FIT-ALL could lessen volatility in power spot market

MANILA, Philippines - The Feed-in-Tariff allowance (FIT-ALL), which would raise electricity prices by four centavos effective this month, could eventually pave the way for less volatility in the spot market, renewable energy players said.

The FIT-ALL will be given to renewable energy (RE) players as an incentive to invest in the more expensive but less lucrative RE sector.  Renewable energy players are solar, wind, biomass and small hydropower companies.

“Renewable energy plants help temper prices in the WESM as it pushes out the more expensive plants like diesel since RE prices are not subject to the volatility of the market,” an industry source said, explaining that electricity prices could eventually be tempered with the development of RE in the Philippines.

“Having more RE plants is good for the country. RE plants help in developing our own indigenous sources of energy, thereby, giving us some degree of energy independence,” the source said.

“RE plants allow the displacement of other more polluting sources of electricity such as coal and oil. This, in effect, lessens the carbon emissions otherwise, emitted by these plants,” the source added.

For instance, the 150-megawatt Burgos Wind Farm of Lopez-led Energy Development Corp. is believed to be able to displace approximately 200,000 tons of carbon emissions annually, EDC has said.

“If the country continues to develop the RE industry, it might eventually become the leader in the region. To date, we are one of the leaders in Southeast Asia in wind farms. The solar industry is becoming more popular,” the source also said.

At a rate of four centavos per kilowatt-hour, the FIT-ALL will be charged to all electricity consumers, similar to a universal charge which is a separate line in electricity bills and is used to pay off the debts of the National Power Corp. (Napocor).

It will ensure that renewable energy developers under the FIT system will be paid in full for their actual electricity generation based on the fixed tariff approved for them.

The state-owned National Transmission Co. (Transco) will implement the FIT-All, which is mandated under the Renewable Energy Act of 2008.

Under the FIT system, renewable energy companies are entitled to the following FIT rates: P9.68 per kwh for solar power, P8.53 per kwh for wind and P5.90 per kwh for run-of-river hydroelectric power.

The government has been trying to attract investors into the renewable energy sector amid calls among environmental groups to develop cleaner sources of energy other than coal.