Economists warn of higher installation targets for renewable energy

MANILA, Philippines–A group of prominent economists has warned about the dire effect on consumers of the Department of Energy’s plan to increase the renewable energy installation targets for wind and solar energy at the expense of reducing the installation targets of lower-costing biomass and run-of-the-river hydropower projects.

In a statement on Monday, the Foundation for Economic Freedom, an organization that advocates market-oriented reforms, good governance and consumer protection, said even if the DOE claimed that the plan would not increase the feed-in-tariff (FIT), this would have the effect of encouraging the installation of higher costing RE technologies and promoting such expensive RE technologies.

“Moreover, despite claims by the Department of Energy that the FIT-ALL (allowance) will not increase, the overall burden on the consumers may increase because solar, which has an efficiency of only 16 percent, must have higher standby power,” FEF said.

In this connection, FEF called on the Energy Regulatory Commission to be transparent to the public about the true overall cost to the Filipino consumer, noting that renewable energy, being intermittent and site specific, would demand higher transmission charges and standby costs.

“The additional grid and administrative costs which will be imposed on the Filipino consumer must be made public and transparent,” the FEF said.

If there are more applicants than target installation for a specific technology, FEF said the best way to go would be to auction the target installation and award the contracts to the lowest bidder–the applicant which demands the lower FIT rate.

“This is the method that will lower, and not increase, the burden on the Filipino consumer,” the group said.

The FIT rates for each specific RE technology per kilowatt hour are as follows: run of the river hydro (P5.90 kw/hr); biomass (P6.63 kw/hr); wind (P8.53 kw/hr); and solar (P9.68 kw/hr).

The current installation target is 750 megawatts broken down as follows: hydro (250 MW); biomass (250 MW); wind (200 MW) and solar (50 MW).

FEF chaired is chaired by former Finance Secretary Roberto de Ocampo while its president is Calixto Chikiamco. Its senior advisers are former Prime Minister/Finance Minister Cesar Virata, UP Economics Professor Emeritus and former Economic Planning Minister Gerardo Sicat and former Finance Minister Ramon Del Rosario Jr. Its board members are Romy Bernardo, Ernest Leung, Thomas Allen, Art Corpuz, Felipe Medalla, Vaugn Montes, Gary Olivar, Simon Paterno, Gloria Tan-Climaco and Francis Varela.