But eight solar rooftop projects worth US$1.65b could mark a turn-around.
The Philippine Board of Investments has approved eight solar projects through Solar Philippines Commercial Rooftop Projects Inc. worth PhP85.96b, or US$1.65b. A conservative estimate of 8GW of solar installations by 2030 includes 35% of that coming from rooftop solar, an investment value of US$2.8b, the Institute for Energy Economics and Financial Analytics (IEEFA) indicated.
According to Sarah Jane Ahmed, energy finance analyst at IEEFA, rooftop solar could lower electricity costs to PhP 2.50 per kWh (excluding financing expenses) and triggering US$2.8b or PhP1.5t in new investment by 2030.
“The government is in a position to change the longstanding status quo, which disproportionally puts fuel-price and foreign-exchange risk on consumers, while utilities and power generators remain insulated from market changes. As a result, power suppliers have no incentive to transition away from coal and diesel or to hedge against price-change and currency risks,” she said.
In a report, Ahmed highlighted how the Philippines continues to lag global trends toward power-sector modernization, which are gaining momentum around rapidly-declining costs and technological advances in renewable energy, energy efficiency and distributed storage. However, the PBI’s nod towards the eight solar projects worth US$1.65b marks an “enormous” opportunity to replace imported-coal and imported-diesel models with indigenous alternatives, the analyst said.
“Solar, wind, run-of-river hydro, geothermal, biogas, and storage are competitive, viable domestic options that can be combined to create a cheaper, more diverse and secure energy system,” she said. This phenomenon alone could save the Philippines up to US$2.2b annually in its current account deficits as well as US$200m per year in diesel subsidies.
In March, Manila Electric Company (Meralco) received the country’s lowest wind electricity generation bid ever on a new 150MW wind turbine project in the Rizal province, for PhP3.50 per kWh. Solar is competing similarly, with Meralco having contracted for a PhP 2.99-per kWh, 50MW capacity plant.
In comparison, coal-fired power generation costs upwards of PhP 3.8-5.5 per kWh whilst the “true” cost of imported diesel-fired power ranges from PhP 15 to PhP 28 per kWh.
Rooftop solar costs PhP2.50 per kWh (without financing expenses) to 5.3 per kWh (with financing expenses), utility-scale solar power can cost as little as PhP 2.99 per kWh, wind is PhP3.5 per kWh, geothermal is PhP3.5-4.5 per kWh, and run-of-river hydro costs PhP3-6.2 per kWh.
However, shifting does not prove to be easy, as Ahmed, said the Philippines faces three major hurdles to the broader adoption of solar power. Firstly, its faces unwieldy requirements around “distribution impact studies” and “distribution asset studies” alongside assorted other solar-permit rules as well as resistance to net billing.
On one hand, end-users are allowed to generate electricity from their solar rooftops for their own use and either sell any excess energy to the distribution utility at current wholesale prices or be fairly credited.
The Philippines also faces administrative problems, which includes inadequate transparency around customer “load profiles,” which show consumption patterns that are crucial to understanding usage, and institutional resistance to net-metering. Financial issues also restrict affordability of and accessibility to rooftop solar.
“More important, fossil fuel subsidies and electricity-sector losses are a growing drag on economic growth in the Philippines. Current plans for fossil fuel generation would instil a long-term dependence on fossil fuel imports, which would lead to more national debt, devaluation of the currency and an increase in inflation, all of which would destabilize the Philippine economy,” Ahmed concluded.
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