FIT delay to affect $2.5B in renewable energy deals

The Philippines risks losing potential investments of as much as $2.5 billion or roughly P107 billion to its neighboring countries if the issuance of much-awaited feed-in-tariff (FIT) rates for the use of renewable energy sources will be delayed further.

In his speech at the 2nd Philippine Renewable Energy Summit Friday, Pedro Maniego Jr., head of the National Renewable Energy Board, said that the expected investments covered only the first 760 megawatts of installation target that was earlier set by the Department of Energy. This referred only to the volume of capacity that renewable energy facilities will be allowed to generate within the first three years of the FIT rate implementation.

Of the $2.5 billion in expected investments, some $891 million are expected to come from the construction of 250 MW of hydropower; $759.75 million from 250 MW of biomass; $170 million from solar; $551.6 million from 200MW of wind power; and $126 million from 10 MW of ocean power development.

In a separate interview with reporters, Maniego meanwhile admitted that some of the country’s potential developers have already lost interest in investing in the country’s renewable energy sector and have in fact, already left the country.

“The more we delay the feed-in-tariff, the more that people will lose interest for example. Remember, we were ahead of Malaysia and Thailand in crafting the renewable energy mechanisms but now, Thailand already has its own version of FIT in place while Malaysia approved theirs last year,” Maniego noted.

“But the Energy Regulatory Commission said they will decide immediately. The only problem is that, what if the ERC decides then an intervenor suddenly files a case in court for a temporary restraining order against the FIT’s implementation,” he further said.

The feed-in-tariff scheme, a much awaited mechanism provided under the Renewable Energy Law, is among the most critical considerations in a renewable energy project as these will determine if it will be economically feasible and viable. This scheme will likewise assure developers of future cash flows since electricity end-users will be charged fixed amounts to cover production of energy from renewable sources such as biomass, wind, hydro, solar, and ocean.

However, number of business and cause-oriented groups, and even government agencies, have since came out to protest the proposed feed-in-tariff rates, as these will result in additional charges to be called, the FIT-allowance, which will be collected from all electricity consumers.

At the sidelines of the summit, developers present at the summit admitted that they can only hold on to their proposed projects only for a limited period. While still bullish in pursuing their respective renewable energy projects, they however admitted that the FIT rates must be issued within the year in order to make their projects still viable.

Based on the application filed by the NREB in May last year, solar developers and ocean energy project proponents will enjoy the highest feed-in-tariff rates of P17.95 per kilowatt-hour and P17.65 per kWh, respectively. Investors in wind development may be given a FIT rate of P10.37 per kWh; for biomass, P7 per kWh; and for hydro, P6.15 per kWh.

Maniego assured the public that the impact of the imposition of these FIT rates will be minimal as the 760 MW installation target represented only 6.34 percent of the total installed capacity in Luzon, and 7.24 percent of the total dependable capacity in Luzon in 2010.  Amy R. Remo