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Philippine regulator issues feed-in-tariff rules

Philbert E Varona

The 2008 Philippine Renewable Energy Act contemplates the establishment of a feed-in tariff (FIT) system, whereby certain preferential treatment will be given to electricity produced from renewable energy sources.

In July 2010, after a series of consultations with stakeholders, the Philippine Energy Regulatory Commission (ERC) promulgated the rules for the FIT system. The rules seek to implement the state policy of offering guaranteed payments on a fixed rate per kilowatt-hour for the following emerging renewable energy sources: wind, solar, ocean, run-of-river hydroelectric and biomass energy resources, as well as renewable energy components of hybrid systems.

The FITs shall be a fixed tariff (instead of a premium over market prices, although the rules also contemplate premium-based FITs in the future) and shall be set by the ERC in accordance with a prescribed formula. Differing FITs may also be established for different technologies and time-of-use (peak and off-peak hours).

The FIT system applies only to areas forming part of the Philippines' national transmission grid. Generally, only generating plants which commenced commercial operations after the Renewable Energy Act took effect in January 2009 (or which were substantially modified or expanded after this date) are eligible for FITs, although exemptions may be applied for. Whenever generation from eligible plants is available, such plants will be given priority to connect to the network and will be paid the corresponding FITs based on the actual quantity of energy delivered.

Eligible generating plants will be entitled to the applicable FITs for 20 years. After this period, the tariffs for these plants will be based on prevailing market prices or such other prices as the generators may agree with an off-taker.

The ERC must adjust the FITs annually to account for inflation and foreign-exchange variations. The National Renewable Energy Board may also recommend a review and adjustment of the FITs to the ERC under certain conditions.

The rules also envision the establishment of a feed-in-tariff allowance. This allowance is a uniform charge imposed on consumers to ensure an equitable sharing in the cost of the FITs.

The proposed tariff rates for the varying types of renewable energy sources were submitted to the Energy Regulatory Commission for approval during the week of May 16 2011. The rates are targeted to be approved within the next few months.

Philbert E Varona

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