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

February 5th, 2010 Posted in feed-in tariff, financial models

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).

In ‘000 US$

1 ha = 10,000 m2

Year

0

Initial investment in land

$2,128

20

43

Freight on Board = FOB USA = $/kW

$1,900

10.00

19,000

Ocean Freight = FRT = 5% x FOB

5%

950

Insurance = INS = 1% x FOB

1%

190

Cargo, Insurance & Freight = CIF = FOB + FRT + INS

20,140

Value Added Tax = VAT = 12% x CIF

12%

2,417

Customs Duty = (CIF + VAT) x (% Duty) x (1 + % VAT)

0%

0

Duty-Paid Landed Cost = DPLC = CIF + VAT + Duty

22,557

Local Freight Cost = LFC = 3% x CIF

3%

604

Delivered Cost at Site = DCS = DPLC + LFC

23,161

Installation Cost = IC = 5% x FOB

5%

950

Transmission line cost 69 kV (T/L)

$42,553

10.0

425.53

Total EPC = DCS + IC + T/L

24,536.53

Contingency (10%) = EPC x 10%

10%

2,454

Documentary Stamps (1%) = EPC x 1% = DS

1%

245

Total Fixed Assets (EPC + Contingency + DS)

27,236

Depreciation term (years)

salvage value

10.00%

1,226

20

Development costs (modeler)

0.50%

136

Other Costs including taxes, contingencies

0.00%

Carbon Emission Registration & Consultancy

0.00

Initial investment in capitalized expenses

1,164.16

Amortization term (years)

salvage value

10.00%

52

20

Working Capital:

Working capital (adjustment to meet DSCR = 1.1)

1.100

1.241

Working capital (initial stocks – biomass fuel) – 2 months

118

Working capital (initial stocks – chemical materials) – 2 months

23

Working capital (mobilization – utilities) – 2 months

51

Working capital (mobilization – maintenance) – 2 months

358

Working capital (mobilization – personnel expense) – 2 months

358

Working capital (pre-paid expense – advance rent) – 2 months

72

Working capital (pre-paid expense – taxes, insurances, etc) – 2 months

1,028

48

Interest During Construction:

Dev’t fees (loan arranger)

0.50%

142

Front end fees (loan arranger)

0.50%

142

Commitment fees (bank)

0.50%

142

Interest During Construction (bank) – 12 months

18

10.00%

4,266

Amortization term (years)

salvage value

10.00%

211

20

Total Investment (land, fixed, capitalized expenses, working capital)

$3,314

33,135

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).

In ‘000 US$

1 ha = 10,000 m2

Year

0

Initial investment in land

$2,128

68

145

Freight on Board = FOB USA = $/kW

$1,900

34.00

64,600

Ocean Freight = FRT = 5% x FOB

5%

3,230

Insurance = INS = 1% x FOB

1%

646

Cargo, Insurance & Freight = CIF = FOB + FRT + INS

68,476

Value Added Tax = VAT = 12% x CIF

12%

8,217

Customs Duty = (CIF + VAT) x (% Duty) x (1 + % VAT)

0%

0

Duty-Paid Landed Cost = DPLC = CIF + VAT + Duty

76,693

Local Freight Cost = LFC = 3% x CIF

3%

2,054

Delivered Cost at Site = DCS = DPLC + LFC

78,747

Installation Cost = IC = 5% x FOB

5%

3,230

Transmission line cost 69 kV (T/L)

$42,553

10.0

425.53

Total EPC = DCS + IC + T/L

82,402.93

Contingency (10%) = EPC x 10%

10%

8,240

Documentary Stamps (1%) = EPC x 1% = DS

1%

824

Total Fixed Assets (EPC + Contingency + DS)

91,467

Depreciation term (years)

salvage value

10.00%

4,116

20

Development costs (modeler)

0.50%

458

Other Costs including taxes, contingencies

0.00%

Carbon Emission Registration & Consultancy

0.00

Initial investment in capitalized expenses

2,540.24

Amortization term (years)

salvage value

10.00%

114

20

Working Capital:

Working capital (adjustment to meet DSCR = 1.1)

