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 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 1 st 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 Development in the Philippines 3 laws & a code that affected the development of mini-hydropower: R.A Mini-hydroelectric Power Incentives Act R.A – Electric Power Industry Reform Act R.A 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:P –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.)

Potential Mini-hydropower Sites Identified LUZONCAPACITY Wangal1.0 MW Irisan 11.6 MW Irisan MW Talecbed0.5 MW Gambang2.0 MW Irisan 21.6 MW Abdao1.2 MW Eddet 12.8 MW Anneng0.8 MW Eddet 33.0 MW Kagaling2.0 MW Lomboy1.5 MW Tuba 21.0 MW Total20 MW LUZONCAPACITY Bineng 43.0 MW Ampusongan2.0 MW Omico 10.9 MW Suyoc1.5 MW Omico 31.5 MW Upper Ampohaw 1.0 MW Upper Labay0.75 MW Irisan MW Lower Ampohaw 1.6 MW Adaoay1.5 MW Ampohaw B1.2 MW Tuba 31.0 MW John Hay1.2 MW Total17.9 MW VISAYAS AND MINDANAO CAPACITY Pamplona0.55 MW Cambagang2.5 MW Tandik8.0 MW Camanlangan5.2 MW Sibulan 1, 2, MW Tamugan5.4 MW Cateel5.0 MW Total54.25 MW TOTAL POTENTIAL MWS