Atty. Floresinda B. Digal The Restructured Power Sector and The Road Towards Clean Energy Atty. Floresinda B. Digal Director, Regulatory Operations Service Energy Regulatory Commission (ERC) Asia Pacific Energy Regulatory (APER) Forum 2016 29 September 2016 EC Rate -Setting Methodologies

Discussion Points Energy Profile Renewable Energy Act of 2008 Incentives for RE Under RE Law Update on Policies APER Forum 2016

Latest data from the Department of Energy shows a significant shift and increased demand for coal and natural gas over the years. The Malampaya gas field began production in 2001 and enabled the supply of at least 2,700 megawatts of power for a period of at least 20 years starting 2002.[8] The gas is conveyed through a 500 km pipeline from the field to Batangas City where it is fed into the generation system. APER Forum 2016

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Million tonnes of Oil Equivalent APER Forum 2016

RENEWABLE ENERGY ACT OF 2008 Republic Act No. 9513 RENEWABLE ENERGY ACT OF 2008 An Act Promoting the Development, Utilization, and Commercialization of Renewable Energy Resources and For Other Purposes APER Forum 2016

Renewable Energy Act of 2008 Bangui Wind Farm Ilocos Norte, Philippines Accelerate the exploration and development of the country’s renewable energy resources by providing fiscal and non-fiscal incentives to private sector investors and equipment manufacturers / suppliers. Republic Act (R.A.) No. 9513 or the Renewable Energy Act of 2008 was enacted to accelerate the exploration and development of the country’s renewable energy resources and promote its efficient and cost effective commercial application by providing fiscal and non-fiscal incentives to private sector investors and equipment manufacturers /suppliers. APER Forum 2016

RE Law Salient Features Renewable Portfolio Standards Feed-In Tariff System Renewable Energy Market Green Energy Option Net Metering for Renewable Energy Transmission and Distribution System Development *DOE to lead, other agencies assist The FITs to be approved by the ERC shall be technology-specific, and may further be differentiated by the size of the plant. It shall have a duration of 20 years, meaning that the Renewable Energy Developers shall enjoy the prevailing Feed-in Tariff applicable to them from the time they start commercially operating and for 20 years thereafter.   It is also subject to annual adjustment to account for local inflation and foreign currency exchange fluctuations. A simple benchmarking indexation formula is provided in the Rules to apply to all technologies. In addition to that, the FITs to be set are to be subjected also to a degression rate to be determined by the ERC to encourage the developers to invest at the initial stage and hasten deployment of renewable energy. Subjecting the FITs to degression also avoids substantial windfall from being enjoyed by developers especially in the technologies where significant cost reductions are expected in the future as these technologies mature. And lastly, the Feed-in Tariffs are subject to review and readjustment by the ERC in the following cases: When the installation targets are already achieved within the targeted period; When the installation targets are not achieved within the targeted period; When there are significant changes to the costs or when more accurate cost data become available; and Other analogous circumstances that justify the review and re-adjustment. However, the readjusted tariffs that may be set by the ERC following this review shall apply only to new Renewable Energy Developers. APER Forum 2016

RE Law Feed-in Tariff Net-Metering Program NON-FISCAL INCENTIVES On-Grid Renewable Portfolio Standards Feed-in Tariff Renewable Energy Market Green Energy Option Net-Metering Program Off-Grid Min. RE Generation Cash Incentives APER Forum 2016

RE Law FISCAL INCENTIVES Income tax holiday Duty-free importation Special Realty Tax Rates Net Operating Loss Carryover Corporate Tax Rate after ITH Accelerated Depreciation Zero VAT APER Forum 2016

Feed-In Tariff System (Sec. 7, R.A. 9513) For emerging renewable energy resources to be used in compliance with the renewable portfolio standard Priority connection to the grid Priority purchase and transmission of, and payment for, such electricity by the grid system operators Fixed tariff by technology Mandated number of years, not less than twelve (12) The ERC, in consultation with the National Renewable Energy Board (NREB) developed the Feed-in Tariff System. APER Forum 2016 12

Feed-in Tariff System Resolution # 16 (July 12, 2010) Resolution # 15, (November 19, 2012) A fixed rate per kilowatt-hour for emerging renewable energy sources, excluding any generation for own use, as approved by the ERC. APER Forum 2016

