Renewable goes flip-flop too

The country’s push for self-sufficiency in energy sources, particularly through the promotion of renewable energy (RE) technologies, is getting mired in some problems, and consequently being challenged by the Board of Investments and – surprise, surprise – even the Department of Energy.

Trouble started brewing when the Feed-in-Tariff (FiT) rules pursuant to the Renewable Energy Law and its implementing rules were scheduled to take effect last month. FiT is some sort of guarantee on new investments in renewable energy sources such as wind, solar, ocean, run-of-river hydroelectric, biomass and hybrid systems.

Aside from setting a fixed rate per kilowatt-hour on applicable renewable energy sources, all energy suppliers will also be required to buy a set amount of electricity that is produced from renewable energy generators.

NREB initiatives

The National Renewable Energy Board (NREB), which was set up last year by the energy department, is mandated to speed up the setting of mechanisms and incentives critical to the implementation of the Renewable Energy law.

The NREB also plans to come out with the rules on net metering by the end of September that will allow consumers who own solar panels and wind turbines to sell their excess output to the grid.

The above initiatives by the NREB are seen as powerful measures that would encourage the growth of the renewable energy sector, which has not been taking off even with escalating prices of the non-renewable fossil fuel sources.

The snag came when the proposed FiT rates were filed with the Energy Regulatory Commission earlier this year. The FiT rates filed by the NREB were as follows: P6.15 per kilowatt hour for hydro, P7 per kwh for biomass, P10.37 per kwh for wind, P17.65 per kwh for ocean energy, and P17.95 for solar.

Solar takes a hit

A recent review of incentives given to investors in renewable energy projects showed that solar power projects required a higher investment outlay, thus the higher FiT rate. Consequently, this would lead to a bigger increase in electricity rates.

Meralco, the country’s biggest distributor of electricity, was first to lodge a protest against FiT rates for solar, and suggested that the current program on renewable energy specific to solar incentives be deferred until technology improvements will be able to bring down generation cost to the same level as fossil fuels.

On its part, to avert higher power rates from solar energy, the energy department reduced its installation targets in the next three years from 100 megawatts to 50. Considering that there were more than 250 MW of new solar power projects being proposed, somebody had to cry foul.

Last month, the European Chamber of Commerce of the Philippines (ECCP) with the European national chambers accused the government of undermining the country’s move towards renewable energies, alternative fuels and a wider energy mix.

Benefits of solar

They pointed out that solar on a macro-perspective would amount to only a two-centavo rate hike. Considering that this would bring in about P33.6 billion worth of investments if the proposed 269MW capacity of solar power plants were installed, the creation of jobs, increased business activities for small enterprises and new capacity to the grid, especially in Mindanao where there has been a power shortage since two years ago would more than offset the rate difference.

With solar energy, the European investors argued, grid parity would take less than five years. As the technology for solar energy develops, and more units installed, the cost of solar energy is expected to further drop to the same levels as other renewable energy sources.

The chamber also pointed out that encouraging investments in solar energy generation avoid further investments in the national grid and makes power available at a fixed rate especially when trading prices at the wholesale electricity spot market are high.

The constant cost of power from solar will likewise benefit the five million Filipino people currently without access to electricity and relying on fossil fuels particularly diesel, which are not only expensive but also hazardous to health, according to the chamber.

Building foundation for alternative energy generation

Notwithstanding the arguments for solar power, clearly the cost of power generated from solar panels and farms still constitute one of the most expensive renewable energy technologies in the world today.

But the Europeans have a point when they chide government for changing its rules in midstream and express alarm over talks about the postponement of the implementation of the Renewable Energy Act. Such flip-flopping is detrimental to investor confidence especially during these times when other countries are seriously wooing the same investors.

At this point, when there is no doubt as to where oil prices will be in the near future, investing in renewable energies should be given priority because of its long-term benefits. We will just have to manage issues such as pricing so that it does not detract from building a solid foundation for alternative energy generation. –Rey Gamboa (The Philippine Star)

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net.