平和
和平
평화
ASEAN
17 June 2014
President Aquino with Mission Director Steele and BAWA members

Solar energy in the Philippines

Is the Philippines solar PV market set to boom or doom in the wake of the revised FIT policy, asks Subha Krishnan, Research Analyst at Frost & Sullivan.

Is the Philippines solar PV market set to boom or doom in the wake of the revised FIT policy, asks Subha Krishnan, Research Analyst at Frost & Sullivan.

Ever since the Philippines enacted the renewable energy (RE) act in 2009, it has been aggressive in encouraging RE developments to bring down the dependence on expensive imported fossil fuels such as coal and oil. This fast growing Asian country aims to deliver more than half of its energy mix through renewable sources by 2030. The country posted a strong economic growth of 7.8 percent in 2012. In order to sustain the growth momentum, the government is keen on diversifying its energy mix portfolio.

According to the Philippines Development Plan (2011-2016), the country had an installed capacity of 15,610 MW as of 2009 and the total installed capacity from RE stood at approximately 5,309 MW. The energy mix was dominated by fossil fuels mostly located in the Luzon grid.

Lately, like its neighboring countries in Southeast Asia, the government of Philippines is taking conscientious effort to increase the RE share in the country’s energy mix so as to ensure long-term energy security. Also, distributed power generation through RE sources is the answer to the country’s frequent power outages and growing demand for electricity.

On-grid Solar PV Application Gaining Traction

Philippines has several islands which makes it difficult to extend power transmission and distribution lines. Further, it is difficult to transport fuel for diesel generators to remote areas. The country is located just above the equator and receives solar radiation of 4.5 to 5.5 kWh/m2 per day. Therefore, if solar energy is made more viable and sustainable, several remote islands could be powered using solar energy. The government is also focusing on encouraging installation of solar panels on rooftops of residential and commercial buildings as this technology is becoming affordable with the declining price of solar panels.

The Philippine solar PV power segment was valued at $208.8 million in 2012, and is expected to grow to $372.6 million in 2016 at a CAGR of 15.6 percent. So far, most of the installations were for off-grid applications for electrifying rural and remote areas of the country. On-grid application of solar PV systems was not an attractive and viable market because of lack of policy framework, unfavorable power purchase agreement (PPA) terms and conditions, the utilities’ reluctance to purchase RE power and non-availability of funds. However, with the introduction of feed-in-tariff (FiT) policy in 2012, the country is likely to start attracting several grid connected solar PV power projects. Also, several renewable energy projects that were kept on hold are expected to get more clarity on their economic feasibility and viability with the introduced FiT rate.

Policy Initiatives – RE Target and FiT Rates

To help spur renewable energy demand, the long awaited FiT rates were approved and released by the Energy Regulatory Commission (ERC) in Philippines during the second quarter of 2012. The new FiT rate for solar has been set at Php 9.68 per kW as against Php 17.95 per kW, proposed by National Energy Renewable Board (NREB). The FiT rate would guarantee power companies an additional amount of money over the market rate for every kW of clean power they sell. This new incentive scheme which was expected to be released in 2009 is likely to spur investments in solar power.

The Department of Energy (DOE) has set a limited installation target of 760 MW through renewables over the next three years. The selected RE projects will be subject to the country’s newly announced FiT. Out of the planned 760 MW power generation target, a three year installation target of 50 MW has been set by the DOE for solar power projects. To start off with, solar power plants with a capacity range of 3-5 MW are expected to be kick-started by 2014 under the new FiT system.

FiT Rate – Impact on Investors and Project Developers

Given that the released FiT rate is much lesser than what was proposed by NREB, the government may rethink and adjust the rates during the initial three years of implementation. As a result, investors are skeptical about the extent of adjustments that the FiT rate will go through over the next three years. Currently, the developers are reviewing the viability of their projects based on the lower FiT rate. The set target of 50 MW is considered low by project developers, especially smaller industry participants. The limited installation target for solar power restricts developers from planning projects over 5 MW of installed capacity. The solar power project developers are appealing to the government to increase the capacity cap from 50 MW, as higher power capacity projects would subsequently reduce the project development cost. Yet another drawback of having a lower FiT rate is that, it would increase the power prices payable by the customers as the tariff system offers a guaranteed price to the supplier.

On the other hand, the government is confident that it can increase the RE mix in its energy portfolio as the investors now have a guaranteed minimum FiT to kick-start their projects. The Energy regulatory Commission (ERC) had arrived at the proposed FiT rate taking into consideration the reducing cost trend in setting up the power projects. While the government is working on tapping the country’s RE potential, it should be noted that over 100 projects that have been submitted under the new scheme are yet to be approved. This delay in preliminary approval process hampers the investors’ interest in the market. A common question among stakeholders - “Will this business climate bring in the desired effect of attracting sizable investment in the RE sector?”continues to linger. The potential can be realized if the government aggressively approves projects and provides the necessary financial support.

Introduction of FiT rate has enabled the country to take its first baby step towards achieving the 2030 RE target. Timely introduction of such schemes has always been a challenging task for most of the developing countries and Philippines is no exception. The next three years is expected to be crucial for the country to measure the success rate of the released FiT rate. This will also serve as a platform to assess whether the country will be able to capitalize on the opportunities to tap its solar radiation potential for generating power.

Author

This article was authored by Subha Krishnan, Research Analyst, Energy & Power Systems, Asia Pacific, Frost & Sullivan. For media queries or more information please contact This email address is being protected from spambots. You need JavaScript enabled to view it..

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Tags: asean, Philippines, renewable energy, solar energy

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