Feed-in-tariff for renewable energy

AMSTERDAM — We just arrived here after almost six hours of train ride from the city of Augsburg, Germany. Actually, we had two train rides in getting here. We had to transfer from one train to another to complete the journey. We first took a train in Augsburg Haupbonhauf (central terminal) and we had a scenic tour of sorts during the two-hour travel.

We disembarked at the next Bahn (train station) and transferred to another train on the same platform for our connecting trip to Amsterdam. It took us another three hours of travel. By ordinary standards, such travel by train would be too taxing. But not for European high-speed trains that are built for comfortable long-haul travel, including cross-country within Schengen states. The only drawback in this mode of transport is you have to drag your suitcases and bags, on and off the train. 

This type of long-haul travel by train is suitable in going around countries like the Philippines. It’s not only for the sake of tourists but could also be an efficient mass transport system for us Filipinos. So it was disheartening to learn that the long-delayed North Rail project got snagged anew even before it could finally take off.

The latest official word about the North Rail project is that the terms of the loan agreement with the government of China are again being renegotiated. This train modernization project is supposed to rehabilitate existing rail tracks to connect northern Luzon provinces to Manila and involve the acquisition of more modern train coaches.

This project has spanned four administrations already. The North Rail project was proposed during the term of former President Fidel V. Ramos. It was pursued during the administration of former President Joseph Estrada until his term was cut short by EDSA 2 in January 2001. It was put back on the front burner when former President Gloria Macapagal-Arroyo took over the government. In good graces with the Chinese government, the Arroyo administration was able to secure highly concessional loan terms for the North Rail project. But somewhere along the way, corruption issues seeped in and got the project nearly sidetracked.

As of the latest development, the whole project is reportedly going back to square one. The new administration of President Benigno “Noynoy” Aquino III has sought a renegotiation of the $503-million loan agreement for the North Rail project for reasons still unclear to me.

Meanwhile, the Aquino administration has soft-pedaled anew in the government’s earlier plans to raise the fares of both the Metro Rail Transit and the Light Rail Transit. Ironically, while contemplating fare hikes, the Aquino administration has provided bigger subsidies to both MRT and LRT in the proposed 2011 budget bill being deliberated by the 15th Congress.

If there is one type of state subsidy worth funding by the government is feed-in-tariff (FIT) as provided for in the Congress-approved Renewable Energy Act of 2009. This has not been fully implemented since it was passed into law almost two years ago.

Governments like Germany’s are seriously encouraging renewable energy development by using feed-in-tariffs as the most effective policy instrument. I gathered this from the fact sheet of Pembina Institute (www.re.pembina.org), a member of the Canadian Renewable Energy Alliance (www.carea.ca), comprising Canadian civil society organizations that hold common interest in promoting a global transition to energy conservation and efficiency and use of low-impact renewable energy.

“A feed-in tariff is simply a guaranteed price set by the government for anyone who wants to sell renewable electricity to the grid, and a guarantee that they will have access to the grid to do so. The price, or tariff, is set so that a modest profit is ensured, thereby unleashing the collective capital resources of the entire province, state, or country to be part of the transition to renewable energy. The additional cost of purchasing the renewable power is shared among all consumers.

“Using feed-in-tariffs, Germany currently generates 12.5 percent of its electricity from renewable sources, while employing more than 215,000 people in the renewable energy sector, according to the German Federal Ministry of Economics and Technology.

“Feed-in-tariffs exist in more than 20 other countries as well. They are the most common policy for encouraging renewable energy systems, in part because ‘feed-in mechanisms achieve larger deployment at lower costs’ than other policy mechanisms such as quotas, direct incentives or voluntary goals.”

Dr. Bernd-Markus Liss, principal adviser of the German international development agency GTZ, earlier said in a forum held in the Philippines that the FIT system and the availability of preferential credit for small-scale investors hold the key to the greater participation of businesses and households in the government’s renewable energy program.

In Germany at present, he noted, the FIT for households that put up and use solar panels was about 0.43 per kilowatthour (kwh). Their loan payment for their investment, on the other hand, is only equivalent to 0.17. This is giving German households good income opportunities and the chance to recover their investments to install solar panels in their homes in a few years.

He strongly recommends that FIT be put in place soon so that the Philippines could finally enjoy the benefits of cheaper electricity from renewable sources of energy.