FIT rates system to bring down power prices in market—NREB

MANILA, Philippines—The National Renewable Energy Board on Wednesday pressed for the imposition of the feed-in-tariff (FIT) rates, saying these could actually bring down the costs of power generation, contrary to allegations hurled against the scheme by various sectors and private companies.

In a briefing on Wednesday, the NREB said the recent study conducted by its technical working group showed that the entry of 200 megawatts of new RE generation could generate savings of as much as P3 per kilowatt-hour, or roughly P1.2 billion, in a month.

These figures were based on a scenario that used the cost of power based on wholesale electricity spot market (WESM) prices in February 2010. This was the month when WESM prices, at a certain hour between February 11 and 13, surged to as much as P68 per kilowatt-hour, well above the National Power Corp.’s rate of P4.02 per kWh at that time.

In effect, what the entry of RE facilities—which will be designated as must-run units—can do is to displace the more expensive power being traded at the WESM, according to the NREB study. The timely inclusion of RE generation will thus force power generation companies to “moderate” their WESM price bids, allowing RE capacity to act as “price stabilizers.”

The NREB pointed out that WESM price spikes could cause increases in electricity bills as shown in the case of the Manila Electric Co., the country’s biggest power distributor for Metro Manila and nearby provinces.

With the recent pronouncements of impending shortages over the next few years, such spikes would be inevitable. RE generation would be able to mitigate such sharp increases, the NREB said.

Reductions in WESM prices have already happened in other countries and were already verified through numerous technical studies in Germany, France and Denmark.

“RE generation is not only clean. It is actually a cheaper power source since the fuel is free—the wind, sun, water, geothermal. These resources are abundant in our country. The WESM benefits further bolster the already strong case for implementing RE now,” noted NREB chairman Pedro Maniego Jr.

Maniego said that the implementation of the provisions of the Renewable Energy Act of 2008 has already been delayed for several years. Most countries, including Asian neighbors, he said, have been investing heavily in renewable energy and have begun putting in place targets and support policies. Globally, RE sources accounted for about 50 percent of new electric capacity in 2010, he added.

“Being an RE-rich but fossil-fuel-poor country, implementing RE now would lead to sustainable development, cleaner environment, energy self-reliance and stable electricity prices for the Philippines,” Maniego said.

The imposition of a feed-in-tariff rate was meant to assure developers of future cash flows, as electricity end-users will be charged fixed amounts to cover production of energy from renewable sources. With this in place, utilities can spread the cost of clean power among customers.

However, the imposition of an additional universal charge called FIT allowance on all power consumers are being slammed by various groups, industries and companies as it could be another burden to all power consumers.