By MYRNA M. VELASCO (SPECIAL REPORT PART II)
October 11, 2011, 2:52am
MANILA, Philippines — Are we missing the boat – or we’re recklessly rushing into bids of accelerating RE installation targets?
If the country, or the government for that matter, drifts into abandoning its own RE policy, stakeholders opine that such move would be tantamount to telling the whole world that: “while we have a fancy of passing laws, we are not really serious in implementing them. So next time, don’t even bet on placing your investments here!”
National Renewable Energy Board (NREB) chairman Pete Maniego Jr. has already started raising the concerns of investors and prospective ‘green energy’ lenders (including the multilateral financing institutions, banks and export credit agencies). That as gleaned from recent turn of events, “there were already apprehensions whether the Philippines would really implement the RE Act” – primarily its provisions on feed-in-tariff and renewable portfolio standards (RPS) among the major sub-policies.
“We might miss the boat again,” he cautions, adding emphatically that “it is almost the same sad story. The Philippines was the leader and innovator in the region. Other countries follow our example and eventually surpass us.”
Perhaps, the major consensus here is for the country joining the RE investment bandwagon. The differentiating factors albeit will still lie on cost impacts and what technology choices must flourish.
Bids for the country’s supposed ‘glory’ at getting ahead into emerging RE developments is an idea being brushed aside by the Foundation for Economic Freedom.
FEF vice chairman Romeo L. Bernardo laments that “we cannot afford to spend recklessly just for bragging rights. Why do we have to buy expensive toys that we cannot afford now, just to show off to our neighbors?”
For the groups feigning that expensive technologies be installed immediately alongside the cheaper ones, Mr. Bernardo reiterates that the Philippines is not really lagging behind when it comes to RE integration on its power mix. “We have our own competencies, geothermal among them,” he says.
He further imparts that, in fact, “we have a very low carbon footprint and a very high renewable mix,” therefore; “we have nothing to be guilty about.”
Latching on the “polluter-must-pay-principle” of the Kyoto Protocol, he notes that countries like the Philippines “whose contribution (to global carbon emissions) is less than half of one percent (a rounding error)” will actually benefit from financial transfers via carbon emissions credits emanating from the so-called polluter-countries – which incidentally are the rich nations.
FEF opines that “the basic reason we are being bullied by developed countries into adopting their climate change agenda is that they see the growth coming from the emerging countries, while they have largely plateaued.” Yet if Asian giants, chiefly China and India would be taken off from the equation, the group notes that “we shouldn’t even be in their radar screen.”
During the initial deliberations at the ERC on the FIT application, some groups have proposed rate benchmarking to ascertain if the proposed RE charges in the Philippines are within competitive levels with our Asean neighbors or at least, with similarly-situated countries.
State-run National Power Corporation observes that NREB leaned in part on its FIT rate computations on the experience of European countries, but “Europe’s condition may not be totally applicable to the prevailing conditions in the Philippines.”
The power firm notes that cost comparisons may be best matched up with the FITs being imposed in Malaysia, Thailand or a similarly-situated country like Ecuador in Latin America. The company points out that for solar, the Philippine rate of P17.95 per kWh is comparable to Malaysia’s P17.45 per kWh equivalent (but that is for its lower capacity solar range of only approximately 4 kilowatts (kW) not for the larger-scale installations envisioned here). For wind, Malaysia has no FIT because it has not batted for any installation on that technology yet. For hydro, the FIT rates of both Malaysia and Ecuador are lower at P3.256-P3.386 per kWh and P2.70 to P3.11 per kWh respectively, as compared to P6.15 per kWh in the Philippines.
The puzzling twist in FIT cost benchmarking, of course, tugs its way into Thailand’s case – wherein the country was able to offer cheaper FIT rates, and that is even within conditions that their lock-up period is shorter at 7 to 10 years. Its FIT rates (or what it refers to as “adder” rate for RE) would be as follows: 8 baht or an equivalent of P11.36 per kWh (solar): 3.5 baht or P4.97 per kWh (wind); and 2.50 baht or P3.55 per kWh (biomass). Of course, that would have to be added to Thai’s retail power rate of 3.0 baht or P4.20 per kWh equivalent.
Bidding or no bidding?
Another hotly-debated topic relative to the flow of investments in the renewable energy sector is: whether to have a bidding on the award of the DoE-approved installation targets or these megawatt-capacities can just be cornered by some parties according to their own whims.
It is not helping much also that Energy Secretary Rene D. Almendras doesn’t seem to have a firm stand on the issue yet – in spite of the fact that his department will be committing billions of pesos of the Filipino people’s hard-earned money to subsidize these RE projects.
