Group hits DOE plan to raise solar installation target

June 16, 2014

A group of prominent economists and sociopolitical thinkers vehemently opposed a government plan to increase the installation target for solar energy, warning that this would unduly burden Filipino consumers with at least P12 billion a year for the next 20 years or a total of P240 billion in additional electricity charges.

Reacting to the Department of Energy’s plan to increase the installation target for solar energy from 50 megawatts (MW) to 500 MW under the feed-in-tariff (FIT) subsidy of P9.80 a KWh on the pretext that the country has to build energy reserves in the summer months of 2015 and 2016, the Foundation for Economic Freedom (FEF) said this decision was “illogical, arbitrary and represents an unjust burden on Filipino electricity consumers.”

FEF argued that the move was “illogical” since the perceived “emergency” was only during the summer months of 2015 and 2016, yet the decision would burden Filipino electricity consumers with additional power charges for the next 20 years.

“This gigantic burden is on top of the already approved subsidy for the existing installation targets for renewable energy that is conservatively estimated at P8 billion annually for the next 20 years,” FEF said.

FEF stressed that it was not against renewable energy but was strongly opposed to the “obscene” prices that must be borne by Filipino consumers due to the “exorbitant” FIT rates and duration of 20 years given to renewable energy developers.

The economists lamented that solar energy developers would enjoy a FIT rate of P9.68/kWh for the 500 MW allocation when the spot electricity market Wholesale Electricity Spot Market (WESM) rate is at least half this level.

“The difference between the WESM rate and the FIT rate will be shouldered by the Filipino consumers,” FEF noted.

Under the existing rules of the FIT system, renewable energy developers, including the solar energy producers, will enjoy a guaranteed rate of return of 16 percent a year for the next 20 years. The FIT rates are fixed for 20 years, regardless of advances in technology and reductions in cost of capital equipment.

“These developers will enjoy a greater amount of abnormal profits because the FIT rates calculated by the Energy Regulatory Commission two years ago may be too high given the drops in interest rates and the cost of capital equipment,” FEF said.

The group further argued that the burden on Filipino consumers would go beyond the FIT subsidy to renewable energy developers.

“Solar is an intermittent power source: It doesn’t generate power at night or when the sun is covered by clouds. It has an efficiency rating of only 16 to 20 percent, which means that most of the time the equipment lies idle. 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. The plan of the Department of Energy will only fatten the profits of solar energy developers and their foreign equipment suppliers at the expense of Filipino consumers who must bear the additional unjust burden, which is effectively a tax, for the next 20 years,” FEF said.

FEF is led by former finance secretary Roberto de Ocampo, former finance undersecretary Romeo Bernardo and economist Calixto Chikiamco as president.


By Doris C. Dumlao
June 14, 2014 
Philippine Daily Inquirer
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