How will RE investors take lower FiT levels?
EARLY VOTE: Emerging from a meeting yesterday with President Noynoy Aquino, congressmen decided to put to a vote immediately upon their return to the House of Representatives the question of ending the debate on the Reproductive Health bill (RA 4244).
The original schedule was to vote today on terminating the debate. It seems the pep talk of the President fired them up to act swiftly.
Albay Rep. Edcel Lagman, the bill sponsor, said the President suggested that they be brave enough to cast a “conscience vote” despite pressure from the Catholic Church to kill the bill.
Considering that the issue has dragged on too long, whether lawmakers voted on it yesterday, today or tomorrow will not make much difference.
The controversial measure has been debated long enough, notwithstanding the fact that many of those talking about it have not even read the final text. The next battlefields will include the Senate and the Supreme Court.
President Aquino seems to be gambling his remaining four years in office on the measure. And his critics say, “Call!”
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FEED-IN RATES CUT: That was a bold balancing act of the Energy Regulatory Commission when it set last July 27 the Feed-in Tariff (FiT) to be applied to renewable energy generation sources such as hydro, biomass, wind, and solar.
The approved FiT figures are substantially lower than those petitioned in May last year by the National Renewable Energy Board:
Hydro resources — P5.90 per kilowatt-hour (versus NREB’s proposed P6.15); biomass — P6.63 (vs P7); wind — P8.53 (vs P10.37); and solar — P9.68 (vs P17.95). The rates are 4-5 percent less for hydro and biomass, 18 percent less for wind, and as much as 46 percent less for solar power.
The ERB deferred fixing the FiT for Ocean Thermal Energy Conversion (Otec) resource while further study and data gathering are ongoing.
“The lowered rates will cushion the impact of implementing the FiT incentive mechanism under the Renewable Energy Act on the electricity rates, while still being sufficient to attract new investments,” said ERC Executive Director Francis Saturnino Juan.
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A LITTLE KINK: With the long-awaited FiT finally out, renewable energy developers can now plan their moves for the next 20 years. They now have numbers, although different from those proposed by the NREB, to guide them.
There is a little kink, however, with Juan’s saying that the approved FIT rates will be reviewed and possibly readjusted up or down after the initial three years of implementation “or when the installation targets for each technology shall have already been met.”
This could mean that while the new FiT will be fixed till 2015, there is uncertainty as to what the adjusted levels could be under the new administration after President Aquino steps down. Lack of predictability in government polices has been a disincentive to investors.
Taking the positive view, however, at least business planners now have some guaranteed minimum FiT figures to factor in over time.
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BALANCING ACT: The FiT determines the price at which power generators will sell or feed-in their electricity to the national grid. The lower the FiT, the lower is the cost of the power mix (from various sources) that will be distributed to consumers.
The ERC was able to lower the FiT for wind and solar power after it updated the construction costs of the representative plants for these technologies as affected by the downward trend in the cost of putting up these RE plants.
The commission also set higher capacity requirements for RE plants to ensure that only the more efficient generators will enjoy FiT incentives.
It was a delicate balancing act since the Aquino administration has promised consumers reasonable and stable power rates, now among the highest in the region, but at the same time reaching out with incentives to RE investors.
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FOSSIL FUEL DEPENDENCE: Renewable energy sources such as hydro, biomass and wind are locally available. The cost of producing power from them is not subject to the political and economic volatility of imported fuels like coal and diesel.
Domestic renewable power sources are environment-friendly and more sustainable than imported fossil fuel. Cutting dependence on imported fuel frees foreign currency for obligations and concerns other than power generation.
When he was still senator, President Aquino said that the country must shift to clean energy technologies. He also committed to raise the share of renewable energy in the country’s power mix to about 50 percent within 10 years.
The benefits of ERC’s fixing the FiTs will not be felt immediately. It will take time before the increased share of RE in the national power mix results in lower retail price of electricity. But the ERC has made a definite step in that direction.
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ALLAY FEARS: The Department of Energy, which sets targets for the installation of RE technologies, expressed appreciation for the ERC’s issuing the FiTs:
“We are fully aware of the tedious task and the challenges of the Commission in ensuring a balanced view to be able to serve the needs of all stakeholders. We are thankful for their effort and we hope that all other stakeholders continue to cooperate to be able to establish a competitive and dynamic power market that will benefit all.”
But it was obvious that the enthusiasm of some RE investors was dampened by the FiTs’ being much lower than those proposed. Those still interested will have to go back to recomputing costs and reassessing trends to justify their investing here.
One other thing that the Aquino administration — not just the ERC and the DoE — should do is allay fears that there are favored power operators and that policies may change in mid-stream.