Renewable energy developers have opposed the proposal to determine the prices of renewable energy based on a bidding system.
The industry players said the proposal of Senator Sergio Osmeña to bid out the pricing of renewable energy projects would be in violation of the Renewable Energy Law and would discourage local and foreign investors.
“The suspension and review by the government of its renewable energy policy by entertaining the matter of bidding, notwithstanding the RE Law, would violate the central tenets of the rule of law, stand in the way of progress and send a chilling message to RE investors and lenders,” the group said.
The group includes Biomass Renewable Energy Alliance Inc. president Jose Ma. Zabaleta, Philippine Solar Power Alliance president Dennis Ibarra, Philippine Association of Small Scale Hydro Developers Inc. president Jose Silvestre Natividad, Bell Pirie Power Corp. managing director Desiree Latimer and Wind Energy Developers Association of the Philippines president Niels Jacobsen.
The group instead pushed for the feed-in tariff system to be used by the government to encourage rapid and sustained investments in renewable energy.
“The bidding system, with its narrow objective of eliciting the lowest price, would not provide any certainty to investor-bidders. It is this uncertainty which makes bidding incompatible with the law since such uncertainty will slow down the implementation of the RE projects,” the developers said in nine-page position paper.
The group said the feed-in tariff system, which provides for a fixed per kilowatt hour rate for each renewable source for a 20-year period, is a policy instrument globally recognized to be cost-effective in stimulating investments for rapid deployment of renewable energy.
“Investors want consistency, predictability and transparency in the rule of law. These same qualities are likewise characteristics of the FIT system, where the financiability of the RE projects hinges on the stability and transparency of the regulatory mechanisms,” they said.
The group said the feed-in tariff system is adopted in developing countries such as China, Malaysia, Indonesia, Pakistan, Sri Lanka and Thailand. It is also adopted in the US, UK, Italy, Japan, Germany and Spain.
They also warned that the bidding system would result in the failure of the RE Law, as well as the withdrawal of confidence in the Philippines as an investment venue. It would also negate and render unnecessary the determination of the FIT by the Energy Regulatory Commission.
An auction system has a singular objective of evincing the lowest cost per kWh while the FIT is an exercise in determining long-term sustainable rate, they said.
“It has been the experience in countries like China and Brazil that where underbidding to obtain contracts is widespread, contract failures are high. An auction system requires lowest cost bid which will discourage the development of dynamic and robust manufacturer and supplier market and goes against the purpose of the RE Law,” the group said.
They said a bidding system may not be ideal especially in a market that is underdeveloped or intended to be developed.
“Bidders must put up significant sums in order to mount a bid, thus adding to layers of transaction cost with little assurance that the risk will be rewarded with an actual contract to build,” they said.
(Published in the Manila Standard Today newspaper on /2012/April/24) article source
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