ADB urged to fund construction of merchant solar power plants
Solar Philippines founder and president Leandro Leviste is urging multilateral and developmental lenders, including the Asian Development Bank (ADB), to finance the construction of merchant solar power plants in order to unlock the full potential of competition in the country’s power sector.
During his speech at the closing plenary session of ADB’s 13th Asia Clean Energy Forum late Thursday, Leviste said solar farms with battery storage could deliver peaking and also 24-hour baseload power at a lower cost compared with that of coal and gas.
“This is something ADB should consider next time it receives a proposal to finance a new coal power plant,” he said.
Merchant solar power plants are a very viable investment in the Philippines, Leviste said, noting the country’s wholesale electricity spot market (WESM) prices are around P5 per kilowatt-hour (kwh) while solar prices – without the feed-in tariff (FIT) perks – can sell at around P3 per kwh.
However, no bank is willing to finance any merchant power plant of any technology without off-take agreements.
Merchant plants are those power plants selling their output to the WESM.
“But because local banks are not used to financing merchant projects, (developers) have not been able to get those off the ground,” Leviste said.
As a development bank, ADB should lead in this kind of project financing so other financial institutions will follow.
“So if any development bank can finance the first solar merchant power plants in the Philippines, we believe that will persuade other financial institutions to follow and perhaps, at that point, the politics of signing bilateral contracts in the Philippines would become irrelevant,” Leviste said.
“The Philippines would move to full retail competition and all our power plants would sell on a merchant basis,” he said.
Solar Philippines has contracted 100 megawatts (MW) of its solar capacity. It is also putting up merchant solar power plants in the country.
“Alongside our 100 MW contracted at $0.057 per kwh, we are constructing an additional 50 MW that will sell into the spot market, for a 150 MW that is the largest in ASEAN today. And we have been required to top up additional equity to offset the merchant risk,” Leviste said.
The company also plans to develop 5,000 MW of solar plants to displace coal power plants currently under development.
“We are developing five gigawatts (GW) of solar plants to be constructed over the next five years. This is urgent because five GW of coal plants are now awaiting regulatory approval to begin construction,” Leviste said.