Anticipating a ripple effect

March 3, 2014: Twisted with tight bends and coiled curves, the road winds its way down the rugged, lush green volcanic slopes of Negros Occidental, part of the Negros Island of the Philippines. At the roadside, children wave and simple but pretty little houses, some of which are still built in the traditional style from bamboo or rattan, stand on stilts. On the horizon are the striking mountains of the neighboring island of Cebu, and in the valley below lies a green-brown mosaic of sugar cane fields and the urban belt of San Carlos City. Beyond, a sparkling expanse twinkles: the San Carlos Solar Energy park. Tens of thousands of modules, mounted on mounting systems with concrete foundations, already line the streets and sugar cane fields of San Carlos City’s economic zone. It is here that, on an area of 350,000 square meters, construction of the largest solar park in the Philippines (22 MW) to date began in October last year.
Up to 1,200 mainly local workers are employed on the site, busy constructing more bipedal aluminum structures from Mounting Systems; assembling modules from Conergy; digging trenches for cables and installing concrete formwork for the central inverter distribution stations from SMA, and assembling yet more modules.
The first phase of 13 MW (named SaCaSol I) was more than 70% complete by the time of pv magazine ’s exclusive visit and has since been completed, according to T.U. Michael Sieg, Chairman and CEO of ThomasLloyd (see p. 90). Construction work progressed well after heavy rains in January left the site partly underwater. On the other side of the street a former sugar cane field has been cleared and leveled and concrete foundations for the framework had already been partially laid on the day of our visit. A security camera on a tower, specifically erected for the purpose, documents the progress of the second 9 MW phase of construction (SaCaSol II). According to Sieg, this second phase will be completed in May. The Philippine President, Benigno Aquino III, has been invited to the official opening ceremony, scheduled for May 15.

Making a difference

San Carlos Solar Energy (SaCaSol), a joint venture between ThomasLloyd Group and the Philippine project developer Bronzeoak, is the building contractor for the solar park. The total cost of the project amounts to approximately $45 million, according to information from Bronzeoak. Because construction is taking place within San Carlos City’s economic zone, component imports are exempt from customs duties and taxes, and a seven year tax exemption is applicable on the solar park’s future profits.
Conergy calculates the 22 MW park’s annual income on 35,000 MWh. A 20 year feed-in tariff (FIT) of 9.68 pesos/KWh ($0.22 cents/kWh) beckons should the final approval of the supervisory authorities be granted over the coming weeks. The 69 kV cable of the National Grid runs directly beside the solar park.
This makes the SaCaSol project the first PV project in the Philippines to be operational under the terms of the 2008 Renewable Energy Act’s FIT. “We expect a ripple effect on the entire market development,” says Sieg.
However, the 50 MW cap for PV and a complicated approval process are barriers to further market players and projects. Sieg also forecasts that working together with the International Finance Corporation (IFC) of the World Bank Group will result in a ripple effect on further market development of renewable energy in the Philippines.
At the end of February, ThomasLloyd and the IFC signed a mandate document for the provision of top financing to the amount of $330 million. The funds will be used for a further solar park on Negros Occidental and for the construction of biomass power plants.
“We consider the partnership with ThomasLloyd to be groundbreaking for the further development of renewable energy in the Philippines,” Jesse O. Ang, Resident Representative of IFC’s Manila office told pv magazine . It is conceivable that the IFC may, at some point in the future, be directly involved in the project. The project is also groundbreaking because the district administration of Negros Occidental has already announced that they will not approve any new coal-fired power stations but will convert the entire power supply on the island to renewable energies (PV, wind, biomass). Right now, the island suffers from power supply shortages due to the severe damage of 52 towers of the 700 MW geothermal power plant on the island of Leyte caused by the super typhoon Haiyan last November.
Hendrik Meller, who works for the German Society for International Cooperation (GIZ) in Manila, sees the prevailing energy shortages in many parts of the country together with a growing environmental awareness as central reasons “for the high interest in photovoltaics” in the Philippines. This was demonstrated in a recent “German Solar Training Week.” To promote local solar projects, he recently coordinated the drawing up of guidelines for project developers, which will be published in the near future. Due to high electricity prices, an average of PHP 12/kWh ($0.27; €0.19) in metropolitan Manila, and the reduced cost of solar electricity at an average of around PHP 8/kWh ($0.18; €0.13), he considers the prospects for photovoltaics in the Philippines to be “very good.” Although the average wholesale prices for electricity are cheaper at around PHP 6/kWh, ($0.13; €0.10) they rise sharply during peak times. Widely used diesel generators are several times more expensive.
Meller is, however, skeptical about the low cap of only 50 MW for photovoltaics under the first phase of the feed-in tariff program (for systems with an effective rated output of more than 100 kW), which has long been oversubscribed. “This makes market access more difficult, especially for newcomers without a very strong balance sheet,” says Meller. He sees the introduction of net metering for systems with a rated output of less than 100 kW more favorably. However, this is only of interest for self consumption as no increased feed-in tariff will be paid for excess electricity. The expansion of PV, even in small plants, is also impeded by “an extremely complex approval process,” says Günter Matschuck, President of the German-Philippine Chamber of Commerce and Industry. The refitting of industrial roofs with PV is often difficult due to existing contracts with electricity suppliers. However, Matschuck, along with Ian Smith, Regional Sales Manager of Canadian Solar, sees a new arrangement allowing large consumers with an annual electricity consumption of more than 1 MWh to choose their suppliers themselves as an opportunity for PV.
Lanie O. Dormiendo of the International Marketing Department of the Board of Investments of the Department of Trade & Industry already considers the conclusion of Power Purchase Agreements (PPAs) for solar power marketing to be very attractive. Several major schemes, including a 35 MW Juwi project on Mindanao, are in preparation. As pv magazine learned from well-informed sources, the 50 MW cap for the FIT payment of solar power is also set to be increased within the next few months.
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