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Barriers to Developing Small Scale Hydropower in the Philippines. A Presentation for the Climate Change Information Center Dec. 10, 2002. Barriers to Developing Small-Scale Hydropower in the Philippines. Summary Introduction to HEDCOR Mini-hydropower development in the Philippines

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Barriers to Developing Small Scale Hydropower in the Philippines

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Barriers toDeveloping Small Scale Hydropower in the Philippines

A Presentation for the

Climate Change Information Center

Dec. 10, 2002


Barriers to Developing Small-Scale Hydropower in the Philippines

Summary

  • Introduction to HEDCOR

  • Mini-hydropower development in the Philippines

  • Barriers to developing mini-hydropower in the Philippines


About Hedcor

Hedcor

Hydro Electric Development Corporation

  • Is an affiliate of Aboitiz Equity Ventures

  • Owns and/or operates 14 mini-hydro plants

  • Total generating capacity of about 39 MWs

  • Generating about 150 GWhrs annually


About Hedcor

Hedcor

O&M contractor of 70 MW

Bakun AC hydro plant

  • 1st and only BOT hydro project

    in the Phils.


About Hedcor

Hedcor

  • Mini Hydropower

    Development

    (design, construction,

    maintenance & rehabilitation)


About Hedcor

Hedcor

  • Fabrication & Machining

  • Watershed Management

  • Liaisoning


About Hedcor

Hedcor’s vision:

We lead in the promotion

and development of clean energy.


Small-Scale Hydropower Developmentin the Philippines

3 laws & a code that affected the development of mini-hydropower:

  • R.A. 7156 - Mini-hydroelectric Power Incentives Act

  • R.A. 9136 – Electric Power Industry Reform Act

  • R.A. 6957 B.O.T. Law

  • National Grid Code


Mini-hydroelectric Power Incentives Act

R.A.7156

Mini-hydroelectric Power Incentives Act

defines mini-hydro as:

100 kws < MINI < 10 MWs

Micro-hydro < 100 KWs


Mini-hydroelectric Power Incentives Act

Republic Act 7156

  • Grants incentives to mini-hydro developers (tax free importation of eqpt.)

  • Obligates NPC to buy generation at avoided cost

  • Vat-exempt status for mini-hydro

  • Special Privilege Tax of 2%

  • Enacted September 1991


Electric Power Industry Reform Act

REPUBLIC ACT 9136

  • The Power bill was suppose to bring transparency.

  • Deregulation, privatization & competition were to lower cost to “true cost of power”

  • Instead we have higher subsidies


Electric Power Industry Reform Act

REPUBLIC ACT 9136

  • SEC. 2. (h): To promote the utilization of indigenous and new and renewable energy sources in power generation in order to reduce dependence on imported energy.

  • SEC. 37. (e) (i): Encourage private sector investments in the electricity sector and promote development of indigenous and renewable energy sources.

  • No specific IRRs


Build Operate Transfer Act

REPUBLIC ACT 6957 & 7718

  • Provided a framework of risk sharing between the private developer and GOVERNMENT

  • Developers could negotiate BOT contracts w/ LGU’s, government agencies and GOCC’s

  • Typically, a developer bids for a contract, constructs and operates the project for 25 yrs, and then turns the project over


National Grid Code

The Code that all power plants comply with:

  • SCADA requirements

  • Tele-protection requirements

  • Communication requirements


Challenges in Developing Hydropower

MARKET

  • Most mini-hydro schemes are in remote areas and therefore usually in coop franchises

  • Electric coops have small loads and poor load factors

  • Run-of-river hydro schemes cannot maintain firm capacity whole year round


Challenges in Developing Hydropower

MARKET

  • Most mini-hydro schemes are in remote areas and therefore usually in coop franchises

  • Only a handful of electric coops are bankable


Challenges in Developing Hydropower

WHEELING POWER

  • High cost of wheeling power:

    • Transmission rate:P0.3076

    • Sub-transmission rate: P0.0362


Challenges in Developing Hydropower

WHEELING POWER

  • The wheeling fee is based on the monthly peak demand.


Challenges in Developing Hydropower

WHEELING POWER

  • The customer’s demand charges will only be reduced if the generator is able to generate at a firm level for the entire billing period


Challenges in Developing Hydropower

Finance

Long term loans at developmental rates are

not available.


Challenges in Financing Mini-hydropower

Finance

  • Development banks receive foreign loans at developmental rates to help promote the development of mini-hydropower

  • And lend to developers at near commercial rates

  • Full collateral requirements


Challenges in Financing Mini-hydropower

Finance

  • Commercial banks are unfamiliar with hydropower projects

  • Uncomfortable taking hydrological risks

  • Required parent company guarantee

  • More expensive than rates extended by development banks


Challenges in Financing Mini-hydropower

FINANCE

When we started (JEXIM):

  • 15.5% per annum (+ GRT)

  • 8 yr term – 21 equal quarterly payments

  • 3 yr grace period on principal

  • fully secured by parent company

    • NO project financing available


Challenges in Financing Mini-hydropower

Probable commercial banking terms today:

  • banks are not very excited to lend to power projects

  • 90-day T-bills + 2.0% spread or about 12.0% (exclusive of GRT)

    • must be fully secured + parent guarantee

    • 70/30 debt equity requirement

    • Project finance using local currency not available


Challenges in Developing Mini-hydropower

Suggested measures to promote the development of mini-hydropower:

  • Create a market

    • require utilities to purchase X% of their consumption from NRE’s

    • public awareness campaign on clean energy


Challenges in Developing Mini-hydropower

Suggested measures to promote the development of mini-hydropower:

  • eliminate or reduce the wheeling fees for NRE’s

  • charge wheeling fees based on average monthly use (i.e. kwhrs/hrs x rate)


Challenges in Developing Mini-hydropower

Suggested measures to promote the development of mini-hydropower:

  • DOE/DENR to initiate steps to augment the revenue of mini-hydropower developers

    • possibly through CDM


Challenges in Developing Mini-hydropower

Suggested measures to promote the development of mini-hydropower:

  • exempt mini-hydropower plants from technical requirements imposed on bigger plants (i.e. spinning reserve, back-up reserve, SCADA, reactive power capability, system frequency limits, etc.)


PotentialMini-hydropower Sites Identified

TOTAL POTENTIAL

100.15 MWS


www.hedcor.com


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