Industry talks are rife that some investor-groups have already divided “secretly” among themselves these installation targets – or that they already set the rules to ensure that their projects can be accommodated into the allocations.
The discomforting pretext is that: it’s not the government policymakers – not the DoE, Congress or the industry regulators – who have been calling the shots here. If policies are not implemented right, the RE subsidies would turn out to be the energy sector’s biggest scam yet.
“Everything would just be a legal play. The RE Law does not provide for a bidding, therefore, there is no need for a bidding,” one RE project developer reasons out.
This early, House committee on energy chair and Joint Congressional Power Commission co-chair Henedina Abad cautions that “an auction process must happen” in the award of the installations. Otherwise, she avers that the law’s implementation will not be done in a manner “that will be fair to all.” The legal framework for the bidding, she says, will have to be provided in a resolution that will be issued by the oversight congressional body after the approval of the FIT rates by the ERC.
The FEF can’t also lend a sober voice on the wishes of some groups to have a ‘sneaky’ award of the RE allocations, which if based on previous pronouncements of Energy Undersecretary Jay Layug, the whole process must only be done by having an “eligibility criteria.” The danger here is that the framers of the ‘eligibility criteria” at NREB, who are supposed to be helping the DoE on the policy, are the same groups of project developers which already worked allegedly on cornering their own shares in the pie.
“We complain about the P1.0 billion Pagcor expenditure over the last several years for coffee not going through a public bidding, yet the NREB proponents dismiss the idea of an auction process for the RE installations when the expected cost is P8 billion a year for 20 years,” the FEF chides.
Rule-making or rate-setting?
Public hearings on the FIT rates have been stalled, primarily because of questions on whether or not the NREB filing under the tenet of rule-making be held as acceptable to the regulators.
Several parties, including the FEF, Manila Electric Company, National Grid Corporation of the Philippines and even consumer groups, stipulate that since the FIT-Allowance charges will directly affect all electricity consumers and its impact on the rates will likely be an increase, the application of NREB shall be deliberated within the ambit of a “rate-setting exercise” and not just merely hinged on a rule-making procedure.
By this, they mean that full-blown hearings and deliberations be carried out. “It is without doubt that, the FIT-Allowance determination is a rate-setting mechanism which is quasi-judicial in nature and hence, subject to more stringent requirements such as publication, public hearings and presentation of evidence,” they point out.
The FEF, in particular, questions that “the present course of the ERC, which is rule-making and not rate-setting, is contrary to the intent of the framers of the Constitution’s promotion of general welfare as these shortcut the right of the public to be notified.”
The rationale for the rate-setting deliberations, they say, is to give the general public wider assessment leverage on what they ought to pay for under the FIT regime.
Yet another distressing concern raised by NGCP would be the scale of reserve or back-up capacity that must be required for wind capacities.
Developers are of the view that it shall just follow the ‘reserve level’ being mandated in the system, which is roughly 32 percent. But the grid operator can’t sit comfortably with the idea as it deems that there should be one-is-to-one matching on megawatt capacity for reserves because wind is highly ‘intermittent’ and it could adversely affect the system
“We have our specific recommendations to the DoE as to the level of reserve that the system will need to operate efficiently with intermittent wind generation. We will follow whatever policy direction (the department) will have to lay down,” officials of the grid company note.
Bringing back the spotlight on solar, there are parallel proposals for rooftop installations. What the solar developers ought to re-assess here, however, is that most of the roofs of Philippine houses are bungalow-designed and could be shadow-prone, hence, such solution may not necessarily be apt.
The collision-course on solar installations is expected to escalate further as discussions on the FIT would move forward.
Nevertheless, the energy secretary and Mr Maniego see some “applications where solar power would literally shine” – these would be in the off-grid areas, wherein people are stanchly begging that their communities be energized. Additionally, the avoided cost is higher because the technology being matched would be diesel – which would be to the tune of P12 to P15 per kWh. That said, the cost reprisal would not be as intense compared to the avoided cost on-grid at P4.50 to P5 per kWh.
For large-scale solar installations which shall be integrated into the grid, Mr. Maniego qualifies that “deployment must be strictly calibrated, so that arable lands for agriculture are not utilized for solar plants.”
He explains that “solar power requires flat areas with no shades. These are the land areas which are also ideal for agriculture.” The cautionary word for the energy department then would be “to ensure that the solar installations would be limited to land which are not agriculturally productive.”
All told, stakeholders maintain that solar’s grid integration must be done with a lot of “prudence.” Solar electricity, they concur, is going to be a large part of our energy future, it just doesn’t belong in our present.
One of my interviewees tossed this as a food for thought: “Good things come to those who wait, and patience is a virtue. Have we forgotten these lessons?” Yes, what is so wrong with waiting then when the reward would be lower cost in our electric bills?