By Lenie Lectura - March 25,
2018
In a bid to give power industry
players enough time to comply with the renewable portfolio standards (RPS), the
Department of Energy (DOE) has set a two-year period—from 2018 to 2019—as
transition years to prepare the mandated participants in developing their
compliance plans to the minimum RPS requirements.
This is so since the success of the
RPS, a DOE order that mandates distribution utilities (DUs) and retail
electricity suppliers (RES) to source a portion of their power supply from
eligible renewable-energy (RE) sources, relies on the power sector’s big
players’ compliance.
Violators are slapped with fines
ranging from P100,000 to P500,000 or, upon the DOE’s discretion, revocation of
license, franchise or authority to operate, and imprisonment of one to five
years.
This can easily be shelled out by
the big players, as most of them are also in the distribution and supply business.
Target
“[The] RPS is a good mechanism to
help achieve the 35-percent renewables target. Enforceability and compliance
are critical to make this an effective mechanism, and the current policy may
need to be enhanced along these lines,” AC Energy President Eric Francia noted
in an interview.
“The DOE is giving the industry a
head start to give time to build RE plants,” he added.
The DOE has issued Department
Circular DC2017-12-0015, which prescribes the rules and guidelines in the
establishment of RPS for on-grid areas.
The circular mandates DUs and RES,
including power-generation companies serving direct connection to customers, to
source or produce a certain percentage of their electricity requirements from
eligible RE resources. In particular, it should be less than 1 percent of their
annual energy demand over the next 10 years.
It also provides that eligible RE
participants may use biomass, waste-to-energy technology, wind energy, solar
energy, run-of-river hydroelectric power systems, impounding hydroelectric
power systems, ocean energy and geothermal energy, among the other systems, as
defined in the RE Act.
The RPS for on-grid areas is
initially anchored on the country’s aspirational target of 35-percent RE share
in the energy mix by 2030, which will be reviewed under the forthcoming
updating of the National Renewable Energy Program (NREP).
RE certificates
A proof, in the form of
certificates, is issued to complying firms.
RE certificates (RECs) will be
issued by the RE registrar to electric power industry participants showing the
energy sourced, produced and sold or used. The REC may be traded in the RE
market in complying with the RPS.
RE market refers to a market where
trading of RECs is made. The RE registry will be created by the DOE.
“For the purpose of this circular,
the REC shall represent all RE and environmental attribute form 1 megawatt-hour
[MWh] of electricity generation sourced from duly registered eligible RE
facilities,” stated the circular.
Francia explained that these
certificates are somewhat similar to the concept of carbon trading, except that
RECs are specific to RE as opposed to a certified emission reduction (CER).
Francia emphasized that REC is
specific to RE. “The CER is much broader because it does not only involve
RE, but also waste-to-energy, waste management, forest protection, etc…. There
is a trading scheme in the Philippines, but a very specific trading
scheme through the RPS, which requires us to purchase a certain percentage of
demand to supply RE source. Now, the REC serves as the proof,” he said.
CER is issued per ton of carbon
dioxide avoided and serves as currency in carbon trading, which is the sale of
carbon-emission reduction based on specific baselines or carbon-emission
standards. “[Carbon trading] is not newsworthy. It’s not being practiced
here anymore,” Francia noted.
DOE Director Mario Marasigan agreed.
“Carbon trading happened here in the country, but that was a very long time
ago,” he said.
Don Mario Dira, Bronzeoak
Philippines director, said via e-mail that carbon trading has minimal impact to
date due to a very low market value.
“Trading of this [carbon] is down.
However, there is still perceived value on carbon credits for those positioning
for the long term. Not until the US and China sign out on the climate-change
protocols, carbon credits are still low tradable assets,” Dira said, adding
that carbon trading is not present in the country and practiced “only in Europe
and the US.”
‘Detrimental’
The Manila Electric Co. (Meralco)
had stated that it will defer the implementation of RPS until further
comprehensive studies on the feasibility and necessary policy mechanism are
conducted.
Meralco said mandating the RPS will
definitely reduce RE developers’ incentive to be more and more
cost-competitive, to the detriment of consumers. “However, if we allow the
market to work, without distortionary policies like the RPS, we may see more
and more RE being integrated into the system without adverse consequences on
prices and on the reliability and quality of electric service,” Meralco Vice
President and Head of Utility Economics Lawrence Fernandez said.
He added there should first be an
assessment of what RE-based projects will be available for compliance. Equally
important, he stressed, is the capacity of the grid to absorb them should they
be studied ahead of any RPS implementation.
The Meralco official also pointed
out that before penalties are imposed, it must first be ascertained that there
is actually enough cost-competitive RE in the market that will allow all DUs
nationwide to comply with the RPS mandate.
“For DUs, charges, whether from RE
or conventional resources, are pass-through costs from which DUs do not earn
anything. The penalties of the RPS rules on buyers like DUs do not incentivize
RE sellers to provide least-cost power, which will be borne by
consumers,” Fernandez said.
Energy Secretary Alfonso G. Cusi has
assured, though, that this will not happen. “The RPS for on-grid rules outlined
various safety nets to protect the electricity end-users and to ensure that
this new venture will not result in higher electricity rates,” Cusi said.
He said a team will be created to
assess rules to ensure compliance, determine the impact on consumers and
establish whether the imposed minimum RE requirement should be continued or
adjusted.
To further protect consumers, the
RPS policy will also be complemented by the competitive selection process (CSP)
policy, which requires all DUs and other mandated participants to undertake
competitive bidding in sourcing their compliance to ensure the “no higher
rates” policy.
Cusi said the requirement to comply
with the CSP ensures a transparent mechanism that ascertains least cost
procurement of power supply and ensures competition among the players.
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