Renewable tariffs seen to cut cost of electricity

Manila Times.net

INDUSTRY players expect the tariff incentive for renewable energy projects to bring down power rates as the cost of conventional fuel rises.

Aloysius Santos, First Gen Corp. vice president for sustainability and energy efficiency, said tariffs on consumers would eventually taper off even though they would pay a premium for renewable energy.

“The more we get renewable energy projects to come in, then the cost will come down. In effect, over a long period of time, renewable energy will lower the rates,” he said.

The Renewable Energy Act of 2008 mandates the establishment of the feed-in-tariff, which would be shouldered by consumers in their electricity bills, to guarantee the returns of renewable energy investors.

Consumers would pay an extra line item in their bills called the FIT-Allowance, from where renewable energy firms would draw their respective tariffs. The National Renewable Energy Board would set the tariff subject to Energy Regulatory Commission approval.

The incentive aims to spur the development of clean and indigenous energy sources, which were largely shunned because of high investment costs and limited markets.

Santos said that what consumers would pay for to support these projects is the difference between the avoided cost of power generation from fossil fuel-based power plants and the FIT.

“So it’s really different from a subsidy. A subsidy remains the same all throughout,” he said.

So when the cost of electricity from coal and diesel plants rises above the FIT, renewable energy companies would have to refund consumers through a lower FIT-All.

Euan Paulo C. Añonuevo