IEEFA Analysis: Rooftop solar to lower electricity costs, unlock up to $2billion investments in the Philippines

20 August 2018, MANILA — A report published today by the Institute for Energy Economics and Financial Analytics details how rooftop solar in the Philippines has the potential to lower electricity costs to PhP 2.50 per kWh (without financing expenses), and bring around US$ 2.8 billion or PHP1.5 trillion in new investments by 2030.

The report — “Unlocking Rooftop Solar in the Philippines” — notes that the Philippines has one of the most expensive electricity rates in Southeast Asia, but concludes that modernized policy can drive the uptake of solar through programs that will ensure power supply and lower prices.

“The government is in a position to change the longstanding status quo, which disproportionately puts fuel-price and foreign-exchange risk on consumers, while utilities and power generators remain insulated from market changes,” said Sara Jane Ahmed, IEEFA energy finance analyst and author of the report. “As a result, power suppliers have no incentive to transition away from coal and diesel or to hedge against price-change and currency risks.”

The report describes how the Philippines can start following global trends toward power sector modernization, which is gaining momentum around declining costs and technological advances in renewable energy, energy efficiency and distributed storage. Every kilowatt of installed rooftop solar means a reduction in the need for imported coal and diesel power, Ahmed added. This could save the Philippines up to US$2.2 billion annually in its current account deficits as well as US$200 million per year in diesel subsidies.

The report further notes that that the Philippine Board of Investments has already approved eight solar projects through Solar Philippines Commercial Rooftop Projects Inc. worth PhP 85.96 billion, or US$1.65 billion. A conservative estimate of 8 gigawatts (GW) of solar installations by 2030 includes 35% of that coming from rooftop solar, an investment value of US$ 2.8 billion. This billion-dollar market can easily grow with the right policies.

“These trends present an enormous opportunity to replace imported-coal and imported-diesel models with indigenous alternatives,” Ahmed 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.”

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To cite just two examples of recent renewable energy deflation in the Philippines, Manila Electric Company (Meralco) in March of this year received the country’s lowest wind electricity generation bid ever on a new 150-megawatt (MW) wind turbine project in the Rizal province, for PhP 3.50 per kilowatt-hour (kWh). Solar is competing similarly, with Meralco having contracted for a PhP 2.99-per kWh, 50-MW capacity plant.

Coal-fired power generation, by comparison, costs upwards of PhP 3.8-5.5 per kWh, and the true cost of imported diesel-fired power ranges from PhP 15 to PhP 28 per kWh.

Rooftop solar costs PhP 2.50 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 PhP 3.5 per kWh, geothermal is PhP 3.5-4.5 per kWh, and run-of-river hydro costs PhP 3-6.2 per kWh.

“Development of all of these more affordable options is still hampered by costly and unnecessary red tape. The Philippine government can help break this logjam by adopting policies that inject more diversity—and more energy security—into the electricity system while helping lower consumer costs by enabling the uptake of cheaper, cleaner options such as rooftop solar,” Ahmed said.

“More importantly, fossil fuel subsidies and electricity-sector losses are a growing drag on economic growth in the Philippines. Current plans for fossil fuel generation would instill 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,” she concluded.

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