Recently, the Energy Regulatory Commission (ERC) presented its Draft Amended Rules Enabling the Net Metering Program for Renewable Energy, which included some controversial highlights. In connection with the issues that were discussed during the Public Consultation on the Proposed Amendment of Resolution No. 9, Series of 2013, A Resolution Adopting the Rules Enabling the Net Metering Program for Renewable Energy and Draft Amended Net Metering Agreement, held last May 17, 2019 at the Energy Regulatory Commission in Ortigas Center, Pasig, I am respectfully informing you of some regulatory updates on solar panels in the Philippines, renewable energy, and net metering.
Net Metering is the process protected by RA 9513 to allow everyday consumers to participate in building the nation’s electricity supply from interconnecting home solar systems to the grid. This vital program allows the consumer to trade their excess energy for credits, which has proven successful in other countries all over the world.
Since its introduction in 2013 here in the Philippines, there have been at least 2,100 net metered installations, which is equivalent to 20 MWp of new generation assets with an oil-displacing potential of 390 thousand barrels of oil. However, net metering is still in infancy with less than 1% of 1% of coverage and gross generation.
In the Draft Amended Rules Enabling the Net Metering Program for Renewal Energy released by the ERC, albeit some positives, there are proposed revisions that make the program less pro-consumer, less pro-utility, and less pro-masses. Such suggestions are in violation of key sections of RA 9513 (Renewable Energy Act) and in gross favor of the utilities, with willful ignorance of consumer rights and valuations for the contributions to the national grid.
Credit Grabbing: Interconnection Setup, RPS Meter, Export of Energy, Solar Tax
What I find contentious is the computation of the Renewable Portfolio Standards (RPS). Meralco and ERC are clamoring to base it on GROSS generation of the entire solar output, which includes the self-consumption component of a consumer owner solar equipment. The Draft Amended Net Metering Agreement even stipulates that the DU shall install another meter in proximity to the RE system to measure the total RE generated, and these costs should be shouldered by the end user, not the DU who reaps the benefit. It should be reiterated that RPS should be based on exported energy traded to the DU. Total RE generated is not the DU’s concern and it is also not subject to the total generation cost of the DU, because it was power generated by the Qualified End User (QE).
Instead of the RPS being a monitoring factor to encourage more renewable energy, it has essentially been weaponized to raise the cost of Net Metered installations and decrease benefits to the host consumer who has spent thousands or millions for a solar setup. This creates a disincentive for the consumer to go solar, junk participation in the net metering process or even report their solar system to authorities for a safety inspection.
RPS valuation on the gross generation of a consumer-owned solar installation is wrong because the RPS should be based on energy sent to the grid, or exported energy. This is not any different from when a DU sources RPS compliant RE dispatched energy from a distant Hydro or Geothermal plant. Exported energy already represents the actual energy that the DU trades in as part of its RPS requirement. They should have no financial stake in the internal self-consumption or RPS from a consumer-owned RE plant or solar setup as it happens behind the meter, or outside their jurisdiction. Again, this is not supported in the law and against the principle of Section 17 of the RE Act, which exempts RE installations from universal charges for the generator’s own consumption.
The most onerous is the inclusion of a “SOLAR TAX”. They will install a generation meter between the inverter and interconnection of loads to measure total output and charge the consumer missionary, UCMD, Lifeline, and FIT all fees for the total solar production, a majority of which is self-consumed and does not pass public domain right of way or franchise area assets.
The presence of the RPS meter is what the utilities want, as it acts as a forty thousand peso barrier in putting individual solar installations, and lets them illegally recover “lost income” from a generation asset that they do not own, permit, or maintain.
Usurious Computations, 1:1 Ratio, and Pricing
Another critical element is that ERC is ignoring the pricing methodology set forth in the original RA 9513. This is contradictory to the definition of net metering and standard global practice. Net Metering as defined in RA 9513, means if you export Meralco 1kWh of energy, its 1kWh value is applied towards consumption. What ERC did was value it less than half or at blended generation rate. To put into figures, Meralco sells power to consumers at P11.50, but buys from the consumer at P5.50 or blended generation charge. The solar industry has been patiently waiting for 6 years now, and this material breach of a Republic Act has not been remedied. Numerous academes, world practices, and legal descriptions of net metering as enshrined in the law are contradicting to this practice. Complaints have been filed by a number of NGO groups and consumers but there is continued contempt on valuing it at pro-utility blended generation charge.
