New policies on renewable energy out soon

by Lenie Lectura – February 18, 2016

from Business Mirror

THE National Renewable Energy Board (NREB) is crafting new policies aimed at stimulating investments in the renewable-energy (RE) sector, in line with the Department of Energy’s (DOE) thrust to reduce the country’s reliance on fossil fuel.

The NREB is the body tasked by the Renewable Energy Act of 2008 to recommend policies, rules and standards to govern the implementation of the law, which granted fiscal and nonfiscal incentives to RE projects.

“The proposals will cover updates and new targets for the National Renewable Energy Program [NREP], FiT [feed-in tariff] rate options, installation targets, renewable portfolio standards [RPS] and net metering,” NREB Chairman Pedro H. Maniego Jr. told the BusinessMirror.

The DOE has so far received the recommendation of the NREB on RPS, which will require power-industry participants to source a certain percentage of their requirements from RE.

Other proposals are still being finalized, before these are formally submitted to the DOE.

“We have submitted our recommendations on the RPS late last year, and [we are] updating this month. FiT, net metering and NREP proposals are to be discussed and finalized by next month,” Maniego said.

He stressed that the NREB’s primary role is “recommendatory” based on its mandate in the RE Act of 2008. “Until the DOE and the NREB have agreed on the way forward, any announcement will be premature,” Maniego replied, when asked to elaborate on the proposed policies.

Energy Secretary Zenaida Y. Monsada confirmed that the NREB is coming up with proposals meant to ensure that RE would have its rightful place in the country’s energy mix.

“According to the RE law, the NREB will recommend policies to the DOE. [The NREB] has just finished its strategic workshop that deals with the road map and what to do to further promote RE. We issued a circular promoting for a 30-percent minimum share of RE in the mix,” Monsada said.

Under Department Circular 2015-07-0014, the share of RE in the energy mix should be at least 30 percent. The renewable sources of power include solar, wind, biomass, ocean and hydro.

Based on the 2014 DOE Power Statistics, 25.64 percent of the country’s total power generation is sourced from RE facilities, or equivalent to about 32.87 percent of the country’s installed generating capacity.

“To maintain the share of RE in power generation, the DOE hereby adopts a policy of adopting at least 30-percent share of RE in the country’s total power-generation capacity, through the holistic implementation of the FiT system and other pertinent provisions under the RE Act and RE IRR [Implementing Rules and Regulations],” the circular stated.

To be sure that this policy is strictly enforced, the DOE will use the FiT installation targets: 250 megawatts (MW) for hydro, 250 MW for biomass, 400 MW for wind, 500 MW for solar and 10 MW for ocean. When these targets are met, a bidding will take place.

The present system involves filling FiT allocation on a first-come, first-served basis. When the slots are filled, the DOE will then adjust the quotas to accommodate more RE developers.

“Upon the full subscription of the existing FiT-installation target, the succeeding rounds for the installation targets for FiT-eligible resources shall be made through an auction system to be adopted by the DOE,” the circular stated.

FiT is the per-kilowatt-hour (kWh) rate guaranteed to RE developers to ensure the viability of their projects. Consumers shoulder this under the FiT allowance (FiT-All) scheme, a separate line component in the power bills. They are now paying an additional P0.0406 per kWh.

Solar

Under the law and pertinent rules, it is the Energy Regulatory Commission (ERC) that sets the FiT rates, while the DOE is the lead implementing agency of the RE Act. It also approves the FiT eligibility of the RE plants, and sets the RE installation target to ensure the security of the power grid and electricity rates.

The deadline for RE developers to avail themselves of the second batch of FiT rate for solar-power projects is set on March 15.

The DOE has increased the capacity allocation of solar-power projects to 500 MW, from 50 MW, to attract more RE developers. The approved FiT rate for solar under the second round is P8.69 per kWh, lower than the P9.68-per-kWh solar FiT rate during the first round of solar-power allocation.

However, based on latest data provided by the ERC, the 500-MW capacity allocation for solar projects under the FiT scheme is yet to be fully subscribed.

“Based on the applications we received so far, the capacity of these solar projects vying for the second round of FiT rates haven’t reach the full 500-MW allocated capacity,” ERC Chairman Jose Vicente B. Salazar said.

