Power execs see drop in RE FIT rates in 5 years

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MONDAY, 18 JULY 2011 20:34 PAUL ANTHONY A. ISLA / REPORTER

UNLIKE other subsidies tucked in the power bills of consumers, the additional costs borne out of feed-in tariff (FIT) for renewable-energy (RE) projects is expected to go down in five years time, Aloysius Santos, First Gen Corp. (FGC) vice president for sustainability and energy efficiency, told reporters in an interview on Monday

“The FIT—which refers to a guaranteed rate given to RE developers for their output—is really different from any subsidy. In fact, there’ll even be a time when there could even be a refund of the rates charged or collected from consumers,” he said.

Although FIT rates are guaranteed to each RE developer, Santos pointed out the amount to be paid is not guaranteed as any particular RE developer will only be paid for the power they were able to produce out of their facility.

Santos said what consumers will only pay is the difference between the FIT and avoided cost.

He explained that, for instance, the difference of P1.15 per kilowatt-hour (kWh) from the FIT for hydropower of P6.15 per kWh and the avoided cost from a conventional coal plant of P5/kWh is what consumers will shoulder.

The difference, he added will have to be multiplied by the annual kWh output of the RE plant.

Santos quickly added, however, that the RE developer could also return or refund to consumers the excess collection if the avoided cost from a conventional coal plant is higher than the FIT rate.

“If the market price goes higher than the FIT rate, the developer has to return the difference to the fund administrator,” Ernesto Pantangco, FGC executive vice president, said.

He added that a common misconception is that whatever the FIT-Allowance is, for instance, P0.12/kWh will be the same rate for 20 years.

“That’s not true because at a certain point the FIT rates will reach parity with the average cost of power and the moment the FIT intersects with the rest of the power rates that are going up, then the FIT will naturally be lower than the average cost of power from conventional sources,” Pantangco said.

He further added that since the FIT rate is good for three years, anybody who builds a power plant can avail of the FIT rate, but in addition to that, there’s an annual digression in FIT rates within three years.

In the case of solar power, according to Pantangco, the annual digression is projected to be 6 percent, which means the solar price will decrease on the second year by 6 percent, and by another 6 percent on the third year.

Pantangco said for other technologies such as biomass, hydropower and wind—which usually take longer to build—the annual digression is 0.5 percent, which bring down the FIT rates by 0.5 percent on the second year and another 0.5 percent on the third year.

Based on the National Renewable Energy Board’s (Nreb) petition, it recommends that the FIT rates for solar power, ocean power, wind power, biomass and hydropower to amount to P17.95 per kWh, P17.65/kWh, P10.37/kWh, P7/kWh and P6.15/kWh, respectively.

NREB has also approved a total of 830 megawatts (MW) in installation targets of renewable energy to be developed. Of the 830 MW, according to NREB, 250 MW will be from hydropower projects, another 250 MW from biomass-power projects, 220 MW from wind, and 100 MW and 10 MW from solar and ocean technologies.