Europe eyed as new source of financing for feed-in-tariff subsidy
THE Department of Energy (DoE) is looking for other funding sources to replace what the government is charging electricity consumers to bankroll costs that private companies incur in developing renewable energy projects.
DoE Undersecretary Felix William B. Fuentebella said the department, in coordination with the National Renewable Energy Board (NREB), might tap foreign funds in line with President Rodrigo R. Duterte’s approach of asking clean energy advocates to help the Philippines in its move away from fossil fuels.
“That’s what we are trying to tap, the foreign funding that we can look into. So we will approach the Climate Change Commission for that,” he said on Wednesday in an interview on the sidelines of a Senate hearing on renewable energy.
Asked about the financing source, he said this includes funds pledged by developed countries during the Paris summit in December last year to help climate vulnerable countries like the Philippines.
“There are also other funding sources,” he said, citing possible grants and assistance from funding agencies.
He said there is money in clean energy that could be tapped to replace the 12.4- centavo FiT (feed-in-tariff ) allowance being collected from consumers for every kilowatt-hour of electricity they consumed. The uniform charge goes to a pool managed by National Transmission Corp. (TransCo) and paid to renewable energy developers.
Renewable energy developers are guaranteed a fixed tariff for projects involving biomass, hydropower, solar and wind technologies. The tariff is meant to accelerate the exploration and development of clean energy sources and encourage the use of renewable energy to reduce greenhouse gas emissions.
The FiT allowance is derived based on factors that include TransCo’s working capital and a so-called FiT differential, or the difference between the guaranteed rate and the actual prices at the wholesale electricity spot market.
CLIMATE FINANCING
Asked about the funding after the Paris summit, Jose M. Layug, Jr., NREB officer-in-charge and former DoE undersecretary, said financing from European countries was being considered.
“Before a country complies with its mandate, the signatories to the Paris agreement agreed to provide financial assistance to those that will abide by the terms. What we are expecting, especially from the European countries, is that they provide financial assistance mechanism for countries like us,” he said.
The country committed to cut greenhouse gas emissions by 70% by 2030 but conditional on a so-called climate financing. The Philippines is considered among the most vulnerable countries to global warming.
Asked if funding is readily available, he said, “Not at this time, but it’s included in the Paris agreement that financial assistance and a mechanism should be put in place. So it’s what we have to work on with them.” Mr. Layug.
Mr. Layug said that if indeed the country gets financial assistance, the funds would likely be placed in a trust fund.
“That trust fund becomes the source of payment for the FiT. That’s how we view it. That’s how we want it to be. So if we get financial assistance from the European countries, they provide us the funding, we put that funding in TransCo and that becomes the source of FiT allowance,” he said.
The FiT allowance currently being collected from consumers covers only the projects that were granted a guaranteed tariff as of end-2015. More solar energy developers completed their projects after that date in a rush to meet the March 2016 deadline set by the DoE. The 12.4- centavo FiT allowance is nearly three times more than the 4.06-centavo per kilowatt-hour approved for 2015.
“The FiT allowance is the difference between the market price and the FiT rate. So if the WESM price is high because oil prices are high then your FiT allowance is not too big. So it varies every year, it depends on the actual price of conventional fuel worldwide,” he said.
Separately, Senator Sherwin T. Gatchalian, who chairs the Senate committee on energy, said he would be filing a resolution that will call for funding a study to produce the country’s nuclear energy policy. The move is in line with the government’s move to reduce electricity cost for consumers.
“That’s an in-depth study, research and a road map that can be funded by the Senate,” he said.
The initiative will be discussed with the DoE, which could provide information on funding and the required technical expertise.
He said the nuclear option was considered as his committee scrutinizes each item that goes into an ordinary household’s electricity bill, including the FiT subsidy.