Post on 15-Jul-2015
Doing Solar PV Power
*RUTH P BRIONES
Project Teaser
Philippines
“Clean energy is climate change adaptation, which must be a global
effort. It is an acknowledgment that mankind´s greenhouse gas emissions
are the ones causing dramatic climate changes. The response must be in
two forms: for unclean energy, higher efficiency; for clean energy, higher
economics. The inventing must be now; the investing must be now.” -
Ruth P Briones July 29, 2010
OUTLINE
Assessment of Philippines’s solar energy potential
Outlining the project application process to secure approval
Foreign investment opportunities and project finance
All rights reserved
―In the Philippines, the solar power investment potential is even greater than the aspirational target
of 1,528MW attributed to solar in the National Renewable Energy Plan until 2030. According to the
DOE's 2009-2030 Power Development Plan (PDP), the country's energy consumption is seen
reaching 149,067 gigawatt-hours (GWh) by 2030, from an estimated demand of 86,809 GWh by
2018 and actual demand of 55,417 GWh in 2008.
Peak demand should hit 14,311 GWh by 2018 and go up to 24,534 GWh by 2030, from 2008's
9,226 GWh. To ensure adequate power supply considering these demand projections, 17,000 MW of
new capacities should be put in place. Luzon alone will need 12,500 MW in additional capacities in
the next 20 years, while Visayas and Mindanao – both already experiencing power shortfalls – will
need 2,150 MW and 2,500 MW in new capacities, respectively, during the same period. A number of
investors have committed to put up 1,338 MW of additional capacity in the three main island grids,
with commissioning of these new facilities targeted for the 2012-2014 period.
Of these committed capacity additions, the bulk will come from coal-fired power plants in Luzon and
Visayas, while all capacity commitments in Mindanao will come from renewable sources, particularly
solar, hydro and geothermal. According to the National Renewable Energy Program (NREP), the
country's RE base should reach 15,304 MW by 2030; almost triple the current installed base. Of this
total, 10% will be attributed to solar. The projected installed base for solar can actually be increased
and accelerated, considering the need to have additional capacities now. While coal, hydro, and
geothermal can provide much-needed additional capacities, these technologies require time and,
therefore, cannot avert rotating brownouts. Such facilities usually take three to five years to put up.
Considering the current supply-demand scenario, especially in Visayas and Mindanao, a year lost
without these additional capacities means lost opportunities.‖ (www.giz.de.com; www.renewables-made-in-
germany.com)
SOLAR POWER INVESTMENT POTENTIAL IN THE PHILIPPINES
A L L R I G H T S R E S E R V E D
PART I:
ASSESSMENT OF THE
PHILIPPINE SOLAR
ENERGY POTENTIAL
SOLAR ENERGY POTENTIAL IN ASIA
A L L R I G H T S R E S E R V E D
PHILIPPINES: 5.0 -5.5 kWh/m2/day
The Renewable Energy Map Potential in the Philippines
MINDANAO
VISAYAS
LUZON
A L L R I G H T S R E S E R V E D
A L L R I G H T S R E S E R V E D
SITES/ AREAS WITH
SOLAR ENERGY POTENTIALS IN THE
PHILIPPINES
792,147,408 MWhr/year
Rank No 68 globally, 2008
Second country in Southeast
Asia in terms of irradiation
and insolation.
Solar irradiation: 1900
kilowatts a square meter
PHILIIPPINES
SECOND COUNTRY IN ASIA-
IRRADIATION AND ISOLATION
Has all the foundation to become a renewable
energy leader in the region owing to the strong semi-
conductor industry and the manpower base
Most comprehensive
Renewable Energy Law in Asia
SOLAR PV ENERGY
INVESTMENT
POTENTIAL FOR THE
PHILIPPINES
A L L R I G H T S R E S E R V E D
YEAR LONG IRRADIATION DATA IN MOST AREAS IN
THE PHILIPPINES
A L L R I G H T S R E S E R V E D
AVERAGE: 4.5 kWh/mm2/day- 5.5 kW/mm2/day
Source: US NREL
A L L R I G H T S R E S E R V E D
Installation target:
50.0 MW
(2012-2014)
Degression Rate:
6% after one-year of FIT
FIT Price:
Php 9.68 /kWhr
(US$ 0.22)
New installation
target:
500.0 MW
(March 2015-2017)
AWARDED CONTRACTS BY DOE:
1,354.156 MW
INSTALLED (2014) CAPACITY: 22.0 MW
* 80MW ( ONGOING CONNECTION ACTIVITIES)
TARGET CAPACITY FOR 2030: 285 MW
ASPIRATIONAL CAPACITY: 1,528 MW
PART II.
