Cagayan Electric Power & Light Company’s Solar Venture(1MWp Grid-tied Photovoltaic Power Plant)

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Mr. Ramon C. AbayaMr. Ramon C. AbayaChairman, Cagayan Electric Power & Light Co., Inc.Chairman, Cagayan Electric Power & Light Co., Inc.

Cagayan de Oro City, the PhilippinesCagayan de Oro City, the Philippines

EMPower Meeting, Paris, 28 June 2005EMPower Meeting, Paris, 28 June 2005

PRESENTATION OUTLINE:PRESENTATION OUTLINE:CEPALCO, A Brief Introduction

CEPALCO’s Initiatives and Experiences in Renewable Energy Development

CEPALCO’s 1MWp Grid-connected Photovoltaic Power Plant

Tandem Operations of 1MWp PV and 7MW Run-of-river Hydro

CEPALCO’s Directions in Renewable Energy Development

CEPALCOCEPALCO is an investor-owned electricity distribution utility company serving Cagayan de Oro City and the three nearby municipalities in Misamis Oriental.

Currently serving more than 90,000 customers with a total demand of more than 100MW.

Current Power Supply Portfolio:Current Power Supply Portfolio:

National Power Corp. ~75%

Diesel IPP 15%

Hydro IPP 1 7%

Hydro IPP 2 1.5%

Solar PV 1%

CEPALCO INITIATIVES & EXPERIENCES CEPALCO INITIATIVES & EXPERIENCES IN RENEWABLE ENERGY DEVELOPMENTIN RENEWABLE ENERGY DEVELOPMENT

CEPALCO’s Renewable Energy Development Effort is Driven by Changes in Philippine Electricity Industry Business Environment

Prior to 1987, power generation business was a monopoly by the National Power Corp. (NPC); development focused on large power plants

From 1987, power generation opened to private investments (E.O. 215); government offered incentives in the development of small Hydro; a DOE circular encouraged development of Ocean, Solar and Wind

Few takers from the private sector; political situation in turmoil: revolutionary government took over Marcos dictatorship

CEPALCO INITIATIVES & EXPERIENCES CEPALCO INITIATIVES & EXPERIENCES IN RENEWABLE ENERGY DEVELOPMENTIN RENEWABLE ENERGY DEVELOPMENT

CEPALCO’s Response to the Changes in Electric Power Industry

The transition into partial deregulation of the generation sector coincided with shortages of power in the early 1990’s

To ensure stable & reliable supply, CEPALCO took advantage of the government’s renewable energy initiatives

CEPALCO developed its Distributed Generation strategies with renewable energy resources; (oil-based plant a priority to relieve shortage at once)

Developed the 7MW run-of-river Hydro & 1MWp Photovoltaic Plant

CEPALCO INITIATIVES & EXPERIENCES CEPALCO INITIATIVES & EXPERIENCES IN RENEWABLE ENERGY DEVELOPMENTIN RENEWABLE ENERGY DEVELOPMENT

Current Situation in Philippine Electric Power Industry

New capacity stymied by Law RA 9136 (2001) on restructuring obliging matching of grid rates currently below costs; looming shortage to relax rule

RP targets for renewable sources (largest producer from wind farm in SEA, largest geothermal developer in the world, Asian manufacturer of solar panels for local and export markets)

Needed: government to immediately pass law on renewables and energy efficiency; hearings completed

CEPALCO’s 1MWp GRIDCEPALCO’s 1MWp GRID--CONNECTED CONNECTED PHOTOVOLTAIC POWER PLANTPHOTOVOLTAIC POWER PLANT

Conceptual Framework Add Value to each kWh generated by the PV Plant

- Financial Value (actual peso benefit) shall determine CEPALCO’s level of investments in the project

- Non-energy value (environmental, grid voltage support, reliability) shall be afforded financial value if verifiably quantified or availed

CEPALCO’s total financial benefit (the Financial Value) is best determined by the Distributed Generation impact (avoided costs) of the PV Plant

- Generation avoided cost equal to energy cost of displaced peaking diesel plant

- Transmission avoided cost equal to avoided wheeling & ancillary service charges

- Distribution avoided costs equal to equivalent savings in deferral of distribution level investments

