…………. 164.1.1. Data and Information Input ……………………. 17

4.1.1.1. Project Profiles ……………………. 174.1.1.2. Company Profile ……………………. 18

4.1.2. Identification of Issues and Gaps ……………………. 184.1.3. Capacity Building Intervention Package ……………………. 18

4.2. Financing Capacity Building Program ……………………. 19

5. Action Plan ………………………………………………………………. 20

6. Annexes ………………………………………………………………. 20LIST OF FIGURES

Figure 1. Sample quality seal for RE systems

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Figure 2. Sample quality seal for RE components and partsFigure 3. Flow chart for the RE Product Certification SystemFigure 4. Details of the capacity building program development process

LIST OF TABLES

Table 1. Sample gap-intervention matrix for capacity building programTable 2. Types of funding assistance for each capacity building intervention

LIST OF ANNEXES

Annex 1 – RE Equipment Manufacturers Product Certification Program (REEMPCP) Manual Annex 2 – Elements of a Quality Control SystemAnnex 3 – Proposed Organizational Structure for the REEMPCP Task ForceAnnex 4 – Potential testing centers for different RE productsAnnex 5 – List of available financing programs.

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EXECUTIVE SUMMARY

The Renewable Energy (RE) Equipment Manufacturers Product Certification Program (REEMPCP), as envisioned in this report, is a testing and verification process that provides an independent and objective assessment on whether a product has met the Philippine National Product Standards on Renewable Energy and the Prescribed Best Practices for its manufacture. Under this scheme, an officially designated certifying organization awards certificate to an RE manufacturer for its product to carry either a Quality Seal or a Quality Mark. These quality logos would signify that the product complies with the requirements of the Philippine National Product Standards on RE and was manufactured following the Prescribed Best Practices.

Within the context of the CBRED project, the RE product certification program would support the renewable energy industry by upgrading the quality of the products produced by local manufacturers. While most local RE products may already be of acceptable quality, it is still necessary to bring them up to international standards in order not to jeopardize customers’ confidence on renewable energy products and systems.

Presently, there are several RE equipment manufacturers in the country offering a host of RE products. Up until now, there has been no accepted industry standards and performance criteria with which to asses the quality of these products. The RE product certification program is intended to address this problem by introducing a framework of quality standards and criteria for the objective assessment of these products. With the proposed product certification program, RE equipment manufacturers would look only at one set of product standards, with the quality seal or mark signifying their compliance to these standards. REEMPCP aims to upgrade the quality, durability and efficiency of locally-manufactured RE products, to achieve this by establishing an RE System Standards and prescribed best practices with a corollary testing and/or verification program that will validate if standards are being met, and to award certificate to RE products and systems complying with the set quality standards to bear a quality mark or seal to signify their quality compliance.

Manufacturers of certified products would have relative advantage over their competitors in securing DOE and other government procurement projects and other assistance. Customers, as well as other stakeholders, will benefit from the Product Certification Program in that they will have the assurance of quality by procuring only the certified products.

This product certification program hopes to encourage RE equipment manufacturers to adhere to a quality control system, a system which ensures (a) the repeatability of the production process, (b) the regular feed-back from employees, customers and suppliers, (c) the documentation trail that forms the basis for the product quality control, and (d) the recognition by customers, partners and clients of the value of the company’s adherence to a set of recognized product quality standards.

RE equipment manufacturers applying for certification of their product/s are assessed based on the Philippine National Standards for RE Products and field performance reports of their products. The quality control system of the manufacturers is assessed as well based on the Quality Control System Guidelines and Standards and the Best Practices and Guidelines for RE Projects. The assessor reviews and evaluates the application for certification and conducts site visits to the applicant’s office/plant. He then makes an assessment report which identifies the strengths and weak areas of the product and the applicant’s quality control system. The assessor then recommends appropriate interventions to address the identified weak areas. Interventions may include training courses, apprenticeship programs, technical assistance and consultancy services such as project management, design, assistance in equipment procurement, research and development, and mentoring. The assessor submits the report to the Task Force Director for decision on whether to award certification to the product or not. The Task Force awards the certification when all the certification metrics are satisfied. When the RE equipment manufacturer is found deficient in the product applied for certification, the Task Force confirms the appropriate interventions proposed in the assessment report which are aimed to help the RE manufacturer qualify for product certification.The responsibility for product certification may at the interim be lodged with the Energy Utilization Management Bureau (EUMB). For this purpose, DOE shall create an RE Product Certification Task Force. The Product Certification Task Force would be a small office headed by a Director with a REEMPCP Group Leader and 4 staff members, whose responsibilities will primarily be to accept applications for product

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certification from RE equipment manufacturers, contract out assessments and evaluation, and monitor the implementation of outsourced tasks.

Implementation features of the REEMPCP include voluntary participation, evaluation and assessment against product standards, provision of incentives, phased implementation, and pilot testing before full implementation of the program. Participation to the program is purely voluntary, with the RE equipment manufacturer given the decision to assess the benefits they stand to get from the program. RE equipment manufacturers are evaluated against product certification standards developed by the RE industry at large, including the RE equipment manufacturers themselves. Incentives such as capacity building programs are made available to RE equipment manufacturers applying to the program. It is necessary to initially phase the implementation of the program to give local RE equipment manufacturers the chance and the time, with the assistance of DOE’s capacity-building program, to develop to a point where they are able to comply with the product certification standards. There will be three certification levels for each product. As one goes from one level to the next higher level, additional criteria would have to be satisfied. The highest level (Level 3) is intended to help the RE equipment manufacturer attain global competitiveness. Also, before the full implementation of the program, an RE equipment manufacturer will be selected for pilot testing. The program will then be ready for full implementation once the pilot test is completed and evaluated; the process has been modified to accommodate issues and concerns that may arise during the pilot test period; and at least one product of an RE equipment manufacturer has been successfully certified.

