Here comes the sun

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By Neil Honeyman

An Independent View

Monday, January 27, 2014


RENEWABLE energy (RE) is a concept that is supported by all of us.

In particular, obtaining electric power by harnessing the radiant energy of the sun’s rays is a highly appealing concept.

But the economic and technological challenges of producing large quantities of electric power from the sun are substantial.

So the recent announcement from San Carlos Solar Energy Inc. (Sacasol) chairman, Jose Ma. Zabaleta Sr. that a P1.9 billion, 19.4 megawatt (MW) solar power project in San Carlos City will start commercial operations in the second quarter of this year is very welcome.

Funding has been a problem for many potential renewable energy projects. In the case of the Sacasol project, funds have been provided by the Thomas Lloyd Group – a global investment bank and investment management group which specializes in projects involving renewable energy and clean technologies.

Sacasol states that the project, which has been approved by the Board of Investments, will enjoy a seven-year income tax holiday incentive and duty-free importation of renewable energy equipment within the first 10 years from issuance.

Serious money begets significant returns. Sacasol states that it expects to provide approximately (!) 31,610,473 kilowatt-hours (kWh) of electricity annually to the Visayas grid.

The Renewable Energy Act of 2008 (R.A. 9513) has specified, in qualitative terms, the establishment of a feed-in-tariff system (FIT) for electricity produced from renewable energy sources. Its purpose is to encourage investments in the fledgling renewable energy industry.

Since the Act was passed, quantified FIT incentives have been prepared and announced by the Department of Energy. In the case of electricity generated from solar energy, the FIT is P9.69 per kWh. The maximum amount in MW that will attract the FIT incentive is 50MW. The criterion is “first come first served” so that the early, second quarter, implementation of the project by Sacasol is likely to obtain FIT benefits.

Since Sacasol estimates it will produce around 32 million kWh per annum, the FIT benefits will be P310 million. FIT, by itself, will therefore produce an adequate annual return, over 16 percent, on the P1.9 billion investment.

In addition, Sacasol will obtain market rates for the electricity it sells.

There is the question as to the administrative aspects by which Sacasol will receive the FIT amounts.

Pete Maniego, chairman of the National Renewable Energy Board, kindly replied to my queries on the FIT system. His reply is as follows:

“If Sacasol will avail of the FIT, all of its generation will be sold to the grid and be given priority connection, purchase, and transmission. In accordance with the revised Feed-In-Tariff Rules approved by the Electricity Regulatory Commission (ERC), the FIT Allowance will be administered by the National Transmission Corporation (Transco). The FIT Collection and Disbursement Guideline was recently approved by ERC. Transco is now in the process of preparing the FIT Allowance Petition and is expected to file the Petition within the first quarter of this year. The approved FIT Allowance rules will govern the administration and payments of the FIT to all eligible Renewable Energy (RE) generators availing of FIT. Payment to RE generators who opt for bilateral agreements and/or WESM will be subject to the provision of their agreement and the WESM rules, not the FIT rules. The FIT is a guaranteed payment to eligible RE producers supplying power to On-Grid areas. The Transco administrator is responsible for ensuring that the FIT payments are prompt.”

***

The Thomas Lloyd Group is also considering investing in other RE projects in Negros Occidental. These will include biomass and additional solar energy projects. The biomass projects are crucial because they should provide support for the sugar industry which, as we all know, will be challenged from 2015 by the free trade arrangements of our membership of the Association of South East Nations (ASEAN).

***

‘Let us roll our strength and all
Our sweetness, up to one ball:
And tear our pleasures with rough strife,
Through the iron gates of life,
Thus, though we cannot make our sun
Stand still, yet we will make him run.’
- Andrew Marvell (1621-1678)
‘To his Coy Mistress’ (1681) l.41

Published in the Sun.Star Bacolod newspaper on January 27, 2014.

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