Wednesday, February 7, 2018

FIT and Beyond: Pace of Change in Reshaping RE’s Policy Future

Wazzup Pilipinas!

"Before delving into the DOE’s policy measures to promote renewable energy, I would like to inform you that the DOE is leading the implementation of Executive Order No. 30. This EO creates an Energy Investment Coordinating Council to speed up the processing of Energy Projects of National Significance.

In essence, this EO directs government agencies to act on the application of qualified and completely documented energy projects within 30 days, otherwise, the application is deemed approved.

The EO will streamline the application process and strengthen inter-agency coordination. The days when bureaucrats will take three years to act on an application hopefully become past.

I am also pleased to inform you that I signed last January 17, 2018 the Department Circular (DC 2018-01-0001) that will guide energy stakeholders in making the sector resilient to disasters. The Circular aims to climate-proof the energy industry, make all energy infrastructure adaptive and resilient to any form of adverse conditions and disruptive events.

Going back to the RE policy mechanisms, I signed last 22 December 2017 the Department Circular (DC 2017-12-0015) which paves the way for the implementation of the Renewable Portfolio Standards (RPS) in the main grid. Its significant provisions are mainly creation of the Composite Team to closely monitor compliance and its implementation; and annual review by the DOE, in coordination with the NREB and stakeholders.

This means that starting 2020, the distribution utilities, electric cooperatives and other mandated participants are required to get at least 1% of their supply from RE. The RPS gives RE developers another avenue to market their RE production. However, the contracting for the RPS to be entered into by the mandated participants will be through a competitive selection process (CSP) to ensure that there will be no undue hike in electricity prices that the consumers will ultimately bear.

The DOE will soon conduct an information campaign to help the concerned sectors gain a deeper understanding of the RPS and assist them in calculating the figures on electricity generation they need to comply with under the RPS.

As to the RPS for off-grid areas, the draft circular will be submitted to public consultations, I strongly urge you to provide your inputs. This policy aims to contribute to the growth of the RE industry and rationalize the efficient use of the universal charge for missionary electrification (UC-ME) and improve efficiency in power generation.

Likewise, the Green Energy Option (GEOP) is being presented in various public consultations so that the inputs of the stakeholders can be consolidated in the final version I will sign.

GEOP will give consumers up to the household level the option to choose RE to meet their electricity demand. This is part of our goal to empower consumers to make an informed choice.

As to the status of the feed-in tariff (FIT) mechanism, because of the drastic decrease in the price of both solar and wind technologies, the FIT implementation is under review.

However, the FIT for biomass and run of river hydropower may be given consideration for the extension of two years or upon subscription of the set installation target capacity, whichever comes first. The set target is 250 MW for biomass and 250 MW for hydropower. This is in recognition of the difficulties encountered by the RE developers in securing permits and licenses, which is one of the reasons why EO 30 was promulgated in the first place.

To date, the present Installed Capacity under FIT System for Biomass is 103.56 MW and for hydropower, its 26.6 MW only.

The DOE, with support from development partners, is currently reviewing the effectiveness and efficiency of the FIT implementation. We really want to ascertain its actual impacts and to know if there was welfare gain as a support mechanism.

The Review focuses on the economic and environmental benefits, if any, of FIT system. The emerging recommendation, as a way forward and to ensure welfare gain from the deployment of variable renewable energy (vRe) such as solar and wind, is to ensure their economic and efficient allocation by properly zoning them. This involves the proper techno-economic analysis down to the sub-station (node) level to pinpoint the exact location where the vREs will be of benefit to the power system at large. We would then be able to direct the RE investors where they should put up their RE investments. The vRE would be able to provide operational benefits by making good use of the existing grid infrastructure and avoid causing congestion.

To conclude, let me point out that the economic incentive to RE developers can be provided either through nodal auction or a nodal FIT. In either case, the expectation is that the pricing mechanisms will be based on the maximum savings at the power system level and not just on the least-cost option for vRE power supply.

Thank you very much and salamat po. Mabuhay tayong lahat!"

*Keynote Address of Secretary Alfonso G. Cusi but delivered by Undersecretary Jesus Cristino P. Posadas at the Asia CEO Forum – Renewable Energy Conference held at Marriott Hotel on February 7, 2018.

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