By John Poquiz

The cost of renewable energy will be shouldered equally by all power consumers, the Energy Regulatory Board said in recently approving the rules for the feed-in tariffs (FITs) of renewable energy producers.

The FITs are the guaranteed price at which the RE developers will be paid for the energy that they will produce and inject into the transmission or distribution system.

The FITs will be paid by consumers connected to the transmission or distribution networks through a uniform per kilowatt hour charge to be known as the FIT Allowance (FIT-All), the implementation of which is similar to the current Universal Charge.

In an interview, Francis Saturnino Juan, executive director of ERC, said the rate impact of the FIT will be known only after the National Renewable Energy Board has filed with ERC the applicable rates for different forms of renewable energy such as geothermal, wind, solar and biomass.

The FIT rules mandate that the National Grid Corp. of the Philippines and distribution utilities to deliver power from renewable energy generators to their customers.

Once a renewable energy source is connected to the transmission or distribution system, the power will be allocated to all the customers in that system.

The proceeds of the FIT-All charges will be administered and paid by NGCP to RE developers.

THe FIT-All will take into account the forecast required revenues for projected deliveries of eligible renewable energy plants, the applicable FIT's and NGCP's administration cost.

The payment to renewable energy developers will depend on how much power they contribute to the grid. The payment to renewable energy generators also differs depending on the technology and the size of the plant.

Once accredited by the ERC, renewable energy producer can enjoy the benefits of the FIT for 20 years.

"With the FIT system embodied in the ERC's FIT rules, we hope to have a sound regulators framework that is responsive to renewable energy market development. With this in place, we anticipate that renewable energy projects will become more bankable, as these projects' future cash flow is not only made easily determinable, but also are fixed and assured," Juan said.

"With the FITs, we hope to remove another barrier to the entry and development of renewable energy in the Philippines, without burdening the electricity consumers with unreasonable rate imposition, he added.

This FIT-All will be established and set by the ERC on an annual basis upon petition by the NGCP.

Renewable energy is expected to cost more than conventional energy, but regulators are hoping the incentives given to RE projects will make the latter competitive.

The incentives in the RE Act include tariff exemption and zero value-added tax on importation of machinery and equipment for the first 10 years of an operating contract, and tax credit on domestic capital equipment and services.

Special tax rates will also be given for equipment and machinery to be used for renewable energy development. An income tax holiday will be granted to potential investors for the first seven years of commercial operations.

The country's medium-term Renewable Energy Policy Framwork aims to develop 4,000MW of additional renewable energy capacity, 1,200MW of which is planned to come from geothermal.