Outlining the project
application process to secure
approval of a Solar
Renewable Energy Project
The permitting, connection
and installation process
Phase IV. Registration and connection
Signing of the 20-year Renewable Energy Purchase Agreement
Phase III: Development
Certificate of Compliance
(issued by the Energy Regulatory Commission)
Phase II: Pre-Development
DOE Confirmation of Commerciality
( conversion of the SESC) to development stage)
Phase I: Project Preparation
Solar Energy Service Contract (SESC)
Solar Energy Service Contract (SESC)- a service agreement between the Philippine Government thru the Department of Energy and an individual or juridical entity created, registered and /or authorized to operate in the Philippines in accordance with the existing Philippine laws and engaged in the exploration, development, or utilization of renewable energy sources and actual operation of RE systems and /facilities converting RE resources into useful energy forms like electrical. Such individual or entity is called Renewable Energy Developer. A DOE Certificate of Registration of the SESC issued to RE Developer serves as proof of entitlement to incentives under the RE Act.
The SESC gives the RE developer the exclusive right to explore, develop or utilize a particular RE contract area.
Certificate of Commerciality, DOR approves the successful completion of pre-development stage and converts the SESC to the development stage.
Certificate of Compliance- A certificate given to a RE developer to engage in the operation of a power plant facility used to generate electricity pursuant to Section 6 of the Republic Act No. 9136; No person may engage in the generation of electricity as a generation company unless it has secured a Certificate of Compliance from the ERC to operate facilities used in the generation of electricity.
A L L R I G H T S R E S E R V E D
PHASES OF DEVELOPMENT OF SOLAR PV PROJECTS IN THE
PHILIPPINES UNDER THE RENEWABLE ENERGY LAW FEED-IN-
TARIFF SCHEME
OUTLINING THE PROJECT APPLICATION PROCESS TO SECURE
APPROVAL OF A SOLAR RENEWABLE ENERGY PROJECT
T H E D E V E L O P M E N T S T A G E S
I. Site and project assessment
II. Design and optimization
III. Procurement
IV. Installation and commissioning
V. Operation and maintenance
VI. Customer enablement
T E C H N I C A L A N D
R E G U L A T O R Y
R E Q U I R E M E N T S
Track Record/Experience
Work Program
Key Personnel Experience
List of Existing company owned equipment
available for RE projects operations
A L L R I G H T S R E S E R V E D
Financial Requirements:
i. Audited Financial Statement
ii. Bank Certification to substantiate
the Cash Balance
iii. Projected Cash Flow for two years
iv. List of existing company owned
equipment for the project
SOLAR ENERGY SERVICE CONTRACT REQUIREMENTS UNDER DOE DC2009-07-0011
Pre-development Stages
• Preliminary Assessment
• Feasibility Study
• Financial Closing
• Declaration of Commerciality
RE Developer procure permits
•Environmental Compliance Certificate
•Free and Prior Informed Consent
•Certificate of Non-Overlap
•Local Government Endorsements
•Other government permits
Service contract as RE Developer
• Individual Filipino
• Corporation: 60% Filipino; 40 % Foreign
• 100% Foreign owned – shall register under the Philippine Laws for Technical and Financial Assistance
A L L R I G H T S R E S E R V E D
IN ITS DEPARTMENT CIRCULAR NO. 2013-05-0009, THE DEPARTMENT OF ENERGY
(DOE) ISSUED ITS “GUIDEBOOKS FOR THE SELECTION PROCESS OF RE PROJECTS
UNDER FIT SYSTEM AND THE AWARD OF CERTIFICATIONS FOR FEED-IN TARIFF
ELIGIBILITY”).
Basic requirements:
•Only those RE developers with valid and subsisting Solar Energy Service Contract (RESC) may apply for the Eligibility and inclusion of their project under the FIT system.
• In their application for conversion of the RESC from pre-development stage to the development stage, RE developers have to indicate that their Declaration of Commerciality is based upon the approved FIT rate.
