Philippines - Government acts to kick-start renewables

PHILIPPINES: The Philippines took a huge step towards harnessing its enormous wind potential in July, when the country's Energy Regulatory Commission (ERC) approved rules for a feed-in tariff for wind and other renewable energy sources.

This is a breakthrough as there had been no clear market framework to make development feasible, even though experts had mapped wind power potential of more than 70GW across the country some time ago (Windpower Monthly, March 2009).

The stakes are high: The country desperately wants to avert the high cost, price volatility and insecurity of foreign energy supplies. Yet, installed wind capacity in the Philippines has stalled at 33MW despite the passage of the 2008 Renewable Energy Act, which provided tax incentives and laid the groundwork for a mandated power purchase price for wind. The law shields wind power revenues from taxes for seven years, setting a 10% corporate tax rate payable throughout the life of the project - a fraction of typical rates. The law also requires that new wind and solar plants be connected to the grid without delay - but a shortage of finance, alongside high-grid access costs, has hampered progress.

Under the new feed-in tariff rules, power consumers will pay more in their electricity bills to subsidise the expansion of green energy. All renewable-generation plants approved by the ERC and built after implementation of the rules will be eligible for the fixed power-purchase prices. Some existing plants will also be able to receive feed-in tariffs, but at reduced terms. The tariffs will expire after 20 years, at which point power prices will be determined by the market or agreements with electricity customers.

The good news for wind developers does not stop there: Transmission system operators must now also give renewables priority connection to the electricity grid. The ERC says the mandated power prices must cover plant costs - including those for connecting to the grid - calculated over the expected life of each plant. The new National Renewable Energy Board will now set feed-in tariffs individually by renewable energy source.

The ERC will adjust power prices annually over their period of applicability to account for inflation and exchange-rate variations. To encourage renewables producers to get started, feed-in tariffs will be gradually reduced at a rate determined by the ERC for each green technology, corresponding to the year operation begins. The government, it seems, believes there is no time like the present.

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