Additional RE capacity expected to bring down power costs

MANILA, Philippines - At least 600 megawatts of installed renewable energy (RE) capacity could reduce average prices at the Wholesale Electricity Spot Market (WESM), the country’s trading floor for electricity, by 80 centavos per kilowatt-hour, according to a paper on feed-in-tariff (FIT) released by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.

“A study conducted by the Melbourne Energy Institute found that only 600 MW installed RE capacity decreases already significantly the WESM prices, in average by 0.8/kwh. As the now approved installation targets equal 1200 MW, the actual savings might even be higher. Renewable energies can also reduce electricity prices during peak demand periods. The output profile of solar plants correlates well with the demand profile of the Philippines. Thus, solar power can contribute to slow down the fast increase of electricity prices during peak demand periods,” GIZ said in its paper.

Aside from lowering cost, GIZ said utilizing renewable energy also has several benefits.

“One reason is that electricity generation from renewable energy makes the country less dependent on energy imports. In 2013, indigenous energy sources saved the country energy imports in the amount of $2.7 billion. 56.75 percent of the Philippines energy demand is already covered by indigenous energy sources. Yet, the energy demand is expected to rise annually by four percent. Renewable energy sources, such as solar and wind, are free of charge and can help to cover the additional demand keeping the Philippine import dependency on a low level,” GIZ added.

Furthermore, it said that deploying renewable energy makes the country less vulnerable to volatile prices of fossil fuels such as natural gas or coal.

Price volatility makes it difficult to predict the future costs for electricity generated from fossil fuels, the paper said.

On the other hand, GIZ said most renewable energies have no fuel costs that makes it easier to predict their costs.

More importantly, GIZ said renewable energy sources will reduce greenhouse gas (GHG) emissions.

“Energy still accounts for a large share of the Philippine GHG emissions with coal as the biggest contributor. The replacement of one kwh coal generated electricity by one kwh RE-generated electricity saves around 960g CO2. RE can reduce energy dependency, vulnerability to volatile prices of fossil fuels, and GHG emissions,” the paper added.