Pay for renewable energy now, reap benefits later, execs say

By: Abigail L. Ho

Philippine Daily Inquirer

12:56 am | Thursday, July 7th, 2011

Power consumers should bear the additional cost of renewable energy now to ensure that the country reaps the benefits of clean power in the long term, ranking energy industry executives said.

According to Shell Companies in the Philippines country chairman Edgar Chua, RE project subsidies should be treated as more of an “insurance premium,” which consumers would be front loading to be able to enjoy future benefits.

“Think of it as a hedge for the future. RE is an area where the Philippines can do well,” Chua said.

He said global energy demand would double by 2050, which meant that demand for increasingly scarce fossil fuels would also skyrocket. Energy prices would spike if no alternatives would be presented.

By 2050, Chua said RE would account for 30 percent of the world energy mix, and the Philippines had the opportunity now to build on its future RE capacity.

First Gen Corp. vice president Al Santos said consumers should be willing to pay for RE technology now instead of waiting until the technologies mature and prices fall.

“It takes time to develop local capacity and capability. Also, in three to five years’ time, the (difference between current grid rates and RE rates) will be zero or almost zero. So why do we have to wait? If we pursue RE projects now, by the time we reach grid parity, we’ll have the local capability to install the various RE technologies,” he said.

Business groups and the Department of Trade and Industry had expressed concern over the Department of Energy’s thrust to boost the country’s RE capacity, as this would entail subsidies that would further jack up already-high electricity prices.

In an earlier interview, Trade Secretary Gregory Domingo said the Energy Regulatory Commission, in coming out with the final feed-in tariff (FIT) rates for RE projects, should take into consideration the country’s global competitiveness.

The FIT 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.

Payment for the use of clean energy will come from a uniform per-kilowatt-hour charge, dubbed Feed-in Tariff Allowance (FIT-All), which will be collected from all electricity end-users. These collections will go into a National Grid Corp. of the Philippines-administered fund from which payments to RE developers will be taken.