FEF Opposes the Increase in Solar Installation Capacity Under the FIT Subsidy

Foundation for Economic Freedom, Inc.

BOARD OF ADVISERS:

Gerardo Sicat

Cesar A. Virata

BOARD OF TRUSTEES:

Roberto De Ocampo Chairman Romeo Bernardo Vice-Chairman Calixto Chikiamco President Ernest Leung Treasurer Atty. Ricardo Balatbat III Corporate Secretary Anthony Abad Art Corpuz Eduardo Gana Felipe Medalla Vaughn Montes Simon Paterno Gloria Tan-Climaco Francis Valera Atty. Ricardo Balatbat III Executive Director

105 Philippine Social Science Center (PSSC) Commonwealth Ave., Diliman, Quezon City

Telefax: (632) 4532375 (Main Office) Tel No.: (632) 8939602 (Accounting)

Website: www.fef.org.ph Email: [email protected] / [email protected]

PRESS RELEASE

FOUNDATION FOR ECONOMIC FREEDOM OPPOSES THE INCREASE IN SOLAR

INSTALLATION CAPACITY UNDER THE FEED-IN-TARIFF (“FIT”) SUBSIDY

We, the Foundation for Economic Freedom, firmly oppose the plan of the

Department of Energy (DOE) to increase the installation target for solar energy from 50

Megawatts to 500 Megawatts (MW) under the Feed-in-Tariff Subsidy of PHP 9.80 per KWh

on the pretext that the country has to build energy reserves in the summer months of 2015

and 2016.

We believe the DOE’s decision is illogical, arbitrary, and represents an unjust burden

on Filipino electricity consumers. It is illogical because while the perceived “emergency” is

only during the summer months of 2015 and 2016, the decision will burden Filipino

electricity consumers with additional power charges amounting to PHP 12 billion annually

for the next 20 years, or a grand total of PHP 240 Billion pesos. This gigantic burden is on

top of the already approved subsidy for the existing installation targets for renewable

energy that is conservatively estimated at PHP 8 billion pesos annually for the next 20 years.

Solar energy developers will enjoy a Feed-in-Tariff (“FIT”) rate of PHP 9.68/kWh for

the 500 MW when the Wholesale Electricity Spot Market (WESM) rate is at least half of





that. The difference between the WESM rate and the FIT rate will be shouldered by the Filipino consumers.

We estimate that the total additional bill for Filipino consumers to be at least PHP 0.32/kW hour if the

additional subsidies for the expanded solar installation capacity is taken into account.

Under the existing rules of the Feed-in-Tariff system, the renewable energy developers, including the

solar energy producers, will enjoy a guaranteed rate of return of 16% per annum for the next 20 years. The FIT

rates are fixed for 20 years, irrespective of advances in technology and reductions in cost of capital equipment.

These developers will enjoy a greater amount of abnormal profits because the FIT rates calculated by

the Energy Regulatory Commission two years ago may be too high given the drops in interest rates and the

cost of capital equipment.

The burden on Filipino consumers goes beyond the Feed-in-Tariff subsidy to Renewable Energy

developers. Solar is an intermittent power source: it doesn’t generate power at night or when the sun is

covered by clouds. It has an efficiency rating of only 16 to 20%, which means that most of the time the equip-

ment lies idle. Because of its intermittent nature, the grid has to build additional reserves. These additional

energy reserves are added costs that will be passed on to the consumers.

The additional electricity costs will further lessen the competitiveness of Filipino manufacturers and

cause job losses.

It is absurd that manufacturers and consumers have to bear this additional onerous burden for the

next 20 years to address a perceived problem that will last for a mere two months in 2015 and 2016

considering alternative solutions are possible and less expensive. The plan of the Department of Energy will





only fatten the profits of solar energy developers and their foreign equipment suppliers at the expense of Fili-

pino consumers who must bear the additional unjust burden, which is effectively a tax, for the next 20 years.

We, the Foundation for Economic Freedom, are not against renewable energy per se, but against the

obscene prices that must be borne by the Filipino consumers due to the exorbitant Feed-in-Tariff rates and

duration (20 years) given to renewable energy developers.

For more information, please check our website: www.fef.org.ph , or contact the following:

Ethel Briones, Program Officer – [email protected] /+63 2 453 2375

Ranna Pintor, Program Officer – [email protected] / +63 2 453 2375

http://www.fef.org.ph

mailto:[email protected]

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FEF Opposes the Increase in Solar Installation Capacity Under the FIT Subsidy