Renewable energy FIT scheme backed

Philippine Daily Inquirer

9:07 pm | Friday, June 3rd, 2011

A suggestion to adopt an auction scheme for renewable energy (RE) instead of the feed-in tariff (FIT) mechanism will do more harm than good for the RE sectors, as this will discourage investments and hamper the RE industry from reaching its full potential.

According to Hans-Josef Fell of the German Parliament, taking the auction route would stunt the growth of the RE industry as only a limited volume of power from RE sources would be required from developers.

“This sends a message to investors to reduce, instead of increase, their investments in RE,” he said. “Also, when you do auctions, only one or two companies may be able to win. Implementing the FIT scheme, on the other hand, will allow more companies to participate in the RE sector.”

During a recent hearing at the Senate committee on energy Thursday, a proposal to adopt a bidding method for RE was floated.

Under the bidding method, utilities would be required to take a portion of their supply from RE sources, and RE developers would have to jostle to be the power providers of choice of these utilities.

Under the FIT scheme, on the other hand, RE developers which opt to be covered by the system would get a fixed return for the power that they would generate, via the FIT allowance, a universal levy that all power users would have to bear.

Mario Marasigan, director of the Department of Energy’s Energy Utilization and Management Bureau, however, explained that the bidding method should not even be considered as what was provided under the Renewable Energy Act of 2008, was the FIT system.

This scheme assures RE developers of future cash flows, as electricity end-users will be charged fixed amounts to cover the production of energy from renewable sources. With this in place, utilities can spread the cost of clean power among its customers.

“Some countries were successful with the auctioning method, but many more were failures. Auctioning is not a good idea because it sends the wrong message to investors,” Fell said. Abigail L. Ho