Covid stalls ‘cost subsidy reduction’ on RE rates

Published November 29, 2021, 5:41 PM

by Myrna M. Velasco

The financial affliction of the coronavirus pandemic, which triggered backlog in feed-in-tariff (FIT) payments to qualified renewable energy (RE) developers, is also seen to delay the reduction in subsidy costs for these clean energy technologies.

According to Atty. Melvin Matibag, president of the National Transmission Corporation (TransCo), there has been discussion to review the FIT rates of RE in the country with targets to reduce them to align with the rates of other countries in the Southeast Asian region. However, given the financial impact of the pandemic, this exercise may not be feasible at this time.

“Right now, the process of reducing the rates (for RE) cannot be implemented,” the TransCo chief executive said, citing the fact that TransCo, being the FIT fund administrator, still has payment backlogs to the RE developers.

He conveyed that the ‘stop collection’ enforced by the Energy Regulatory Commission (ERC) — primarily for interest charges on unsettled or just partially paid FIT obligations to qualified RE projects, would end up as financial predicament to the investors; and the government would not want to worsen their burden by reducing the FIT rates at this time.

To note, the FIT rates of solar and wind installations within ASEAN neighbor-countries are in the range of P3.00 to P4.00 per kilowatt hour (kWh); considerably lower than the P7.00 to P8.00 per kWh second wave FIT rates that were accorded to Philippine RE projects; hence, there had been relentless call for targeted reduction of RE subsidy charges.

Matibag nevertheless reiterated that “because of the pandemic, they’re again looking at backlog of payments, so we don’t know if it’s time to look into lowering the cost,” with him emphasizing that at this point, “we’re trying to maintain a balance between the interest of the RE producers and the consumers.”

The TransCo chief executive narrated that the company has been “looking at ways to reduce the cost for consumer,” although he also qualified that they cannot just disregard the capital investments injected by the RE developers as well as their expectations on the stability of policies and rules which served as anchor of their decisions in putting up projects in the country.

“The problem is, when a lot of our renewable power plants were put up, there had been capital investments those RE companies have put up. So we’re also concerned about that,” Matibag noted.

But when the country’s economy can already bounce back from the financial blow of the pandemic, he stated that TransCo and the Department of Energy (DOE) as well as the RE developers will continue to sort out means how to reduce cost subsidy for these RE-generated capacities.

“We’re in constant communication with the RE developers and the DOE for the guidance because our direction of course, is to evaluate lower cost for our consumers,” the TransCo president said.