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Feed-in tariff rates for renewable energy in the Philippines

The Philippine Energy Regulatory Commission (ERC) approved on July 27 2012 the feed-in tariffs for solar, wind, biomass and hydropower projects. The approved tariffs are: P9.68 ($0.23) per kWh for solar, P8.53 per kWh for wind, P6.63 per kWh for biomass and P5.90 per kWh for run-of-river hydro. The ERC deferred fixing the FIT for ocean thermal energy conversion pending further study.

In arriving at these tariffs, the ERC accepted the methodology used by the National Renewable Energy Board (NREB) and took into account, among other things, the cost of construction and operation of the representative plants for each renewable energy technology, the generation output or capacity factors of these plants and the reasonable return on investment to be granted the renewable energy developers. However, the approved feed-in tariffs are lower than what was proposed by the NREB, which were: P17.95 per kWh for solar, P10.37 per kWh for wind, P7.00 per kWh for biomass and P6.15 per kWh for run-of-river hydro.

The substantially lower rates, specifically for solar and wind, were arrived at after the ERC updated the construction costs to reflect the downward market trend of constructing renewable energy plants and adopted higher capacity factors to ensure efficiency of renewable energy plants enjoying the feed-in tariffs. For all renewable energy technologies, the ERC also adopted a lower equity internal rate of return of 16.44%, except for biomass, which would enjoy a rate of 17% to alleviate fuel risks.

Subject to certain exceptions, the feed-in tariffs will be applied only to generation facilities that will enter into commercial operation after the tariffs become effective, or to such parts of existing facilities that have been substantially modified or expanded as described under the feed-in tariff rules. Further, to encourage renewable energy companies to invest at the initial stage and hasten the deployment of renewable energy, the tariffs will be subject to a degression rate to be approved by the ERC. The degression rate recommended by the NREB is 6%.

The approved feed-in tariffs will also be subject to review and adjustment after an initial implementation period of three years or when the installation targets for each technology as set by the Department of Energy have been met. The Department of Energy has approved a three-year installation target of 250MW for run-of river hydro, 250MW for biomass, 50MW for solar, 200MW for wind and 10MW for ocean thermal energy conversion.

Arlene M Maneja

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