Viewpoint: A Response to the Proposed Bill for Micro-Grids

Establishment of Micro-grids Supplied with Electricity from Solar PV Power Plants with Battery Storage will Result in Expensive Rates for Consumers in the Micro-grids

By David A. Tauli, President, Mindanao Coalition of Power Consumers

The economic rationale for the establishment of micro-grids by independent investors in the franchise areas of distribution utility companies is that doing so will result in rates for electricity consumers that are lower than the rates that would result from extending the distribution system to the consumers who would be served by the micro-grid.

This should be the main criterion in evaluating the proposed bill in the Lower House of the Philippine Congress to grant a franchise to the Solar Para sa Bayan Corporation (SPBC) of Lean Leviste. Affected consumers should ask concerning the Bill: Will the Bill result in our being supplied electricity at affordable rates?

The answer to this question is NO, considering the technology that SPBC is proposing as power supply for the micro-grids in remote rural locations. This technology is solar photovoltaic power plants with storage batteries.

Assuming no subsidy, the rate that an investor would charge consumers in micro-grids for power supply from solar PV with battery would be more than twenty pesos per kWh (20.00 PhP/kWh). This is lower than what would be charged for power supply from kW-sized diesel-fueled power plants. But very few consumers in remote rural areas would be able to pay such a rate.

Therefore, using the criterion of providing electricity to remote rural communities at affordable rates, the bill granting a franchise to the SPBC would achieve no practical purpose.

But even if the establishment of a micro-grid would result in rates of around ten pesos per kWh, the proposed bill is still an exercise in futility. There are procedures now in place, primarily the Qualified Third Parties (QTP) process established by the Department of Energy, and the Competitive Selection Process (CSP) established by the DOE and approved by the Energy Regulatory Commission, for the establishment of micro-grids by any interested investor. Admittedly, the CSP and the more generic Least-Cost Acquisition process of the EPIRA have been corrupted in recent years by most of the electric cooperatives in Mindanao, resulting in the exorbitant rates that currently characterize electric cooperatives in Mindanao. But the corruption of the CSP and LCA can be prevented by the vigilance of consumer groups over the power supply acquisition practice of their electric cooperatives.

The application to grant a national franchise to the Solar Para sa Bayan Corporation did not consider the economic implications of the Bill for remote rural communities. Even if it is passed, it would not result in enabling the impoverished communities to be supplied with electricity at affordable rates.

December 7, 2018