The Government has come up with a decision to award renewable energy (RE) projects under the Feed-in Tariff (FIT) scheme only to developers that can already start commercial operations of their facilities, officials said yesterday. 

"FIT allocation will be given to the first developers who can complete their projects. The completion means first to commence commercial operations of their RE projects," Department of Energy (DoE) Secretary Carlos Jericho L. Petilla said in a text message.

Mr. Petilla was not immediately available when sought for additional details, but DoE Director for RE Management Bureau Mario C. Marasigan said: "FIT eligibility will be determined upon successful commissioning and start of commercial operations." "This means whichever project starts commercial operations will be the ones that can avail of the FIT rate. We will award FIT eligible projects until we reach the installation targets," Mr. Marasigan said.

"We will send letters to RE developers to announce this," Mr. Marasigan said when asked on how the department will inform the proponents, adding that the DoE "will inform RE developers this week."

ONLY CRITERION

Mr. Marasigan said everyone that are ready with their feasibility studies can already submit their applications and start developing their projects.

He said it is the only criterion to award FIT-eligible projects, but noted that there will be testing of the projects before the commercial operations.

"So during the testing, we will be there to see the actual capacity of the project. Then we will award [the project]," he said.

"Upon successful commissioning and affirmation of commercial operation, we will endorse the project to the ERC (Energy Regulatory Commission) for the issuance of certificate of compliance under FIT system," he added.

Mr. Marasigan said the department came up with the measure to make sure that proponents will really develop their projects. 

"We want to push through with the projects. So if the developers are really serious, they should start constructing even without the FIT."

"UNDERSTANDABLE"

Sought for comment, an official from the European Chamber of Commerce of the Philippines (ECCP) said that the department’s decision to set standards is "understandable."

"The 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," ECCP Vice-President Martial G. Beck said in a text message yesterday.

The ECCP, together with other German companies, promotes the use of renewable energy in the country.

Meanwhile, Energy Development Corp. (EDC) -- which is planning to construct an 86-megawatt (MW) wind project in Burgos, Ilocos Norte -- supports the move of the Energy department.

"We welcome the proposal of the Secretary of Energy. We fully support a transparent process that will allow such as Burgos wind, which is ready to proceed, to achieve commercial (success)," EDC President and Chief Operating Officer Richard B. Tantoco said in a text message.

"Following the secretary’s announcement, we will commence construction very shortly," Mr. Tantoco added.

On the other hand, the Philippine Solar Power Alliance (PSPA) -- a group of solar power developers in the country -- urged the department to reconsider their decision.

"We urge [Mr.] Petilla to seriously reconsider that. We suggest for the DoE to require strict compliance on construction date and give penalties on construction default," PSPA Spokesperson Tetchi C. Capellan said in a statement sent via text message.

"NOT THE BEST"

"Basically, what they want is understandable. But that is not the best direction or remedy because its expensive to develop projects. So they would need the FIT to assure the return of investment, which will give them financial capability," Ms. Capellan said.

Ms. Capellan added: "Banks will not likely release funding because they are awaiting for the FIT allocation."

Mr. Marasigan said the DoE decision will give default advantage to bigger players in terms of financing, but "it will also make sure that the project will be finished." 

"After we award the contracts covering the installation targets, we can think about giving advantages to small players. But right now, what we need are the projects that will bring in additional capacity," he said. Mr. Marasigan said last November that the department will come up with specific parameters to determine the eligible projects to ensure that once a project has been awarded, it will really "stand" and contribute to the capacity of the grid.

The DoE’s assigned installation targets for RE technologies totaled 750 MW. Currently, run-of-river hydro and biomass projects are allocated at 250 MW each, wind power at 200 MW, and solar power at 50 MW. The installation targets -- which limit the number and capacity of projects for each renewable technology -- are used as a basis for the FIT rates.

The ERC approved, in July last year, FIT rates per kilowatt hour for the RE projects: for the run-of-river hydro (P5.90), biomass (P6.63), wind (P8.53), solar (P9.68). The FIT rate, which will be divided to actual consumers as FIT allowance, will be paid to the RE developers over a fixed period of 20 years. -- Claire-Ann Marie C. Feliciano

Source: Business World; Economy; 13 February 2013