More and more countries are using feed-in tariffs (FIT) to integrate renewable-energy (RE) systems to the mainstream market. According to the Renewables 2011 Global Status Report, 61 countries and 26 states/provinces have already set up FITs as of early this year. This is almost double the number of countries with FITs in 2005, and more countries are looking to establish their own FIT systems.
Feed-in tariffs pay a guaranteed price for electricity generated from renewable sources such as hydro, wind, geothermal and biomass within a specific period of time. Given the high cost of initial investment in establishing a renewable-energy plant, ensuring that the electricity it generates has ready customers is crucial to maintain its operations and attract investors to bankroll large capital.
To encourage technological learning, cost-reduction and innovation, many FIT systems have a tariff-degression scheme in place. Tariff degression reduces tariff rates given to new installments of RE systems as time passes, so that R&D for producing renewable energy at a lower cost will continue.
Governments, however, must strike a delicate balance between encouraging investments in renewable energy and protecting consumers from exorbitantly high electricity prices. As clean-energy pundits Miguel Mendonça and David Jacobs put it, FITs should be designed to provide a stable investment framework, and not as a source of windfall profit for RE producers.
Through the Renewable Energy Act of 2008 (Republic Act 9513), we empowered the Energy Regulatory Commission (ERC) in consultation with the National Renewable Energy Board to devise a feed-in tariff system in the Philippines.
More than two years have passed since RA 9513 was enacted, but the ERC has yet to approve the FIT rates. Investors who have initially expressed interest in clean energy in the country are now jittery, given that they have been waiting long for a clear policy position on RE.
We have incorporated a FIT system in the Renewable Energy Act of 2008 precisely to accelerate the development of emerging renewable-energy resources in the Philippines. The law is now in place. Given the fluctuating prices of oil and coal in the world market, as well as the unsustainability of its use, the government should not be dillydallying in ushering in renewable energy in the country.
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