Expensive electricity and unstable power supply are two
big concerns for many sectors and businesses in the Philippines. These problems
have adverse economic and social impact for the people.
Electricity-intensive sectors like hotels, malls and
manufacturing are forced to raise the prices of their products and services.
Many local government units cut on the use of street lights. When many streets
are dark at night, there are more crimes and road accidents that happen, and it
is the poor who are likely to be victimized. It is them who walk on dark streets,
where thieves, rapists, and murderers hide.
Policies and measures therefore, that further raise our
already expensive electricity should be avoided. Unfortunately, the reverse is
happening, as certain business sectors and the Department of Energy (DoE)
expand those policies that contribute to more expensive electricity. Like the
feed-in tariff (FIT) under the Renewable Energy Act of 2008 (Republic Act No.
9513; RA).
After delaying the implementation of FIT from 2009 to
2011, the Energy Regulatory Commission was pressured to grant the renewables
lobby in July 2012, but at a lower rate as requested by the National Renewable
Energy Board (NREB). (See Table 1)
Of the four new renewables (the “old renewables” are
geothermal and big hydro), solar is the most problematic. From the original
50-megawatt (MW) allocation, it was raised by former DoE Secretary Carlos
Petilla to 500 MW, in exchange for lower FIT for the next 450 MW.
Then the Philippine Solar Power Alliance, the main solar
lobbying group, sent a letter to the DoE last June asking to expand the solar
FIT allocation from an already expanded 500 MW to 2,000 MW -- a 1,500-MW hike
in the allocation.
This will make expensive electricity a bigger problem in
the future. The FIT allowance has been collected since February at P0.0406/kWh.
There are projections that this will rise to P0.13/kWh or more by 2016.
FIT has gone up and continues to go up in Germany,
Denmark, Spain, United Kingdom, and other European countries.
Germany has one of the world’s most elaborate renewables
subsidy schemes. The feed in act (similar to our FIT) has been rising as more
renewables, wind and solar especially, were 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. (See Table 2)
From a negligible 2.4% of total electricity price in 2003
up to 21.4% in 2014, the FIT is now a major cost contributor to expensive
electricity in Germany which is now second highest in Europe, trailing Denmark.
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,
(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.
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.
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 seven 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 to be carried
for the next seven 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 writer 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 ever rising electricity prices in the country. The case of Germany
is already a guide for us.
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.
Bienvenido S. Oplas, Jr. heads the free market think
tank, Minimal Government Thinkers, Inc., and a Fellow of the South East Asia
Network for Development (SEANET).
------------See also:
BWorld 21, More internet use means lesser corruption?, October 31, 2015
BWorld 22, WESM, PEMC and search for competitive electricity prices, November 05, 2015 BWorld 23, ASEAN trade bureaucracies and Doing Business 2016 Report, November 07, 2015
BWorld 24, Traffic and Newton's 3 laws of motion, November 12, 2015
Energy Econ 37, More on Wind Power in Germany, June 07 2015
Energy Econ 39, the UPSE-Ayala forum on the PH power sector, July 25, 2015
Energy 47, Low capacity factor of wind, solar and biomass plants, November 04, 2015
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