The DOE shall be provided training by IRG-P in the mechanics of implementing the certification program.

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1. INTRODUCTION

To achieve the objectives of Subcomponent 6, DOE will institutionalize a system whereby RE manufacturers would voluntarily have their products and manufacturing systems assessed to determine areas of weaknesses – particularly in product design and manufacturing process.

The Renewable Energy (RE) Equipment Manufacturers Product Certification Program (REEMPCP), as envisioned in this report, is a testing and verification process that provides an independent and objective assessment on whether a product has met the Philippine National Product Standards on Renewable Energy and the Prescribed Best Practices for its manufacture. Under this scheme, an officially designated certifying organization gives the privelege to an RE manufacturer for its product to carry either a Quality Seal or a Quality Mark after complying to the requirements of the certification process. These quality logos would signify that the product complies with the requirements of the Philippine National Product Standards on RE and was manufactured following the Prescribed Best Practices.

Within the context of the CBRED project, the RE product certification program would support the renewable energy industry by upgrading the quality of the products produced by local manufacturers. While most local RE products may already be of acceptable quality, it is still necessary to bring them up to international standards in order not to jeopardize customers’ confidence on renewable energy products and systems.

1.1. Guiding Principles in the Program Design

In designing the proposed product certification program, the proponents were guided by the following general principles:

a. The certification program should reflect DOE’s desire to upgrade local RE manufacturers’ global competitiveness. It is DOE’s way of assisting these local manufacturers improve the quality of their products to be competitive in the international market.

b. The program should not be regulative, but should rather be intended to foster the sense of competition among local RE manufacturers.

c. Participation in the program should be voluntary. The companies themselves should decide whether they would benefit from participating in the program.

d. Determination of the certification standards and criteria, as well as best practices guidelines should be participatory and by consensus among manufacturers, customers and other stakeholders.

The importance of the participation of all RE manufacturers and key stakeholders in the product certification program cannot be overemphasized. Engaging a range of participants from different fields is important because of the perspective and priorities they bring and the broad support base that they can provide. Involving a diverse mix of stakeholders is also important as a means to avoid the negative impacts that will certainly occur if the needs or experiences of certain sectors are not taken into consideration in the planning process. Therefore, another important guiding principle in the drawing up of the product certification program is that it should seek as broad a representation of the manufacturers and key stakeholders as possible.

The following is a summary of important actors and stakeholders that, as a minimum, should be considered:

1. Government Agencies . Definitely, the DOE, BPS and others responsible for, or have jurisdictions over environmental concerns, rural development and infrastructures, development projects, financing, and licensing and certifying, among others.

2. RE Industry . This sector does not only include those directly responsible for manufacturing RE products and systems, but also those sectors providing support to the industry. The RE industry has extensive technical and market experience. It has started to realize the need for product

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and quality system standards for the industry. It is important for the industry to accept the certification program – if the industry does not accept it, then it is doomed to fail.

3. Academic Institutions . Considering their experience and technical expertise, it is important to involve the academic institutions, particularly the engineering colleges of large universities.

4. Finance Community . The finance community has a significant input to the future of the RE manufacturing industry and the RE product certification program. On a global scale, financing is available for RE projects as alternatives to cleaner environment. Quality products will surely find their way to securing financing.

5. Non-Government Organizations . NGOs represent an important resource for RE technologies. Often, they are among the first to promote the use of RE products and systems in rural and remote communities. They are familiar with the social infrastructure of these communities and how best to penetrate them. They are also familiar with the structure and practices of government. Because of these, NGOs will bring valuable inputs into the certification program.

6. Consumers . Without doubt, it is always important to include the target customers and consumers, both rural and urban, in discussions that may affect product delivery and reliability. In this case, it would be useful to involve past and current product users to allow them to share the good and bad experiences they have had in using RE products.

7. Critics . While it may not feel comfortable listening to people who do not agree with your views or plans, it is important to hear all opinions and concerns early in the process. This exercise may surface potential problems at the early stage of planning and give you the opportunity to address them properly.

Finally, it is recognized that for the product certification program to succeed, (a) it must have the support of the RE manufacturing industry it represents; (b) it must be credible to funding instituions, government and industry groups; (c) it must provide benefits to the users and stakeholders that outweigh the price they have to pay for higher quality products.

1.2. Rationale of the RE Equipment Manufacturers Product Certification Program

Experience with a significant number of RE products and installations during the last two decades have shown that the quality of RE products is an essential precondition for the RE industry growth and sustainability. In fact, predominance of sub-standard RE products has been one of the major reasons for failure of many RE systems in the field and has become a serious obstacle in the widespread and sustainable applications of RE products and systems not only in the Philippines but worldwide.1

Presently, there are several RE equipment manufacturers in the country offering a host of RE products. Up until now, there has been no accepted standards and performance criteria with which to asses the quality of these products. The RE product certification program is intended to address this problem by introducing a framework of quality standards and criteria for the objective assessment of these products.RE product certification is an effective vehicle for upgrading the technical capability, efficiency and competitiveness of local RE equipment manufacturers. As noted in the previous paragraph, RE equipment manufacturers presently have limited standards and best practices guidelines, if at all, for producing quality and reliable products and systems. With the present product certification program, RE equipment manufacturers would look at only one set of product standards, with the quality seal or mark signifying their compliance to these standards.

1 Foley, G. (1995): Photovoltaic Applications in Rural Areas of the Developing World, World Bank Technical Paper No. 304, Energy Series, (The World Bank, Washington, D. C.), p.54; Schweizer, P. and P. Preiser (1997): Socio-Technical Analysis of Solar Home Systems (SHS) in the Nepal Himalaya, Proceedings of the 14th European Photovoltaic Solar energy Conference, Barcelona, Spain., pp. 2552-2555.

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An immediate consequence would be the mitigation of the proliferation of substandard systems and equipment, which, in the past, has severely damaged the image of RE. With the product certification program, customers would be guided in procuring only quality products; and would have the means of distinguishing the good products from the bad.

