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Accelerate the development of the countrys renewable energy resources by providing fiscal and non-fiscal incentives to private sector investors and equipment manufacturers / suppliers.
One of the most comprehensive and forward looking RE law in the world Provides substantial fiscal and non-fiscal incentives Non-fiscal incentives include RPS, FIT, REM, Green Energy Option, Net Metering, Financial Assistance, RE Trust Fund & Must/Priority Dispatch.
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Functions of NREB
1. Recommend the feed-in tariff for each emerging RE technology 2. Recommend, monitor and review implementation of National Renewable Energy Plan 3. Evaluate, recommend and monitor the mandated Renewable Portfolio Standards 4. Oversee Renewable Energy Trust Fund
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NREB Challenges
Feed-In Tariff which would:
Allow RE developers to recover their investments and provide them with internationally acceptable ROI's during the FIT period Accelerate the development of competitive RE technologies, and Not unduly burden the consumers with heavy pass-on charges
NREB Challenges
Installation Targets which are: In compliance with the Renewable Portfolio Standards; and Consistent with Philippine Energy Plan and the National Renewable Energy Program Renewable Energy Portfolio Standards which would: Promote the diversification of energy supply, Help reduce GHG emissions; and Ensure compliance from the mandated participants
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NREB Challenges
Green Energy Option which would: Provide End-users the option of choosing RE Resources as their source of energy Net Metering which would: Give incentives to End-users to generate electricity from eligible on-site RE generating facility and delivered to the local generation grid; Generate employment for installers of solar panels, micro wind turbines and other building-installed RE equipment
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Regulatory Framework
2.2 Per Technology and Size
Technology-specific FITs based on NREB recommendation May further be differentiated based on the size of the Eligible RE Plant as recommended by NREB
Recommendat ions
Based on ERC FIT Rules Representative project Single rate for each technology FIT Application with ERC submitted on 16 May 2011
FIT (?)
Revenues Less
O&M costs and G&A costs Using Excels GoalSeek function Annual capital expenditure and debt service Corporate income tax and local taxes Equals
Present value of cash flows to equity investor equals equity investment cost
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Proposed by RE Developers
June 2010 Oct. 2010 11.48 7.44 23.81 11.92 18.52 Nov. 2010 9.94 7.40 20.55 11.85 18.52 April 2011 8.22 6.56 19.11 11.29 18.52 April 2011 7.00 6.15 17.95 10.37 17.65
NREB Approved Degression Rates 0.5% after 2nd year 0.5% after 2nd year 6% after 1st year 0.5% after 2nd year None
For a solid biomass project a project with capacity between 1MW and 10MW 3/ For a ground-mounted project with more than 500kW capacity
2/ For
where: FIT Payments per Renewable Energy (RE) Resource = Installation Target per RE Resource X Applicable Capacity Factor X FIT per RE Resource Avoided Cost = Average WESM Prices at P4.50 X Installation Target per RE Resource X Applicable Capacity Factor; inflated by 4% per annum. Projected Total Demand (2010) = 55.266 thousand gWh; inflated by 4.2% per annum
Notes: 1. Rate impact of the FIT after three years of effectivity of the FITs 2. Avoided cost based on the average WESM price of Php 4.50 / kWh (2010) 3. With degression in the FITs
FIT - refers to a renewable energy policy that offers guaranteed payments on a fixed rate per kWh for emerging renewable energy sources, excluding any generation for own use, or to rate itself as established pursuant to these Rules.
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Where (All forecasts): FIT Rate = Peso per kWh rate approved by the ERC for each technology Market Rate = Price of electricity displaced by FIT generation National Sales = Total sales of electricity to all on-gird customers Other = Working capital allowance, Admin fee, Trustee fee
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Based on the FIT Rates and Installation Targets Filed with the ERC
Technology FIT Rate Installation Target (MW) 100 220 250 250 10 830 Year 3 FIT Impact (in centavos) 2.3 3.7 4.1 1.4 0.5 12.0
For 44% of Meralco's consumers (~100 kWh/month), impact of FITs on FIT All would increase power bills by ~Php12.00/month on the 3rd year, if all installation targets are attained.
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For 44% of Meralcos consumers (~100 kWh/month), FIT All will decrease power bills from ~ Php12.00/ month to ~Php8.30/month
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When market rates go above the FIT Rates RE generation would even serve as a hedge against price increases
Hydro Plant FIT 6.15 P/kWh Pesos H = (-1) P/kWh * Generation (kWh) Biomass Plant FIT 7.00 P/kWh
Cost difference H:
7 8 = (-1) P / kWh
Pesos B
Cost difference B
Market price of power
FIT Rate
Market price of power e.g. 8 P/kWh Pesos S
FIT Rate
Cost difference W
Pesos W
Cost difference S
FIT Rate
Market price of power Solar Plant FIT 17.95 P/kWh
FIT Rate
Total Pesos
in Fossil Fuel)
Total Php/Yr
Admin charges
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For 44% of Meralcos consumers (~100 kWh/month), the higher average generation cost versus the FIT would decrease power bills by ~Php1.70/month
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Is the FIT All at risk of run-away costs like Spain due to over installation of RE?
In Spain 2,500 MW of Solar PV from 2006 to 2008 from a base of 88 MW can this happen to the Philippines? Under the FIT Rules, the installation targets set by NREB for the initial FIT period of 3 years would serve as a governor or trigger mechanism to adjust the FITs downwards or upwards. As part of the FIT submission, degression rates were also included. 6% reduction for Solar One year after FIT rates apply 0.5% reduction for all others Two years after FIT rates apply
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Beyond this, a diverse mix of technologies is critical to the power systems reliability (e.g. Mindanao's reliance on hydro, sustainability of biomass for fuel over 20 yrs).
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RE assisted by FIT All builds local capacity to scale-up as RE prices drop and conventional prices increase!
Price of non-RE power rises due to: - Increase in oil and coal prices1 - A price on carbon - Environmental externality costs
20 Year life of RE power plant (Years) FIT All is an Investment to prepare for wider RE deployment 1For a coal plant, a US$10 increase in the price of coal results in a ~21 Centavo / kWh increase in its electricity price 29
In Summary
44% of Philippine consumers will pay for the deployment of emerging RE resources through the FIT All this will progressively add up to Php 0.12/kWh or Php12 / month in 3 years, IF the total installation targets are attained. Over the FIT term of 20 years, this investment will most likely be recovered because of the expected continual increase in fossil fuel prices. Installation targets and periodic review would mitigate the deployment of the more expensive RE technologies. Benefits from this aside from making economic sense;
Could even serve as hedge against future price increases of fossil fuels Local capacity building to the minimize the lag and speed-up large scale deployment when RE is more cost competitive, thereby, improving economies of scale. Encourages other nations to act on mitigating CO2 emission considered by many to be the largest threat faced by mankind!
Lifeline users consuming 100 kWh or less per month in urban areas and 50 kWh or less in rural areas could be exempted from paying the FIT-All contribution. 31
Thank You!
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