•A RE developer holding a SESC under development stage may apply for FIT eligibility provided that it shall include in its submission a notarized proof and/or declaration that the project is not bound under any contract to supply its generated energy to any distribution utility (DU) or consumer.
•A Certificate of Endorsement (COE) under the FIT can be issued by DOE after the confirmation of the electromechanical completion of the plant.
•Certificates of Endorsement under the FIT will be issued on a first-come, first-served basis until the approved installation target is fully subscribed.
A L L R I G H T S R E S E R V E D
PERMITTING PROCESS FOR SOLAR PV
PROJECT UNDER THE RENEWABLE ENERGY LAW STAGES GOVERNMENT APPROVALS AND ACTIONS
Project Preparation File Application at the DOE Conduct of Environmental Impact Assessment
Conduct of Feasibility Study Completion of Corporate Requirements
Pre-Development Requires: i. Environmental Trust Fund ii. Environmental Monitoring Fund iii. Environmental Guarantee Fund
BOI Project Registration DOA Certificate BIR Certificate Business Permit NCIP Certificate DENR Environmental Compliance Certificate DENR Permit to Operate DAR Order of Conversion LGU Resolution of Support from host municipality and provincial government LGU Building Permit LGU Electrical Permit
Distribution Impact Study LGU Certificate of Final Inspection DOE Solar Energy Service Contract DOE Certificate of Confirmation of Commerciality
Development
Conduct of Grid Impact Study DOE Confirmation of Electromechanical Completion DOE Certificate of Endorsement for FIT Eligibility
ERC Certificate of Compliance
Registration and Connection NGCP/DU Connection Agreement NGCP Transmission Service Agreement NGCP Metering Service Agreement TRANSCO RE Payment Agreement Registration to the WESM DU Power Supply Agreement
DU Connection Agreement
A L L R I G H T S R E S E R V E D
Selection Process of RE Projects under FIT System and the Award of Certifications for Feed-In Tariff Eligibility‖ (FIT
Department Circular No. 2013-05-0009
SESC
Issued by DOE
To SPV Developer
Declaration of Commerciality
SPV developer submits to DOE
Certificate of Confirmation of Commerciality
-issued by DOE
A L L R I G H T S R E S E R V E D
Certificate of
Endorsement the
NGCP
NGCP to
conduct Grid
Impact Study
Interconnection
Agreement/
Renewable
Energy Purchase
Agreement
FACTORS IN SITE SELECTION FOR THE SPV PROJECT
Slope: the land must be flat free and not being used for years as an agricultural land.
Distance and Accessibility: Can be accessed by vehicles
Near the national grid Free of obstacles
Free of shadings Has perfect soil for ramming of the substructure
Alienable and disposable not being use for agricultural farming in 5-years
Not forest land except that a land tenurial instrument is procures
Not covered by CARP Law
A L L R I G H T S R E S E R V E D
SPV SITE LOCATION SELECTION FOR UTILITY PROJECTS IN THE
PHILIPPINES- REQUIREMENTS
Not located in flood prone and typhoon prone areas
Consider peace and order situation.
Consider the environmental, political, social, economic and technical issues in the locality.
Not blocked by the existing RE source application.
A L L R I G H T S R E S E R V E D
Legal
Instruments
• 25-year Usufruct
• 25-year Lease agreement
• Lease –Purchase
• Purchase
SITE SELECTION
CLIMATE CHANGE
MAP
IN THE PHILIPPINES
A L L R I G H T S R E S E R V E D
PART III.
Foreign investment
Opportunities and project
finance for solar pv power
LEGAL AND REGULATORY INSTITUTIONAL
FRAMEWORKS FOR FOREIGN INVESTMENTS IN
SOLAR PROJECTS IN THE PHILIPPINES
Republic Act No 9513 -Renewable Energy Law
Executive Order No. 226-Omnibus Foreign Investment Code of 1987
Republic Act No. 7042- Foreign Investment Code of 1991
Republic Act No.7721- Foreign Banks Act
Republic Act No.7652 – Investors Lease Act
Republic Act No. 7718- Build- Operate- Transfer Law
Investment Priority Projects of 2014
Philippine Millennium Development Goals
A L L R I G H T S R E S E R V E D
SOURCES AND MANNER OF FINANCING
Public Sector Loans – Government Banks ( Land Bank of the Philippines, Development Bank of the Philippines)
Private Sector Loans ( World Bank, International Financing Corporation, Asian Development Bank)
Short Term Loans Domestic Borrowings – local banks
Other Financing Institutions – international and local
A L L R I G H T S R E S E R V E D
SOLAR PV POWER HAS A GREAT DEAL OF APPEAL FOR
INVESTORS LOOKING AT OPPORTUNITIES IN THE
RENEWABLE ENERGY MARKET IN THE PHILIPPINES
Easy to assess and forecast the availability of the resource.
