Solar industry seeks clarity on future of microgrid subsidy

By Victor V. Saulon – December 16, 2019 | 12:04 am
from Business World

National Electrification Administration (NEA)

LEGISLATORS need to decide on continued subsidies for off-grid power generation and distribution systems under the proposed microgrid law, the head of the Philippine Solar and Storage Energy Alliance said.

“The challenge there is really, number one, there should be certainty on the subsidy of microgrid. The position of government is still unclear on whether the UCME (universal charge for missionary electrification) is going to be removed or not,” Ma. Theresa C. Capellan, who chairs the alliance, said in an interview.

“In any missionary area you need subsidy,” she said. “You have a situation where your island is only as small as 20 kilowatts (kW), 40 kW, these are small islands, small grids” she said. “I’m not saying they will forever be at 20 (kW), but you’re starting at 20 (kW).”

Ms. Capellan is a member of the technical working group evaluating the proposed law on microgrids. A microgrid is a single controllable grid and can connect and disconnect from the national grid, the country’s interconnected network of power transmission towers, lines and substations.

The National Power Corp. (Napocor) has a mandate to provide power in areas that are not connected to the transmission grid. The UCME is collected from all on-grid electricity end users as determined by the Energy Regulatory Commission (ERC) and as called for under Republic Act No. 9136 or the Electric Power Industry Reform Act of 2011. The collected funds are then used for rural electrification, among others.

“Your investment in a small island like that will be substantial and so your returns may not be as attractive. Now having said that, you can make it attractive if you rationalize the subsidy,” Ms. Capellan said.

“There has to be certainty on that in order for the private sector to really aggressively help the government in addressing total electrification,” she added.

The Department of Energy (DoE) has been saying that it wants to do away with the subsidy through a gradual phase out to reflect the true cost of electricity even in areas where private companies are reluctant to enter.

“It’s okay if there is a phase-out, but they have to rationalize it. I think their (DoE) main concern is that the resorts are really enjoying the subsidies, which should not be the case because the subsidy is there for energy-poor communities,” Ms. Capellan said.

“They have to find a way to make the UCME available targeting only the energy-poor islands. Unless they are able to resolve that then they cannot have the inflow of capital and investments in off-grid areas,” she added.

Ms. Capellan said the proposed law should further streamline the permitting process for off-grid energy companies.

“The permits that are required for a 1 megawatt (project) is the same permit that is required for the 10 kW,” she said, adding that developers would thus opt for big projects that offer bigger returns and more efficient deployment of time and people.

“They have to simplify it further. I think they have done a lot already. They have the new guidelines. But the challenge is really whether this kind of simplification will make (the) private sector jump into that missionary area because that is the objective of the DoE — to finish during this term the target, the last mile,” she said.

Ms. Capellan said the proposed law should also be clear on who is in charge of “missionary” areas, or remote islands where electricity remains non-existent. She said it is unclear whether it should be Napocor or the National Electrification Administration.