In the long term, the value of a product certification program is that it encourages RE equipment manufacturers to adhere to a quality control system – a system which ensures: (a) the repeatability of the production process, (b) the regular feed-back from employees, customers and suppliers, (c) the documentation trail that forms the basis for the product quality control, and (d) the recognition by customers, partners and clients of the value of the company’s adherence to a set of recognized product quality standards.

1.3. Objectives of the RE Equipment Manufacturers Product Certification Program

As conceived, the program will have the following objectives:

o To upgrade the quality, durability and efficiency of locally-manufactured RE products;o To achieve this by establishing an RE System Standards and Prescribed Best Practices

with a corollary testing and/or verification program that will validate if standards are being met and best practices followed;

o To issue a certificate for RE products and systems complying with the set quality standards to bear a quality mark or seal to signify their quality compliance.

1.4. Benefits of the Product Certification Program

The benefits of REEMPCP to RE equipment manufacturers as well as their clients and other stakeholders are described in this section.

1.4.1. RE Equipment Manufacturers

Several benefits would accrue to RE equipment manufacturers who would join the product certification program. For instance, the program would benefit manufacturers of certified products in marketing since the program will allow banks, financial institutions and donors to more easily assess the benefits and risks in procuring the product. This enables the manufacturers to have more ready access to funding sources since they will be focusing their products and production process on the same standards that funding institutions use.

Product certification would also improve the product’s market competitiveness. In addition to an enhanced product image, manufacturers can mark-up the price of its certified products as a result of it carrying the quality seal or mark. They can reduce their costs of after-sales service with the Quality Control System (QCS), as required by the product certification. These savings and higher price could in fact more than offset the costs required to install the QCS. And, of course, advertising the product’s certified status would increase the product’s market.

More immediately, manufacturers of certified products would have relative advantage over their competitors in securing DOE and other government procurement projects and other assistance for the following reasons:

o Manufacturers of certified products would be eligible for DOE’s capacity-building program. Under this program, an RE manufacturer could avail of the training, consultancy and advisory services, as well as other technical assistance provided by the DOE or its contractors. Additionally, manufacturers of certified products would be eligible for a number of DOE funding assistance.

o Inclusion in the DOE registry of certified products. Only certified products would be eligible in any DOE and/or government procurement of RE products.

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o Manufacturers of certified products could avail of the technology and needs assessments services. These services are to be provided free of charge or at subsidized fees by the MSC.

o Manufacturers of certified products could also participate in the DOE/MSC mentoring program. Mentoring is a scheme of extended training program where consultants/trainers are available even after the training has been completed for consultation and/or problem solving and troubleshooting.

1.4.2. Customers and Other Stakeholders

Customers, as well as other stakeholders, will benefit from the Product Certification Program in that they will have the assurance of quality by procuring only the certified products. More specifically, an accreditation program will

o Allow finance and door organizations to more easily assess the risks in procuring RE products.

o Provide clients with a tool to evaluate potential RE product manufacturers and suppliers.

2. THE RE EQUIPMENT MANUFACTURERS PRODUCT CERTIFICATION PROGRAM

REEMPCP aims to upgrade the technical performance, efficiency, and competitiveness of locally-manufactured RE products by providing necessary capacity building to local manufacturers. The program is designed not to regulate the industry but to guide RE equipment manufacturers in satisfying a set of product standards accepted by the industry. In partnership with the RE equipment manufacturer, the program ensures continuing assistance towards the objective of upgrading the quality of locally-manufactured products to make them competitive in the international market. The resulting RE products provides assurance to customers that they are of high quality and reliability.

This product certification program hopes to encourage RE equipment manufacturers to adhere to a quality control system, a system which ensures (a) the repeatability of the production process, (b) the regular feed-back from employees, customers and suppliers, (c) the documentation trail that forms the basis for the product quality control, and (d) the recognition by customers, partners and clients of the value of the company’s adherence to a set of recognized product quality standards.

2.1. Definitions

2.1.1. RE Equipment

At present, the RE products that qualify under the definition of RE equipment are solar PV system components and pico-hydro. Specifically, the components are the following:

o PV Batteryo Battery Charge Controllero Invertero Ballasto Pico-hydro Turbine

2.1.2. RE Equipment Manufacturer

An RE equipment manufacturer includes any of the following entities:o Product Manufacturero Product Suppliero Product Distributoro System Integrator

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A manufacturer produces, supplies, or distributes a well-defined product which is produced in volume, and is characterized by a uniform specification. These products are considered as identical and are manufactured not for a specific client or customer, but for the market in general.

A manufacturer is to be distinguished from an engineering service company, which is a company or entity that provides specialized, professional, technical consultancy and services in the various aspects of renewable energy. These services include (1) engineering design, (2) system and equipment fabrication, (3) installation, (4) commissioning, (5) quality control system assessment, (6) product testing/laboratory services, (7) research and development, (8) contract after-sales repair and maintenance, (9) education & training, and (10) other technical and specialized services such as quality systems audits.

Note that system and equipment fabricators are not included in the definition of a manufacturer, but instead considered it as an engineering service company. Though the end result of a fabricator’s service is an RE system or product, this product is not manufactured in the usual sense of the word. More often, the fabricated products are custom-built, subject to a fixed set of specifications supplied by the customer. Normally each product is unique, although they may be closely similar. Examples of fabricated products are mini- or micro-hydro power plants. While they may bear similarities in a number of aspects and features, each installation is uniquely designed and built to take into account the characteristics of the site, the power demand, topography, and distance to power users, for example. Specifications determined by the national safety codes and standards, as well as best practices and available manpower are also considered.

2.2. Quality Seal for RE Systems

Figure 1. Sample quality sealfor RE systems

The quality seal, shown in Figure 1, is a brightly colored emblem that signifies that the product bearing the seal has complied with all the certification standards and QCS requirements. More specifically, it means that the product has successfully passed testing and evaluation against the set of approved national product standards for renewable energy.

