Philippines: Solar operators locked out of FiT may need to shut down

Philippines: Solar operators locked out of FiT may need to shut down

SOLAR POWER developers that failed to qualify to the Department of Energy's
(DoE) incentive scheme are contemplating shutting down as the electricity
rates they have obtained are not enough to recoup their investment or even
to sustain operations.

"I sat down with the stranded (solar power developers). They tried to
rationalize with me that if they're not given any form of assistance at
whatever rate ... what would happen to them is they shut down," National
Renewable Energy Board (NREB) Chairman Jose M. Layug, Jr. told reporters on
the sidelines of a Senate hearing on energy issues.

He said the companies were getting a price of between P2.50 to P3.00 per
kilowatt-hour (kWh) at the electricity spot market for their power output.

"They cannot operate at that price," Mr. Layug said.

The solar power projects were built on the expectation of a rate of P9.68
per kWh during the first phase of the feed-in-tariff (FiT) incentive scheme
or P8.69 per kWh during the second.

The scheme ended in March 2016 in what the industry called a "race to FiT"
that saw an installation target of 500 megawatts (MW) oversubscribed by
about 360 MW. The "stranded" solar farms without a guaranteed FiT were built
for around P26 billion, industry sources said.

Mr. Layug said he had discussions with DoE Secretary Alfonso G. Cusi who
sought recommendations on how to resolve the "stranded" solar capacity.

"But that's not an assurance that they will be given FiT or any form of
subsidy. I don't want to preempt the board because I'm going to sit down
with them anyway," he said.

"They will definitely ask for cost impact if we provide or endorse FiT, but
let's see. There's nothing certain at this time. What's for sure is the
secretary said we will not add anymore to the original list already
previously endorsed for FiT," he added.

Mr. Layug said NREB would not want the closure of the solar farms, calling
that outcome as "ginto na, naging bato pa" just because the developers lost
in the race.

He said when he had sat down with the developers to see options that NREB
can offer and recommend to Mr. Cusi. These developers include four of the
biggest solar farms that failed to get DoE endorsement for the guaranteed
FiT rate.

"We've discussed before a possible auction for the stranded (capacity) and
see what price would come out. The details we don't know yet but one
possible way, they auction, they submit a bid to the DoE on what would be a
good price for them and then the DoE would endorse (the price) to ERC
(Energy Regulatory Commission)," he said.

He said another option would be to look at the developers' marginal cost.

"If it's not an auction, maybe let's look at marginal cost. In other words,
what would be that price that they could continue to operate. There would be
some number crunching with the R.E. (renewable energy) developers and see if
we can propose that to the secretary, endorse it and see whether he would
consider," he said.

In June 2016, the DoE under the past administration endorsed 17 solar
projects to receive the guaranteed FiT of P8.69 per kWh for 20 years. Before
them, seven other projects were endorsed to receive a rate of P9.68 per kWh,
bringing the total installed capacity of the 24 projects to 525.95 MW or
25.95 MW more than the target.

Don Mario Y. Dia, director and treasurer of Bronzeoak Philippines, Inc.,
said it has been almost a year since the DoE came out with a list of
FiT-qualified solar farms, but nothing has been resolved yet of the stranded
solar capacity.

"Nothing has been accorded, not even an official statement coming from the
DoE," he said.

Bronzeoak is the developer of two solar farms of Negros Island Solar Power,
Inc. (islaSol) on Negros island, both of which failed to make it to the list
endorsed by the DoE in June 2016.

"If there is no FiT anymore then it has to be official," Mr. Dia said,
referring to a written issuance from the department.

He also said that an investigative committee created by the DoE to dig into
allegations that the race was rigged had been downgraded to a "study group"
without coming up with a report.

Asked about the price of electricity that developers were getting, he said
there are days it is as low as P1.00 to P2.00 per kilowatt-hour.

"The others will close down. And others will be foreclosed," he said. "The
banks are worried. They're very worried."

Under the FiT system, qualified developers of emerging renewable sources are
offered a fixed rate per kWh of their exported electricity, but excluding
the energy for their own use. Their entitlement is taken from a "FiT
allowance" billed to all on-grid electricity consumers who are supplied with
power through the distribution or transmission network.

The DoE's endorsement is given before the ERC issues each qualified solar
project developer a certificate of compliance, which is then reviewed by the
National Transmission Corp. (TransCo) as basis before issuing a renewable
energy payment agreement. TransCo issues the agreement, which the developers
use to support their claim to the guaranteed FiT rate.

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Link to Original Article:
http://www.bworldonline.com/content.php?section=Economy&title=Solar-operator
s-locked-out-of-FiT-may-need-to-shut-down&id=145075

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com