The government has decided that it will be survival of the fittest for those who will avail of “feed-in-tariff” for green or renewable energy projects.

To ensure that those who benefit from the “feed-in-tariff” will last, the Department of Energy has decided to do away with stringent eligibility criteria.

All the DOE now wants is for those who will be the first to put up the plants to get the perks.

Department of Energy Secretary Carlos Jericho Petilla said that “what we are doing is to make sure that only the strong will survive”.

“Right now, I need the capacity,” the energy chief emphasized.

“FIT allocation will be given to the first developers who can complete the quota. Definition of completion is the first to commence commercial operation,” Petilla noted.

The eligibility criteria should included technical performance and financial capabilities, among others. 

DOE’s new policy of awarding, however, is expected to give a default advantage to big companies who have the financial resources to start its project right away. 

“Yes, it will (give big firms the advantage). It will also make sure that the project will be finished,” Petilla said.

According to Petilla, there are a lot of power projects in the country that are not moving.

He said that developers of the said projects have not been fulfilling its service contract requirements with the DOE.

The FIT encourages investment in renewable energy by the government offering long-term contracts to producers. The goal of feed-in tariffs is to offer cost-based compensation to renewable energy producers, providing the price certainty and long-term contracts that help finance renewable energy investment.

The Energy Regulatory Commission’s approved FIT rate includes P9.68 per kilowatt-hour for solar; P8.53 per kWh for wind; P6.63 per kWh for biomass and P5.90 per kWh for hydropower projects. 

The DOE’s 750-megawatt installation target is divided among different types of renewable energy projects, with 250 MW being allocated for hydropower, 250 MW for biomass, 50 MW for solar, and 200 MW for wind power. Projects that will receive the allocation from the DOE’s installation target will be subject to the feed-in-tariff rates.

However, the DOE has reported oversubscription in solar and wind with project proposals already reaching 120 MW and 400 MW, respectively. 

Biomass and hydro, meanwhile, are still undersubscribed with 51 MW and 210 MW, respectively. 

Petilla said that increasing the installation targets will only result in an increased electricity rates in the country. 

The FIT, after all, will be paid by the consumers in their electricity bills. The amount of the feed-in-tariff allowance (FIT-ALL) is still under the evaluation of the ERC. 

“So this will likely be a race on who will finish first,” Petilla said. 

“Let’s have an oversupply of energy, let a bigger installation come up. Once all of them are installed, then, (that’s the time) we can think about it,” he noted.

With the rule on awarding the FIT already set, DOE’s new policy has drawn mixed reactions from the stakeholders in the local energy sector. 

“DOE’s first to operate, first to get the FIT policy is not the best, but in the Philippine context, it is understandable that they had to choose this option, to be able to sort out who among the many developers are serious about building plants. Only the most serious investors will remain,” said Martial Beck, vice president of the European Chamber of Commerce of the Philippines. 

Local renewable energy developer Energy Development Corp. has also shown its support for the DOE’s decision. 

EDC hopes to avail of the FIT rate for the 86-MW Burgos wind power project it plans to put up in Ilocos Norte.

“We fully support a transparent process that will allow projects such as Burgos wind, which is ready to proceed, to achieve commerciality,” said Richard Tantoco, EDC president and chief operating officer.

“Following the secretary’s announcement, we anticipate that the project will commence construction very shortly,” Tantoco added.

The Philippine Solar Power Alliance (PSPA), meanwhile, is in support of the original proposition for tighter documentary requirements on financial closure.

PSPA founder Tetchi Capellan said that the government should implement an allocation policy that “balances private initiative and regulation.”

“We urge Secretary Petilla to seriously reconsider and instead implement restrictions on post construction asset sale, possibly three years after commercial operations,” Capellan said.

“Likewise, we suggest for DOE to require strict compliance on construction date and impose heavy penalties on construction default,” she noted.

Source: Malaya; Business; 13 February 2013