Certified products may carry the seal for a period of three years, subject to renewal upon compliance with the re-evaluation requirements

2.3. Quality Mark for RE Components and Parts

okThe quality mark, shown in Figure 2, is a brightly colored emblem that signifies that the component or part bearing the mark has complied with all the certification standards and QCS requirements. More specifically, it means that the component or part has successfully passed testing and evaluation against the set of approved national product standards appropriate for that component or part.

Certified products may carry the seal for a period of three years, subject to renewal upon compliance with the re-evaluation requirements.

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r or mark tandards iies and centers, and three years, subject to

renewal upon compliance with tyhe

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Figure 2. Sample quality markfor RE components and parts

2.4. The Product Certification Process

REEMPCP is a certification system which assesses the quality of RE products. These products are evaluated against RE Product Standards and Best Practices developed for each product. These product standards and best practices were developed according to the standards development process of the Bureau of Product Standards. A technical working group (TWG) for each RE technology (solar, pico-hydro) was formed composed of experts from the following seven sectors:o Governmento Industry and Tradeo Professionalo Testing Institutiono Academico Consumero Research and Development

The TWG deliberated and agreed on the final form and substance of the standards and guidelines. The TWG has been institutionalized and may therefore be convened by the Department of Energy as may be necessary at any given time in the future.

Any RE equipment manufacturer as defined in Section 2.1.2 who is willing to go through the program may apply for certification of its product/s. It must be noted that individual products, rather than the RE equipment manufacturers, are certified.

The product certification process is illustrated in the flowchart shown in Figure 3.

Figure 3. REEMPCP Process Flowchart

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RE Equipment Manufacturers

Product Testing*/Retesting**

Manufacturers QCSAssessment*/

Review**

Certified RE Product***

Final Draft Standards For RE Projects

Draft QCS Guidelines

and Standards

Final Draft Recommended Best Practices

for RE Projects

Report

Report

DOEAssessment

Passed?

CapacityBuildingProgram

DOE Issues License

For Product Label***

Yes

*Upon Application** Annually*** Product Label valid for 3 years.

Field Performance

ReportsNo

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RE equipment manufacturers applying for certification of their product/s are assessed based on the Philippine National Standards for RE Products and field performance reports of these products. The quality control system of the manufacturers is assessed as well based on the Quality Control System Guidelines and the Recommended Best Practices for RE Projects. The assessor reviews and evaluates the application and conducts site visits to the applicant’s office/plant. He prepares an assessment report which identifies the strengths and weak areas of the product and the applicant’s quality control system. The assessor then recommends specific interventions to address the identified weak areas. Interventions may include training courses, apprenticeship programs, technical assistance and consultancy services such as project management, design, and development, assistance in equipment procurement, research and development, and mentoring. The assessor submits the report to the Task Force Director for decision on whether to award certification to the product or not. The Task Force awards the certification when all the certification metrics are satisfied. When the RE equipment manufacturer is found deficient in the product applied for certification, the Task Force confirms the appropriate interventions proposed in the assessment report. These interventions are specific to the needs of the manufacturer and aim to help the RE manufacturer qualify for product certification.

2.4.1. Application for Product Certification

The application process for product certification involves the following steps:

2.4.1.1. RE manufacturer accomplishes the following application forms:i. Form 1 – Application for RE Product Certificationii. Forms specific to the product/s applied for certification:

o Form 2 – Application for Battery Certificationo Form 3 - Application for Battery Charge Controller Certificationo Form 4 - Application for Inverter Certificationo Form 5 - Application for Ballast Certificationo Form 6 – Application for Pico-hydro Turbine Certification

2.4.1.2. RE Equipment Manufacturer submits the application forms to the Task Force Director. The receiving staff (Staff 1) affixes an applicant number in Form 1 (Application for RE Product Certification) and a product application number for each product applied for certification. The receiving staff then reviews the application for completeness in required supporting documents. He fills out Form A (Checklist). When the application is found deficient, the staff accomplishes Form B (Application for Product Certification Status Advice) to ask the applicant to complete the required documents.

2.4.1.3. When the applicant has submitted all the documents required, the next staff (Staff 2) accomplishes Form C (Tasks for Subcontract) to identify the technical and management evaluation services to be contracted out or outsourced. He prepares the Bid documents (Eligibility Requirements, Instructions to Bidders, and Terms of Reference) and submits the same to the Group Leader for review and approval. When approved, the Group Leader endorses it to the Task Force Director for final approval. Staff 2 then facilitates the bidding and selection process.

2.4.1.4. When the assessment and evaluation services are awarded, the Assessors are given copies of the application forms and they execute the Terms of Reference.

2.4.1.5. When the Terms of Reference are satisfied, the Assessor prepares an assessment report and submits it to the Task Force Director.

2.4.1.6. Staff 3 of the Task Force reviews the assessment report and recommends to the Group Leader whether to award the product certification or not. When the Group Leader is convinced that the RE equipment manufacturer has fully complied with the certification standards, he endorses the award of product certification to the

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Task Force Director for final decision. Otherwise, interventions that have been identified and recommended by the Assessor are implemented until such time that all certification standards are substantially complied with by the RE equipment manufacturer.

2.4.1.7. The certificate to use the Quality Mark or Quality Seal is issued by the Secretary of the Department of Energy to the RE equipment manufacturer complying with all the certification standards.

2.4.2. Product Certification Metrics

Bases for product certification are described in this section. These include the Philippine National Standards and Guidelines on RE Products and Quality Control System.