1.100

1.100

522

Working capital (initial stocks – biomass fuel) – 2 months

Working capital (initial stocks – chemical materials) – 2 months

554

Working capital (mobilization – utilities) – 2 months

Working capital (mobilization – maintenance) – 2 months

1,005

Working capital (mobilization – personnel expense) – 2 months

Working capital (pre-paid expense – advance rent) – 2 months

Working capital (pre-paid expense – taxes, insurances, etc) – 2 months

2,082

Interest During Construction:

Dev’t fees (loan arranger)

0.50%

471

Front end fees (loan arranger)

0.50%

471

Commitment fees (bank)

0.50%

471

Interest During Construction (bank) – 12 months

18

10.00%

14,123

Amortization term (years)

salvage value

10.00%

699

20

Total Investment (land, fixed, capitalized expenses, working capital)

$3,226

109,687

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).

In ‘000 US$

$/kW

kW

Year

0

Initial investment in land

$2,128

20

42.55

Freight on Board = FOB USA = $/kW

$1,300

10.00

13,000.00

Ocean Freight = FRT = 5% x FOB

5%

650.00

Insurance = INS = 1% x FOB

1%

130.00

Cargo, Insurance & Freight = CIF = FOB + FRT + INS

13,780.00

Value Added Tax = VAT = 12% x CIF

12%

1,653.60

Customs Duty = (CIF + VAT) x (% Duty) x (1 + % VAT)

0%

0.00

Duty-Paid Landed Cost = DPLC = CIF + VAT + Duty

15,433.60

Local Freight Cost = LFC = 3% x CIF

3%

413.40

Delivered Cost at Site = DCS = DPLC + LFC

15,847.00

Installation Cost = IC = 5% x FOB

5%

650.00

Transmission line cost 69 kV (T/L)

$42,553

20.0

851.06

Total EPC = DCS + IC + T/L

17,348.06

Contingency (10%) = EPC x 10%

10%

1,734.81

Documentary Stamps (1%) = EPC x 1% = DS

1%

173.48

Total Fixed Assets (EPC + Contingency + DS)

19,256.35

Depreciation term (years) salvage value

10.00%

693.23

25

Development costs (modeler)

0.50%

96.49

Other Costs including taxes, contingencies

0.00%

0.00

Carbon Emission Registration & Consultancy

0.00

Initial investment in capitalized expenses

144.88

Amortization term (years) salvage value

10.00%

5.22

25

Working Capital:

Working capital (adjustment to meet DSCR = 1.1)

1.100

1.236

0.00

Working capital (initial stocks – fuel) – 2 months

0.00

Working capital (initial spares – installation) – 2 months

2.92

Working capital (mobilization – utilities) – 2 months

6.57

Working capital (mobilization – maintenance) – 2 months

16.67

Working capital (mobilization – personnel expense) – 2 months

16.67

Working capital (pre-paid expense – advance rent) – 2 months

3.33

Working capital (pre-paid expense – taxes, insurances, etc) – 2 months

48.39

2.22

Interest During Construction:

Dev’t fees (loan arranger)

0.50%

97.22

Front end fees (loan arranger)

0.50%

97.22

Commitment fees (bank)

0.50%

97.22

Interest During Construction (bank) – 12 months

24

10.00%

3,888.76

Amortization term (years)

salvage value

10.00%

150.49

25

Total Investment (land, fixed, capitalized expenses, working capital)

$2,362

23,624.20

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).

In ‘000 US$

$/kW

MW

Year

0

Initial investment in land, $/ha

$2,128

2

4.26

Freight on Board = FOB USA = $/kW

$1,500

30.00

45,000.00

Ocean Freight = FRT = 5% x FOB

5%

2,250.00

Insurance = INS = 1% x FOB

1%

450.00

Cargo, Insurance & Freight = CIF = FOB + FRT + INS

47,700.00

Value Added Tax = VAT = 12% x CIF

12%

5,724.00

Customs Duty = (CIF + VAT) x (% Duty) x (1 + % VAT)

0%

0.00

Duty-Paid Landed Cost = DPLC = CIF + VAT + Duty

53,424.00

Local Freight Cost = LFC = 3% x CIF

3%

1,431.00

Delivered Cost at Site = DCS = DPLC + LFC

54,855.00

Installation Cost = IC = 5% x FOB

5%

2,250.00

Transmission line cost 69 kV (T/L)

