A Regulator's Perspective on Setting the Feed In Tariff

RAUF A. TAN Commissioner, Energy Regulatory Commission, Philippines

Asia Clean Energy Forum 2011 Manila June 21, 2011
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Agenda
Who is able to sell? Which are the products entitled to FIT? Should there be FIT discrimination? How to set the FIT level? What other issues affect the FIT? Who pays? Who buys? How will the FIT be collected & settled? How to ensure transparency?
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Which are the products entitled to FIT? Should be defined by :

Legislation Policy framework Regulation

Who is Able to Sell?

Any licensed RE producer Not all RE producers can sell
Priority connection to the grid Priority Dispatch RE access and integration to the grid challenge Required reserve issues for non-firm energy Refusal for connection?
By whom Under what circumstances
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Should there be FIT discrimination? Technology Size Fuel type Load Factor

How to set the FIT level?

Top-down approach:
Benchmarking

Bottom-up approach:
Average private avoided cost Average social avoided cost RE cost-based RE-conventional energy supply equilibrium (Optimal Penetration Approach)

How to set the FIT level?

How to set the FIT level?

RE Cost-based
Investment for the plant Other costs related to the project, such as expenses for licensing procedures Operation and maintenance (O&M) costs Fuel costs (in the case of biomass and biogas) Return on/of capital Other potential revenues (for example, CER selling) Fiscal and other non-tariff incentives should be considered for passing through to end-users Financial constraints commonly used by financing institutions (DSCR, etc.) Transmission cost depending on the regulation and capped (distance, total cost, % of the investment, etc) According to the expected amount of electricity generated and the estimated lifetime of the power plant, a levelized tariff can be fixed.
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How to set the FIT level?

How to set the FIT level?

Optimal Penetration Approach

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How to set the FIT level?

NREB Proposed FIT & Installation Target (P/kWh) (MW) Biomass 7.00 250 Ocean 17.65 10 RoR Hydro 6.15 250 Solar 17.95 100 Wind 10.37 220

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What other issues affect the FIT?

Premium vs. Fixed Duration Indexation Review Degression

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What other issues affect the FIT?

Premium vs. Fixed Duration Indexation Review Degression Premium is an amount paid on top of the electricity market price while a fixed FIT is guaranteed remuneration that is independent from the electricity market price

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What other issues affect the FIT?

Premium vs. Fixed Duration Indexation Review Degression Fixed Unlimited Based on output

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What other issues affect the FIT?

Premium vs. Fixed Duration Indexation Review Degression To protect investors from inflation by providing a riskadjusted return Annual passthrough of local inflation and foreign exchange rate variations using a formula
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What other issues affect the FIT?

Premium vs. Fixed Duration Indexation Review Degression To allow consumers to benefit from technological advance; and, to secure new investments Forward or backward looking approach Frequency
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What other issues affect the FIT?

Premium vs. Fixed Duration Indexation Review Degression To induce earlier, rather than later, RE investments; and, to reduce the RE costs to consumers as far as technology advances allow Rate Frequency

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Who Pays?
Equal burden sharing of all electricity consumers as the whole community takes advantage of a low-emission economy

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Who Buys?
Electricity consumers Who should act as agent?
Entity obligated for the Renewable Portfolio Standards Distribution Utility

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How is the FIT collected and settled?

Need of a system and identification of responsible parties for the collection and settlement of the FIT FIT Allowance Collected by the distribution utility or retail electricity supplier as a separate charges in the electricity bill Contributed to a Fund managed by the Grid Operator who pays the RE producer the amount of FIT equivalent to its production
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How is the FIT collected and settled?

F I T NGCP
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How to Ensure Transparency

Rules
Public Consultation

FIT Levels
Public Consultation

FIT Allowance
Public Hearing

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THANK YOU!

Title of Presentation

www.erc.gov.ph

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