Revamp an inutile EPIRA and revisit RE Law

Despite a decades-old law that promised to restructure the country’s cumbersome and burdensome power generation and distribution sector, the Philippines still ranks as among the countries with the most expensive electricity rates in Asia.

Other than selling off the power generation and transmission assets of the National Power Corporation, the Electric Power Industry Act (EPIRA) of 2001 has remained inutile in delivering competitively-priced electricity for Philippine industries, commercial establishments and households.

Since there have been no new investments in big fossil-fuel power plants that are more efficient and capable of producing lower-priced electricity, the country is now even being threatened by power outages – definitely not something that bodes well for an economy that has just been given an improved investment rating.

Given the current impasse in the country’s power generation sector including the long lead time needed to commission any new power plant, the situation seems dire.

Revisit pursuit of renewable energy

In the face of high power rates, it is timely to revisit the country’s quest to strengthen its efforts in the sector of renewable energy generation. And there has been commendable progress, especially with regards government’s efforts to make it competitive with some fossil fuels.

In 2012, the Energy Regulatory Commission (ERC) approved feed-in tariff (FIT) rates for wind, solar, hydroelectric and biomass energy at surprisingly lower rates than originally being mulled.

The approved rates were far from what potential investors in renewable energy projects had been hankering for, and what had earlier been forwarded by the National Renewable Energy Board (NREB) for consideration.

In its May 2011 petition, NREB sought a FIT rate of P17.95 for solar energy, which had been slashed almost half to P9.68 per kilowatt-hour in the ERC decision last July 2012.

The NREB had asked for P10.37 per kwh for wind, P6.15 for hydroelectric, and P7 for biomass. The approved ERC FIT rates were P8.53 for wind, P5.90 for run-of-river hydroelectric power, and P6.63 for biomass. The ERC deferred fixing a FIT rate for ocean thermal energy conversion until further studies are completed.

Technological advances

With recent technological advances, especially in the sector of solar energy, the ERC did well by keeping its options open and biding its time before making a balanced decision.

Countries like China and India today are rushing to develop solar energy power plants that are able to provide competitively priced electricity especially in far-flung areas. This is good news for distribution companies like Meralco which are forced to charge subsidized rates.

This year, a few micro solar power plants of three-MW and five-MW capacities will be operational under the FIT rates which have come down to as low as P7 per kwh. A few geothermal and wind power projects are also underway but will be expected to contribute to the national grid in only three to five years’ time.

While there are still too few investors who are actually interested in putting money in solar energy and other non-fossil fuel projects, the Energy department is optimistic that renewable energy will be generating lower-priced electricity within the decade that could actually lower current high power rates.

This fearless forecast comes with the consolation that fossil-based fuel will continue to be expensive given its fast rate of depletion and the fact that power rate distribution in the Philippines’ archipelagic structure will always be expensive.

Getting RE projects off the ground

Even with the temporary setback that the approved lower FIT rates presents, there is hope, even if on a much smaller scale, for renewable energies. But the government must get rid of the bureaucratic red tape that interested investors, and even green advocates, have been complaining about.

The current FIT rates, and the promise of a review every three years, have already ensured that consumers will not be short-changed by new renewable energy investors, unlike what happened in the take-or-pay agreements between the government and independent power producers in the early 1990s.

But the FIT system is only going to be worthwhile if the hundreds of interest investors in renewable energy are able to progress their project proposals in an efficient and transparent way.

Particularly for solar energy, the marked reduction in the price of photovoltaic cells and solar energy panels has created an interesting market in off-grid areas where opportunities to earn from renewable energy power generation have been opened to small entrepreneurs.

Call them the sari-sari stores of electricity in far-flung rural areas, these ventures have the potential of allowing cheaper-priced electricity to be sold to homes that have enjoyed expensive electricity only from gasoline- or diesel-fired generators.

If this model is allowed to work also, but in a bigger way, for mini-hydro, biomass and wind power generation initiatives – perhaps, in time, even using the ocean’s power – then we can truly look forward to some solid gains for renewable energy.

For the Philippines, with thousands of islands that make electricity distribution a challenge, small renewable energy producers that can operate their own distribution lines could very well become a big contributor in weaning the country from fossil fuels for power generation.

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