Feed-in Tariff System Based on cost of a representative project Technology-specific 20 years duration Subject to degression and adjustments Subject to review SALIENT FEATURES Now let us proceed to the discussion on how the FITs will be set, as provided in the FIT Rules. The FITs to be approved by the ERC shall be technology-specific, and may further be differentiated by the size of the plant. It shall have a duration of 20 years, meaning that the Renewable Energy Developers shall enjoy the prevailing Feed-in Tariff applicable to them from the time they start commercially operating and for 20 years thereafter.   It is also subject to annual adjustment to account for local inflation and foreign currency exchange fluctuations. A simple benchmarking indexation formula is provided in the Rules to apply to all technologies. In addition to that, the FITs to be set are to be subjected also to a degression rate to be determined by the ERC to encourage the developers to invest at the initial stage and hasten deployment of renewable energy. Subjecting the FITs to degression also avoids substantial windfall from being enjoyed by developers especially in the technologies where significant cost reductions are expected in the future as these technologies mature. And lastly, the Feed-in Tariffs are subject to review and readjustment by the ERC in the following cases: When the installation targets are already achieved within the targeted period; When the installation targets are not achieved within the targeted period; When there are significant changes to the costs or when more accurate cost data become available; and Other analogous circumstances that justify the review and re-adjustment. However, the readjusted tariffs that may be set by the ERC following this review shall apply only to new Renewable Energy Developers. APER Forum 2016

Overall FIT Framework TransCo FIT-ALL END-USERS APER Forum 2016 This is the overall FIT Framework. Whenever there is renewable energy injected into the system, NGCP or the utilities, in the case of the embedded plants, allocate the energy among all their customers or electricity end-users. In turn, all electricity end-users are obligated to pay a uniform Peso/kWh charge referred to as Feed-in Tariff Allowance or FIT-All. The FIT-All is collected by the utilities or by NGCP itself in the case of end-users that are directly connected to the transmission system and remitted to TransCo. TransCo acts as the administrator of the FIT-All proceeds and takes care of the settlement with the Renewable Energy Developers based on the quantity they delivered into the system and the applicable Feed-in Tariff. TransCo FIT-ALL APER Forum 2016 15

Process in Setting the FIT ERC may, initiate the proceedings in the review of the FITs. NREB Now let us proceed to the discussion on how the FITs will be set, as provided in the FIT Rules. The FITs to be approved by the ERC shall be technology-specific, and may further be differentiated by the size of the plant. It shall have a duration of 20 years, meaning that the Renewable Energy Developers shall enjoy the prevailing Feed-in Tariff applicable to them from the time they start commercially operating and for 20 years thereafter.   It is also subject to annual adjustment to account for local inflation and foreign currency exchange fluctuations. A simple benchmarking indexation formula is provided in the Rules to apply to all technologies. In addition to that, the FITs to be set are to be subjected also to a degression rate to be determined by the ERC to encourage the developers to invest at the initial stage and hasten deployment of renewable energy. Subjecting the FITs to degression also avoids substantial windfall from being enjoyed by developers especially in the technologies where significant cost reductions are expected in the future as these technologies mature. And lastly, the Feed-in Tariffs are subject to review and readjustment by the ERC in the following cases: When the installation targets are already achieved within the targeted period; When the installation targets are not achieved within the targeted period; When there are significant changes to the costs or when more accurate cost data become available; and Other analogous circumstances that justify the review and re-adjustment. However, the readjusted tariffs that may be set by the ERC following this review shall apply only to new Renewable Energy Developers. APER Forum 2016

Approved FIT Rates FIT 1 ERC Case No. 2011-006 RM July 2012 NREB- Proposed (in PhP/kWh) ERC-Approved Run-of-River Hydro 6.15 5.90 Solar 17.95 9.68 Wind 10.37 8.53 Biomass 7.00 6.63 Effectivity “Payment of the approved FIT rates to the eligible RE Developers shall commence upon the effectivity of the Feed-in Tariff Allowance (FIT-All), which shall be determined by the Commission at a later date after due proceedings thereon.” Note: Decision on OTEC FIT deferred APER Forum 2016 17

