Friday, August 5, 2011

BOI: Cheap over glamor anytime

Renewable energy issue heats up
The Board of Investments (BOI) wants to further delay the tapping of renewable energy as it will make the cost of doing business in the country more expensive than it already is.
At the sidelines of AsiaMoney’s Power Industry and Infrastructure forum yesterday, Cristino L. Panlilio, BOI managing head, said the country should wait until the cost has become cheaper before going big into renewable energy.
"Renewable is a very exotic idea. For now, the Philippines cannot afford it because we have a really high electrical cost," he said.
"Here I am trying to invite investors, manufacturers, especially those who use a lot of energy. I think it is understandable for me to say to postpone that (renewable energy)," he said.
"The technology is getting cheaper and cheaper and cheaper. In the long run, we may see it more affordable, closer to the current cost of other more traditional sources of fuel. Every year, the cost of solar farming facilities is going down," he added.
The National Renewable Energy Board has proposed that the country source 10 percent of its power requirement from renewable energy suppliers in the next three years. The proposed installations are 250 megawatts for small hydroelectric power, 250 MW for biomass, 100 MW for solar energy, 220 MW for wind energy, and 10 MW for ocean power technology.
The NREB’s proposed rates for renewable energy are markedly higher than current generation charges of around P5 per kWh. The proposed rates are P6.15 per kWh for hydro, P7 for biomass, P10.37 for wind, P17.65 for ocean energy, and P17.95 for solar.
These are known as the feed-in rates (FITs), the guaranteed price at which renewable energy developers will be paid for the energy that they will produce and inject into the transmission or distribution system.
Considering the 10 percent targeted share and the dominance of small hydro, the average penalty to consumers in tapping renewable energy is placed at 12 centavos per kWh. This is known as the FIT allowance (FIT-All), which will be included in the universal charge on all power users.
The proposed FITs were submitted by the NREB to the Energy Regulatory Commission in May. The ERC was supposed to come up with a decision within 90 days after submission or the middle of August.
But the ERC said it could not hold public hearings because the NREB failed to publish the FIT application as required by the rule.
Peter Maniego, NRE chairman, said the NREB did not have the budget to publish the petition, which he said would cost the board P1.1 million.
"We did not publish it in full because it’s 28 pages and it will cost us P1.1 million. But then we are forced to follow the ruling. We have to look for money. It’s good that DOE will help us because NREB itself doesn’t have any budget," he said.
The FIT is one of the incentives for renewable energy developers incorporated in the Renewable Energy Act.
The incentives in the RE Act include tariff exemption and zero value-added tax on importation of machinery and equipment for the first 10 years of an operating contract, and tax credit on domestic capital equipment and services.
Special tax rates will also be given for equipment and machinery to be used for renewable energy development. An income tax holiday will be granted to investors for the first seven years of commercial operations.
Earlier, the advocacy group Foundation for Economic Freedom Inc. said government should not burden power consumers with subsidies for renewable energy, as it would only make the country less attractive to investors.
The group said power consumers would pay about P8 billion annually for the next twenty years just to ensure the profits of renewable energy developers through the FITs.
"We believe that burdening consumers with additional 12 centavos per kilowatt hour will make industry, already suffering from the highest power cost in Asia, less competitive and will make the country less attractive to investors," the group said.
FEF said that Filipino consumers should not be obliged to pay P10 per kWh for wind energy and P17.95 per kWh for solar power, when the average price of power from conventional sources is only at P5 per kWh.
"We believe that the country has no obligation to reduce carbon emissions as it is contributing less than a percent to global carbon emissions. The country already produces more than 30 percent of its power from renewable energy such as geothermal," the group said.
The group added that renewable energy is best for off-grid electrification, where the avoided cost is much higher.
Reacting to FEF, Peter Maniego, chairman of the NREB, said the cost of power from conventional sources like coal is consistently going up.
Since the price of power from renewable energy would be pegged for 20 years, he said, it is best to draw power from sources which are not subject to volatile pricing.
"The proposed FITs for hydro and biomass at P6.15 and P7 per kWh, respectively, are already lower than the coal tariff. If coal plant power rates increased at a rate of only 10 percent per annum, it would reach P10.65 per kWh by 2014," he said.
"This rate is higher than the proposed rate of P10.37 per kWh for wind. If the proposed wind projects push through, the installations with service contracts would take from two to three years to construct. The first installations will not be in place until 2014. At that time, coal power rates will be higher than wind," he added.

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