The approval of the feed-in tariffs (FIT) for renewable energy may mean big for power-deficient Mindanao.
Cagayan Electric Power and Light Co. (Cepalco), the country’s biggest producer of solar energy, has remained bullish that with the right government support, 100-150 megawatts of clean solar energy can be online in the next three years, with the first 20-MW plant ready to supply the grid in less than a year.
Civil society organizations are also calling on the Department of Energy (DOE) and the Asian Development Bank (ADB) to mobilize funding for this solar project and the rehabilitation of the hydroelectric plants of Mindanao from the Clean Technology Fund (CTF).
Cepalco, which operates the lone on-grid solar power plant with an installed capacity of 1 MW, plans to build solar power facilities capable of generating 40 MW in northern Mindanao, with the first half available in 2013 if it finds government support sufficient to sustain growth in the long term.
The Energy Regulatory Commission (ERC) on July 27 released after years of work the FIT for renewable energy sources, such as solar, wind, run-of-river hydro, biomass and ocean.
The FIT is one of the nonfiscal incentives provided by the Renewable Energy Act of 2008 (Republic Act No. 9513), which guarantees payment of fixed tariff for renewable energy generation over a mandated period.
Cecilio Suma-oy, Cepalco senior manager in charge of the company’s solar development program, says that if there will be a “window of opportunity, we shall commission the first 20-MW within 2013 to help address the supply shortage in the Mindanao grid.”
He, however, adds that the firm is still studying the ERC rules to see if the approved FIT for solar, which is at P9.68 per kilowatt-hour, will be economically and financially feasible in the long term.
“Ideally, the FIT must be able to sustain the development of the solar industry in the country. With the current FIT based on a temporary ‘oversupply’ situation, succeeding projects will no longer be feasible when the solar power market has recovered,” Suma-oy says.
Cepalco is advocating for the installation of solar power plants to complement Mindanao’s hydropower capacities, especially during the prolonged dry season. Its on-grid plant was the biggest among developing countries when it opened in 2004. Since then, many countries, like Thailand, have built bigger on-grid solar power plants.
“There are investors who are interested to pursue solar power projects in Mindanao but got stalled due to the absence of concrete government support for these initiatives,” Suma-oy says.
Advocates of renewable energy are also taking on the opportunities opened by the renewable energy FIT.
Aksyon Klima (AK), a national civil society coalition, sees the rules as a game-changer and is calling on the ADB, which is in the process of approving a $500-million loan to the DOE under its CTF, to support the funding needs of Cepalco’s solar initiative.
Renewable energy supporters have been criticizing the DOE’s plan to use the CTF loan for electric tricycles (e-trikes), which, they suspect, is being used as a political leverage for the 2013 election.
They criticize the design of the CTF loan funded project to distribute more than 200,000 e-trikes in the country as ill-advised. Although e-trikes are cleaner compared to gasoline-fed tricycles, recharging the batteries of these vehicles may entail additional base load demand which may come from fossil fuel generators, like new coal power plants.
Elpidio Peria, AK lead convenor and CTF observer for the Asia Pacific, says the ADB can avoid being dragged into the controversy if it invests the loan in actual renewable energy projects and helps Mindanao overcome its power problems.
Power supply, not e-trikes
The problem is power supply, not tricycles, says Red Constantino of the Institute for Climate and Sustainable Cities. His group has pioneered the franchising of electric jeepneys in Makati City.
National Renewable Energy Board chair Pete Maniego Jr. says the approval of the FIT mechanism should encourage investors in renewable energy. It has initially targeted 760 MW of new renewable energy power projects.
Maniego allays fears that the FIT would result in increased power rates, saying that in the medium to long term, the initial cost on FIT will be small compared to fossil fuel like coal.
Prices of coal and other fossil fuels, he says, have consistently increased over the years, while those of renewable energy products, although relatively higher now, “will reach grid parity in seven to eight years or the price of renewable energy will equal with fossil fuel-based generators.”
“FIT allowance will be paid only for the first seven years totaling P14 billion, but thereafter, renewable energy will contribute to lower grid rate amounting to P105 billion over 13 years,” Maniego explains.
Suma-oy stresses that solar energy is the best alternative to the urgent energy needs of Mindanao as it can be installed in the shortest time possible.
Aside from drumbeating financing for solar energy in Mindanao, AK also recommends the reprogramming of the ADB’s CTF loan to support the rehabilitation of the Agus-Pulangi hydroelectric plant and provide seed capital of Mindanao Power Co. (MPC), which is envisioned to take over the management of the Agus-Pulangi hydroelectric plants, the backbone of the island’s energy generation. It produces more than half of Mindanao’s power needs.
The Mindanao Development Authority is batting for the establishment of MPC and the rehabilitation of the Agus-Pulangi facilities to provide much-needed reserves in the shortest possible time.
The Mindanao grid is currently pressed by very low reserves. Studies have indicated that by 2014, it will have a total power shortage of 250 MW.