Re-Tooling the Philippine Renewable Energy Strategy and Rationalizing FIT Subsidies (Part 2)

David Celestra Tan, MSK
10 September 2019

Back to RE and they are not all the same

Lobbyists for Solar and Wind are always waving the RE flag as if they are all the same, specially if we consider public interest. There is expensive and intermittent RE like solar and wind. Then there are RE’s that are actually grid competitive like run of river hydro, biomass, and hybrid.
Part of the economics of solar, and wind to a lesser degree, is they produce energy at lower capacity factors than hydro and biomass that can generate power 24 hours day. Solar is limited to only when the sun shines highest from 11am to 5pm.

In technical terms, Solar only has capacity factors of about 15%, wind at about 65%, and hydro and biomass up to 92%.  Additionally in terms of spatial efficiency, solar and wind take up 1.5 hectare per mw when biomass needs 2 hectare per 10mw.

Re-Tooling the Implementation of the RE law or our Renewable Energy program

Let us re-tool our RE program keeping in mind a few things. 1) the cost to the public is paramount and should be considered. Filipinos are not the great polluters of the world and we should not be made to pay a heavy price for our share of global warming. 2) “Clean energy” does not mean “RE” per se. 3) there are already enough interested proponents that the sector can already be made competitive. I would like to add a fourth one which is that the RE program offers an opportunity for the government to achieve true “inclusive” growth, that new rhetoric of economic policy makers and government leaders.

1. Methodology for recovery

Let us do away with dumping the RE FIT output to the WESM. It is disrupting the WESM market. RE supply, as market price taker, pushes the WESM price down and therefore reduces their selling price and FIT recovery in the WESM. This in turn increases the amount of subsidies that will be charged to the consumers.  Why not just establish a fixed “green rate” that would be equivalent to the “avoided” cost of coal or natural gas power on the grid.  This will make the FIT subsidies stable and transparent. At a fixed green rate, it can considered as a bilaterally contracted supply that are settled outside the market and should not influence the market rate.

2. Solar

a. Grid connected solar should now be awarded by competitive bidding whether it is through the Transco or by bilateral contracts with large enough DU’s. No more FIT subsidies.

b. Technically, they should be grid-compatible just like the rest of the power generators. That means solar should mitigate its own intermittence. They should be able to maintain their synchronization to the grid and not expect the grid operator to source and provide their own voltage regulation, like when overhead clouds pass.

(if they can’t yet, then let’s look at other less expensive RE’s)

c. Let us promote more aggressively the roof-top solar not by subsidies but by enabling regulations. Let us make it easy for them to connect and be free from the procedural roadblocks put up by DU’s. Let us improve our net metering rules.

d. If we really want solar to soar as a clean energy source, let us consider mini-grids or community solar. Why can’t a homeowner collaborate with his grocery store neighbor for a joint solar project? Why can’t we coop with our neighbors. This will not only make solar demand explode, it will create a new industry with probably 1,000,000 jobs nationwide. And probably turn 1,000,000 home and building owners as power generation entrepreneurs. This will give true meaning to “inclusive” growth.  (Why should the Meralco cartel have all the fun?)

And why grab that opportunity from Filipinos nationwide by monopolizing it with a solar ng bayan nationwide franchise to an influential family? Why not use that legislative influence to put in the enabling law that will benefit millions of Filipinos, as entrepreneurs and not as laborers?

e. Let us already take a stand. No more FIT for grid connected solar and for those who got them in FIT Rounds 1 and 2, we should consider a more expedited degression rate. Meralco’s solar contracts dropped from P5.35 per kwh to only P2.99 after they undertook even an imperfect CSP. That’s a P2.36 per kwh reduction although we understand the tricky formula actually averaged P3.40 per kwh. Still that’s a big drop.  Let us hope Lean Leviste delivers the P3.40 per kwh at a true 85mw.

3. Wind

Let us establish a defined target and approval criteria. But then they must similarly be grid compatible with their own voltage fluctuation capabilities. Subject them to biddings. If some locations are feasible but too expensive, we should not have them. Remember, it is not RE at all cost. Clean energy that is affordable is what we should aspire for.

4. Run of River Mini-Hydro

Let us encourage electric coops to do these more with more support from DOE and NEA. Let us just be more sensible with the procurement of back-up power during the dry summer months. This is one of those that deserve the current FIT.

5. Biomass

Biomass generation does not need more FIT subsidies as a government support. What it needs is encouragement in facilitative rules in approvals and supply off-take. Not many people know (including some policy makers in DOE) that one big roadblock for biomass projects is this inane requirement by a DOE approval engineer that any proponent should have its agricultural feedstock supply contracted 100% to get his approval? It is nowhere in the rules. If a private investor is willing to proceed with only 50% of his feedstock contracted but is willing to buy the 50% of his rice husk from the market, why should the DOE stop him? RE is an energy- based contract anyway so if he does not produce energy he gets no income.

Many biomass projects can proceed if the DOE instead require the proponent to submit a viable long term feedstock plan that the DOE can evaluate. Why ask for a 100% contract? How many sources can give you that outside of the rice millers in Northern Luzon?

6. Hybrid and Ocean Thermal

“hybrid” has a potential for base load supply and can be grid competitive. We need clearer rules and definitions so that it can be pursued by many proponents. This is a great way to reduce another Universal Charge, the missionary electrification. Hybriding if implemented with more impetus can reduce missionary subsidies by P2 billion a year in the off-grid areas. Let us just drop Ocean Thermal conversion for now. It is experimental and too expensive even in the USA where it started decades ago.

7. Making the Right People Pay for FIT

The DOE and ERC are passing on the cost of these RE to the electric consumers. Why not make the coal people pay?  It is after all their damage. Why make poor Juan dela Cruz pay? Why reward local producers of coal by exempting them from VAT?  Coal generators should pay for cleaning it up. Or Carbon offsetting it. Recover the FIT subsidies from the coal generators in the form of environmental assessment or some kind of carbon offset fee.   If the ERC is looking for a way to send “price signals” to the power industry as a regulatory tool, this is an excellent one.

At this stage, we don’t know which is worse. A bad policy or a frozen one? But it doesn’t need to be. We can retool these based on reconnecting with the original concept of clean energy and learning from our experience that people will compete and sharpen their pencils if they need to. We only offer subsidies to encourage energy investors to come in but when there are enough people already interested, we can ask everyone to participate in the bidding not only to reduce rates but for transparency and contracts to the deserving.

What we have presented here are just some of the options and avenues for more sensible renewable energy strategy that is in the public interest.  Let us hope it is helpful in deciding which way to go at this RE crossroad.

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com.ph