2.4.2.1. Philippine National Standards on RE Products

Standards for the following priority RE products were developed according to the standards development process of the Bureau of Product Standards:

o Solar PV System Components: Battery Charge Controllers - General Safety and Performance Requirements

o Solar PV System Components: Inverters for Stand-alone Photovoltaic Applications - General Safety and Performance Requirements

o Solar PV System Components: DC Supplied Electronic Ballasts for Tubular and Compact Fluorescent Lamps - Performance Requirements

o PV GAP Recommended Specification PVRS 5 – Lead-acid batteries for solar photovoltaic energy systems (modified automotive batteries). Blank detail specification – Qualification Approval under the IEC Quality Assessment System for Electronic Components (IECQ-CECC)

o PV GAP Recommended Specification PVRS 5A – Lead-acid batteries for solar photovoltaic energy systems – General requirements and methods of test for modified automotive batteries

o Best Practices for the Design, Specification, Installation and Maintenance of Solar PV Systems

o Pico-hydro Turbine – Method of Test

o Pico-hydro Turbine - Specifications

Above standards cover specifications and guidelines on component/product testing relative to performance and operating characteristics, environmental durability, mitigation of negative environmental impacts, if any, and safety concerns for users and installers.

Compliance with the standards is essential in maintaining the quality and integrity of the RE products throughout their useful life.

2.4.2.2. Quality Control System

A Product Quality Control System (QCS) is a framework of standards against which the company’s manufacturing processes, systems and personnel are evaluated for consistency, quality of results, success of continuous improvement procedures and documentation necessary to evaluate any portion of the

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manufacturing processes and/or system. As a manufacturing quality control system, it involves the following:

o A way of doing things that is understood and accepted by all involved – from the most senior manager to the newest employee.

o A system of documenting development efforts, work procedures, work performed, testing, modifications, customer feedback, etc.

o Regular reviews and evaluation of critical aspects of the manufacturing operation.

o Use of results of reviews and customer feedback to improve the quality of work

A consistent and broadly recognized QCS is important for the certification of a manufacturer’s product. Without both the reality and perception of quality, a manufacturer will be disadvantaged in the market in terms of access to customers and financing. Annex 3 outlines some of the elements that must be found in a Company to show that a QCS is in place.

For an RE equipment manufacturer to succeed, its management needs to ensure that products manufactured are consistent and that the processes involved are documented and reviewed regularly against industry standards. Additionally, the quality system must extend beyond the immediate scope of RE equipment manufacturers. It must include inputs from its clients and other stakeholders. Communication with these actors and stakeholders is essential to identify their needs and insights and to address them with the products of the manufacturer. With a recognized QCS, along with product requirements and standards and best practices taken from the RE industry, even a small RE equipment manufacturer can participate in national and international business opportunities. It provides a level of confidence to new customers, along with the potential for new financing options.

Perhaps more importantly, QCS improves the efficiency of the business and the reliability of its products and services, leading to increased profits and additional opportunity.

The value of QCS is in (a) repeatability of the process, (b) the regular feedback possible from employees, customers and suppliers, (c) the documentation trail that forms the basis for the quality system, and (d) the recognition by customers, partners and clients of the value of the company’s adherence to a set of recognized quality standards.

Implementing QCS provides an RE equipment manufacturer with a level of rigor and discipline necessary for continuous improvement and validation. Adherence to quality standards provides competitive advantage by improving business practices and gaining the recognition by customers of the advantages of doing business with an organization that has implemented a quality system.

Annex 2 outlines some of the elements that must be found in a Company to show that a QCS is in place.

2.4.2.3. Best Practices in RE Product Manufacturing

Best practices of both local and international companies in the following activities have been compiled in the Draft Final Report:

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o Product designo Production processo Installation procedureso After-sales service

Selection of criteria for certification and their leveling will be done by consensus among local manufacturers.

2.4.3. Certification Levels

While the goal of the certification program is to make local RE equipment manufacturers globally competitive – which means compliance with internationally-recognized standards, it is admitted that presently, most, if not all, local RE equipment manufacturers cannot directly compete in the international market and, often, with foreign RE equipment manufacturers even in the local market. Given this reality, it is necessary to initially implement the program in three phases to give local manufacturers the chance and the time, with the assistance of DOE’s capacity-building program, to develop to a point that they are able to comply with the full certification requirements.

During the initial two phases, compliance requirements for certification will be relaxed to enable the majority of local RE equipment manufacturers to comply. The certification metrics would then be made stiffer every year, for both new applicants and those reapplying, until 2010, when the evaluation criteria would be close to, if not identical with, the internationally-accepted standards.

2.5. Certifying Organization

Management of the product certification system will be lodged with the appropriate organization. The certifying organization must be an objective organization, with credibility in the industry and in the market. It must have sufficient personnel and financial resources to carry out its product certification function.

To avoid conflict of interest, the certifying organization can not be one of the RE equipment manufacturers, or its affiliates. The ideal candidate would be an industry organization, a standards organization, or a government agency charged with the development and promotion of renewable energy. In any case, the organization must be familiar with the requirements and nuances of the product certification process.

The certifying organization would have the following functions:

o Maintain the database of accredited RE equipment manufacturers

o Establish through a process of consultation and consensus among RE industry players the certification metrics and standards

o Process application of the applicant’s candidate product

o Subcontract to accredited quality assessors the detailed evaluation of applicant’s product against accepted certification metrics and standards

o Review reports of the quality testing laboratories and quality assessor to determine whether to award certification.

o Award product certification license to successful manufacturers

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o Develop with applicant manufacturers that fail the testing and evaluation suitable capacity-building program to enable the manufacturers to comply with certification metrics and standards

o Monitor compliance and regularly update product certification metrics and standards

There are two possible options with regards to the certifying organization. Either (a) identify an existing organization, or (b) create a new entity specifically for this purpose. Because of the logistical, time and financial costs involved, as well as to avoid triggering unnecessary resistance to the program, the first option is clearly preferred.

