RE tariff seen as hedge against fuel spikes – IFC

Manila Times.net
Published : Saturday, October 22, 2011 00:00 Written by : EUAN PAULO C. AÑONUEVO


THE tariff incentives for renewable energy (RE) projects should not be seen as additional burden on consumers’ pockets but as a hedge against future hikes in conventional fuel prices, the International Finance Corp. (IFC) said.


“People look at the feed-in-tariff [FIT] as a cost but another view is that you look at FIT as a differential. Right now RE is expensive but over time that may not be the case,” Jesse Ang, IFC resident representative to the Philippines said.


The RE Act of 2008 mandates the establishment of the FIT, which shall guarantee developers’ returns over a fixed period. The incentive aims to draw investments in green technology, which has long been hampered by high investment costs and limited markets compared with conventional power plants.


The FIT, however, would be shouldered by consumers through their electricity bills, a prospect that does not sit well with some members of local business communities given the country’s high power rates. The Philippines’ electricity rate is tops in the region and the fifth in the world.


The IFC official said that while the FIT may drive up rates further, the tariff will be pegged thus would be surpassed by increases in oil and coal prices in the future.


“Eventually, RE will become cheaper than fossil fuels. Short term it is expensive but in the long term it will be competitive,” he added.


In addition to this, the country would be able to draw investments to far-flung places where RE sources can be harnessed.


Ang said that the IFC, the World Bank’s private sector lending arm, is already in talks with RE players, whom he did not disclose, keen on putting up projects in the Philippines.


“We’ve been talking to RE players and we’re certainly interested to help them but everybody’s waiting for the FIT. So the sooner they can decide on the FIT at whatever form the better,” he said.


The Department of Energy earlier approved an installation target of 760 megawatts, or the volume of RE generation that can qualify for FIT by 2014, and a proposed FIT-Allowance (FIT-ALL) of about P0.11 per kilowatt-hour.


The FIT-ALL, which shall be set yearly by the Energy Regulatory Commission, will be the new line item in consumers’ electricity bills where RE developers will draw their respective FIT for 20 years once approved by the regulator.