Philippines Government approves initial feed-in tariffs for hydro, biomass, wind and solar

The Energy Regulatory Commission (ERC) approved tariffs for run-of-river hydro, biomass, wind and solar projects. The Government will pay developers these rates for energy fed into the grid. However, it has held off on announcing a tariff for Ocean Thermal Energy Conversion (OTEC) generation to allow for further study.

The tariffs are considerably lower than those proposed by the National Renewable Energy Board (NREB) last year, particularly for wind and solar projects. The ERC said that this reflected the falling costs of installing these technologies and incorporated a lower equity rate of return for investors. However it referred to the NREB's methodology – which took into account factors such as construction and operation costs, capacity and reasonable return on investment – in arriving at the new tariffs, it said.

The ERC said that the new tariffs would apply for an initial three-year period, or until the installation targets set by the Department of Energy for each technology had been met. After this point, the tariffs would be reviewed and readjusted.

"The ERC's lowered FITs will definitely cushion the impact of implementing the FiT incentive mechanism under the [Renewable Energy Act] on the electricity rates, while still being sufficient enough to attract new investments in renewable energy," said Francis Saturnino Juan, executive director of the ERC. "This is win-win for all."

The approved FiT for solar installations will be 9.68 Philippine pesos (PHP), or approximately 14.9p, per kWh generated regardless of the size of the installation. Run-of-river hydroelectric power sources will be entitled to 5.90PHM/kWh, wind 8.53PHP/kWh and biomass 6.63PHP/kWh.

Some renewable energy developers are reviewing the viability of their projects following the announcement, according to news website Rappler. The NREB proposed a rate almost double that agreed for solar, at 17.95PHP/kWh, as part of its submission last year.

"We are very thankful to ERC for finally releasing the FiT," Tetchie Capellan, founder of the Philippine Solar Power Alliance (PSPA) told the website. "[But the rates are] significantly lower than what the industry applied for."

JJ Samuel Soriano of US-based energy firm Sunconnex added that the company would have to study what the ERC took into account in coming up with the rate before it could "assess if it will still be financially feasible to construct and operate".

However environmental groups welcomed the announcement, with Greenpeace Philippines describing it as a "crucial step" towards the group's "vision of a renewable revolution". WWF-Philippines added that encouraging investment in renewables would help the country reverse its growing reliance on fossil fuels, which now account for over a third of the country's power.

"The Philippines is a fossil fuel-poor country," Gia Ibay, climate change programme director with WWF-Philippines. "Investing in [renewable energy] shields us from the volatility of the fossil fuel market while taking advantage of what we have been endowed with."

The country has the potential to develop 1200MW of geothermal capacity, 2308MW of sustainable hydro, 235MW of biomass and 7404MW of wind power capacity over the next ten years, according to a recent study by WWF.