The Philippines Energy Regulatory Commission (ERC) has finally approved feed-in tariff rates after probably one of the most protracted rate-setting efforts in the history of feed-in tariff policy.
The country’s feed-in tariff program was first called for in the Renewable Energy Act of 2008 which directed the government to set rates for wind, solar, run-of-river hydro, biomass, and ocean thermal energy.
The rates set by the ERC are less than those recommended the National Renewable Energy Board (NREB) and do not include Ocean Thermal Energy Conversion (OTEC).
Tariffs for OTEC will be added later after more information specific to the Philippines is collected.
The policy and the specific rates has been beset by quarrels within the government and opposition from various influential interest groups. The regulatory commission alone took more than a year to rule on the recommendations of the NREB.
In the ERC’s announcement, the tariffs are differentiated only by technology. There is no differentiation by size or other factors. In this regard, the tariff schedule is much simpler than those now found in relatively new feed-in tariff programs like those in Great Britain, or Ontario, Canada.
Nevertheless, in a companion press release, the ERC says that the tariffs may also be differentiated by size and whether the generation occurs during peak and off-peak periods. The press release also says the tariffs are valid for 20 years, though the legislation requires only that the term not be less than 12 years.
The tariffs are subject to adjustments based on inflation of currency exchange rates, says the ERC, but no details are provided about what this means.
Further, the rates are also subject to review if the renewable targets are or are not met, and if there are significant changes to the cost of each technology or more information on costs becomes available. Any changes in the tariffs will only affect new projects, not existing plants.
The tariffs will be in force for three years when they will be reviewed.
The ERC said in its announcement that it chose to reduce the tariffs from those proposed by the NREB because it disagreed with the NREB’s on the cost of the technologies used, their performance, and on the rate of return required. Importantly, the ERC said it did concur with the methodology used by NREB in setting the rates.
In the case of wind and solar, the ERC said that it lowered installed costs because of market trends and raised the expected performance to “ensure only the more efficient” plants will use the tariff.
The ERC said it used an internal rate of return target of 16.4% in its calculations except in the case of biomass, a favored Philippine technology, which it raised to 17% to account for fuel risk.
No explanation was given why geothermal was not included in the Renewable Energy Act, nor in the final tariffs. The Philippines, after the US, is one of the world’s largest producers of geothermally-generated electricity. Nearly one-fifth of electricity in the Philippines is generated with geothermal energy.
Feed-in tariffs were a central feature of the Renewable Energy Act. The petition by the NREB to the ERC states that feed-in tariffs are “indispensable” to achieving the goals of the Renewable Energy Act because it-like Germany’s Renewable Energy Sources Act before it–
Grants priority connection to the grid, Grants priority to the purchase, transmission, and payment for renewable generation, and Provides a fixed tariff that pays for the renewable generation for a fixed period. The ERC makes no mention of targets in its announcement. The NREB included targets for the first three-years of the program in its original proposal.
The NREB noted in its petition that a well-designed FIT system “is generally the most efficient and effective support scheme for promoting renewable energy”. Now that the program has been officially approved for inclusion in rates charged Philippine consumers, the true test of the country’s commitment to new renewables will begin.