Approval of renewable energy incentives may ease Mindanao power woes

By: BenCyrus G. Ellorin
August 9, 2012 4:45 AM

InterAksyon.com
The online news portal of TV5

CAGAYAN DE ORO CITY, Philippines - The approval of the feed-in-tariffs for renewable energy may mean big for power deficient Mindanao.

The country's biggest producer of solar energy has remained bullish that with the right government support, 100–150 megawatts of clean solar energy can be online in the next three years, with the first 20MW plant ready to supply the grid in less than a year.

And civil society organizations are calling on the Department of Energy and the Asian Development Bank to mobilize funding for this solar project and the rehabilitation of the hydro electric plants of the island from the Clean Technology Fund (CTF).

The Cagayan de Oro Power and Light Company (Cepalco) which operates the country's only on-grid solar power plant with an installed capacity of 1 megawatt, plans to build at least 40MW solar power facilities in Northern Mindanao with the first half available in 2013 if they find government support sufficient to sustain growth in the long term.

The Energy Regulatory Board has released after years of work the feed-in-tariffs (FIT) for renewable energy sources such as solar, wind, run-of-river hydro, biomass and ocean last July 27.

The FIT is one of the non-fiscal incentives provided by the Renewable Energy Act of 2008 (RA 9513) that guarantees payment of fixed tariff for renewable energy generation over a mandated period.

According to Engr. Cecilio Suma-oy, Cepalco senior manager in charge of the company's solar development program, “If there is a window of opportunity we shall commission the first 20MW within 2013 to help address the supply shortage in the Mindanao Grid.”

He added however they are still studying the ERC's FIT rules to see if the approved FIT for solar, which is at P9.68/kWh would be economically and financially feasible in the long term.

“Ideally, the FIT must be able to sustain the development of the solar industry in the country (and avoid a seesaw scenario – projects are viable in some years and not in other years). With the current FIT based on a temporary “over-supply” situation, succeeding projects will no longer be feasible when the solar PV market has recovered,”

Cepalco is advocating for the installation of 100–150 megawatts of solar power plants in Mindanao to complement optimally the hydro capacities, especially during prolonged dry season. Cepalco's 1MW on-grid solar power plant was the biggest among developing countries when it opened in 2004. Many countries like Thailand have built bigger on-grid solar power plants.

“In terms of investor interest, there are already investors who are interested to pursue solar PV projects in Mindanao but got stalled due to the absence of concrete government support for these initiatives,” Sumaoy said.

Advocates of renewable energy are also taking on the opportunities opened by the approved renewable energy FIT.

The national civil society coalition Aksyon Klima (AK) sees the FIT rules which is mandated in the RE law as a game changer.

In fact, the AK is now calling on the Asian Development Bank (ADB) which is in the process of approving a $500-million loan to the Department of Energy (DOE) under its Clean Technology Fund (CTF) to support the funding needs of Cepalco's solar initiative in Mindanao.

Renewable energy advocates have been criticizing the DOE's plan to use the CTF loan for electric tricycles which they suspect may be used as political leverage during the 2013 election.

They criticize the design of the CTF loan funded project to distribute more than 200,000 e-trikes in the country as ill-advised. Although e-trikes are cleaner compared to gasoline-fed tricycles, recharging the batteries of these vehicles may entail additional base load demand which may come from fossil fuel generators, like new coal plants.

According to AK lead convenor and CTF observer for the Asia Pacific, lawyer Elpidio Peria, the ADB can avoid being dragged into controversies if it invests the loan to actual renewable energy projects and help Mindanao overcome its power problems.

“The Committee (of ADB CTF) can avoid being dragged in the potential political mess of the e-trikes being rolled out in local government units in an election period,” Peria said.

The problem of Mindanao is power supply not tricycles, said Red Constantino of the Institute for Climate and Sustainable Cities. Constantino's group has pioneered the franchising of electric jeepneys in Makati City.

National Renewable Energy Board (NREB) chairperson Pete Maniego Jr. said the approval of the FIT mechanism should encourage investors in renewable energy.

The NREB has initially targeted 760MW of new renewable energy power projects in the short term.

Maniego allayed fears that the FIT would result in increased power rates, saying that in the medium- to long-term, the initial cost on FIT will be small compared to fossil fuel like coal.

Coal and other fossil fuels, he said, have consistently increased over the years, while renewable energy, although relatively higher now, “will reach grid parity in 7-8 years or the price of renewable energy will equal with fossil fuel based generators.”

“FIT allowance will be paid only for the first 7 years totaling P14 billion but thereafter, RE will contribute to lower grid rate amounting to P105 billion over 13 years,” Maniego explained.

Sumaoy said solar energy is the best alternative to the urgent energy needs of Mindanao as it can be installed in the shortest time possible.

Aside from drum-beating financing for solar energy in Mindanao, AK also recommended the re-programming of the ADB's CTF loan to support the rehabilitation of the Agus-Pulangi hydro-electric plant and provide seed capital for the Mindanao Power Company which is envisioned to take over the management of the Agus-Pulangi hydro electric plants, the back bone of the island's energy generation. It produces more than half of Mindanao's power needs.

The Mindanao Development Authority is batting for the establishment of the MPC and the rehabilitation of the the Agus Pulangi hydro plants to provide much needed power reserves in the shortest possible time.

The Mindanao grid is currently pressed by very low reserves. Studies have indicated that by 2014, it will have a total power shortage of 250 megawatts.