PSPA attends RE Executive Roundtable on Policy and Regulatory Constraints

Philippine Solar Power Alliance, represented by PSPA President Tetchi Capellan,  joined leaders from the wind, biomass, and  run-of-river sub sectors  for RE Executive Roundtable in Manila.

Of the climate change mitigation pledges made at the United Nations Framework Convention on Climate Change (UNFCCC) Paris Agreement in December 2015, more than 40% include specific targets to increase the share of the energy mix sourced from renewable energy (RE). The International Energy Agency (IEA) projects that to implement these climate pledges $13.5 trillion of investment will be required in energy efficiency and low-carbon technologies from 2015 to 2030. Currently, energy production and use account for approximately 75% of global greenhouse gas emissions and electricity demand is expected to increase by more than 40% between now and 2030, almost entirely from emerging markets. Developing economies like the Philippines are making choices today that will either send them down a low carbon energy path or lock them - and the world - into fossil-fuel based energy infrastructure for decades to come.

It is in this context that Allotrope Partners organized the "Accelerating Clean Energy Deployment in the Philippines: Executive Roundtable on Policy Constraints and Regulatory Bottlenecks”. In this event Allotrope Partners convened Renewable Energy (RE) private sector leaders to identify Renewable Energy industry-specific policy constraints and regulatory bottlenecks that impede sustained RE investments, with the goal of developing a clear and concise set of recommendations on how to address such constraints and bottlenecks via a multi-stakeholder approach. This initial meeting was designed to help launch a longer term effort to help rapidly scale investment in and deployment of renewable energy in the Philippines through unique collaboration between the public, private, non-profit and philanthropic sectors.

As a key player in the RE sector, the Philippine Solar Power Alliance, represented by PSPA President Tetchi Capellan, joined leaders from the wind, biomass, and run-of-river sub sectors last 25 November 2016 at The Ascott Bonifacio Global City at the roundtable. The following inputs form the highlights from the high-caliber pool of resource persons gathered during the event:

  1. The best that the government can do to accelerate clean energy deployment is  to provide clear and consistent policy signals, instead of flipping for and against RE all the time, e.g. the recent pronouncements for support for more coal plants and for nuclear power. Strengthen and make robust the Philippine Energy Plan (PEP) Update for 2016-2030 with real numbers and a real timetable for rolling out market enabling policies like the Renewable Portfolio Standards (RPS) and the lowering of the Contestability thresholds. “Precisely because we are not a centrally planned economy then we should have clear, dependable, consistent policy signals and frameworks from the government that entice private sector investment into RE.”
  2. Reform the FIT race policy, especially for solar, since it turns out that this has not been beneficial to investors as can be seen by the 300 MW "stranded" solar projects. Such "stranded" solar assets, having taken part of the race but were not included in the Solar FIT Phase 1 and 2 allocations, are forced to sell to the spot market, which is currently averaging at PHP 2.65/kWh, or a mere 30% of the latest FIT rate. This is very discouraging to the private sector and promotes/maintains/highlights the perception that RE investments are indeed very risky.
  3. Beyond the prevailing FIT allocations for all the emerging RE sectors, there must be a way to transition to a post-FIT market outside the market involving bilateral contracts.  It has been initially raised by the National Renewable Energy Board (NWRB) that South Africa has the "most applicable" methodology on “auction-based FITs”  that can be adopted by the Philippines, but the RE private sector is not familiar with this. Highlight that what is attractive about the FIT is not the rate per se, but the guaranteed offtake that ensures cash flows.
  4. Undertake a study on the best approach for the auction-based FITs that creates a market for RE investors while keeping the FIT Allowance (the pass-through cost to consumers) at a minimum. This answers the government’s call to balance (1) energy security and (2) cost to consumers.
  5. For the market outside the FIT and its various iterations, the one involving direct bilateral contracts, we can push to provide an exemption for projects less than 5 MW; these small projects should be exempted from the Competitive Selection Process (CSP) rules. The FIT rate-setting formula (not the actual PHP/kWH rates) can be used to set the rates for these <5MW direct bilateral contracts.
  6. Reform/make efficient the acquisition process for certain permits like the NCIP (National Commission on Indigenous Peoples) and the NWRB (National Water Rights Board), which have been shown to cause unnecessary delays. For NCIP, even without IPs in a project site, the process to secure the document takes three (3) months. For NCIP and the NWRB, each step in the Pre-Development, Operating/Development, and Post-Commissioning entails clearances, when this can just be a single step. This entails DOE leadership to implement the reform.
  7. Educate and empower the offtakers, including clarifying concerns on variability from intermittent sources such as wind and solar and the long-term levelized costs of RE-based energy, which have shown competitiveness as against coal and oil. These offtakers include electric cooperatives, private distribution utilities, and bulk end-users (called contestable customers).
  8.  Extend the FIT reduction deadline for biomass and run-of-river hydro, which is originally set for 12 February 2017.
  9. There also seems to be a lack of in-house capability among the grid operator (National Grid Corporation of the Philippines), local distribution utilities (DUs), and local consultants in designing interconnection plans that integrate newer technologies such as solar and wind, and enhancing the technical capability and being technology-updated of those involved in transmission and distribution must also be prioritized . There was an instance of a mis-designed interconnection plan that the EPC had to reject and revise, which caused project delays. 
  10. Make FIT payments more efficient; as one FIT-awarded developer reported, FIT payments are currently delayed by 8 months. This sense a clear signal to the private sector that expected cash flows are going to arrive on time.