Philippines Department of Energy Signs 26 Renewable Energy Contracts Worth $275 Million

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Philippines Department of Energy has signed a further 26 renewable energy service contracts (RESCs) under the Renewable Energy Act of 2008, bringing the total of such contracts signed since the enactment of the government strategy to about 180.

The Renewable Energy Act (Republic Act 9513) was introduced in December 2008 to promote the development and utilization of renewable energy sources in the country and to raise the current 4,500 megawatts (MW) of energy derived from renewable sources up to 9,000 MW by 2020. The act provides both financial and non-financial incentives to entice companies to invest in renewable energy sources.

Under the act, companies can claim income tax reductions for the first seven years of new plant operations. Equipment and machinery imported to construct and operate new installations are exempt from duty, and companies can claim tax-free carbon credits for new installations. Power generated from renewable sources is also exempt from value-added tax.

Among the non-financial incentives offered by the act are prioritization of renewable energy-produced power, feed-in tariffs to enable companies to offer more competitive rates and the compulsory use of renewable energy in the national grid.

The first round of RESCs resulted in seven contracts worth $983 million being signed in September 2009, while the second round, consisting of a further 87 contracts worth $2 billion, was completed just a month later. Early in February this year, a further 112 RESCs were signed, covering 68 mini-hydroelectric projects, 17 wind energy projects, and five geothermal projects for an estimated investment value of $1 billion and generating capacity of more than 2,000 MW. At the same time, a further 22 RESCs for biomass projects worth around $500 million were also signed, and expected to supply about 256 MW in the next two to five years.

The latest round of 26 contracts covers a range of renewable energy projects, which will produce an estimated 402 MW of power in total at an investment cost of $275 million. The contracts cover six hydro installations, six geothermal power stations, five wind power plants, two biomass-fuelled plants, and an ocean power plant. In addition, a further six contracts were signed for non-commercial biomass operations.

One of the RESCs signed was for a 30-MW biomass plant to be constructed in Santa Cruz, Puerto Princesa, on the island province of Palawan, which will use woodchips as feedstock. The woodchips are planned to come from an 80,000-hectare mixed coconut and ipil-ipil plantation, with more trees to be planted to replace those used to feed the power plant.

Phil-Korean Renewable Energy Corporation, a personal investment of the retired director of Kepco Philippines Corporation Won Gul Lee and other Koreans, plans to invest $71.26 million in the biomass plant, with construction planned to start within the year. Kepco Philippines Corporation is a subsidiary of Korea Electric Power Corporation (NYSE:KEP) (KEPCO) (Seoul, South Korea).

The plant is scheduled to be commissioned in 2013 and, together with the plantation, will provide employment to about 3,000 people in the province. Electricity generated by the plant will be sold to Palawan Electric Cooperative (Puerto Princesa City, Philippines).

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