IN 2008, Congress passed the Renewable Energy (RE) Act (Republic Act 9513) which was designed to encourage the use of RE sources such as solar, wind, and biomass in the generation of electricity. This Act introduced, in qualitative terms, the concept of “feed-in tariffs” (FIT) for electricity generated from RE sources. FIT is a subsidy designed to encourage electricity from RE sources.
The task of quantifying FIT for RE was shouldered by the National Renewable Energy Board (NREB). In the case of solar energy the rationale for quantification depended substantially on the capital investment required to generate 1 megawatt (MW) of electricity. The data used was obtained from the US.
What was apparent at the time but not taken into account was the very rapid technological advances which resulted in two important factors leading to cheaper solar electricity. The first was the cost reduction in producing solar panels and the second was the greater efficiency in converting solar energy into usable electricity.
These factors cause the FIT for solar energy to be far too high. The first 50 MW attracted a FIT of P9.68 per kilowatt hour (kWh) and the subsequent 450 MW had a FIT of P8.69 per kWh.
The excessive subsidy is compounded by the fact that for 20 years the FIT rate will increase in line with inflation. Assuming that inflation will be four percent per annum, this means that the original FIT of P9.68 per kWh will increase to P15.49 per kWh by the end of the second decade.
This contrasts enormously with the cost of producing electricity from solar energy which has decreased markedly due to technological advances. In fact, electricity from solar sources is now offered to Manila Electric Co. (Meralco) for only P2.99 per kWh. A profit is still being made.
The politically correct RE industry has been treated excessively generously by the government at the expense of the consumer.
Despite this, 10 years after the passing of the RE Act, only two percent of our electricity comes from RE sources.
Our already expensive electricity is made even more expensive by additional taxes being imposed on coal from which most of our electricity originates.
The tax on coal is currently P50 per ton but will rise to P100 per ton in 2019 and P150 per ton in 2020.
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We are currently paying 18.30 centavos per kWh to offset the FIT subsidies, even though very little, if any, purchases by the Central Negros Electric Cooperative (Ceneco) or Panay Electric Company (PECO) come from RE sources. But due to under-recoveries in 2017 this rate will increase to 25.32 centavos per kWh starting with the bills we shall receive later this month.
Our expensive electricity is a factor which makes the Philippines less competitive relative to other ASEAN countries than it should be. Yes, we experienced a 6.7 percent increase in Gross Domestic Product (GDP) last year but it would be higher if the government exerted greater control over electricity prices.
Another aspect is the murky power supply deals that are contracted. The House of Representatives’ good government and energy committees are examining alleged Energy Regulatory Commission (ERC) laxity in allowing electric utilities such as Meralco to forgo bidding in power supply arrangements.
We need a similar examination of Ceneco’s and PECO’s deals./PN