Based on latest data provided by the ERC, the second batch of offering for a guaranteed power rate for solar projects has only attracted about 360.41 MW of total capacity.

When asked if the figures reflect a low turnout of interested investors, Maniego said: “Actually, there are more than 500 MW of solar-power projects under construction. However, most of the developers have encountered delays. Thus, it is still not certain how many will finish their projects by March 15, 2016.”

Energy Undersecretary Mario C. Marasigan said some RE developers may have difficulty meeting the deadline. The DOE official, however, is confident that the 500 MW would be fully subscribed soon.

Promoting RE

Monsada said her office is aggressively fulfilling international commitments and promoting indigenous sustainable energy to entice RE developers to invest in more RE projects.

“We are committed to increase our RE capacity and maintain a minimum of 30-percent share in the power-generation mix in the coming years,” Monsada said.

Through this government intervention, the country will be able to achieve its undertaking to triple installed RE capacity by 2030, reflecting its 21st Conference of the Parties pledge and proactively responding to the Asia-Pacific Economic Cooperation’s aspiration of doubling RE capacities of member-economies from the 2010 level by 2030.

“Aside from the proposals of the NREB, we are banking on the FiT system to promote the use of RE on a larger scale and to attract new investments for RE facilities,” added Monsada, when sought for comment.

The DOE has so far awarded 657 RE contracts more than seven years after the RE Act of 2008 was enacted into law.

At end-2015, the agency said these contracts have a potential generation capacity of 13,499.52 MW, as against the total installed capacity of 3,026.33 MW.

Of the 616 RE projects awarded by the government, 352 are hydro power; 124 solar; 55 wind; 38 biomass; 41 geothermal; and 7 ocean energy. These 617 contracts were awarded for grid use.

On top of these, there were 40 RE contracts awarded for self-generation of electricity for their own use. These include one for hydro and wind; 13 for solar; and 25 for biomass.

The latest DOE data also showed that there are 273 pending RE projects, 193 of which are hydro; 56 solar; 2 ocean; 7 biomass; 10 wind; and two are geothermal.

The potential generation capacity of these pending RE projects could reach 4,603.73 MW, as against an installed capacity of 207.91 MW.

The DOE data also showed that there are 21 biofuel projects to date, 10 of which are bioethanol and the remaining 11 are biodiesel.

The DOE aims to increase the country’s RE-generation capacity to 20,000 MW by 2030.

Government’s role in RE

National Grid Corp. of the Philippines President and CEO Henry Sy Jr. earlier stressed the importance of the government’s role in reaping the benefits of the seven-year-old RE law.

He said the enforcement of government policies is equally important as the investments poured in by the private sector.

“Much has been said about the benefits of RE, most especially in developing countries like the Philippines. However, for us to reap the benefits of RE, we need more than investments on power plants, transmission facilities and other infrastructure. Clear policies, stringent regulation and commensurate incentives are equally important in the effective implementation of the RE law,” Sy said during the Philippine Energy Summit.

Republic Act 9513, or the RE Act of 2008, also seeks to increase the utilization of RE resources by developing national and local capabilities in the use of RE systems, and promoting their efficient and effective application by offering fiscal and nonfiscal incentives.

These incentives include income-tax holiday; duty-free importation of renewable machinery, equipment and materials; special realty-tax rates; net operating loss carryover; corporate tax rate of 10 percent; accelerated depreciation of plant, machinery and equipment; zero-percent value-added tax rate; tax exemption on carbon credits; and cash incentive for missionary electrification.

Industry stakeholders, however, are still facing tough challenges, including high up-front cost and technologies, and inaccessible financial packages.

Sy said open dialogue and exchange are very essential in an industry, such as the power sector, which is composed of varied stakeholders with different interests.

“It is high time that industry players started the conversations going and worked toward cleaner and more sustainable energy sources, and toward a successful and competitive energy industry that is [on a] par with, if not better than, Asean counterparts,” Sy said.

“Today we take a look at the opportunities that the Philippine power industry faces, starting with the rapidly changing global energy outlook; the possibility of one Asean grid; the prospects for gas and its emergent role in the generation sector; and the direction we need to take to improve and maximize the spot market,” he added.

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