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Feed-in Tariff (FiT) to be issued by March 2011

February 16th, 2011 Posted in feed-in tariff

Feed-in Tariff (FiT) to be issued by March 2011

The government thru the National Renewable Energy Board (NREB) is targetting to come up with the feed-in tariff (FiT) rate scheme by the end of March this year (2011), a top Department of Energy (DOE) official said.

The FiT is the price per kWh sold that will be paid to all renewable energy (RE) developers and power generators for puting up these intermittent power generation plants. It shall be fixed for 15 years and shall be subject to review every 3 years with the possibility of lowering the FiT as technology and economy of scale improves. It is, however, prospective, and applies only to future RE projects, thus protecting the earlier RE investments from regulatory and pricing risks arising from technological improvements. The RE technologies being intermittent are thus considered must run and will be dispatched when available and transmission and distribution system operators are obliged to ensure that investments are made to ensure their safe and stable connection into the grid.

The FiT is paid to the RE developers by the TRANSCO (National Grid Corporation of the Philippines or NGCP) who provide the metering and transmission services to the distribution utilities (DUs) and electric cooperatives (ECs). In turn, the DUs and ECs collect the renewable energy charge (REC) as a pass-thru charge from the end-consumers such as industrial, commercial, residential, public and street lighting and agricultural consumers. The FiT is uniform throughout the country but specific for each technology and certain capacity range in cognizance of the technological and economic differences due to plant capacity or size.

The REC is calculated by the ERC based on the total FiT payments to RE developers (Peso/kWh x kWh generated by RE) / (kWh sales of all DUs and ECs). The NREB prepares the RE Development Plan and using the projected kWh generation and sales it calculates the total FiT payments to all RE developers. Then the NGCP provides the annual sales to all grids (Luzon, Visayas and Mindanao) and divides the total Fit payments to arrive at a uniform REC to be collected similar to the universal levy from all consumers and private generators in the country.

“By end of March, it will happen. There is already submission of initial numbers at the Energy Regulatory Commission (ERC)” said the DOE official.

Public hearings have been scheduled all over the country after applications from the NREB for FiT have been received by the ERC.

Meanwhile, the DOE is set to conduct regional public consultations for the rules governing the establishment of the renewable portfolio standards (RPS) nationwide. The rules to be reviewed will identify among others the instllation targets for all RE resources in accordance to the National RE Program.

The first consultation will be held in Bacolod City in the Visayas on Feb. 16, followed by Laoag City in Norther Luzon on Feb 21, Cebu City in the Visayas on Feb 23, Cagayan de Oro City in Northern Mindanao on Feb 24 and Davao City in Southern Mindanao on Feb 25.

The RPS is a market-based policy that requires the electric power industry participants such as distribution utilities (DUs) and RE generators and suppliers/aggregators to source an agreed portion (say 10%) of their energy supply from eligible RE resources.

The purpose of the FiT and RPS as envisioned in Republic Act no. 9513, known as the “Renewable Energy Act of 2008”, is to contribute to the growth of the RE industry by diversifying energy supply, spur socio economic development in rural areas (agri-based fuels for biomass power plants, mini-hydro), and help address environmental concerns in the country by reducing harmful emissions from fossil fuels (pollutants SO2, NOx, particulates, heavy metals; green house gas emission CO2). (From Philippine Star, Wed. February 16, 2011, page B-8, by Ms. Donnabelle L. Gatdulla)

The preliminary calculations shows the FiT to be in the order of magnituted below. These are not official ERC or NREB numbers and are based on intial calculations of this energy technolgy expert:

PROPOSED FITs

Technology

Fuel/Capacity

Size of Representative Project

Proposed FIT (Php/kWh)

Biomass
1.   Power Generation Solid Biomass Bagasse, Agricultural Residues, Woodchips & Other Biomass

