RE developers seek pass-on of P2.6B in FIT under-recoveries

by Myrna Velasco – January 20, 2016

from Manila Bulletin

Payments to renewable energy (RE) developers incurred an aggregate shortfall of P2.6 billion from November, 2014 to October, 2015, thus, they have been batting for recovery of such corresponding costs in their new feed-in-tariff allowance (FIT-All) filing for this year.

In a presentation to the media, market operator Philippine Electricity Market Corporation (PEMC) has noted that if referenced on actual spot prices during the period, the FIT-All differential could have been at average P0.06 per kilowatt hour.

Nevertheless, the regulatory approved FIT-All was just at P0.0406 until December last year, thus, there have been under-recoveries.

The Energy Regulatory Commission (ERC) earlier presented that payments made to RE developers based on FIT-All collections already hovered at P2.0 billion – that was until end-2015. The operator of the Wholesale Electricity Spot Market (WESM), however, highlighted “that an estimate of P4.26 billion was needed to be recovered through the FIT-All charge to pay FIT eligible plants at their respective FIT rates for the period November, 2014 to October, 2015.”

Jonathan B. De La Vina, PEMC’s senior specialist in Corporate Operations and Market Development has explained that the FIT-All collections’ calculated shortfall already included projects that are already in operations but their Renewable Energy Payment Agreements (REPA) with FIT administrator National Transmission Corporation (TransCo) were still not effective during the period.

He stressed that these projects must be included in the estimates because their FIT payments shall be treated retroactive based on their affirmed commercial operations date as stamped by the Department of Energy.

The WESM operator, together with the National Renewable Energy Board (NREB), emphasized though that the “must dispatch arrangement” set for RE technologies in the merit order had generally pulled down settlement prices in the spot market.

With the RE sources being set for priority dispatch in the merit order, PEMC has explained that the more expensive sources had been displaced and the overall effect could have been P1.00 per kWh reduction in the overall cost of spot market transactions. The total cost should have been more than P8.0 billion.

“Must and priority dispatch of FIT-eligible plants resulted to lower spot costs by an estimate of P8.29 billion for the period November 2014 to October, 2015,” De La Vina has noted.

NREB vice chairman Ernesto B. Pantangco has qualified, however, that the cost impacts would differ depending on the spot market purchases or level of bilateral power contracting of servicing distribution utilities and electric cooperatives.

“What we wanted to prove, what we wanted to show today is really what we’re saying all along from the very beginning that the introduction of RE will be beneficial to the market and this has been proven in this situation,” he said.

But moving forward, Pantangco stressed that it is vital for the RE sector to project if the impact would still be the same, especially with the additional installations that will be underpinned by the FIT system.