No variability associated with the cost of the main fuel, sunshine.
Compared to other renewable sources of energy, solar PV is quick to deploy.
A utility scale solar PV plant can be developed in 1.5 years as compared to an average of 2 years for onshore wind and up to 7 years for a geothermal power plant.
Rapid deployment makes solar an attractive solution in the Philippines in order to meet the country’s renewable portfolio standards and keep up with increasing energy demand.
A L L R I G H T S R E S E R V E D
INVESTMENT
PROPOSAL
AND APPROVAL
Any investment proposal
shall comply with certain
requirements under
Philippine laws.
A L L R I G H T S R E S E R V E D
Merger - must comply with the legal requirements under the Corporation Code of the Philippines;
Acquisition - must comply with Section 40 of the Corporation Code and subject to the restrictions regarding foreign equity ownership under the 1987 Constitution.
Management Contract - must comply with Section 44 of the Corporation Code.
Joint Venture - may be entered into without legal restriction on registration unless the parties thereto form another business organization requiring registration such as a corporation or partnership
Project Funding
Scheme
INVESTMENT PROPOSAL AND APPROVAL
B A S I C I N F O R M A T I O N U S U A L L Y S O U G H T B Y A N I N V E S T O R / F U N D E R
i. Name of proponent, Physical address, Postal address, Telephone number, Fax Number, E-mail address, name of contact person, Mobile Phone Number of contact person.
ii. Brief description of investment proposal
iii. Proposed Value of Investment
iv. Proposed Corporate status of the proponent
v. Proposed capital of investment entity and timing of capital take up
vi. Name and references of the EPC contractor
P R O J E C T I N F O R M A T I O N
R E Q U I R E D
i. Site of proposed investment
ii. Basis of access to site
iii. Proposed duration of investment
iv. Anticipated rate of return on investment
v. Environmental Impact of the investment
vi. Amelioration and remediation of environment impact
vii. Proposed employment impact
viii. Number, grades and source of any proposed expatriate staff and proposed duration of their employment
ix. Anticipated benefits of the investment to the economy and infrastructure
x. Audited balance sheet for proponent organization
xi. Due diligence certificate for proponent
xii. Company profile of proponent
A L L R I G H T S R E S E R V E D
THE SOLAR
POWER
INVESTMENT
BANKABILITY
CHALLENGE
Technology:
is it proven?
Can the EPC provide references and has
capability to deliver the project on time?
What is the anticipated ROI?
Will it be viable commercially with the
Feed-in-tariff rate of Php9.68 per kWhr?
When is the facility
generate a good return?
A L L R I G H T S R E S E R V E D
KEY DRIVERS IN
SOLAR PV PROJECT FINANCE
Project Analysis — Completion Risk Contractors
Manufacturers
Transmission Construction Contract Terms
Construction Technology Risk
Project Analysis — Operation Risk
Operator Operating Costs
A L L R I G H T S R E S E R V E D
FOREIGN INVESTMENT OPPORTUNITIES AND
PROJECT FINANCE
Solar projects can be complex and funding sources fickle. It is important for
developers to complete the solar project while funding is still available and
to ensure investors the project will operate as planned.
FOREIGN INVESTMENT
OPPORTUNITIES AND PROJECT FINANCE
A L L R I G H T S R E S E R V E D
Foreign and local solar technology developers are pushing for a massive installation of solar panels on rooftops of households, commercial establishments and buildings in the country.
Potential market for solar industry players : estimated at about $450 million, or P19 billion, yearly. Based on the 50,000 households (representing 10 per cent of the half a million constructions yearly) that can install solar panels with a capacity of 2 kilowatts.
