Key alternatives: The government seeks to expand the renewables portfolio

Already producing more than one-quarter of its electricity from renewable energy sources, the Philippines has a proven track record in developing large-scale, economically viable green energy projects. But while earlier power plants have consisted almost exclusively of hydro and geothermal power, the country’s new National Renewable Energy Programme seeks to diversify and expand renewable energy contributions to the energy mix. In broad strokes, the programme aims to increase installed capacity from renewable energy by 200% (nearly 10 GW) by 2030 from 2011 levels.

In working towards these goals, the Philippines is looking to place itself as one the pre-eminent green power producers in the region, including as the largest geothermal energy producer in the world and as biggest wind energy producer in South-east Asia. Under the plan, some 1495 MW of geothermal energy is to be constructed by 2030, along with 2345 MW of wind power, 5394 MW of hydropower, 277 MW of biomass power, 350 MW of solar power and 71 MW of ocean power.

OVERSIGHT: Much of the framework for this mandate is governed by the Renewable Energy Act of 2008, which paved the way for further policy implementation as the strategy gained momentum. Some of these milestones include the creation of the Renewable Energy Management Bureau (REMB), National Renewable Energy Board and National Biofuels Board in 2009, the implementation of the net metering programme in April 2012 and adoption of a feed-in tariff (FIT) incentive scheme, which was finalised in July 2012. As of mid-2013, other policy mechanisms such as the Renewable Energy Portfolio Standards are under final review.

FITTING IN: The key to this renewable energy push is the FIT system, which grants preferential rates for electricity sales from qualified renewable power producers. After a period of deliberation and readjustments since June 2010, the Energy Regulatory Commission issued its final decision on FIT rates in July 2012. As such, generators are eligible for a FIT rate of P9.68 ($0.23) per KWh for solar power, down from earlier estimates of P23.81 ($0.57); P8.53 ($0.21) per KWh for wind power, down from P11.92 ($0.29); P6.63 ($0.16) per KWh for biomass, down from P7 ($0.17); and P5.90 ($0.14) per KWh for hydropower, down from P6.15 ($0.15).

To qualify for the scheme, electricity generators must meet certain eligibility requirements. For example, hydropower projects must be run-of-river power plants (as opposed to large-footprint reservoir systems) with installed capacity between 1 MW and 10 MW. Qualifying solar power projects must be ground-mounted (rather than rooftop installations) with capacity of 500 KW or greater, and biomass power plants are required be powered by solid rather than liquid fuel.

INCENTIVES: In addition to the FIT, the government has granted other financial incentives for renewable projects. These include an income tax holiday of seven years and reduced income tax rate of 10% upon expiration of the holiday; duty-free imports; a special real estate tax rate of less than 1.5%; accelerated depreciation of assets; tax exemption on carbon credits; and tax credits on domestic capital equipment and services. Renewable power projects are also given priority in terms of grid connection, as well as offtake once the generators begin transmitting electricity to the grid.

While development of these projects has proceeded cautiously as investors awaited the final outcome of implementing mechanisms such as the FIT, producers have shown a good deal of interest in the sector. A total of 296 renewable projects with a combined installed capacity of 5573 MW have been given the go-ahead by the government as of May 2012, according to a report from the REMB. The majority target hydropower, with a total of 2548 MW of installed capacity divided among 141 projects. Wind power also generated a good deal of interest, with 56 projects totalling 1738 MW, along with 35 geothermal plants with a total of 806 MW, 18 solar projects for 271.22 MW, 45 biomass projects (164.55 MW) and three ocean energy projects (5 MW). There are a further 210 projects with a total of 2356 MW under pending applications.