Shifting Seasons Wind Energy in the Philippines

Transcription

1 Shifting Seasons Wind Energy in the Philippines Atty. Poch Ambrosio, Spokesman Wind Energy Developers Association of the Philippines 10 th Wind Energy & Development Dialogue October 15, 2015/ Berlin, Germany

2 Agenda I. Introduction II. Private Sector Perspective on Framework Conditions of Philippine Energy Market III. Financing of Philippine Wind Projects IV. German Influence in Philippine RE

3 Introduction Spokesman & Corporate Secretary, Wind Energy Developers Association of the Philippines Umbrella organization of all wind developers in the Philippines Born of pioneering experience with regulatory change and need for the industry to keep pace Heavily involved in policy development and advocacy for wind & RE

4 Introduction Co-Founder & Corporate Counsel, NorthWind Power Development Corporation The first commercial wind farm in the Philippines and Southeast Asia Began development in 2000, built with a Mixed Credit Facility from DANIDA Commercial operations in June 2005 under a bilateral agreement with the local electric cooperative in Ilocos Norte Province, Philippines Tariff at a discount to the delivered cost of power from the National Power Corporation

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6 Impact of NorthWind Pioneering effort which paved the way for other wind and RE projects Benchmark for legal, financial and technical standards Proof of concept/ showcase for other wind developers

7 Impact of New Legislation Electric Power Industry Restructuring Act of 2001 Unbundling of NPC reference rate Regulator required parties to re-negotiate bilateral Mutual pre-termination in 2009 Renewable Energy Act of 2008 FIT System and other Incentives Inclusion of NorthWind in FIT System

8 Philippine RE Framework December 2008: Renewable Energy Law passed, after 20 year legislative debate June 2009: RE Law IRR adopted by DOE in accordance with RE Law timeline July 2010: FIT Rules adopted by ERC August 2012: First round of FIT for 750MW of RE approved by ERC

9 Philippine RE Framework Rates for First FIT Round: 250MW Run-of-River Hydro (US$0.12) 250MW Biomass (US$0.14) 200MW Wind (US$0.18) 50MW Solar (US$0.21)

10 Philippine RE Framework July 2013: DOE issues FIT Eligibility circular December 2013: FIT-All Guidelines for Collection & Disbursment of FIT adopted by ERC (US$0.0009) May 2014: First FIT Project in Commercial Operation November 2014: Template RE Payment Agreement approved by ERC March 2015: First collection under FIT System

11 Philippine RE Framework Key features of FIT Eligibility Circular First to build, first to FIT : race to fill quota No allocation until in commercial operation; avoids non-performance and wasted allocations Full subscription of quota requires new installation target and new FIT First 200MW exceeded and further 200MW quota declared

12 EDC Burgos Wind 150MW NorthWind 51.9MW NLREC 81MW Philippine RE Framework 33MW as of June 2013, to 336.9MW at end-2014, and PetroWind 39MW TAREC 54MW Alternergy 54MW An additional 90MW in first half of 2015 Totaling 426.9MW Required additional installation target of 200MW on top of first 200MW, at different rate (US$0.17) Balance of only 6.1MW in wind installation target; BUT construction has stopped

13 Philippine RE Framework Main Advantage: FIT Eligibility Circular jump-started RE Development in the country Confirmed lowering effect of RE on electricity spot market Disadvantages: Transmission or any kind of forward planning not possible Additional cost of race and potential for shortcuts and for corruption Conducive to developers with on-balance sheet financing capacity Steep reduction in FIT between first 200MW and next 200MW Regulatory lag from declaration of new installation target and determination of corresponding FIT

14 Financing of Philippine Wind Projects Primarily balance sheet financing Five of 6 companies under the FIT are affiliated with banks or large conglomerates Three have affiliated banks in the conglomerate Two are part of conglomerates; Only 1 availed of true project finance (Alternergy)

15 Financing of Philippine Wind Projects EDC (150MW) funded from bond market Northern Luzon Renewables (81MW) constructed with 70% equity, then refinanced NorthWind (18.9MW), TAREC (54MW) and PetroWind (54MW) have shareholder support mechanisms which fall away when the FIT has been secured Alternergy (54MW) and TAREC were expected to be among the 1st to be in commercial operation but did not make it to the initial 200MW Situation will not change unless First to build, first to FIT is revisited and changed to a financiable quota allocation scheme Cheaper and smaller RE projects have not had same success

16 The Wind Shifts The same first to build, first to FIT is now spurring solar installations to fill a 500MW quota, with the same issues New DOE Circular mandates 30% RE in energy mix together with: An immediate shift to an auction system upon full subscription of wind and solar installation targets of 400MW and 500MW, respectively; Replacement power for generation shortfalls. Delay in further installation targets and uncertainty in viable rates and further development

17 German Presence in Philippine RE Entry of Siemens in Philippine wind turbine market, performing side-by-side with Vestas turbines in Ilocos Norte High expectations for reliability and availability Exemplary project execution: 6 turbines in 10 days for NorthWind Best practices in turbine operation What is Needed? Philippines is looking to Germany for best practices in technology, operations and policy EPC or Equipment Suppliers with Construction Finance Facilities

18 Thank You!