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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

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 philippines2
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
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 hedcor4
About Hedcor

Hedcor

O&M contractor of 70 MW

Bakun AC hydro plant

  • 1st and only BOT hydro project

in the Phils.

about hedcor5
About Hedcor

Hedcor

  • Mini Hydropower

Development

(design, construction,

maintenance & rehabilitation)

about hedcor6
About Hedcor

Hedcor

  • Fabrication & Machining
  • Watershed Management
  • Liaisoning
about hedcor7
About Hedcor

Hedcor’s vision:

We lead in the promotion

and development of clean energy.

small scale hydropower development in the philippines
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
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 act10
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
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 act12
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
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
National Grid Code

The Code that all power plants comply with:

  • SCADA requirements
  • Tele-protection requirements
  • Communication requirements
challenges in developing hydropower
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 hydropower16
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 hydropower17
Challenges in Developing Hydropower

WHEELING POWER

  • High cost of wheeling power:
    • Transmission rate: P0.3076
    • Sub-transmission rate: P0.0362
challenges in developing hydropower18
Challenges in Developing Hydropower

WHEELING POWER

  • The wheeling fee is based on the monthly peak demand.
challenges in developing hydropower19
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 hydropower20
Challenges in Developing Hydropower

Finance

Long term loans at developmental rates are

not available.

challenges in financing mini hydropower
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 hydropower22
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 hydropower23
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 hydropower24
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
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 hydropower26
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 hydropower27
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 hydropower28
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.)
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