24 JULY 2010

ERC - Subsidy for RE via feed-in-tariff stretched to 20 years

The subsidy to be borne by consumers via the feed-in-tariff (FIT) component to be reflected in the electric bills for emerging renewable energy (RE) technologies will be stretched to 20 years, according to the rules issued by the Energy Regulatory Commission (ERC).

The initial proposal will be to incorporate peso-per kilowatt hour FIT Allowance (FIT All) as a charge in the electric bills for initially 12 years, then changed to 15 years, but this was stretched longer so the resulting levelized cost to end-users will be lower.

“Eligible RE plants shall be entitled to the applicable FITs to them for a period of 20 years,” the ERC rules specified, noting that for the period beyond that, operations for mature RE projects shall already be anchored on market prices.

There have also been provisions for review on the FIT system, especially for generation facilities already reaching or surpassing 12 years of operations.

The calculated feed-in-tariff across technologies will range from P7.00 to P25 per kWh (with solar technology seen bearing the highest FIT; while wind will be at a median of P12-P15 per kWh). Nevertheless, the ERC rules prescribe that the National Renewable Energy Board (NREB) will need to file a levelized FIT, computed from the estimates for various RE resources.

When approved by the regulator, system operator National Grid Corporation of the Philippines (NGCP) will bill it to its load customers, and the distribution utilities will in turn reflect it as separate item in the electricity bills.

While the FIT is an incentive package set for project developers under the RE Law, this is generally considered a form of subsidy but coming directly from the pocket of consumers channeled through the electric bills.

Qualified to avail of the feed-in-tariff, aside from wind and solar, would be project developers in biomass, waste-to-energy facilities, ocean/tidal current, run-of-river hydros and specified hybrid systems; while exclusions were given to base-load capable impounding hydros and geothermal facilities.

To avail of the incentive, the ERC rules emphasized that “all such RE plants shall be deemed eligible upon issuance of a COC (certificate of compliance) authorizing them to operate as FIT-eligible RE plants.”

The FIT, as the regulator prescribed, shall be technology specific and such must be differentiated based on the size of the eligible RE plant, and as recommended by the NREB.

Read article source in Manila Bulletin Publishing Corporation, July 24, 2010