Uncertainty over future of Philippines Wind industry

Uncertainty over future of Philippines Wind industry

Under the Duterte administration the outlook for wind looks uncertain as the
Philippines government pursues cheap electricity, which is putting at risk
the progress made by renewable and sustainable energy.

In recent years the Philippines has more than quadrupled its installed wind
capacity, which had remained at a stubborn 33MW for several years.

But under president Rodrigo Duterte, longer-term prospects for wind look
unclear. The Department of Energy (DoE) has not yet announced a third round
of wind and solar installation targets or feed-in tariff (FIT) rates. One
local developer, North Wind Power Development Corporation, has put all
current development projects on hold, which include another extension of its
Bangui Bay wind farm.

The Duterte administration has made the reduction of electricity rates its
main focus. The DoE has initiated a study of all the components of the
electricity consumer's bill to seek ways to reduce costs.

As a result, electric utility line losses, distribution and transmission
charges, universal charge and the FIT are all under review. However, the DoE
has not formally announced a timeline for its study on the reduction of
electricity bill components.

Cheap power at all cost

"Given the thrust of the administration to lower power costs, the concept of
renewable energy for a cleaner environment and to mitigate climate change,
does not have any traction with an administration which feels justified to
use the cheapest form of power towards its goal of development," said North
Wind Power Development Corporation legal counsel Poch Ambrosio.

"The challenge is to convince the Duterte administration that renewable
energy is a cost-efficient and economically competitive option which should
be given its proper place in the energy mix," he added.

According to Ambrosio, there have been some statements from the DoE that the
next FIT round for wind and solar will be set by an auction, rather than the
regulatory review by the Energy Regulatory Commission. "Because there are no
mechanisms in place for this it is unlikely to be before 2018 for these
rules to be formulated," he said.

Given the uncertainty of the next FIT rounds, he said some wind and
geothermal developers are pushing for the establishment of a Renewable
Portfolio Standard, which again could take a year to implement.

But according to Make Consulting's Asia-Pacific analyst Robert Liew, an RPS
is not necessarily a strong policy driver, since it relies on enforcement
and a strong enough financial penalty to force compliance.

"I don't think it has been successful in other wind markets in APAC where it
has been used because the big utilities - the entities that have to comply -
usually have strong political connections that can influence it," Liew said.

Chinese involvement

Liew believed even though the Dutuerte administration is prioritising cheap
energy at the cost of renewables, his policy of pursuing closer strategic
ties with China opens up the possibility of Chinese involvement in wind
projects as developers or turbine suppliers, since Chinese turbines are more
competitively priced.

"This marks a change from the past when the previous Philippines
administration had a contentious relationship with China over marine
territory conflicts which is now on the backburner," Liew said.

According to Aaron Daniels, managing director of regional wind technical
advisory Modern Energy Management (MEM), his firm is working with other
developers in the Philippines that intend to proceed with their projects
regardless.

"Without being too specific, reasons range from alternative off-takers,
economies of scale in project size, having projects with superior capacity
factors, which translate as better wind resources," Daniels said.

"These factors can make the project financially viable without waiting for a
third FIT [round]. There are developers that have found a way to overcome
dependence on subsidies that are moving forward with their projects. I
really do believe this is the future of the renewable energy industry in the
region."

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com