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
• 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 Development
in 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 Minihydropower
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 Minihydropower
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 Minihydropower
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 Minihydropower
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 Minihydropower
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 Minihydropower
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 Minihydropower
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 Minihydropower
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
LUZON
CAPACITY
Bineng 4
3.0 MW
VISAYAS AND
MINDANAO
CAPACITY
LUZON
CAPACITY
Ampusongan
2.0 MW
Pamplona
0.55 MW
Wangal
1.0 MW
Omico 1
0.9 MW
Cambagang
2.5 MW
Irisan 1
1.6 MW
Suyoc
1.5 MW
Tandik
8.0 MW
Irisan 360
1.0 MW
Omico 3
1.5 MW
Camanlangan
5.2 MW
Talecbed
0.5 MW
1.0 MW
Gambang
2.0 MW
Upper
Ampohaw
Sibulan 1, 2, 3
27.6 MW
Irisan 2
1.6 MW
Upper Labay
0.75 MW
Tamugan
5.4 MW
Abdao
1.2 MW
Irisan 4
0.75 MW
Cateel
5.0 MW
Eddet 1
2.8 MW
1.6 MW
Total
54.25 MW
Anneng
0.8 MW
Lower
Ampohaw
Eddet 3
3.0 MW
Adaoay
1.5 MW
Kagaling
2.0 MW
Ampohaw B
1.2 MW
Lomboy
1.5 MW
Tuba 3
1.0 MW
Tuba 2
1.0 MW
John Hay
1.2 MW
Total
20 MW
Total
17.9 MW
TOTAL
POTENTIAL
100.15 MWS
www.hedcor.com