To effectively carry out its functions, the certifying organization must be (a) an objective third party, representing the interests of the RE industry, its key actors and customers; (b) able to administer the program objectively and fairly; (c) able to maintain the product certification criteria, standards ad metrics current and responsive to the needs of the industry; (d) in a position to reward incentives to those manufacturers that would participate in the program.

2.5.1. DOE as Interim Certifying Organization

Presently, only the DOE satisfies the criteria discussed in Section 2.5 above, and has the stature and persuasive influence to carry out the product certification program. DOE’s mandate in implementing the program may be anchored on Chapter 1, Sections 5e and 5g of the Republic Act No. 7638 – An Act Creating the Department of Energy, Rationalizing the Organization and Functions of Government Agencies Related to Energy and for Other Purposes, to wit,

CHAPTER 1. General Provisions

SEC. 5. Powers and Function – The Department (of Energy) shall have the following powers and functions:

(e) Regulate private sector activities as provided under existing laws; provided, that the Department shall endeavor to provide for an environment conducive to free and active private sector participation and investment in all energy activities.

(g) Formulate and implement programs, including a system of providing incentives and penalties, for the judicious and efficient use of energy in all energy-consuming sectors of the economy.

Under these provisions, the certification program would be viewed as a system of providing incentive for local RE manufacturing companies to be competitive in the international market.

The responsibility for the product certification may be lodged with the Energy Utilization Management Bureau (EUMB). For this purpose, DOE may create an RE Product Certification Task Force2. As discussed in the REEMPCP Implementer’s Manual (Annex 1), the Product Certification Task Force would be a small office headed by a Director with a REEMPCP Group Leader and 4 staff members, whose responsibilities will primarily be to accept applications for product certification from RE equipment manufacturers, contract out assessments and evaluation, and monitor outsourced tasks. The proposed organizational structure of the Product Certification Task Force is shown below.

2 Initially, the product certification function may be assigned to a Task Force. Eventually, when the more permanent organizational home of the program has been decided on, this function of the Task Force may be transferred to a more permanent office.

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A Task Force will be created within DOE’s Energy Utilization Management Bureau (EUMB) to administer the product certification program. The Task Force will be headed by a Director who is also the Director of EUMB. The Task Force Director functions as the interface between REEMPCP and the Secretary of Energy. The Director recommends to the Secretary awards of product certification and is the ultimate arbiter of disputes.

The REEMPCP organization includes a group leader who oversees the whole registration program as well as its personnel composed of three (3) staff and a database administrator. The staff accepts, reviews, and evaluates the application forms submitted by RE equipment manufacturers. The staff also identifies evaluation services to be subcontracted such as technical and quality system evaluations. The database administrator is in charge of maintaining the database of all applicants and certified RE products to REEMPCP.

2.5.2. Towards Self-regulation of the RE Industry

Self-regulation is a possible alternative organizational option. In fact, in most developed countries, product certification is usually done through industry/professional organizations. In the Philippines, however, this option may not be workable due to the following reasons:

o The RE industry is very heterogeneous, consisting of several sectors (solar, biomass, wind, mini-hydro)

o These sectors are competing with each other

o Consensus may be obtained within a sector, but might be more difficult to get across the different sectors.

Under the above conditions, consensus may only be possible with the imprimatur of the DOE. However, with the successful implementation of the registration program under the DOE, self-regulation may in the future be an option, when the industry players realize the benefits of the program.

3. IMPLEMENTATION

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EUMB DirectorTask Force Director

RE Equipment Manufacturers Product Certification Group Leader

RE Engineering Service Providers Registration Group

Database Administrator

Staff 3Staff 2Staff 1

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Figure 4. Proposed REEMPCP Task Force Organizational Structure

Implementation features of REEMPCP include voluntary participation, evaluation against product standards, provision of incentives, phased implementation, and pilot testing before full implementation of the program. Participation to the program is purely voluntary, with the RE equipment manufacturer given the decision to assess the benefits of the program. RE equipment manufacturers are evaluated against product certification standards developed by the whole RE industry, including the RE equipment manufacturers themselves. Incentives such as capacity building programs are made available to RE equipment manufacturers applying to the program. It is necessary to initially phase the implementation of the program to give local RE equipment manufacturers the chance and the time, with the assistance of DOE’s capacity-building program, to develop to a point that they are able to comply with the product certification standards. There will be three certification levels for each product. As one goes from one level to the next higher level, additional criteria would have to be satisfied. The highest level (Level 3) is intended to help the RE equipment manufacturer attain global competitiveness. Also, before full implementation of the program, a single RE equipment manufacturer will be selected for pilot testing. The program will then be ready for full implementation once the pilot test is completed and evaluated; the process has been modified to accommodate issues and concerns that may arise during the pilot test period; and at least one product of an RE equipment manufacturer has been successfully certified.

3.1. Voluntary Participation

Participation in the product certification program would be voluntary and will be motivated by acquiring the prestige associated with the quality seal/mark and the institution issuing the certification. A company’s decision to participate would be determined by its perception of the benefits they will get out of the program. Voluntary participation is the more acceptable way by which levels of quality are promoted by government, rather than mandated through regulations. This is most especially true of manufacturers, which are highly professional, and technically specialized. The voluntary scheme and the certification metrics can change constantly to keep pace with developments in the technology and the requirements of the market.

3.2 Evaluation

The manufacturer applying for product certification must fully comply with the certification metrics. The testing and evaluation for compliance with the certification metrics must be undertaken by an assessor accredited by DOE to render technical and management evaluation and assessment services.

Laboratory and/or field testing of candidate product shall be undertaken by a BPS-accredited testing laboratory. Presently, there may be a shortage of such laboratories. Part of the incentives under this product certification program is DOE’s assistance to local laboratories and testing facilities to enable them to obtain BPS accreditation. This assistance could include financial assistance in the procurement of laboratory/testing instruments and equipment. An example of this assistance is the request of CEMTRe for funding to procure equipment for a mini-hydro power turbine testing facility. Other potential testing centers for different RE products are given in Annex 4.

