The National Grid Corp. of the Philippines has urged the government to drop its “wait-and-see” stance in approving transmission investments for renewable energy facilities.
In its draft Transmission Development Plan 2011, the NGCP said the wait-and-see approach would have adverse implications for both congestion and overall system reliability, and may likely hike electricity prices in the country.
The NGCP explained that the Energy Regulatory Commission’s decision to adopt this approach “does not encourage a timely implementation of investments and may lead to less optimal transmission solution to support incoming renewable energy resources.”
The NGCP warned that areas where a piecemeal approach, instead of a proactive plan, would be implemented would lead to imprudent investments. This approach required more right-of-way and longer transmission lines, resulting in heavy investments and increased power rates to end-users.
A more efficient approach, it said, would be to have all connection requirements coordinated (as opposed to a “wait and see” approach), to ensure that a transmission backbone and strategically-located substation would be built to provide access to wind sites already identified in the area.
“This is a more prudent and economically feasible approach to connect to the system in contrast to each wind farm building their own long individual lines,” NGCP said.
The proactive approach, however, would require mechanisms to eliminate the “chicken and egg” problem, which has been seen in the renewable energy sector. A pro-active mechanism should be able to eliminate uncertainty on how investment in transmission infrastructures will be recovered and how the renewable energy developers will pursue their plans consistent with the government plans and rules.
At present, renewable development around the world is faced with what is described as “chicken and egg” problem where generation investors are not willing to build a project without adequate transmission facilities, and transmission operators on the other hand will not expand transmission facilities without guarantees from generation investors.
“NGCP cannot respond proactively if transmission regulations and existing policies prevent it from doing so. RE developers, on the other hand, cannot build their projects when there is no adequate transmission capacity,” NGCP explained.
“With the expected growth of the RE industry, particularly that of wind power, the required mechanism and strategies that will guide NGCP and RE developers must be in place soon. Otherwise, the industry will face a ‘chicken and egg’ problem on transmission and generation development,” it added.
The NGCP has thus proposed the creation of a competitive Renewable Energy (RE) Zone.
“The government under its own National Renewable Energy Plan should identify areas with high potential for large scale development of RE resources. Once identified, the area can be declared as a competitive renewable energy zone,” NGCP said.
“This will facilitate not only the competitive deployment of RE-based generating facilities but will serve as NGCP’s reference in formulating a long-term plan for the transmission capacity needed to support the RE zone,” it added.
Another proposal was to have a National Transmission Corridor.
“The government should also declare the associated right-of-way as a national transmission corridor to facilitate acquisition and construction of the transmission lines. In the United States, the Energy Policy Act of 2005 granted the US Department of Energy the authority to create geographic areas designated as National Interest Electric Transmission Corridor (NIETC),” the NGCP explained.
An NIETC corridor is a region where electricity transmission limitations are adversely affecting the lives of people. This designation was intended to speed up siting of interstate transmission lines in the US by giving electric utility access to federal eminent domain.
“The Philippines can adopt the same model with a concept similar to NIETC. This will ensure that transmission routes needed in the long term as identified in the transmission and power development plans, including that of the RE zones, will be reserved and acquired before open spaces become unavailable due to rapid urbanization,” the NGCP stressed.