To produce a kilowatt of solar power from these rooftop panels, one would need to invest about $ 3,500 for the actual components and installation works.
Investment can be recovered in about seven years;
Solar panels usually last for at least 25 years.
Proposed offtake for a Solar
Renewable Energy Project in the Philippines
•The electricity to be generated has the following offtake options:
•20-year Renewable Energy Purchase Agreement (REPA) under the Renewable Energy Act whereby the National Grid Corporation of the Philippines is the offtake counterpart;
•Sale of electricity directly to the Wholesale Electric Spot Market (WESM) or directly to the registered participants of the WESM;
•Sale of electricity under a 25-year Power Purchase agreement (PPA) with the local electric cooperative
•Sale of electricity under the Net Metering Scheme under the Renewable Energy Act.
A L L R I G H T S R E S E R V E D
A L L R I G H T S R E S E R V E D
The Renewable Energy Law (Republic Act No. 9513): This law
establish the framework for the accelerated development and advancement of renewable energy resources and development of a strategic program to increase its utilization. The pertinent provisions are as follows; The feed-in-tariff (FIT) system: providing the priority
connections, priority purchase and priority transmissions of the solar energy generated; Providing a fixed tariff for the sale of solar energy generated to be sold on the grid at Php 9.68 per kWh or US $ 0.225; The FIT is applied to the Solar energy generated in compliance with the Renewable energy portfolio standard (RPS);
Renewable Energy Market (REM). This is established in connection with the rules of the wholesale electricity spot market; Renewable Energy Option. The Philippines established the
Green Option program providing the end-users the option to choose RE resources as their source of energy;
The role of the Philippine government’s incentives is important in Solar
Renewable Energy Project, and it will take advantage of these incentives
to the maximum extent.
Philippine
Government
Renewable
Energy
Investment
Concession
• Income Tax Holiday (ITH) - for the first seven (7) years of its commercial operations; Additional investments in the project shall be entitled to additional tax income taxation after seven (7) years attributable to the investment;
•Duty Free Importation of RE machinery, equipment and Materials. – Within the first ten (10) years upon the issuance of a certification of an RE Developer, the importation of machinery and equipment and materials and parts thereof;
• Special Realty Tax Rates on equipment and machinery- realty and other taxes on civil works, equipment, machinery and other improvements of a Registered solar RE facilities shall not exceed one and a half (1.5) per cent of their original costs less accumulated normal depreciation;
• Corporate Tax Rate. After the seven (7) years of income tax holiday, if there are no improvements or additional investments on the solar energy facility, the Solar Energy Operator shall pay a corporate tax of ten per cent (10%) on its corporate net taxable income
• Accelerated depreciation. In case the solar energy developer failed to receive an ITH before full operation, it may apply for accelerated depreciation in its tax books;
• Zero Percent Value-Added Tax Rate- the sale of solar energy generated shall be subject to zero percent (0%) value-added tax (VAT);
• Cash incentives of Solar Renewable Energy developers for Missionary Electrification. The solar renewable energy developer shall be entitled to a cash generation-based incentives per-kilowatt hour generated, equivalent to fifty percent (50%) of the universal charge for power.
Philippine Government Incentives under Renewable Energy Law (R.A. 9513)
A L L R I G H T S R E S E R V E D
SOLAR ENERGY PROJECT INCENTIVES:
OMNIBUS INVESTMENT CODE OF 1987 (AMENDED BY RA 7918
• Income tax holiday for 6 years;
• Exemption from value-added tax;
• Simplified customs procedure;
• Unrestricted use of consigned equipment;
• Employment of foreign nationals;
• Deduction on taxable income of expenditures on necessary infrastructure related to project development;
• Additional deduction on taxable income of 50% of wages corresponding to the increment in direct labor hired within the first five years of registration;
• Deduction on taxable income of expansion expenses if additional deduction for labor expense were not claimed.
The Investment Code provides investment incentives to enterprises registered with the Board of Investments (BOI). Solar RE projects can be registered with the BOI for its “pioneer” status to avail privileges.
A L L R I G H T S R E S E R V E D
PLEASE CONTACT:
A L L R I G H T S R E S E R V E D
Ruth P Briones
Email: hrpbriones@gmail.com
Phone Nos: +632 263 5871
Mobile No: +63 916 627 0910