The product certification program has value in the market only when all participants acknowledge that the certification metrics are rigorous. Thus, the RE industry, the RE equipment manufacturers, and other stakeholders must identify and agree on the basic metrics to be required for certification. The most efficient approach to drawing up a set of workable product certification metrics is to convene a number of meetings that bring together all the industry actors and stakeholders to evaluate the internationally-accepted metrics and standards in the light of the requirements and nature of the local market. During these meetings the participants are asked the following:

o Do the internationally accepted metrics adequately reflect the political, economic, social, religious and technical realities of the local market?

o Must these metrics be implemented completely from the start, or can they be phased-in over time?

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o What are the costs of adopting these metrics?

3.3 Incentives

While participation in the program is purely voluntary, strategies have to be formulated to make local RE manufacturers aware of, and more importantly, participate in the certification program. In particular, DOE would have to look at some incentive packages that would attract RE manufacturers to join the program. Among these might be

o as pre-condition to bidding for DOE/government product procurement, o as one of the requirements for availing of loans and other financial assistance from DOE,

DBP and other government financial institutions, oro as one of the requirements to avail of grants, loans and licensing from foreign governments,

banks, and funding agencies.

No RE manufacturer who applies would be denied certification. If a manufacturer fails certification the first time, DOE will develop with the company a capacity building program to help them comply with the certification requirements. This assistance will continue until the company’s product is successfully certified. The decision to forgo certification will therefore entirely depend on the company’s decision not to re-apply.

3.4 Phased Implementation

While the goal of the certification program is to make local RE manufacturers globally competitive, this means compliance with internationally-recognized standards. It is admitted that presently most, if not all, local RE equipment manufacturers cannot directly compete in the international market and, often, with foreign RE manufacturers even in the local market. Given this reality, it is necessary to initially implement the program in three phases to give local manufacturers the chance and the time, with the assistance of DOE’s capacity-building program, to develop to a point that they are able to comply with the full certification requirements.

During the initial two phases, compliance requirements for certification will be relaxed to enable the majority of local RE manufacturers to comply. The certification metrics would then be made stiffer every year, for both new applicants and those reapplying, until 2010, when the evaluation criteria would be close to, if not identical with, the internationally-accepted standards.

3.5 Potential Problems and Pitfalls

While most groups may believe that the development of an RE product certification program would be beneficial to the RE industry, the RE technologies and the community, it is inevitable that a small number of individuals would be voicing opposition for personal, professional or any other reasons.

Objections might be raised, for example, by (a) marginal manufacturers, who would feel that they might not be able to comply with the certification requirements; that the criteria and standards will be used to exclude them from the market; (b) small companies that may view the certification program as opening the door to more recognized and better-supported competition; (c) those who might feel that it is simply an administration burden and will cost them additional overhead that cannot be offset by the promised benefits; and (d) those who would view the certification program as a means to formally exclude or downplay a specific technology in which they have a stake, or worst, a sinister plot to allow insiders and some political interests to dominate the market.

It might also be difficult to find sufficient financial resources and enough qualified participants who can give up the time to develop and implement the program. Because of these potential problems, it should be realized that, most likely, it will require a longer time to develop and implement the program than one might expect.

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The best way to deal with individuals and companies that may not support the program is to ensure that they are included in the program development process from the very start. They could well prove to be an asset, more than a nuisance. While we may feel uncomfortable working with them, they could provide valuable checks on the over-enthusiasm of those who are committed to the program. They could likewise provide alternative or contrary view points, which the organizers and planners of the program would most likely overlook. Additionally, they would most likely be more supportive of the program and accept its outcomes if they feel that their concerns were addressed and/or, more importantly, incorporated into the program.

If the challenge is financial, it is necessary to identify additional resources as early as possible. Some of these possible sources are local and/or international foundations, the traditional bilateral and multilateral sources available to the country, as well as the RE industry itself.

3.6 Pilot Testing the Certification Program

Once the certifying organization has been identified, the business system made operational, and the industry, as well as the actors and other stakeholders have accepted the program in principle, the next step would be to pilot-test the program.

To better control and properly evaluate the program, it is suggested that a manufacturer be identified and subject it through the certification process. The program will then be ready for full implementation once (a) the pilot test is completed and evaluated; (b) the process has been modified to accommodate issues and concerns that may arise during the pilot test period; and (c) at least one product of an RE equipment manufacturer has been successfully certified.

Before proceeding with the full implementation, however, it is essential to evaluate the immediate demand against the certifying organization’s financial, manpower and other resources to ensure the program would be implemented smoothly. Likewise, it is important that no manufacturer would obtain an inappropriate advantage by being accredited too far in advanced of its competitors.

4. CAPACITY-BUILDING PROGRAM FOR LOCAL RE MANUFACTURERS

As indicated, no manufacturer who applies will be denied the certification. If a company’s product fails the certification process, the manufacturer may avail of the capacity-building component of the program.

4.1. The Capacity Building Program Development Process

The following diagram shows the capacity building program development process:

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Identify Issues and Gaps

Product Tests Report

QCS Assessment Report

Capacity-BuildingProgram

Product Profile Company Profile

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Figure 4. Details of the capacity building program development process.

In Figure 4 we show the details of the block labeled capacity building program in Figure 3. Basically, the capacity-building program will be designed around an assessment of a manufacturer’s capability to meet DOE’s certification requirements. This assessment will include identification of gaps and issues which prevent the company’s compliance. The basic information for the assessment will come from the result of the company’s evaluation relative to the certification metrics, as well as documents submitted by the company, such as project (including products and services) and company profiles.

4.1.1. Data and Information Input

4.1.1.1. Project Profiles

From the project profiles, the following assessment parameters may be considered:

A. Products

1. Performance and operating characteristics. Principally, these assessments will rely on the results of product testing and field performance evaluation.

