A ‘degression rate’ structure or a feed-in-tariff (FiT) system which declines over the years is being injected into the Rules by the Energy Regulatory Commission (ERC) to ensure that renewable energy (RE) producers will not be reaping windfalls to the detriment of the electricity consumers.

ERC executive director Francis Saturnino Juan, in his speech at the Asia Clean Energy Forum, emphasized that subjecting the FiT to degression “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.”

He further explained that the pass-through charge for renewable energy, which has been re-packaged as Feed-in-Tariff Allowance (FIT-All) will be fixed for 15 years. The resulting tariff will likely be higher in the initial years and declining over time, taking into account that wider utilization of RE technologies will eventually result in lower costs.

“The feed-in-tariffs are subject to adjustment to account for inflation of foreign currency exchange fluctuations,” Juan added, noting further that these are also subject to review and readjustments contingent upon how targets are being achieved or been failing at specified timeframes.

The regulator similarly qualified that the propounded 15-year initial duration is still subject for review, with comments from stakeholders that other technologies may need longer term FiT support.

“Aside from being technology-specific, the feed-in tariffs may further be differentiated by the size of the plant and whether or not they are for peak or off-peak, in the case of certain technologies such as biomass,” the ERC official stressed.

Via discussions at the National Renewable Energy Board (NREB), there are already FiT simulations given for each technology, but the resulting FIT-All charge which will then be passed on to all electricity consumers is still being calibrated.

The calculation of the pass-through FiT-All charge in the electricity bills will also depend on the level of RE capacity injected into the system which might be rightly determined by the proposed Renewable Portfolio Standard (RPS). The system operator National Grid Corporation of the Philippines (NGCP) will take care of the FiT settlements with the RE developers.

Apart from the applicable feed-in-tariff, the FIT-All charge also factors in “forecasted required revenues for the projected deliveries of the eligible renewable energy plants, the generation charge to be paid by customers of distribution utilities for the renewable energy supplied by embedded RE plants and the NGCP’s administration costs.”

Juan noted the proposed ‘degression’ methodology is also “meant to incentivize the early comers” or the sponsor of pioneering projects on emerging RE technologies such as wind, solar, run-of-river hydro, biomass and ocean/tidal current resources.