SOLAR POWER: WHY IT CAN BE CHEAPER THAN COAL
LEANDRO L. LEVISTE makes the case for solar power simple and believable. Build a big capacity project and economies of scale will take care of bringing down development cost and in turn, electricity bills. Replace dieselfired plants with solar farms and remove another layer of universal charges billed to consumers.
Some doubted his ability to get these done, but on Friday his company Solar Philippines Power Project Holdings, Inc. broke ground on the biggest solar farm in the country thus far — a 150- megawatt ( MW) facility in Concepcion, Tarlac on a 150-hectare former sugarcane farmland.
His project is bigger than a competitor's 132.50- MW solar farm that widely out-scaled his previous 63.3- MW project in Calatagan, Batangas. Both were endorsed by the Energy department in June last year to receive a feed-in-tariff rate of P8.69 per kilowatt-hour ( kWh).
The Solar Philippines president said his latest project would be producing electricity at a cost of “close to P4 per kWh” or just a fraction of the old rate, which was set less than a year ago.
“We can't disclose exactly yet, but it will be published in the ERC (Energy Regulatory Commission) Web site. It's definitely below P5 ... It's above P4,” he said, as he backed up his claim.
After the groundbreaking, Mr. Leviste said he would be flying to various parts of Mimaropa (Mindoro Occidental and Oriental, Marinduque, Romblon and Palawan) for possible solar ventures.
“Every island in the Philippines, we want to bring solar power 'cause at this moment they're burning diesel at P16-18 per kWh and being subsidized by the entire country through the
universal charge for missionary electrification,” he said.
Mr. Leviste explained how he was bringing down power cost and challenging coal as the cheapest source of daytime electricity, at least for now. For one, he said the “time horizon” for solar projects is different from those of regular companies.
“Sa atin (For us), short-term is one month, medium- term is three months, long- term is six months,” he said. “In six months,
lahat nakatayo na (all of these will be built).”
But he gave the project some leeway of possibly completing the construction of all 150 MW within 2017. The plant will be put up in phases, with the first 50MW built within the second half.
Solar Philippines is set to launch next month a 600- MW solar panel factory at First Philippine Industrial Park in Sto. Tomas, Batangas, marking the first time that the products will be made by a local company. It will also inaugurate a solar farm in Tanauan, Batangas and another in Naic, Cavite.
“Tinatanong ng mga iba bakit ’ yong presyo natin napababa
(Others were asking how we were able to lower our prices),” he said.
“One is, of course, vertical integration,” he said, referring to in-house manufacturing of solar panels, construction and financing. “But the others [ are] also [ because of ] the economies of scale. If you have coal-powered plants, gas plants — 1,000 MW that's how they can get to P4 or P3.5 per kWh.”
He cited the case in the Middle East where the cost of solar power output can reach as low as P1.5 per kWh “because they're doing 1,000-MW plants.
“So we're making a first step by building a 150-MW plant here in Tarlac. But we hope that in the near future, we'll be able to bring it to hundreds of megawatts if not thousands to lower the cost here further,” he said.
He also attributed the lower price to the overall decline in the cost of building a solar farm worldwide.
“Before it was $2 million per MW and then it became $1.5 [million] and now it's only $1 million per MW without the battery,” he said.
At the moment, the Tarlac facility has yet to forge a supply contract with any distribution utility, making it a merchant plant whose output is at the mercy of fluctuating spot market prices.
“Under the RE ( renewable energy) law, it's ‘must' dispatch,” Mr. Leviste said, referring to the priority given to solar farms when their output is traded in the market.” ' Yon nga lang, [ but] we're a price-taker of whatever is the prevailing prices at that point.”
“But what's gonna happen by having more merchant plants is that the WESM (wholesale electricity spot market) prices will go down because the RE plants bid at zero and the more RE plants come in, the more the expensive generation is pushed out. So the current record low prices of P3 per kWh, we'll bring it down to P2.5 per kWh,” he said.
“The cost went down significantly between 2015 and 2016 because the Japan and China markets slowed down and all of these supply needed to be sold so there was an oversupply,” he said, placing the decline in prices possibly at 30%. “But now it has stabilized because the demand is catching up with the supply, and it's stable.”
“So on average you can say [the decline in prices is at] 10-15% per year but what we're doing is we're pricing in the future price reduction into our existing rates,” he said.
SOLAR CHEAPER THAN COAL?
Mr. Leviste explained his claim that solar is now cheaper than coal by enumerating the costs that go into producing coal-fired power, including the price of the fuel itself, the capacity fee and other charges.
“Depending on the load factor that you run it, the average price for coal in the Philippines is around P4 [per kWh]. Plus VAT ( value- added tax) it becomes P4.5, plus transmission [ it] becomes P5.5. And there are some coal [plants] that are on a peakoffpeak basis and those peaktime coal supply is at P5 plus VAT plus transmission. [ It's] even much higher. So let's say... coal is between P4-5, all these things considered,” he said.
In all, he said the price of “baseload solar” is coal price minus 10%.
“It's a market, it has to be competitive and we don't expect anyone to sign up with us just because we're clean. So we are pricing our solar at a lower rate at whatever the prevailing price of coal,” he said.
He said the reason why he was transparent about pricing was because he wanted to grow the market fast.
“We think that the pie is not just limited to the current supply in the Philippines. If we can make a great start here, then we can bring our partners — here and abroad — international. Because in the world right now, solar is still addressed to 1% of the supply. And in our lifetimes it will become 50%, if not more. So it's not about market share, it's about growing the market and bringing the Philippines international,” he said about a grander plan for the local solar industry.
During the groundbreaking, Mr. Leviste's more ambitious declaration is storage for solar power, which many veterans in the industry here and abroad consider as too pricey.
“In six months, the battery is already here,” he said. “The batteries are very flexible. We can use it to supply the 24 hours or we can use it to supply a larger MW for the early evening.”
Mr. Leviste previously said that almost all of his solar farms would be integrating batteries to allow a 24- hour reliable supply of electricity starting this year, describing the innovation “the game- changer of 2017.”
But he has yet to convince the Energy secretary about the commercial viability of solar batteries for baseload power.
“I'm here to witness the groundbreaking,” said DoE Secretary Alfonso G. Cusi about Friday's ceremonial launch. He said he has seen the inverters, which “shows the seriousness of the proponent in realizing the project.”
“Kaya lang hindi ko pa nakikita ’ yong ( But I haven't seen the) battery. I'd like to see it,” he said.