GEF CEPALCO PV CEPALCO is presently operating under a 50-year license that enables it to produce, purchase, transmit and distribute electricity in the Cagayan de Oro City area.  In 1996 CEPALCO ranked fourth among the 20 private utilities in the Philippines in terms of electricity sales and revenues.    The project, to be implemented by CEPALCO, is to build and operate a 1 MW grid-connected solar photovoltaic (PV) power plant, which will be integrated into the CEPALCO electric distribution network in the city of Cagayan de Oro, on the island of Mindanao in the Philippines.  The PV plant will operate in conjunction with the recently built 7 MW Bubunawan run-of-the-river hydroelectric power plant. The hydro plant will operate as a load follower, varying part of its output inversely with the output from the PV plant.  The saved water will be stored in the hydro plant''s reservoir, to be utilized during peakload periods in which PV output is not available.  This conjunctive operation will, within the capacity of the PV-Hydro system, reduce CEPALCO''s peakload demands which would need otherwise to be supplied from thermal sources.    The project''s main purpose is to act as a demonstration plant for proving the principle of conjunctive PV-hydro peak power generation.  While a number of large-size, grid-connected PV power plants have been built in recent years, all of them are located in developed countries.  None of them is operating conjunctively with a corresponding hydroelectric plant to augment peakload energy supplies.  In this respect, the CEPALCO plant will be the first one of its kind.    The 1MW PV plant is expected to generate 1,100,000 kWh of clean electricity annually.  This amount of electricity will displace about 1,500 barrels of fuel oil per year, reducing carbon dioxide emissions of about 800 tonnes per year.  Apart from the global environmental benefit of reduced carbon dioxide emission, this project has additional local environmental benefits in terms of reduced emissions from diesel generation that would otherwise be used to generate the same amount of electricity.  It will also support the further development of a global market for solar PV technology.     This demonstration project will improve the local distribution company''s technical competence in electricity generation from renewable sources and provide valuable know-how in the development and operation of clean energy distributed electricity generation.  Projects of this type benefit the local population because their electricity needs are met through clean technologies which guarantee a clean environment for the local population.    The International Finance Corporation (IFC), acting as an executing agency on behalf of the International Bank for Reconstruction and Development (World Bank) in its capacity as an Implementing Agency of the Global Environment Facility (GEF), intends to finance up to US$4.0 million of the project costs from GEF resources.  IFC considers that the purpose of the GEF funding is to promote a demonstration plant for grid-connected applications of PV power plants in the developing world and to demonstrate the principle of conjunctive PV-hydro peak power generation.