Market Status: Philippines - High grid access costs halt progress

Activity in the Philippines' wind sector is raising hopes that the target of 300MW installed capacity by 2014 can be reached. But a lack of finance and high grid access costs have prevented the island nation, which reached 33MW early last year, from adding capacity beyond January 2009.

by Barbara Bayer 1 March 2010

In December 2008, the Philippines passed the Renewable Energy Act, which provided tax incentives and a mandated power purchase price for wind energy production. The law shields wind power revenues from taxes for seven years, after which a 10% corporate tax rate is payable throughout the life of the project. These prices are a fraction of the typical rates. The law also requires that new wind and solar plants be connected to the grid without delay.

The government had hoped that electricity suppliers would now be required to procure power from renewable energy resources at government-set prices. However, it is still drawing up guidelines, which it expects to announce in the next few months, says Arnulfo Zabala, senior research specialist at the wind unit of the Department of Energy (DOE). A purchase price for wind has yet to be decided.

Zabala says the government has just given the green light for 17 projects by five developers, allowing them to conduct pre-development activities. The installed capacity for the contracts, due to be signed last month, is expected to exceed 188MW. The largest on the list is a 40MW project in Pagudbud, Ilocos Norte, by Energy Development Corp (EDC). But Makati City-based developer Trans-Asia Renewable Energy Corp represents the largest share of the total, with 118MW across several projects. These are planned in six provinces across the Philippine archipelago, including Cavite, Batangas and Quezon. The capacity of a tenth Trans-Asia project, in Anda and Guindulman municipalities, Bohol Province, has yet to be determined.

Of projects that received DOE approval last year, with a combined capacity exceeding 620MW, those by Energy Logics Philippines, Northern Luzon UPC Asia Corporation and EDC have completed feasibility studies and will be commissioned within three years, says Zabala. Combined capacity for these is set to exceed 250MW. This includes the long-delayed 86MW Burgos Ilocos Norte project by EDC, a 120MW project by Energy Logics in Pasuquin-Burgos and a 50MW project by Northern Luzon UPC Asia, in Pagudpud. Turbines have yet to be purchased, says Zabala.

Experts point to great potential. A study by the US National Renewable Energy Laboratory estimated the Philippines' potential capacity at over 76GW. Although other estimates do not come nearly this high, Zabala believes gross theoretical potential is still 70GW.