ERC-Approved Degression Rates Approved FIT Rates ERC-Approved Degression Rates (in PhP/kWh) ROR Hydro 0.5% after year 2 from effectivity of FIT Solar 6% after year 1 from effectivity of FIT Wind Biomass APER Forum 2016 18

Approved FIT Rates SOLAR FIT 2 WIND FIT 2 Resolution No. 6, Series of 2015 (March 27, 2015) PhP8.69 per kWh Effective May 6, 2015 up to March 15, 2016 WIND FIT 2 Resolution No. 14, Series of 2015 (October 6, 2015) PhP7.40/kWh Limited to three (3) wind projects only: Trans-Asia’s San Lorenzo Project – 54MW Petro Wind’s Nabas Project – 36MW Alternergy’s Pililia Project – 54MW APER Forum 2016 19

Feed-In Tariff Allowance (FIT-All) How can we pay the RE Developers? Section 2.5: FIT Rules Feed-In Tariff Allowance (FIT-All) FIT-ALL APER Forum 2016 20

FIT-All Payment & Collection Guidelines FIT-All Guidelines ERC Resolution No. 24, S. of 2013 (December 16, 2013) Resolution Adopting the Guidelines on the Collection of the FIT-All and the Disbursement of the FIT-All Fund. FIT-All Payment & Collection Guidelines FIT RULES ` APER Forum 2016 21

What is FIT-All? Collecting Agents: DUs NGCP RES Uniform ₱/kwh charge Payable by all electricity users Proceeds go to FIT-All Fund, administered by Transco, from where the RE payments will be sourced APER Forum 2016 22

Net-Metering Rules Resolution # 9 On-grid systems. Installations of <100kW For eligible RE Technologies End-user should be in good credit standing The RE System must be compliant with the standards Resolution # 9 23 May 2013 APER Forum 2016

Interconnection Set-Up Bi-Directional Meter REC Meter APER Forum 2016

Issues/Challenges *entitlement to lifeline DU Resistance - violation of franchise Additional responsibility Revenue loss Qualified End User Investment cost recovery Limitations on size/rate recovery *entitlement to lifeline EC Rate -Setting Methodologies

Prospects for Clean Energy APER Forum 2016

Initiatives Towards Clean Energy APER Forum 2016

EC Rate -Setting Methodologies

The National Renewable Energy Program (NREP) outlines the policy framework enshrined in Republic Act 9513 or the RE Law. It sets the strategic building blocks that will help the country achieve the goals set forth in the Renewable Energy Act of 2008. The NREP signals the country's big leap from fragmented and halting RE initiatives into a focused and sustained drive towards energy security and improved access to clean energy. million barrels of fuel oil equivalent (MMBFOE) APER Forum 2016

National Renewable Energy Program The government launched the National Renewable Energy Program (NREP) to steer the country in achieving the goals of higher utilization of renewable energy. The NREP sets target for each RE and looks at tripling the total RE capacity until 2030 to reach 15,236 MW by the end of the timeframe. APER Forum 2016

Balanced Energy Mix Fuel mix goal is aimed at reducing the country’s dependence on coal Under the previous administration former President Benigno Aquino 3rd, the government was targeting a fuel mix of 30 percent from coal, 30 percent from RE, 30 percent from natural gas, and the remaining 10 percent from oil-based power plants. The fuel mix goal was aimed at reducing the country’s coal dependence. APER Forum 2016

Update on Policy Energy Mix policy being reviewed 30:30:30:10 (Coal:RE:Natgas:Oil) Energy Mix should be in line with econ needs Phil. signed the 2015 Paris Agreement Phil. Has low carbon emissions Our level of economic development at this point does not allow us to rely completely on RE EC Rate -Setting Methodologies

Study to revive the Bataan Nuclear Power Plant The feasibility of using nuclear power in the Philippines is currently being looked into. Energy policy makers are revisiting the nuclear power option as growth accelerates and the government is determined to power up poorer communities. The Department of Energy has cited the imperative need to secure additional supplies of electricity. Data shows that the demand for electricity could jump to as high as 126-terawatthours by 2030, from 82 terawatthours in 2015 - a growth of 5-percent per year. APER Forum 2016

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