What To Do With The 700mw Stranded Solar Projects?

David Celestra Tan, MSK

16 April 2016

The solar industry lobby group, Solar Alliance is asking the DOE to extend the granting of the premium P8.67 per kwh FIT rate to those solar projects that failed to commission by the March 15, 2016 deadline but had finished 80% of their build-up works. They claim it is about 700mw. This would be on top of the 450mw that met the deadline.

Let us put these into perspective.

1. The 450mw of solar is most of the RE projects that is getting the generous FIT rate that so far is costing the consumers P0.12 per kwh in Renewable Energy Subsidy. That is from the initial P0.045 per kwh “promo rate”.

2. Now about 700mw solar that did not make the March 15, 2016 deadline is asking to be granted the same rate. How much will that cost the consumers? Note that a Feed In Tariff rate of P8.67 means a solar subsidy of at least P4.17 per kwh. That means a total of about P4.5 billion a year of subsidies that will be passed on to the consumers. This will be added to the 0.12 per kwh new FIT subsidy rate.

3. We realize that these solar investors have poured in probably P40 billion into their projects and they are 80% complete. However, they knew coming in that it is a race against time program. In fact it is likely that most of them knew already that they will not be able to build fast enough to meet the March 15, 2016 deadline. They took the risk and must take the consequence. Why should we stick the consumers with the bill for the gamble they took?

4. Having said that, we cannot ignore that these promoters and investors have facilities that are almost finished and in fact had DOE certifications. Perhaps the DOE and ERC must look at those Solar projects that were actually finished 100% but did not meet the March 15, 2016 because of failure to secure timely inspections, testings, and certifications from NGCP and ERC for COC. The government must take some responsibility for the regulatory delays.

5. As to those that are only 50 to 80% finished, we propose that those be allowed to participate in an auction under Competitive Selection Process with a 75 day completion deadline. At least the consumers will be assured of a competitively determined price with a maximum allowable rate of say P7.67 per kwh. This way the solar investors and the consumers would have a reasonable win-win situation. Some solar promoters claim that they can be profitable at P7.00 per kwh.

6. To protect the consumers, we also propose that these solar projects be given a maximum annual energy that they can deliver at the Fit Rate, not an open ended “all energy produced” type of deal that exposes the consumers to uncontrolled subsidy levels. Anything they produced above the eligible energy shall be paid at the market price. There are indications from grid data that solar actually produces energy as early as 9am to 5pm and not the claimed limit of 5 hours from 11 am to 4pm. This output was used to justify the first round of FIT Rate at 9.68 per kwh and the 2nd round of P8.67 per kwh.

At the promo rate of P0.045 per kwh, most of the RE projects are not being paid their full FIT rate. NREB, DOE, and ERC and of course the Philippine Solar Alliance knew all along that the FIT rate will have to rise. Yet they are calling for more and more solar under generous fit rates. The PEMC even released a study saying the consumers are actually benefitting a net of P4 billion a year from the increased supply of 682.9mw of RE to the grid. That benefit claim was based on a FIT subsidy of P0.045 per kwh. Clearly not the true subsidy that so far is P0.12 per kwh.

On top of these, NGCP will eventually have to buy load regulating ancillary services to compensate for the intermittence of solar. Another costs to the consumers caused by solar that must become part of the equation on its costs and benefits.
Another hoodwinking of the DOE, ERC, and the consumers. Et tu NREB and PEMC?

The Philippine Solar Alliance is not only lobbying for these 700mw of stranded solar projects but calling for up to 2,000 mw as a solution to the energy supply needs of the country. That is like solving a short term problem with a long 20 year solution and subsidy costs.

Let us not forget that the cost of solar goes beyond the FIT. Meralcos rate is increasing because of the P0.12 per kwh RE subsidy. Would these RE subsidies reach P0.48 per kwh if the lobbyists get their way?

Once again, we are not against clean energy and solar. We feel however that since the industry has matured and the energy efficiency of these RE projects have been proven with empirical operating data under Philippine soil (of sun and wind) that all these, at a minimum. must now be subjected to a proper CSP.

Talking about CSP, now we are wondering whether the DOE and ERC are really committed to the honest to goodness implementation of the CSP policy that gave the Meralco consumers so much hope for the better.

It is about time that the consumers are no longer treated as a silent bottomless pit on whom all consequent costs of government policy and industry lobby will be charged. Let us not forget that in our democracy, it is for the govern that the government must behave and function. Our government officials swore to this when they took their oath of office.

Consider this when resolving the 700mw stranded solar projects.

Matuwid na Singil sa Kuryente Consumer Alliance Inc
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