Avoiding (the debate on) avoided costs
In recent consultations with RE developers before officers of the NREB, at least two experts brought up the issue of costs avoided with the installation of renewables.
‘Irrelevant!’ Almendras’s bright guy on the board exclaimed.
Irrelevant? What planet is this guy from anyway? What for and how are the tariff impacts of RE installations supposed to be calculated?
In another exchange, he was forced to backtrack after he asserted that conventional generation and RE technologies faced the same fuel risks. You see, coal and diesel energy supply agreements have provisions that pass fuel risks to consumers.
On the other hand, RE developers –operators, once they sign on to FiTs, are at the mercy or vagaries of nature:
• For wind, no one knows where the wind blows when;
• For biomass, fuel availability is risky;
• For solar, when the sun shines it shines. When it doesn’t bring no umbrella;
• For run-of-river hydro, ask cooperatives with installed capacity how they service debt during droughts;
Note also that none of these technologies have a record of commercial success in the Phiilipines and that is why they need a temporary but catapulting push.
Any banker will tell you that for the same expected return, projects with higher variability in IRR require a risk premium. Isn’t that conventional wisdom? Unfortunately, the conventional generation guys are unconventional and illogical when it suits their interests.
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