Uncertainty over future of Philippines industry
Windpower Monthly 23.11.16
Sara Ver Bruggan
In recent years the Philippines has more than quadrupled its installed wind capacity, which had remained at a stubborn 33MW for several years.
But under president Rodrigo Duterte, longer-term prospects for wind look unclear. The Department of Energy (DoE) has not yet announced a third round of wind and solar installation targets or feed-in tariff (FIT) rates. One local developer, North Wind Power Development Corporation, has put all current development projects on hold, which include another extension of its Bangui Bay wind farm.
The Duterte administration has made the reduction of electricity rates its main focus. The DoE has initiated a study of all the components of the electricity consumer’s bill to seek ways to reduce costs.
As a result, electric utility line losses, distribution and transmission charges, universal charge and the FIT are all under review. However, the DoE has not formally announced a timeline for its study on the reduction of electricity bill components.
“Given the thrust of the administration to lower power costs, the concept of renewable energy for a cleaner environment and to mitigate climate change, does not have any traction with an administration which feels justified to use the cheapest form of power towards its goal of development,” said North Wind Power Development Corporation legal counsel Poch Ambrosio.
“The challenge is to convince the Duterte administration that renewable energy is a cost-efficient and economically competitive option which should be given its proper place in the energy mix,” he added.
According to Ambrosio, there have been some statements from the DoE that the next FIT round for wind and solar will be set by an auction, rather than the regulatory review by the Energy Regulatory Commission. “Because there are no mechanisms in place for this it is unlikely to be before 2018 for these rules to be formulated,” he said.
Given the uncertainty of the next FIT rounds, he said some wind and geothermal developers are pushing for the establishment of a Renewable Portfolio Standard, which again could take a year to implement.
But according to Make Consulting’s Asia-Pacific analyst Robert Liew, an RPS is not necessarily a strong policy driver, since it relies on enforcement and a strong enough financial penalty to force compliance.
“I don’t think it has been successful in other wind markets in APAC where it has been used because the big utilities – the entities that have to comply – usually have strong political connections that can influence it,” Liew said.
Liew believed even though the Dutuerte administration is prioritising cheap energy at the cost of renewables, his policy of pursuing closer strategic ties with China opens up the possibility of Chinese involvement in wind projects as developers or turbine suppliers, since Chinese turbines are more competitively priced.
“This marks a change from the past when the previous Philippines administration had a contentious relationship with China over marine territory conflicts which is now on the backburner,” Liew said.
According to Aaron Daniels, managing director of regional wind technical advisory Modern Energy Management (MEM), his firm is working with other developers in the Philippines that intend to proceed with their projects regardless.
“Without being too specific, reasons range from alternative off-takers, economies of scale in project size, having projects with superior capacity factors, which translate as better wind resources,” Daniels said.
“These factors can make the project financially viable without waiting for a third FIT [round]. There are developers that have found a way to overcome dependence on subsidies that are moving forward with their projects. I really do believe this is the future of the renewable energy industry in the region.”
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