Feed In Tariff

With the ratification of the Renewable Energy Law and its imminent signature into law, discussions about its implications to Philippine society should be more frequent. A key feature of this law is the Feed in Tariff. The simplest way of explaining this is that for a renewable energy source, the buying price will be defined for the next few years. This price could be fixed for the whole period or could follow a year by year fixed value scheme. The intent is to make the price higher than the market value to ensure cost recovery for expensive renewable energy systems.

This may be over your head, so I'll do an example. Today in Manila, the generation rate is about PHP 4.50/kWh. Applying feed in tariffs, the government could define the rate for solar to be PHP10/kWh for the next 15 years. Another way of doing feed in tariffs would be defining the solar generation rate to be PHP 20/kWh for the next 5 years, PHP 12/kWh for years 6 -10 and PHP 7/kWh for years 10-15.

So, who pays for the difference between the feed in and the market rates? That would be the consumer. Would this not make our price of electricity higher? In countries that have this, the price increase is negligible. Here's how:

Say we used 10,000,000 kWh for our city and solar power consumed was 100,000 kWh. We assume there are 100,000 households in the city

Power from non-solar sources - 9,900,000 kWh
Power from solar sources - 100,000 kWh
Generation Cost of non-solar power (@ PHP 4.50 / kWh) - PHP 44,550,000
Generation Cost of solar power (@PHP10/kWh) - PHP 1,000,000
Total generation cost - PHP 45,550,000
Generation cost/kWh - PHP 4.56/kWh

the addition will only be PHP 0.06/kWh. So for a household consuming 100 kWh/month this means only an additional PHP 6.00 per month.

The impact of feed in tariff is highly dependent on the cost and penetration (extent of use) of the renewable technology.

Initially, the DOE did not like to have this incentive as part of the Law. Groups like Greenpeace and solar companies pushed for this scheme. The point they raised is that this has been critical in the success of renewable energy programs in other countries like Germany. The implementation of this scheme would lie with the Energy Regulatory Commission.

A working Feed in tariff scheme is in operation in Cagayan de Oro running under CEPALCO. CEPALCO is noted to have the a 1MW solar array, the largest in the developing world.

At this point, more stakeholder discussions need to happen to define the feed in tariff values. This should take place in the next 6 months as the implementing rules of the law are being defined.