Barriers toBarriers toDeveloping Small Scale Developing Small Scale

Hydropower in the Hydropower in the PhilippinesPhilippines

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

HedcorHydro 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

HedcorO&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 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

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

• 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

• 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

• High cost of wheeling power:– Transmission rate: P0.3076– Sub-transmission rate: P0.0362

Challenges in Developing Hydropower

• The wheeling fee is based on the monthly

peak demand.

Challenges in Developing Hydropower

• 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

Long term loans at developmental rates are

not available.

Challenges in Financing Mini-hydropower

• 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

• 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

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.)

PotentialMini-hydropower Sites Identified

LUZON CAPACITY

Wangal 1.0 MW

Irisan 1 1.6 MW

Irisan 360 1.0 MW

Talecbed 0.5 MW

Gambang 2.0 MW

Irisan 2 1.6 MW

Abdao 1.2 MW

Eddet 1 2.8 MW

Anneng 0.8 MW

Eddet 3 3.0 MW

Kagaling 2.0 MW

Lomboy 1.5 MW

Tuba 2 1.0 MW

Total 20 MW

LUZON CAPACITY

Bineng 4 3.0 MW

Ampusongan

2.0 MW

Omico 1 0.9 MW

Suyoc 1.5 MW

Omico 3 1.5 MW

Upper Ampohaw

1.0 MW

Upper Labay

0.75 MW

Irisan 4 0.75 MW

Lower Ampohaw

1.6 MW

Adaoay 1.5 MW

Ampohaw B 1.2 MW

Tuba 3 1.0 MW

John Hay 1.2 MW

Total 17.9 MW

VISAYAS AND

MINDANAO

CAPACITY

Pamplona 0.55 MW

Cambagang 2.5 MW

Tandik 8.0 MW

Camanlangan

5.2 MW

Sibulan 1, 2, 3

27.6 MW

Tamugan 5.4 MW

Cateel 5.0 MW

Total 54.25 MW

TOTAL POTENTIAL

100.15 MWS

www.hedcor.com