Who benefits from FIT-All – consumers or developers?

Who benefits from FIT-All – consumers or developers

For most of us, the word “FIT” carries a connotation of a healthy diet and an active lifestyle. But for those in the energy industry, the word “FIT” means “feed-in-tariff”

But exactly what exactly is this “feed-in-tariff”?

According to the National Grid Corporation of the Philippines (NGCP), the FIT is a system set by the government that will encourage renewable energy (RE) developments and investments in the country.

This system was designed to provide incentives to developers that utilize RE sources. This is through the FIT-ALL, or FIT allowance billed to consumers’ electricity bills.

In 2017, FIT-All in electricity bills is at 18 centavos per kilowatt hour.  

“The FITs are subject to degression to encourage the developers to invest at the initial stage and hasten deployment of renewable energy and also to avoid substantial windfall from being enjoyed by developers especially in the technologies where significant cost reductions are expected in the future,” the Energy Regulatory Commission (ERC) said.

But who exactly benefits from the country’s FIT scheme?

Greenpeace has described the FIT-All scheme as “the most important recent development for renewable energy in the Philippines.”

“Renewables are considered “must dispatch,” which means they enjoy the benefit of priority dispatch or connection to the grid,” it added.

According to NGCP, the FIT-All will result in a more environmentally friendly energy sources. The “development of alternative energy sources will ultimately benefit future generations.”

But some say otherwise.

“FiT-All is one of roughly 12 different charges and taxes in our monthly electricity bill and the one with the fastest increases in recent years,” a report from Business World said.

According to Manila Times, FIT is “reduced over time to compensate for future technical developments that result in lower costs in RE technology.”

PEMC corporate operations and market development senior specialist Jonathan dela Vina said last year that estimates show that the integration of FIT-eligible RE plants in the market gave way to a cost reduction of P4.04 billion or P0.0567 per kwh from November 2014 to October 2015.

This meant back then that consumers would have paid P0.12 per kilowatt hour without the impact of the integration of FIT in the market and the merit order effect, PEMC vice president for corporate planning and communications said in a report.

But did consumers benefit from this so-called cost reduction in energy production?

In 2015, FIT-All on a consumer’s electricity bill is at around four centavos per kwh. In 2016, this was raised to 12.40 centavos/kwh, 18 centavos/kwh in 2017. And in 2018, it will be raised to 29.32 centavos/kwh, according to a report by Business World.

“The recent hike will force all Filipino consumers to pay an additional 18.3 centavos per kilowatt-hour. That hike is 5.90 centavos more than the provisionally approved rate of 12.4 centavos per kilowatt-hour approved last January and since reflected in our electricity bills,” A Philippine Star column said.

“FIT is an onerous tariff. It collects billions from consumers in order to subsidize the companies that produce renewable energy. Its effect is to free the rich investors in newfangled and unreliable energy sources from business risks and ensure their profitability,” it added.

Recently, consumer group Laban Konsyumer Inc. (LKI) has taken the lead in asking the Energy Regulatory Commission (ERC) to revert the feed-in-tariff allowance (FIT-All) of  the state-run National Transmission Corp (TransCo) to its original application in 2016 instead of the May 2017 decision.

The “ERC should … revert the FiT allowance of Transco… for the benefit of all on-grid electricity consumers retroactive to January 2016,” LKI President Victorio Mario Dimagiba said in a statement.

Dimagiba warned that the issue could be raised to the courts, which “might intervene and issue [a]temporary restraining order against the ERC decision.”

While FIT encourages investors to enter the RE sector, and with the rise of renewable energy in the energy mix because of it, there are sacrifices that must be made by unfortunately, the consumers.

What about you? Who do you think benefits more from FIT?

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