As of today, with over 2,000 installations and assuming 30 percent of the 20 MWp of solar generation is exported, the valuation at P5.50 vs P11.50 causes the 2000+ Net Metering customers to be shortchanged by an estimated P54 Million pesos a year. This is a travesty on part of the regulatory bodies as this constitutes state-sanctioned plunder of GWh to consumers who spent thousands on solar installations.
The defense furnished by the ERC is that if ERC follows the law, the rates of people without solar would go up. This flies in the face of conventional wisdom that historically shows that retail rates are widely affected when supply is low, especially during peak daytime hours, with billions of pesos spent on peaker generation plants that are diesel and oil-driven. These plants dispatch energy at much greater amounts than the entire net metering program and at kWh values HIGHER than retail rates that Net Metering calls for. Our country simply needs more energy, and we should not restrict it with pro-monopoly policies.
Technical Knock Out
There are also some moves to technically knock out solar with “special” Only in the Philippines requirements. The Philippine solar installer industry was not consulted or invited during the drafting of the Philippine Distribution Code of 2017. As a result, it is interesting to note that there are “special” clauses to limit solar interconnections utilizing equipment not available in the WORLD market such as ten-minute reconnection times when grid power resumes. This is in contrast with the European standard for reconnecting under one minute or even the United States reconnection time of 5 minutes. We recommend a review of the 2017 Philippine Distribution code, seek an amendment of publishing of an updated 2019 code that takes into the account the rapid development of microgrid technologies, frequency and voltage support from DERs and consumer/utility scale battery systems and e-vehicles.
Not For the Masses
I would not imagine the DUs to stoop this low, but they are also seeking the automatic denial of lifeline subsidy for people consuming less than 100kWh a month or P1k bill if they avail of solar net metering. If you have a solar panel in the Philippines, you are not poor and unworthy of the subsidy. In short, the message Meralco is conveying is loud and clear: if you are not in the upper class, then you cannot go solar. This is because Class C and below cannot avail of net metering, because the permits and fees would cost MORE than the solar panels themselves. The net metering permitting alone for small solar setups such as 540wp or 1kWp cost more than the solar panel systems themselves.
Batteries give energy reserves for brownouts, bad weather, and power outages. This translates to savings when the technology improves and smoothens out demand-supply curves. However, the best minds from the DUs and ERC are saying batteries should be removed. The DUs want to specifically remove batteries for net metered installations because they simply want to protect their business – despite climate change, global warming, and purported claims that there will be an oversupply if too many people have solar. Our current concerns revolve around power shortages, and yet their ultimate priority is to maintain their monopoly and maximize every potential channel to charge fees. Solar penetration amongst consumers at this current time is 1% of 1%, indicating that the executive branch of Government has not yet done enough. We are actually promoting an energy policy that screams “Coal Pa More”, and it is detrimental to national interest and foreign reserves. Even worse, it endangers the economic and ecological survival of our children.
If the proposed draft amended rules are approved and implemented, we as a nation will be taking many steps backward. This will actually discourage people to install RE systems, avail of net metering and permit installations. Another result is that many will be forced to consider underground RE system installations. There is already significant reluctance of the public and even the DUs themselves after 6 years of net metering. Two thousand connections from a country with a 105 Million population is an insignificant statistic. Only 20 utilities and cooperatives out of the 120 DUs and coops show up and declare that more has to be done.
If history were a teacher, these very similar heavy-handed tactics have transpired in the earlier years of solar – in Nevada, Spain, Hawaii, and Florida. It is interesting to note that they have reversed those pro-utility policies and the public consistently voted the officials who have sided with utility profit interests out of office.
We have to take this to battle. We want a consortium of solar installers and stakeholders to take this to ERC and other policymakers because we believe in standing up for what is fair for the Filipino people. I am appealing for your time and support in helping us enable a Net Metering Program for Renewable Energy that makes sense. After all, we are one and aligned in steering the nation towards a clean and sustainable future. I look forward to your continued guidance as we forge ahead towards accomplishing our shared commitment to serve the best interests of our fellow countrymen.
A Concerned Citizen