ERC issues higher ‘degressed tariff’ for run-of-river hydro

The Energy Regulatory Commission (ERC) has issued higher feed-in-tariff (FIT) of P6.1110 per kilowatt hour (kWh) for run-of-river (ROR) hydropower facilities that will fill up the balance of the prescribed 250 megawatts cap for this renewable energy (RE) technology.

The newly enforced FIT for ROR hydro is based on a ‘degressed rate’, which should have reflected tariff reduction, but it was paradoxically increased by the industry regulator.

As designed, ‘degressed rates’ are generally assumed to decrease over time or will be reduced progressively for new entrants to reflect market developments, including delays in project implementation.

Within acceptable industry precept, the principle of degression is to incentivize power plants to be completed sooner or on time– so for RE developers, the earlier they can reach commercial operations, they’re supposed to get higher price. But ironically, the ERC effectively rewarded the developers that have been delayed on their project completion.

In a ruling rendered by the regulatory body, it emphasized that its approved degressed rate for ROR hydro reflected “annual degression of 0.5%;” although it ended up imposing higher rate. The reckoning period for the adjusted tariff had been from January 1, 2020 to December 31, 2021.

This is already the third FIT rate set for run-of-river hydro ventures – the first was at P5.90 per kWh in 2015; then the second was at a degressed rate of P5.8705 per kWh in 2017.

In the initial wave of project developments for run-of-river hydro, the ERC qualified that “only six (6) plants were subscribed for this first round, for a total capacity of 43.1 MW.”

Then in the next batch of ROR projects, eight plants reached commercial stream and had availed of the FIT incentives for a total 102.901MW capacity.

Given that scale of hydropower developments, the ERC indicated that the remaining balance in the installation target had been at 103.999MW – and that will cover eligible plants coming in starting January 2020 until its full subscription. By far, as of June this year, the balance of unsubscribed capacity hovers at 77.217MW.

The FIT is a subsidy coming directly from the pockets of consumers; hence, the higher charges approved by the ERC will mean added cost in the electric bills of all Filipino ratepayers.

Run-of-river hydro facilities are those that are harnessing energy from flowing water for electricity generation, and that in turn, shall be supplied to the grid to shore up power supply that can be delivered to end-users.

The ERC expounded that “the FIT is a policy mechanism to accelerate investments and hasten the deployment of renewable energy as a key strategy toward achieving energy security and self-reliance.”