Renewable energy, feed-in tariff temper higher costs

MANILA, Philippines – The entry of feed-in tariff (FIT)-approved renewable energy (RE) projects in the power market has tempered higher electricity costs, based on a study conducted by the market operator.

Consumer groups have questioned the inclusion of a subsidy in the form of feed-in tariff allowance (FIT-All), which is a uniform charge billed to all on-grid electricity consumers as a form of incentive to RE power developers.

A FIT-All of P0.0406 per kilowatt-hour (kwh) was reflected in the end-users’ electricity bills starting January 2015.

While this was an additional charge to consumers, a recent study conducted by the Philippine Electricity Market Corp. (PEMC) showed market prices were reduced nearly 50 percent with the inclusion of FIT-eligible plants in the market, National Renewable Energy Board (NREB) vice chairman Ernesto Pantangco said in a media briefing yesterday.

“Before... we were talking about generalities and impact without actual figures to show. Also, there were no projects that were coming online when we started the hearings of the FIT. But now, we now have actual figures which actually prove the controversy before, that with the introduction of RE into the system, there is a net benefit to the consumer and not just a cost,” he explained.

During the briefing, PEMC presented a study analyzing the financial impact of FIT in the Wholesale Electricity Spot Market (WESM), the country’s power spot market, from November 2014 to October 2015.

The market operator said FIT-eligible RE plants are placed in the market as “merit order effect,” which means its generating capacity is a priority in dispatch to the grid.

In his presentation, PEMC corporate operations and market development senior specialist Jonathan dela Viña said estimates indicate that the integration of the FIT-eligible RE plants in the market resulted in a cost reduction of P4.04 billion or P0.0567 per kwh from November 2014 to October 2015,” he said.

This means consumers would have paid around P0.12 per kwh without the impact of the integration of FIT in the market and the merit order effect, Robinson Descanzo, PEMC vice president for corporate planning and communications added.

“Without the FIT, consumers would have ended paying more,” Pantangco added.

The study came at a time when TransCo proposed a higher FIT-All for 2016, which means higher monthly electricity bills for consumers.

Last December, the National Transmission Co. (TransCo) sought for regulatory approval for the P0.1025 per kwh FIT-All, which will also cover under-recoveries.

TransCo is a government agency created under Republic Act 9136 or the Electric Power Industry Reform Act (EPIRA) of 2001, which used to operate and manage the country’s power transmission system until it was bid out in 2008.

The FIT-All is part of the implementation of the Renewable Energy Law promulgated in 2008, which will serve as an incentive to RE developers to further pursue developments in the sector.

For the initial FIT-All, TransCo has collected P2.04 billion, with a collection efficiency of 95.32 percent, as of Jan. 8.