LAOAG, Ilocos Norte: The feed-in-tariff (FIT) system, a government incentive given to renewable energy (RE) producers, would eventually lower electricity rates, according to industry players.
This is contrary to the belief that the FIT mechanism will increase power rates after the government imposed a four-centavo per kilowatt-hour (kWh) additional charge on consumers’ monthly bills through the FIT allowance (FIT-ALL).
The feed-in tariff system guarantees all eligible RE plants an entitlement to the applicable rates for a 20-year period. These tariff rates are: P5.90 per kWh for run-of-river hydro; P6.63 per kWh for biomass; P8.53 per kWh for wind; and P9.68 per kWh for solar.
The FIT-ALL is offered to RE producers as an incentive to invest in the more expensive RE sector.
Philippine Electricity Market Corp. (PEMC) President Melinda Ocampo likened FIT-ALL to a buffer fund that is envisioned to spur RE development in the country.
PEMC is the administrator of the Wholesale Electricity Spot Market WESM, the country’s trading platform for power supply.
Ocampo said that under the FIT system, eligible RE plants as identified under the RE Act shall be given preference in the dispatch scheduling. Their remaining obligation involves of submission of their projected outputs.
Pursuant to the Renewable Energy Act of 2008, all intermittent resources and FIT-qualified resources are entitled to “must dispatch” and “priority dispatch,” respectively, subject to the issuance of qualification and registration guidelines.
As a consequence of the preferential dispatch, eligible RE resources will be given priority to inject to the grid as price-takers, displacing expensive fuels.
Ocampo said this may result in lower prices on the spot market as has been observed by other power exchanges.
“Assuming the impact of FIT system-wide is one peso per kilowatt reduction, this is high compared to the increase in your total bill, which is four centavos equivalent to FIT,” she explained.
Since 2012, the PEMC has been working on the appropriate framework for the implementation of “must dispatch” and “priority dispatch” of RE resources.
This is in accordance with the purposes of the WESM Rules to encourage the use of
renewable sources of energy.
“PEMC has been relentless in realizing its mandates under the RE Act,” said Ocampo.
For his part, First Gen Corp. vice president Aloysius Santos said that with the entry of RE plants, the more expensive power plants will be “bumped off” the trading floor.
“I agree that if you introduce RE plants that are qualified for FIT with zero bid, electricity prices will go down,” he told reporters in a briefing.