12.4 MW

9.75

2.  Waste to Energy Livestock Wastes

1.0 MW

7.85

3.  Waste to Energy Municipal Wastes

8.3 MW

9.85

Run-of-River Hydro

1.  Micro Hydro Capacity <= 100 kW

840KW

8.15

2.  Mini Hydro 100 kW < Capacity < 10 MW

8 MW

7.85

3.  Small Hydro  10MW < Capacity < 50 MW

15 MW

6.95

4.  Ocean Energy

OTEC Capacity <= 10 MW

10 MW

18.65

Solar

1.   Residential/Small Scale Capacity<= 500 kW

215 kW

25.75

2.   Ground Mounted Capacity > 500 kW

20 MW

22.65

3.   Building-Installed Capacity> 500 kW

10 MW

24.85

Wind  

 

 

1.  Residential Capacity <= 100 kW

 

12.75

2.  Commercial Capacity > 100 kW

30 MW

10.75

 

The above table were calculated using the following assumptions:

1) Capital structure of 30% equity and 70% debt of total project cost

2) Minimum equity returns by investors of 16% p.a. and commercial rate of lenders of 10% p.a. to encourage investment  in RE

3) Provision for transmission line capital recovery as part of the project cost (e.g. biomass 10 km, mini-hydro 20 km, solar PV 10 km, wind 20-35 km, ocean thermal 10 km)

4) Use of 69kV transmission line at a cost of P2,000,000 per km depending on conductor

5) Transmission line losses calculated based on phase, length, type of conductor, etc.

6) Installed equipment cost estimate based on: FOB $/kW, ocean freight 5% of FOB, insurance 1% of FOB, VAT 12% of CIF, customs duty 0% of CIF and VAT, local freight cost 3% of CIF, installation cost 5% of FOB, contingency 10% of EPC, documentary stamps 1% of EPC, economic life for FiT recovery 15 years, salvage value 10%, project development cost 2% of land and fixed assets

7) Working capital requirements: 2 months fuels and equipment spares, 3 months utilities, 3 months maintenance of rest of plant, 3 months personnel expense, 1 month land lease/rent, 1 month taxes, insurance and services, and 1 month transportation expenses

8) Interest during construction: loan arranger fees 1% of amount to be financed, modeler and legal fees 1% of amount to be financed, commitment fees 0.5% of un-drawn loan, interest during construction 8% p.a. or 8/12% per month of drawn amount

9) The total project cost is sum of installed equipment cost, working capital requirements and interest during construction

10) Variable O&M costs of 0.00027 $/kWh (sample for wind from Power Generation Technology)

11) Fixed O&M costs of 0.0853 $/kW/year (sampe for wind from Power Generation Technology)

12) Debt service reserve (DSRF) fund of 6 months of debt (principal and interest)

13) The DSRF is deposited in a FCDU earning 4% p.a.

14) Final tax on foreign currency deposit (DSRF) 7.5%

15) Special privilege tax of 1% of electricity revenue

16) Special realty tax of 1.5% of depreciated project cost

17) DOE 1-94 of 0.01 PhP/kWh electricity sale

The reader is advised to get in touch with the technology expert for assistance in calculating their particular feed-in tariff and in the conduct of energy resource assessment, capital and operating cost estimates, and feasibility studies to determine the first year electricity tariff (FiT), levelized generation cost breakdown and profit, and economic returns (project and equity IRR, project and equity payback, project and equity NPV). The model includes also a report on the income and expense statement, balance sheet and statement of cash flows needed by the bank for evaluation purposes.

You may also order directly thru PayPal my various project finance models for renewable energy power plants for diesel, biomass, cogeneration, mini-hydro, solar PV, wind and ocean thermal, municipal solid waste to power, oil thermal, coal thermal, natural gas thermal and combined cycle, nuclear, large hydro, geothermal and other power generation and energy storage technologies.

Please proceed to the ENERGY DATA page of this blog.

Marcial

energydataexpert@gmail.com

mars_ocampo@yahoo.com

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