• Think tank condemns ‘abnormal profits’ for renewable energy generators

    A THINK-TANK associated with former government economic managers has attacked the subsidy regime for solar energy, saying the scheme will effectively raise power rates by P12 billion annually over the next 20 years and give renewable energy generators “abnormal profits.”

    The Foundation for Economic Freedom (FEF) added that the Department of Energy’s plans for solar under the feed-in tariff (FIT) program will result in a FIT subsidy of P9.80 per kilowatt-hour (kWh), exceeding the regulator-approved P9.68/kWh.
    The rise in subsidies will be the direct result of increasing the installation target for solar energy to 500 megawatts (MW) from 50 MW, the FEF claimed.The FEF website lists former Prime Minister Cesar E.A. Virata and former socio-economic planning minister Dr. Gerardo P. Sicat in its Board of Advisers and counts among its Trustees former Finance Secretary Roberto F. de Ocampo. The current socio-economic planning secretary, Dr. Arsenio M. Balisacan, is counted as a Fellow.It considers itself “a public advocacy organization dedicated to advancing the cause of economic and political liberty, good governance, secure and well-defined property rights, market oriented reforms and consumer protection.”

    In a statement, FEF acknowledged the need to build additional capacity for the 2015 and 2016 dry seasons, but said it should not come at the cost of burdening electricity end-users.

    “We believe the DOE’s decision is illogical, arbitrary, and represents an unjust burden on Filipino electricity consumers,” FEF said.

    “It is illogical because while the perceived ‘emergency’ is only during the summer months of 2015 and 2016, the decision will burden Filipino electricity consumers with additional power charges amounting to P12 billion annually for the next 20 years, or a grand total of P240 billion pesos,” it claimed.

    FEF said the expected increase in power rates would be on top the already approved subsidy for other renewable energy technologies, “conservatively estimated at P8 billion annually for the next 20 years.”

    “We estimate that the total additional bill for Filipino consumers to be at least P0.32/kWh hour if the additional subsidies for the expanded solar installation capacity is taken into account,” it added.

    The Energy Regulatory Commission (ERC) is set to revise its resolution that sets the FIT rates for renewable energy (RE) projects.

    Under the FIT, RE developers will dispatch the capacity of their projects to the grid at a premium rate for a period of 20 years.

    The scheme — approved in July 2012 — provides the following rates for RE technologies: run-of-river hydro, P5.90 per kilowatt-hour (kWh); biomass, P6.63/kWh; wind, P8.53; and solar, P9.68/kWh

    These were based on the installation ceilings set by the DoE for each RE technology.

    Originally, run-of-river hydro and biomass projects were to have 250 MW each; with wind at 200 MW; and solar 50 MW.

    The Energy department had decided to raise the allocation for solar to address supply problems during the dry season.

    “We are expecting better summer months in 2015 with the new plants that are coming in but I cannot leave that to chance so I want additional solar plants because the profile of solar fits summer,” Energy Secretary Carlos Jericho L. Petilla said last month.

    But the FEF on Friday said RE developers “will enjoy a greater amount of abnormal profits because the FIT rates calculated by the… ERC two years ago may be too high given the drops in interest rates and the cost of capital equipment.”

    The organization also pointed out that solar is an intermittent power source since it cannot generate power at night. Its efficiency rating, the group added, was only pegged at 16-20%.

    “Because of its intermittent nature, the grid has to build additional reserves. These additional energy reserves are added costs that will be passed on to the consumers,” FEF said.

    “It is absurd that manufacturers and consumers have to bear this additional onerous burden for the next 20 years to address a perceived problem that will last for a mere two months in 2015 and 2016 considering alternative solutions are possible and less expensive,” it added.

     

    By Claire-Ann Marie C. Feliciano
    June 13, 2014 
    Business World Online
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