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The Philippines has the unhealthy label of having the
“second or third most expensive electricity prices in Asia” next to Japan and
Singapore. This is not a good news for energy-intensive industries like
manufacturing and hotels where electricity demand can be running 24/7.
With ASEAN economic integration, many big
energy-intensive industries will be put up in cheaper-electricity countries
like Vietnam, Thailand, Malaysia, Indonesia and Cambodia, then export to the Philippines
at zero tariff. That means potential job creation that fails to materialize
here.
It is important then that all succeeding government
energy policies should be geared towards reducing the prices of electricity.
Unfortunately, we are doing the opposite with the implementation of the feed
in tariff (FIT), priority dispatch,
and renewable portfolio standards (RPS)
under the Renewable Energy law of 2008 (RA 9513).
FIT means guaranteed fixed price for solar, wind, biomass
and run-of-river hydro for 20 years. FIT for solar and wind in particular are
2x current average prices of conventional energy sources. Priority dispatch
means even if cheaper conventional energy is available, expensive renewables
will be prioritized in the grid. And RPS is the minimum percentage of
generation that should come from eligible RE resources.
Let us briefly review the
case of Germany – #1 in solar installation in the planet, #3 in wind after the US and China, and perhaps having the most
gallant policies in FIT, other
subsidies, and priority dispatch of renewables in the industrialized world.
Figure 1. Electricity prices in selected rich countries,
2015.
Source: Gilbert Kreijger, Stefan Theil, Allison
Williams, “How to Kill an Industry”,
Handelblatt, 24 March 2016, https://global.handelsblatt.com/edition/396/ressort/companies-markets/article/how-to-kill-an-industry
So Germany has the most expensive residential electricity
tariff and second most expensive in industrial tariff next to Japan. The
authors further made these observations:
* Ordinary
consumers saw their electricity bills double since the introduction in 2000 of
RE; total cost has risen from €0.9 billion in 2000 to €23.7 billion last year
and will likely hit €25.5 billion this year.
* Some 350,000
German households have had their power cut off, up 13 percent from 2011.
Shocking inefficiency with RE producing €25 billion in electricity-bill
surcharges this year will only be worth €3.6 billion on the market.
* Green-power
surcharge on electricity bills already cost consumers €188 billion since it was
first introduced in 2000 – or €4,700 for each of the country’s 40 million
households. The nuclear shutdown will cost another €149 billion by 2035,
according to a Stuttgart University study.
How expensive is FIT in Germany that they are among the
factors why a number of that country’s top manufacturing and energy-intensive
firms like Siemens and BASF are moving or have already moved their production
facilities abroad?
Figure 2. FIT rates in Germany, lessons for the
Philippines
Source for Germany: No Tricks Zone, Germany’s Electricity Price More Than
Doubles…Electrocuting Consumers And Markets, December 07,
2014.
In 2003 in Germany, FIT constituted only 2.4% of the
electricity price. By 2011, it ballooned to 14% and further up to 21.4% by
2014. In the Philippines, there is a huge % increase in the FIT-Allowance (or
FIT-ALL) from 2015 to 2016, tripling FIT-ALL rates in just one year.
The RE law or RA 9513 was enacted in December 2008 but
FIT was only granted in July 20012 mainly due to public opposition to more
expensive electricity, and was finally implemented in February 2015. Starting
this April 2016, the FIT-ALL will rise to 12.40 centavos/kWh. Households that
consume up to 200 kWh a month will pay an extra P24.80. Households that consume
up to 300 kWh a month will pay an extra P37.20/month.
Aside from FIT, priority dispatch and RPS, the RE law
gives many other subsidies or relaxation of taxation to renewable producers,
privileges that are denied to producers of conventional but cheaper power
sources. Among these additional sweetheart deals contained in Section 7 of RA
9513 are: income tax holiday for 7 years, duty-free importation of RE
machinery, equipment and materials within the first 10 years, special realty
tax rates, net operating loss carry over (NOLCO) for the next 7 years, 10%
corporate tax rate (not 30%), and tax exemption of carbon credits.
Renewables are good and useful because they help expand
power capacity in the country. But the FIT, other subsidies and privileges
given to them are not, they contribute to more expensive electricity prices and
grid-destabilizing power supply that go up or down within minutes.
If cheaper electricity, more stable power supply, and more
investments and job creation are to be the priority for the Philippines, we
should allow market pricing of energy sources and in the grid dispatch. The
expanded MW allocation for solar, from the original 50 MW to 500 MW, should be
recalled. There are pressure and lobbying to further raise solar allocation to
2,000 MW to be eligible to FIT.
Compromise measures would look like these: (1) revert the
FIT-eligible solar allocation from 500 MW back to 50 MW, or down to 250 MW but
retain priority dispatch for solar at market rates for up to 1,000 MW. (2)
revert the FIT-eligible wind allocation from 400 MW back to the original 20 MW,
but retain priority dispatch for wind at market rates up to 1,000 MW.
Biomass and run-of-river hydro do not create much problem
now compared to solar and wind. So the existing FIT-eligible allocation of 250
MW for both can be retained. Additional pressures to expand this capacity
should be resisted too.
Bienvenido S.
Oplas, Jr. is a Fellow of the Albert del Rosario Institute, a BusinessWorld
columnist, and President of Minimal Government Thinkers.
minimalgovernment@gmail.com.
------------See also:
Energy 59, Cheap oil and the OFWs, March 07, 2016
Energy 60, PH solar companies, PagIBIG loan for solar, March 12, 2016
Energy 61, EPDP lecture on PH power projections by 2040, April01, 2016
BWorld 25, Feed in tariff means expensive electricity, November 14, 2015
BWorld 51, WESM as market-oriented, PEMC as bureaucracy-oriented, March 25, 2016
Sensational libertarians and solar power in the Visayas, March 30, 2016
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