$42,553

20.0

851.06

Total EPC = DCS + IC = T/L

57,956.06

Contingency (10%) = EPC x 10%

10%

5,795.61

Documentary Stamps (1%) = EPC x 1% = DS

1%

579.56

Total Fixed Assets (EPC + Contingency + DS)

64,331.23

Depreciation term (years) salvage value

10.00%

2,894.91

20

Development costs (modeler)

2.00%

1286.71

Other Costs including taxes, contingencies

0.00%

0.00

Carbon Emission Registration & Consultancy

30.00

Initial investment in capitalized expenses

1,887.18

Amortization term (years) salvage value

10.00%

84.92

20

Working Capital:

Working capital (adjustment to meet DSCR = 1.1)

1.100

1.289

0.00

Working capital (initial stocks – fuel) – 2 months

0.00

Working capital (initial spares – installation) – 2 months

1.17

Working capital (mobilization – utilities) – 2 months

2.63

Working capital (mobilization – maintenance) – 2 months

265.00

Working capital (mobilization – personnel expense) – 2 months

265.00

Working capital (pre-paid expense – advance rent) – 2 months

1.33

Working capital (pre-paid expense – taxes, insurances, etc) – 2 months

570.47

35.33

Interest During Construction:

Dev’t fees (loan arranger)

1.00%

662.23

Front end fees (loan arranger)

1.00%

662.23

Commitment fees (bank)

0.50%

331.11

Interest During Construction (bank) – 12 months

12

8.00%

5,297.81

Amortization term (years)

salvage value

10.00%

312.90

20

Total Investment (land, fixed, capitalized expenses, working capital)

$2,439

73,176.05

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).

In ‘000 US$

$/kW

MW

Year

0

Initial investment in land, $/ha

$21,277

2

42.55

Freight on Board = FOB USA = $/kW

$3,136

1.00

3,136.00

Ocean Freight = FRT = 5% x FOB

5%

156.80

Insurance = INS = 1% x FOB

1%

31.36

Cargo, Insurance & Freight = CIF = FOB + FRT + INS

3,324.16

Value Added Tax = VAT = 12% x CIF

12%

398.90

Customs Duty = (CIF + VAT) x (% Duty) x (1 + % VAT)

0%

0.00

Duty-Paid Landed Cost = DPLC = CIF + VAT + Duty

3,723.06

Local Freight Cost = LFC = 3% x CIF

3%

99.72

Delivered Cost at Site = DCS = DPLC + LFC

3,822.78

Installation Cost = IC = 5% x FOB

5%

156.80

Transmission line cost 69 kV (T/L)

$42,553

10.0

425.53

Total EPC = DCS + IC + T/L

4,405.12

Contingency (10%) = EPC x 10%

10%

440.51

Documentary Stamps (1%) = EPC x 1% = DS

1%

44.05

Total Fixed Assets (EPC + Contingency + DS)

4,889.68

Depreciation term (years) salvage value

10.00%

220.04

20

Development costs (modeler)

0.50%

24.66

Other Costs including taxes, contingencies

0.00%

0.00

Carbon Emission Registration & Consultancy

25.00

Initial investment in capitalized expenses

49.71

Amortization term (years) salvage value

10.00%

2.24

20

Working Capital:

Working capital (adjustment to meet DSCR = 1.1)

1.100

1.359

0.00

Working capital (initial stocks – fuel) – 2 months

0.00

Working capital (initial spares – PV installation) – 2 months

0.00

Working capital (mobilization – utilities) – 2 months

0.00

Working capital (mobilization – maintenance) – 2 months

0.02

Working capital (mobilization – personnel expense) – 2 months

0.02

Working capital (pre-paid expense – advance rent) – 2 months

0.00

Working capital (pre-paid expense – taxes, insurances, etc) – 2 months

0.04

0.00

Interest During Construction:

Dev’t fees (loan arranger)

0.50%

24.91

Front end fees (loan arranger)

0.50%

24.91

Commitment fees (bank)

0.50%

24.91

Interest During Construction (bank) – 12 months

12

8.00%

398.55

Amortization term (years)

salvage value

10.00%

21.30

20

Total Investment (land, fixed, capitalized expenses, working capital)

$5,455

5,455.22

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

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    Thanks…Bill Massey



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