People's Domain

[Opinion] Are we going to benefit from FIT?

In July this year, the Energy Regulatory Commission (ERC) has issued the rules for Feed-in-Tariff for renewable energy sources. The Feed-in-Tariff or FIT is one of the incentive mechanism s in the Renewable Energy Act passed in 2008.

The passage of the rules by the ERC was hailed as a crucial step which will set the stage for the development of the vast renewable energy sources in the country like the run-of-river hydropower, biomass, wind and solar energy.

In the same manner, the ERC was commended for its work of keeping the mandate of the Electric Power Industry Reform Act (EPIRA) by issuing the rules for FIT “the soonest possible time”. Four years after the RE law was enacted, the FIT is envisioned to usher the entry of some P106.85 billion in investments and which will attain the total target of 760-MW from RE sources.

Of the 760-MW target capacity, 250-MW will come from hydro, 250-MW from biomass, 200-MW from wind 50-MW from solar and 10-MW from ocean although the FIT rates for ocean thermal energy was not determined after the ERC recommended that it requires further study.

The approved FIT rates for hydro is P5.90/kWh; biomass at P6.63/kWh; wind at P8.53/kWh and solar at P9.68/kWh. How will these FIT rates be considered competitive with coal or diesel?

The question, however, is this: how will consumers going to benefit from the table of rates set in the FIT? To backtrack, the question of rates lies on the concern I posted years ago in a discussion on power issues when I asked how will the consumers going to benefit from renewable energy when the contract that will govern renewable energy will have the same elements from the contracts of conventional energy sources like coal.

Moreover, what sort of safeguards will be established by the government in order to ensure consumers will benefit from renewable energy sources especially that the government did not offer an alternative ownership set up. Like fossil fuel, RE remains privatized and with minimal participation from other stakeholders.

Examining the rates approved by the ERC provides an illustration why consumers will continue to suffer from expensive electricity even with RE. This is unfortunate for electricity coming from RE sources does not have a cost by itself. Its cost is in the facility or equipment. The consumers are banking on RE as a logical response addressing high cost of electricity in the country.

There are numerous questions concerning the development of the renewable energy and its FIT rates but it remains unresolved. The country’s power sector remains heavily favorable to fossil-fuel investors. In fact, the Climate Change Commission (CCC), a body hailed as a first of its kind in the world, has its commissioners sitting in awe while climate causing coal plant developers are shopping for new areas to construct its project, of course, with the help of the Dept. of Energy. It appears that the DoE does not care about existence of the CCC or its work while the CCC does not have the teeth to stop the DoE from facilitating the establishment of coal plants in spite of the fact that there are no laws governing fossil fuel development in this country while there is a law on renewable energy development and which is again considered as a first of its kind.

Yet the problem solely lies on the policy framework – the EPIRA. The RE development is walking within the same path of conventional electricity governed by no less than EPIRA. This is defeating the purpose of harnessing to its full potential the RE sources in the country. With the EPIRA framework, RE is being governed by the same structure that governs fossil fuel.

On top of not having developed an alternative framework for RE, the ERC likewise did not formulate a reasonable pricing methodology which will benefit consumers in the long run. The cost of RE is favorable to private sector developers for it provided the incentives for its investment. The cost of capital, however, will eventually be passed-on to ordinary consumers.

There is really a need to use an alternative framework in order to optimize the opportunity being presented by RE in lowering electricity rates in the country. In the age of climate change, we cannot be blind to the differentiated emissions being contributed the different types of consumers. For sure, we, residential consumers, do not have the same level of emissions if compared to commercial or industrial consumers.

Consistent with that line of thought, the consumers with low greenhouse gas emissions should not have to bear the same burden of increased electricity rate from those with larger emissions. The current FIT applies a uniform rate. I believe that those who contribute more emissions must pay more while those who emit less should shoulder less costs relative to the country’s renewable energy transition.

What we need today is an alternative framework for renewable energy; a framework which is socially just and wherein all the people can benefit. The current FIT might be a step towards achieving development for RE but it is a development for RE investors. As far as the framework and the FIT rates are concerned, the consumers will have little benefit from it.

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