* This is my guest article in No Tricks Zone yesterday.
----------
Source: BDEW: Germany’s Electricity Price More Than Doubles…Electrocuting Consumers And Markets, 7 December 2014.
----------
The Philippines enacted the Renewable Energy (RE) Act of
2008 (Republic Act 9513) that contains various subsidies to renewables like feed-in-tariff (FIT).
While it was signed into law in December 2008,
FIT was not implemented until July 2012 because many sectors including
manufacturing opposed higher price on already expensive Philippine electricity
rates. But the World Wildlife Fund
(WWF), Greenpeace and other environmental groups in the country lobbied hard to
implement the FIT and the Energy Regulatory Commission (ERC) was pressured to
grant their lobbying, but at a lower rate as requested by the National
Renewable Energy Board (NREB).
Figure 1. Proposed
vs approved FIT in the Philippines, Pesos
per kWh
(Rates approved in
mid-July 2012)
Prior to July 2012, there were not many renewable plants
that were put up because of the uncertainty
when the FIT will be granted and implemented . After July 2012, there
was certainty and more renewables were put up.
The ERC started public hearings regarding how much would
be added to the monthly bill of electricity consumers in the Philippines when
FIT is reflected. In August 2014, the National Transmission Corporation
(Transco), the FIT administrator according to
the law, said that the forecast annual payout for renewable energy
companies based on the FIT petition
would be P8.5 billion ($192.3 million) for 2015 and P10.25 billion ($231.9
million) for 2016. Wow! (Source: Philippine
Star)
Last February, Manila Electric Cooperative (Meralco) and all other electric cooperatives and distribution utilities in the Philippines started collecting the introductory
FIT of PHP 0.04 per kWh. If this rate is retained throughout the year, projected
collection by Transco that it will distribute to the renewable firms would be PHP2.7
billion. If the 12 percent VAT is
included, this will be a P3.02 billion (US$ 68.3 million, at prevailing P44.2/$
exchange rate) leakage from the pockets of electricity consumers nationwide.
FIT rate will be adjusted and rising through time as more
renewables are added to the country’s power
generation mix.
Rising FIT has happened
and continues to happen
in Germany, which probably has one of the world’s most elaborate renewables
subsidy schemes. The FIT keeps rising as more renewables, wind and solar
especially, are added yearly to the energy mix and electricity distributors are
forced to buy them even when cheaper electricity from coal,
natural gas, nuclear and hydro are available.
Figure 2. FIT in
Germany, in Euro cents per kWh
Source: BMU Germany’s
Electricity Price More Than Doubles…Electrocuting Consumers And Markets, 7
December 2014.
So electricity prices in Germany keep rising. This will
happen to the Philippines too, no thanks to RA 9513, the renewables cronyism
law.
Figure 3. Cost
paid by households in Germany, Euro cents per kWh
What makes FIT a formula
for ever-rising price of
electricity?
As contained in Section 7 of RA 9513, FIT forces the
following:
(a) Priority connections to the grid for electricity generated from emerging renewables such as wind, solar, ocean, run-of-river hydropower and biomass power plants,
(a) Priority connections to the grid for electricity generated from emerging renewables such as wind, solar, ocean, run-of-river hydropower and biomass power plants,
(b) priority purchase and transmission of, and payment
for, such electricity by the grid system operators;
(c) fixed tariff to be paid to renewables producers for 20 years; and
(d) compliance with the renewable portfolio standard (RPS).
The RPS as contained in Section 6 of the law, is the
minimum percentage of generation from eligible renewable energy resources to be
set by the NREB.
So combining FIT and
RPS, this means that even if
cheaper power from say Quezon coal or Sual coal, Magat or Pantabangan hydro, Sta. Rita or
Ilijan natural gas are available especially during non-peak hours, but wind
power from Ilocos are available, Meralco and the various provincial electric
cooperatives in Luzon grid are forced to buy from the expensive wind power
plants.
While many environmental activists were among the groups that
opposed electricity price hikes in the past, it is sure they will rein in their noise and militance now that their beloved renewables will be among the
major contributors to rising electricity
prices in the country. Double talk can
happen anytime.
Recently, the Department of Energy (DOE) announced 14 RE projects
with combined capacity of 304 MW which have been endorsed as qualified for the
FIT program. The DOE has issued certificates
of endorsement (CoE) to five biomass, three small hydro, two solar and four
wind power projects.
This means that those power capacity will be dispatched
to the grid at a fixed rate over a period of 20 years.
The installations for RE power totaled 750 MW: run-of-river hydro and biomass projects at 250
MW each, wind power at 200 MW, and solar power at 50 MW, but may soon be raised
to 500 MW.
Aside from FIT and
RPS, RA 9513 gives many other subsidies or relaxation of regulations and
taxation to the renewable producers, privileges that are denied to producers of conventional but cheaper
power sources. These privileges include: (a) Income tax holiday for 7 years;
(b) duty-free importation of RE machinery, equipment and materials within the
first 10 years; (c) special realty tax rates; (d) net operating loss carry over
(NOLCO) to be carried for the next 7 years; (e) 10% corporate tax rate (not
30%),; (f) tax exemption of carbon
credits; and (g) tax credit on domestic capital equipment and services.
This author is not against renewable sources per se. They
are fine, along with geothermal, big hydro, coal and natural gas. What is
objectionable is the cronyism and favoritism granted to the renewables which results in an: ever rising electricity
prices in the country. The case of Germany is already a guide for us. The same
pattern is happening too in Spain and UK.
Government intervention and cronyism in energy policy is
wrong and counter-productive.
Governments should get out of electricity pricing and stop forcing grid
operators and electricity distributors to buy from renewables even if
their rates are expensive. RA 9513 needs major amendments to remove the FIT and
RPS schemes.
-------------
See also:
Energy Econ 15: Electricity Angsts, Presentation at UP Diliman, March 08, 2014
Energy Econ 26: Dealing with Power Deficit in 2015, September 19, 2014
Energy Econ 31: Coal, Renewables and Possible Blackouts in Germany, December 08, 2014
Energy 32: Is the PH Power Supply Ready for the AEC?, January 17, 2015
Energy 33: Renewables Cronyism, Germany and UK Cases, January 26, 2015
No comments:
Post a Comment