Monday, May 2, 2011

Make RE subsidies transparent, limited and technology neutral--FEF

In the matter of implementing the Renewable Energy Act of 2008 (R.A. 9513), the Foundation for Economic Freedom (FEF) believes the Feed-in-Tariffs to be issued by the Energy Regulatory Commission must provide for an absolute peso cap on the total amount of subsidies that the public will be made to bear. These subsidies must be capped both on an annual basis and for the life of the project.

The amount of public subsidy for Renewable Energy (RE) projects,   which could run to several tens of  billions of pesos per discussions at the National Renewable Energy Board,  should be explicitly disclosed and shown to be  commensurate to the social benefit that the public is expected to derive from this program.  As is done for all public expenditures, the outlay should be transparently evaluated based on "value for money" to the public.  It should likewise consider the ability of the public to shoulder additional levies on a per kWh cost of power. The Philippines already suffers from one of the highest power rates in the world. We should not unnecessarily add to the already heavy burdens of our electricity consumers and businesses.

Moreover, the FEF believes that the selection of projects that have recourse to such subsidies should be based on  lowest cost Renewable Energy projects first, regardless of technology. We believe this is the best use  of resources for the country as it will require the least amount of subsidies  per kilowatt-hour generated, which in turn can support higher installation  targets and greater quantities of environment-friendly energy for a given  cost to the consumer.

We estimate the subsidies required for the two  most expensive RE technologies, Solar and Wind, could otherwise pay for 6  times as much energy from the next cheaper source, which is Biomass, or 15  times as much energy from the cheapest, which is Run-of-River hydro, of the  RE technologies eligible for the Feed-In Tariffs. When you add the cost  of additional reserves and transmission facilities needed to support these RE  projects, the case for judicious allocation of the FIT subsidies becomes even  more compelling.
While this approach may initially  discourage diversity of RE sources, the potential to produce more Renewable  Energy at affordable costs should be the overriding policy direction.  In any case, the projected energy from these more expensive  technologies is not of a magnitude that would impact the energy mix, just the  energy cost. Postponing some of the more expensive technologies,  instead of locking in the high costs now for 20 years, will allow the  Filipino people to benefit from the expected improvements in both the  efficiency and costs of these technologies. The Philippines already has  renewable energy generation capacity equivalent to almost 34% of its total  installed capacity, well ahead of most other countries in the world. We  can move further ahead by focusing our limited resources on the more  affordable renewable energy projects at this time.

This is not to say  that technologies such as Solar PV have no place in our energy mix at this  time. They may be the best, or only, substitute, in some areas, for  expensive diesel-fired plants serving off-grid customers. When they are used  to augment off-grid diesel installations, the avoided costs (and emissions)  are higher, so the required incremental subsidy is less. And no additional reserves or transmission facilities are needed. In fact, solar technology is already used in a significant number of rural electrification projects all  over the country.

We support the Renewable Energy Act of 2008 and believe our  future hinges on the sustainable use of resources. But when the public has to bear the costs, let us ensure the resources are used judiciously.

The Foundation for Economic Freedom is a public advocacy group espousing market oriented reform for good governance and equitable consumer access. The Foundation is composed of, among others, eminent economists and former senior government officials such as PM Cesar Virata, Bobby Ocampo, Felipe Medalla, Romy Bernardo, Calixto Chikiamco, Mahar Mangahas, Simon Paterno, Ruping Alonzo, Gerry Sicat, Gary Teves, Peter Wallace, Alan Ortiz and Gloria Tan Climaco. Please see attached Corporate Profile for reference.

You may get in touch with our Executive Director, Atty. Ricardo P. Balatbat III, at the office number provided below or through his cell phone number, 0917 -5693262 or via his email at, for any clarification or query.

1 comment:

  1. You've been hoodwinked to support the RE law because you also support more environmental and energy regulations, more carbon taxation, to "save the planet" scam. The RE law is simply business cronyism in favor of the RE developers. See a longer argument here,