Energy Technology Expert

Preliminary Feed-in Tariff (FiT) for Renewable Energy Sources in the Philippines – Biomass, Mini-Hydro, Wind and Solar

Last January 20-21, 2010, the Philippine Department of Energy (DOE) and the National Renewable Energy Board (NREB) and in consultation with the Renewable Energy (RE) Alliance, conducted a three day seminar at the Subic International Hotel at the Subic Free Port, Province of Zambales, Philippines.

With the recent passage last year (2009) of the Philippine Renewable Energy Law (R.A. 9513) and its Implementing Rules and Regulations (DC 2009-05-0008), a Feed-In Tariff mechanism has to be established in the country within a year (February 2010).  In particular, a feed-in tariff scheme which provides an obligation to the power industry to source RE generation at a guaranteed fixed price over a period of time, which should not be less than a period of 12 years (15 years per ERC), to be determined by the Energy Regulatory Commission (ERC).

Very recently, the ERC submitted its draft rules for the determination of FiT including the setting of RE capacity cap in order to allow the smooth penetration of RE resources in the national grid, the calculation of renewable energy charge (REC) to be collected by the National Grid Corporation of the Philippines (NGCP) from all customers in the Philippines to pay the aggregate feed-in tariff of all RE developers that supplied power to the grid.

During the seminar/workshop, a German Consultant – Dr. Menke, provided the overall framework for the development of Fit in Germany, Europe, US and other major economies, and made recommendations on how the Philippines could further promote RE thru the implementation of the FiT mechanism in order to attain the target Renewable Portfolio Standards (RPS), Green Energy Option (GEO) and other RE mechanisms with the end in view of mitigating climate change and global warming with the use of RE to supplement or replace conventional fossil fuels.

At the tail-end of the seminar/workshop, the project finance models of the author of this blog, Engineer Marcial T. Ocampo, were extensively used in making a first pass or estimate on the FiT to be charged by biomass, run-of-river hydro, wind and solar energy.

My previous blogs have presented snippets of these project finance models and the results are summarized below.  The main assumptions are: exchange rate of PhP47 per US$, 30% equity (at 16% p.a. IRR) and 70% debt (at 10% p.a. interest), 20 year economic life, nominal plant capacities and plant heat rates expected from current technology, variable O&M and fixed O&M based on actual Philippine experience or as calibrated using Paul Breeze’s best practices ($/kWh and $/kW/year).  Other assumptions include 5% plant own use, 3% transmission line loss, 10 km transmission line costing PhP2,000,000 per km.

Of course the fiscal and non-fiscal incentives provided by the new RE Law were included such as 10% income tax rate, 7 year income tax holiday, 0% customs duty, 1% government royalty, 1.5% special realty tax, etc.  However, carbon emission reduction credits under the CDM of the Kyoto Protocol were not included in the FiT calculation as this is an added benefit.

a) Biomass Direct Combustion (coconut husk, agricultural wastes, wood wastes) – 8.8477 per PhP/kWh (0.1882 US$/kWh) @ 10 mw rated capacity, 75% capacity factor, 0.00520 $/kWh, 0.430 $/kW/year and 3,314 $/kW all-in project cost (1,900 $/kW FOB USA).

b) Biomass Cogeneration (sugarcane bagasse) – 9.6457 per PhP/kWh (0.2052 US$/kWh) @ 34 mw rated capacity, 75% capacity factor, variable O&M of 0.700 PhP/kWh, fixed O&M of 0.846 PhP/kW/year and 3,226 $/kW all-in project cost (1,900 $/kW FOB USA).

c) Mini-Hydro (run-of-river) – 4.3582 per PhP/kWh (0.0927 US$/kWh) @ 10 mw rated capacity, 50% capacity factor, 0.00100 $/kWh, 0.0200 $/kW/year and 2,362 $/kW all-in project cost (1,300 $/kW FOB USA).

d) Wind farm – 11.0600 per PhP/kWh (0.2353 US$/kWh) @ 30 mw rated capacity, 25% capacity factor, 0.00027 $/kWh, 0.0853 $/kW/year and 2,439 $/kW all-in project cost (1,500 $/kW FOB USA).

e) Solar PV Array – 35.4607 per PhP/kWh (0.7545 US$/kWh) @ 1 mw rated capacity, 15% capacity factor, 0.00000 $/kWh, 0.0002 $/kW/year and 5,455 $/kW all-in project cost (3,136 $/kW FOB USA).