Solar project developers are batting for 3 to 5-year moratorium on land conversion requirement stating the 6-8 month permitting period is a major ‘choke point’ causing delays on their project rollouts.
In a recently concluded Asian Solar Summit, Salvador Antonio Castro Jr., president and CEO of Cleantech Global Renewables Inc., said that if the government will allow a temporary suspension of land conversion permitting, that could substantially shorten the development gestation of solar projects. With that, he said, solar project developers effectively help solve Luzon grid’s need for additional capacity especially in the critical summer months of 2022 to 2024.
At present, it would take 6-8 months or even longer to secure an approval from the Department of Agrarian Reform (DAR) to re-classify and convert a land to be used as a site for solar farm installation.
This timeframe is even longer than the actual construction of a solar plant, which by design, just typically takes six months to less than a year.
“In today’s world, wherein we do not have the reserves, wherein the pandemic is still present and we have to ensure that vaccines are fully contained and keep them at certain temperatures so we’ll be able to distribute them all over the Philippines, we definitely need the power and my answer there is: perhaps, for the next 3 to 5 years, we can have a moratorium on land reclassification and DAR conversion,” Castro said.
He added if that project permitting phase will be temporarily suspended, “we can shorten our development cycle by as much as eight months.”
Castro qualified “We’re not asking for a permanent removal, perhaps, just a temporary moratorium… we are in a dire situation and we need all the solutions that we can find.”
Additionally, Maria May Militante, chief of public relations and business development officer of publicly listed energy firm MRC Allied Inc., laid down probabilities that many local government units (LGUs) may refuse issuance of project permits or defer project approvals because of the forthcoming national elections by May next year.
Given that formidable permitting handicap, she proposed that President Rodrigo Duterte may issue an Executive Order (EO) or any legally defensible Presidential fiat that shall prevent LGUs from suppressing renewable energy (RE) project approvals – taking into account the very ominous state of the energy sector.
“There’s an impending election, some LGUs will not release permits in the next couple of months knowing that there’s an impending change in administration, so that will cause further delay in project developments,” Militante lamented.
Thus, she said, “An EO would best solve that, with the support of the DOE (Department of Energy), because that becomes a national concern as energy security is indeed a national concern -- especially that we’re getting back from a pandemic. We want to boost our economy, so energy security is important.”
For his part, Reynaldo Casas, president of the Solar Confederation of the Philippines, is advancing his pitch with the banks and lenders to consider financing solar projects based on ‘merchant model’ of development.
“Power supply contract is the ‘gold standard’ today in the banking sector due to rate agreement on a per kilowatt-hour power generated that will be paid by the DU (distribution utility) over a span of 20 or more years. However, in other domains, we have what we call the merchant plants, the option of selling power to the grid by quoting a rate per kWh,” he explained.
With that, Casas emphasized that in their case, two of their solar projects in Luzon that had not been incentivized with feed-in-tariff (FIT) actually thrived financially and they also got timely settlements or payments when their capacities are traded in the Wholesale Electricity Spot Market.
Anchoring on that business premise, Casas indicated that he will be crafting a position paper that the industry can dangle to some major banks in the country – prospectively for them to lever up on bankrolling merchant solar projects.
“Many of the banks today only support those with PSAs (power supply agreements). But due to the positive outcomes we’ve personally experienced, I’m now crafting a position paper to be submitted to the banks. Our experience in the universe of merchant plants is that there is a need to address the appetite of the banking industry to support merchant plants,” Casas stressed.