No rent seeking on RE please

Some proponents of renewable energy are getting desperate. They have apparently engaged some PR professionals to get media behind their attempt to unfairly benefit from a government imposed subsidy supposedly to save the environment. Thus far, they have failed to get what they want, thanks to a group of economists and public policy advocates who understand the issue enough to stand up for the consumers.

They are trying to paint the Foundation for Economic Freedom (FEF) as anti-renewable energy. Nothing could be farthest from the truth. I am a Fellow of the FEF and I have been an advocate of renewable energy from way back to the years I have spent with the then Ministry of Energy in the late 70s to early 80s. I was there on day one, so to speak, when we launched pioneering projects in what we at that time called non-conventional energy.

I know enough about the folks that make up the FEF to say they are not against renewable energy sources like geothermal and hydro, whose generation cost are competitive with traditional sources of energy.  They are not even against solar or wind when used in off-grid areas, where the avoided cost of using diesel is high and it makes sense to use these renewable energy sources.

What the FEF is against, as economist Toti Chikiamco, FEF president puts it, is forcing Filipino consumers to pay twice the cost of conventional energy from wind and more than three times the cost of conventional energy for solar by way of a forced surcharge on Filipino power consumers. The worse part of this proposed surcharge is that it will be paid for by Filipino consumers for twenty years even if the cost of technology goes down to guarantee a rate of return of 17 percent per annum to RE developers. This is pure and shameless rent seeking.

In this era where transparency and fair play are musts in matters affecting the purse of the Filipino people, it is the obligation of FEF to voice its opposition to granting subsidies to RE projects under the FIT (feed-in tariff) system without competitive bidding.  This is against the “matuwid na daan” of President Aquino and is unfair to Filipino consumers who have no voice on the matter.

Thus, it is not true that FEF is working against the RE policy of P-Noy. In fact, P-Noy did say that he is for renewable energy but we must mind the details so that our RE policies do not adversely affect the interests of the lowly consumers. This is where FEF’s position on RE takes off.

In a recent public statement, FEF president Chikiamco underscored the anomaly of the present FIT petition of the Renewable Energy developers before the ERC. He pointed out that the cost of renewable energy is dramatically going down all over the world. But here, the RE advocates want a FIT rate for solar of P17.95 per kilowatt hour when it is only an average of P7 per kilowatt hour in China and India.

In a recent report in Business World, experts in Scotland, a world leader in renewable energy (RE), advised the Philippines to make sure generation incentives like the FIT rate are thought through to avoid their experience. There is now uncertainty in the United Kingdom surrounding a planned reduction of what emerged to be overly generous feed-in tariffs. “The UK has set its initial tariffs too high,” Johnnie Andringa, chief executive of turbine assembler Gaia-Wind Ltd., told visiting journalists, referring to the guaranteed payment renewable energy producers get from the state (in our case, it would be from the consumers).

“Technology became cheaper in the past three years. But government was too slow [in adjusting tariffs]. There was an election. They couldn’t make changes fast enough. If government is slow, it gets difficult,” Mr. Andringa said.

The Philippines can learn from this as it sets up its own feed-in tariff system, said Paul O’Brien, the international senior business executive for renewable energy technologies at the state-run Scottish Development International.

A recent Bloomberg report also supported the validity of the FEF position. Solar according to this Bloomberg report is now cheaper than diesel without subsidy in parts of India and was committed by developers through auction. This is another proof from experience that we should wait and insist on an auction. Here, our developers will not even consider an auction.

The cost of solar energy in India declined by 28 percent since December 2010, according to Bloomberg New Energy Finance. The cause was a 51 percent drop in solar panel prices last year as the world’s 10 largest manufacturers, led by China’s Suntech Power Holdings Co., doubled output capacity. An Indian contractor said “Solar is going mainstream in India, helped by Chinese pricing.” India joins pockets of Italy, Spain and Hawaii where rising fuel costs and lower panel prices make solar pay for itself without state subsidies.

With fast advances in technology and growing competition, solar prices could achieve grid parity in three to five years, meaning no need for any subsidy. So why not wait (delay, if you will) instead of forcing the Filipino electricity consumers to cough out for high prices now and locking them in at that rate for twenty years?

The PR campaign of the RE salesmen would like to make us believe that the approval of the FIT Rate is a moral imperative. They ignore the fact that we need not feel conscience stricken by failing to jump in on the RE bandwagon to halt climate change because our country has such a small carbon footprint and already has one of the highest RE energy mix in the world.

This is not a question of morality, but of money and greed.  Nobody is stopping the RE developers from putting up projects to help save the environment. Indeed, there are some RE developers who have done so, admirably without the benefit of the FIT. But the greedy rest want the government to guarantee their super profits for twenty years by imposing a surcharge on the helpless Filipino consumer now.

Our power rates are high enough. The ERC must for once, protect the interest of the consumers. I can’t recall the last time the ERC had done that. –Boo Chanco (The Philippine Star)