Scottish experts on RE urge caution on generation incentives

Posted on January 23, 2012 12:07:54 AM


GLASGOW -- Experts in Scotland, a world leader in renewable energy (RE), last week advised the Philippines to make sure generation incentives are thought through and complemented with support for research and development as gleaned from their experience in growing the sector.
This way, the uncertainty now in the United Kingdom surrounding a planned reduction of what emerged to be overly generous feed-in tariffs can be avoided, they said.
“The UK has set its initial tariffs too high,” Johnnie Andringa, chief executive of turbine assembler Gaia-Wind Ltd., told visiting journalists on Friday, referring to the guaranteed payment renewable energy producers get from the state. The tariffs are slated to come down for new projects by April according to earlier reports, causing what Mr. Andringa says to be a mad rush to set up generators in the short-term but also causing hesitation among investors moving forward.
“Technology became cheaper in the past three years. But government was too slow [in adjusting tariffs]. There was an election. They couldn’t make changes fast enough. If government is slow, it gets difficult,” Mr. Andringa said.
The Philippines can learn from this as it sets up its own feed-in tariff system, said Paul O’Brien, the international senior business executive for renewable energy technologies at the state-run Scottish Development International.
“The government really needs to think: what happens if a lot decide to build renewables? What happens if it’s a total success or failure?” he said in a separate briefing.
In some cases, feed-in tariffs may be nixed altogether as in the case of off-grid areas in the Philippines where wind power will be cheaper than that currently produced from diesel generators, Mr. Andringa said.
In the meantime, generous incentives in the United Kingdom along with a rule requiring utilities to source a percentage of power from renewable sources have admittedly been instrumental in luring investors, Mr. O’Brien said.
Renewable energy sources were estimated to have been able to supply 35% of Scotland’s requirements last year, putting it on its way to meeting the 100% target by 2020, he said.
Cameron Johnstone, chief executive of tidal energy firm Nautricity Ltd., for his part said state support must also come in during the research and building stages of projects.
Firms like his benefit, for instance, from shared testing centers for marine technology in Scotland as well as a one-stop shop that helps in securing permits from several state agencies, Mr. Johnstone said.
The ease of doing business here has also allowed Nautricity, a spin-off from research work conducted in a local university, to take on an unconventional corporate structure ideal for luring investors.
Mr. Johnstone explained that he sets up special purpose vehicles to take charge of power generation to convince investors to eventually buy into the projects. This allows Nautricity to sit apart and continue to collect royalties from the use of its inventions.
After all, technologies must be piloted so that upgrades can be made to make renewable energy cheaper and thus more acceptable to the market, Mr. Jonhstone said.
“You have to introduce a market economy in supporting technology and make it future-proof, not reliant on subsidies,” he said. -- Jessica Anne D. Hermosa