Tuesday, August 23, 2011

Solar developers told to rechannel investments in off-grid areas

August 21, 2011, 8:00am
MANILA, Philippines — Prospective solar developers are in for a deeper dilemma with the proposal of Joint Congressional Power Commission co-chairman and Senator Sergio Osmeña III to further trim down the grid-integrated solar installations to 20 megawatts from the 50MW already endorsed by the Department of Energy.
But the lawmaker has a counter-proposal. He recommended that the solar developers must shift their attention to off-grid areas, where up to 100 megawatts of installations can be easily earmarked for them.
“The avoided cost in off-grid areas is P12 per kWh for diesel facilities, so it will be more feasible to re-channel your investments there,” he stressed.
Even at 50MW, the lawmaker indicated that the cost impact would still be “considerable” given that all consumers will have to bear the brunt of the P17.95 per kilowatt hour (kWh) feed-in-tariff (FIT) set for the technology.
The position of most of the JCPC lawmakers will be to wait for the time when the cost of solar will go down dramatically so the consumers will not be unduly burdened with exorbitant FIT which would be locked up for 20 years.
It came directly from the words of affiliated companies of the Philippine Solar Power Alliance (PSPA) that with China and Japan “sucking up the solar market,” the cost for the technology may decline drastically in the next few years.
Project developers are proposing to solve the teetering supply crisis in Mindanao with solar-based generation, but lawmaker and other players in the industry view this as an expensive proposition.
The solar project proponents, however, are trying to soften the cost impact by presenting the “blended rate” that would eventually be passed on to consumers – meaning, the high FIT rate for solar may be alleviated once integrated with the lower costs of hydro and other technology options. The overall FIT to be passed on in the bills then would be lower.
Project developments in off-grid areas are also subsidized through a universal charge for missionary electrification, but recovery for such costs have been incurring considerable lag times. Therefore, it may not entirely be an attractive proposition for developers.
In contrast, the collection for FIT rates may turn out more straightforward and it is seen getting administered more efficiently. As a result, settlements with project sponsors may be done in a more expeditious manner.
The suggested solar capacity may reach as high as 400 megawatts. Of the prospect, 150MW have already been formally applied for in Mindanao by 6 to 7 developers.
Based on the record of the energy department, however, the 11 proposed solar projects for the grid may only yield a total capacity of 96 megawatts.

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