CEPALCO’s 1MWp GRIDCEPALCO’s 1MWp GRID--CONNECTED CONNECTED PHOTOVOLTAIC POWER PLANTPHOTOVOLTAIC POWER PLANT

Project ChallengesEconomic and Social returns (non-financial benefits) are much higher than financial returns

- Monetary value of displaced CO2 and imported fossil fuel not quantified

- Grid support (voltage and reliability improvement) provided by the PV Plant was not quantified as actual utility financial benefit

Grid electricity price is too low to match - Current grid rate (generation + transmission) is around USD0.06/kWH

- PV electricity selling rate to recover CEPALCO investment must be at least USD0.14/kWH; if total plant cost is to be recovered, USD0.52/kWH

- Diesel power plants (Mindanao peaking plants) generation costs are around USD0.10/kWH

CEPALCO’s 1MWp GRIDCEPALCO’s 1MWp GRID--CONNECTED CONNECTED PHOTOVOLTAIC POWER PLANTPHOTOVOLTAIC POWER PLANT

Project FinancingIncremental costs in constructing the PV (i.e. difference in netpresent values of the PV against the reference diesel plant) shall be taken from other available sources (incentives, grants, etc.)

Final Project Financing Sources- Total PV Plant Investments: USD5.38M

- NPV of reference diesel plant: USD1.38M (CEPALCO Equity)

- Amount provided by the GEF: USD4.0M

CEPALCO’s 1MWp GRIDCEPALCO’s 1MWp GRID--CONNECTED CONNECTED PHOTOVOLTAIC POWER PLANTPHOTOVOLTAIC POWER PLANT

0

20,00040,000

60,000

80,000

100,000120,000

140,000

160,000

1 2 3 4 5 6 7 8 9 10 11 12

Expected Actual

month

kWh

Annual Expected Energy = 1,261,000 kWh

Actual Generated Energy = 1,504,100 kWh

Actual > 19%

Plant actual AC capacity > 950kWac,stc

Project Construction and Operation Started construction in August 2003 and accepted July 2004

One Year Operations Data (monthly AC kWh generation)

CEPALCO’s 1MWp GRIDCEPALCO’s 1MWp GRID--CONNECTED CONNECTED PHOTOVOLTAIC POWER PLANTPHOTOVOLTAIC POWER PLANT

Plant Rating and PerformancePlant components show good tracking of available solar energy

CEPALCO’s 1MWp GRIDCEPALCO’s 1MWp GRID--CONNECTED CONNECTED PHOTOVOLTAIC POWER PLANTPHOTOVOLTAIC POWER PLANT

Plant Rating and PerformancePlant components show good tracking of available solar energy

CEPALCO’s 1MWp GRIDCEPALCO’s 1MWp GRID--CONNECTED CONNECTED PHOTOVOLTAIC POWER PLANTPHOTOVOLTAIC POWER PLANT

Plant Rating and PerformancePlant components show good tracking of available solar energy

TANDEM OPERATIONS: TANDEM OPERATIONS: 1MWp POWER PLANT 1MWp POWER PLANT –– 7MW HYDRO7MW HYDRO

PV PANELSPV PANELSDC TO ACINVERTERDC TO ACINVERTER

Total Generated Power = X KWH

Stored Water = Y Cubic Meter,

Equivalent to X KWH when released

Conjunctive operation adds value to PV generated kWh

“Firms” the PV capacity

Threatened during low flow periods – hydro takes extraordinary control measures

Implementation of conjunctive algorithm withheld pending accumulation of more operations data from both hydro and PV

FUTURE DIRECTIONS IN FUTURE DIRECTIONS IN SOLAR ENERGY DEVELOPMENTSOLAR ENERGY DEVELOPMENT

CEPALCO’s Distributed Generation Policy and Strategy DG shall focus on on-grid Renewable Energy Technologies (RET)Explore or avail some means that converts positive externalities of RET kWh (e.g. environmental impact) into financial values

Current Renewable Energy Development EndeavorsEC-ASEAN Energy Facility (EAEF) funded feasibility studies of three RET potentials: (1) 25MW bagasse-fired cogen; (2) 6-8MW hydro; (3) rooftop PVAdded value for PV: accessible to research, demonstration effect, green pricing

CAGAYAN ELECTRIC POWER & LIGHT CO., INC.33 T. Chavez St., Cagayan de Oro City, Philippines

http://www.cepalco.com.ph info@cepalco.com.ph