2. Safety requirements. As specified in appropriate products standards, relevant laws and best practices.

3. Environmental Impact. In addition to the pre-project development impacts, environmental impacts arising out of the operation of the product must also be evaluated.

4. Operating and maintenance manuals. In addition to making these manuals available at project turnover, these must be complete, accurate ad straightforward to understand. It should cover all aspects of the operation of the product ad must also provide guides for troubleshooting and repairs.

5. After-sales service. Note if after-sales service is provided, and in what form. Consider adequacy of the service, and whether fees are charged and how much.

4.1.1.2. Company Profile

The applying manufacturer will be required to submit a Statement of Competence and its company profile. The documents should discuss and elaborate on the company’s technical and management capabilities, as well as financial resources.

The company profile must broadly be in the form of a SWOT analysis – highlighting on the company’s strengths and weakness. Also to be included are best practices which have been pioneered and are clearly attributable to the company.

4.1.2. Identification of Issues and Gaps

The evaluation and analysis of all data and information about the manufacturer should enable us to identify several issues and gaps preventing the company from fully complying with the certification requirements. Among the issues and gaps that might be identified would include those related to (1) their products and other services, if any; (2) technical issues, (c) issues related to their management system, (d) product quality control system, and (e) management information system, and (f) safety and environmental concerns.

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4.1.3. Capacity Building Intervention Package

The analysis of the issues and gaps would then result in the design of a capacity-building package to be implemented by the manufacturer. This package may include one or more of the following interventions (a) training courses, (b) apprenticeship programs, (c) technical assistance and consultancy services, including assistance in project management, design and development, (d) equipment procurement, (e) research and development, and (f) mentoring, where the company is guided by a technology and/or management expert, acting as a mentor, to help solve specific problems. The output of this analysis may be in the form of a Gap-intervention matrix, as shown in Table 1.

Although the capacity-building packages that would be developed under the program will be company-specific, there would expectedly be common training and seminar modules that would be applicable to the needs of several other RE manufacturers. In those cases, an industry-wide capacity-building program may be spinned-off ad regularly offered by either the DOE or the MSC.

Table 1. Sample gap-intervention matrix for capacity building program

Gaps Interventionso High Manufacturing Costo High cost of production/ material fabrication

equipment

o Subcontractingo Integrate manufacturing activityo Mass production

o Poor Equipment Qualityo Lack of manufacturing process/ standard for

better quality/efficient equipmento Lack of qualified technicianso Lack of better fabrication techniques

o Compulsory test of equipment for distributiono Standardize design parts for inter-changeabilityo Organize manufacturers workshop towards

design/ parts standardizationo Stronger after-sales service by equipment

distributoro Establish common fabrication facilitieso Technical trainingo Technical training for new fabrication

o Lack of Policy to Support Fabricatorso Lack of incentives for fabricatorso Lack of policy on fundingo Lack of capital

o Formulate policies to provide incentive for equipment fabricators (i.e. less tariffs and duties)

o Financial assistance

o Lack of Coordinated Activitieso Lack of commercially available efficient designo Lack of cooperation between fabricators and

R&D organizations

o Develop fabrication capability through coordinated R&D

o Government to setup a center to showcase R&D outputs for fabricators

o Establish a local fabricators networko Participatory R & D

4.2. Financing Capacity Building Program

The RE Product Certification program will also assist the RE manufacturers develop financial packages to fund the recommended capacity-building interventions. Possible funding may be in the forms of (a) loans, (b) grants/technical assistance, and (c) equity investment/infusion in

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those cases where procurement of major and/or expensive equipment, e.g., test equipment, may be needed. These types of funding assistance are summarized in Table 2. Annex 5, on the other hand, provides a list of financial institutions which may be approached for funding assistance.

Table 2. Types of funding assistance for each capacity building intervention

Capacity Building Needs Type of Financing Assistance Available

Training Courses o Grant

Apprenticeship Programs o Grant

Technical Assistanceo Granto Loano Equity Investment

Consultancy Serviceso Granto Loano Equity Investment

Process Design and Development o Loano Equity Investment

Equipment Procuremento Loano Equity Investment o Grant

Research and Development o Grant

5. ACTION PLAN

Upon approval of the Product Certification Program, the DOE should organize under EUMB a Renewable Energy Product Certification Task Force, to be headed by a Director. The Task Force will be responsible, among others, for:

Overseeing the implementation of the RE Product Certification Program

Undertaking the annual review and updating of the certification metrics, whenever necessary

Coordination with other local and international product certification bureaus and institutions

Regular dialogue with RE manufacturers, their customers, projectdevelopers and other RE stakeholders for the purpose of getting their views and inputting these in the updated certification program, and most specifically on the certification metrics and criteria, and the certification procedures

Coordinating with the Market Service Center for any technical requirements and support

Drafting of issuances, administrative orders, memoranda and other legal documents on its own, or upon request by DOE, related to the product certification.

Advising the DOE Secretary and other officials of the DOE on all matters related to product certification program

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IRG-P shall provide training to the RE ESP Task Force on the mechanics for implementation of the RE Equipment Manufacturers Product Certification Program.

One potential constraint in the full implementation of the product certification program is the absence or the limited number of accredited RE testing laboratories. In this regard, DOE may consider providing technical and financial assistance to some government and/or university laboratories to enable them to attain the BPS accreditation requirements. This assistance may be similar to that extended by the DOE to the Lights and Appliance Testing Laboratory (LATL). Some of the other laboratories that may be assisted by DOE would include U.P. Solar Laboratory and the Energy Research and Development Center of PNOC-Energy Development Corporation. Proposals from other universities and independent research institutions may likewise be entertained.

6. ANNEXES

Annex 1: REEMPCP Implementer’s ManualAnnex 2: Elements of a Product Quality Control SystemAnnex 3: REEMPCP Stakeholders Information KitAnnex 4: Potential Testing Centers for Different RE ProductsAnnex 5: List of Available Financing Programs

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