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Republic of the Philippines

. San Miguel Avenue, Pasig City

NO. 10, SERIES OF 2012, A




ERC CASE NO. 2014-004 RM


Before the Commission for resolution is the matter pertaining to
the review of the Feed-in Tariff (FIT) rate for solar energy generation,
as necessitated by the new installation target of 500 MW for Solar set
by the Department of Energy (DOE).
In view of the letter dated May 23, 2014 of the National
Renewable Energy Board (NREB) endorsing to the Commission the
Certification dated April 30, 2014 issued by the DOE, which revised
the solar energy installation target under the FIT System from 50 MW
to 500 MW, the Commission initiated the instant rule-making
proceedings, seeking the review and possible amendment of its
Resolution No. 10, series of 2012, entitled "A Resolution Approving
the Feed-in Tariff (FIT) Rates."
In a Notice posted at the Commission's website on June 4,
2014, the Commission invited all interested stakeholders to submit
their respectivecornments and inputs on the proposed amendments
to Resolution No. 10, series of 2012.
On various dates,' the
respective comments:





ERC CASE NO. 2014-004 RM
DECISION/March 27, 2015
Page 2 of 25


Manila Electric Company (MERALCO);
Mindanao Energy Systems, Inc. (MINERGY);
Philippine Electricity Market Corporation (PEMC);
San Carlos Solar Energy, Inc. (SaCasol); and
Mr. Troy Colmenares (Concerned Citizen).

Subsequently, NREB, in its letter dated June 13, 2014,
submitted to the Commission its proposed new solar FIT, using
updated market information for the solar energy power plants,
equivalent to PhP9.1 O/kWh, effective after March 15, 2015.
Meantime, on July 17, 2014, the Nagkaisa, represented by Mr.
Edsil Bacalso, filed its comment.
On August 4, 2014, the Commission issued a Notice of
Proposed Rule-Making in ERC Case No. 2014-004 RM setting
NREB's proposed FIT for solar energy of PhP9.10/kWh to a public
hearing on September 2, 2014. On the same date, the Commission
furnished the DOE with copies of the comments received from the
During the September 2, 2014 public hearing, the following
stakeholders submitted their respective comments and thus, were
considered as Parties in the instant case:

Astroenergy Development Mindanao, Inc. (Astroenergy);
Enfinity Philippines Renewable Resources, Inc.;
Philippine Solar Power Alliance, Inc. (PSPA);
SaCasol; and
Mr. Colmenares.

In the said public hearing, the Commission took note of all the
comments of the stakeholders, including that of the Foundation for
Economic Freedom (FEF), represented by Mr. Ernest Leung. FEF
manifested that the new FIT for solar energy should be lower

Thereafter. 2015 Page 3 of 25 because of the significant improvements in the borrowing rates in the country. Gerry Magbanua. and testified on NREB's proposed FIT for solar energy of PhP9. PEMC and Atty. the Commission. MERALCO. the Commission issued an Order setting the case for public hearing on January 28. Magbanua. DOE. Energy Development Corporation (EDC) and Atty. VECO.1 O/kWh. 2014 public hearing. NREB. NREB was. Moore's testimony and before the hearing was terminated. NREB. NV VOGT Philippines. Astroenergy. Mr.ERC CASE NO. Visayan Electric Company. an international engineering consulting firm. Inc. to appear during the next scheduled hearing for cross-examination by the Parties. Ocampo propounded c1arificatory questions thereon. Subsequently. which is one of the assumptions used by the Commission to arrive at the approved PhP9. Moore's presentation. PSPA was directed to furnish all the Parties with copies of Mr. directed to present other witnesses and/or evidence in support of its proposed FIT for solar energy of PhP9. At the said hearing. Magbanua's testimony. VECO. PSPA requested that it be allowed to make a presentation on the 22% net capacity factor. PSPA. presented its study and findings on the range of capacity factors that can be expected of solar plants at various locations in the country.. a member of its Technical Working Group. PSPA. The DOE was also enjoined to send a representative at the said hearing to address the questions that may be raised therein with respect to the Certification dated April 30.10/kWh during the September 2. Thereafter. Mr. Ranulfo Ocampo appeared. NV VOGT Philippine Solar Energy One. including the key assumptions used by the Commission to arrive at the approved PhP9. the Commission directed Mr. during the said hearing. After Mr. (VECO). 2015 public hearing. . 2014 it issued on the new Solar FIT Installation Target. likewise.1 O/kWh. Alquin Chan. NREB presented its witness. RASLAG Corp. who presented the details of NREB's proposed FIT for solar energy of PhP9. SOLEQ. EDC.68/kWh FIT for Solar and those that have changed as a result of recent events. On January 20. the Commission. PEMC. SaCasol. Astroenergy and Kirahon Solar propounded c1arificatory questions thereon. 2015. Mr. Mott Macdonald. if it so desires. SaCasol. MERALCO. 2014-004 RM DECISION/March 27.68/kWh Solar FIT. Philip Napier Moore of Mott Macdonald. In the same Order. SOLEQ.. 2015. Inc. During the January 28. After Mr.

1000/kWh FIT. all other assumptions from the existing approved FIT remain substantially the same. Applying all the foregoing updated information to the FIT Financial Model will result in a PhP9. inclusive of balance of plant (EPC) prices range from US$1. study. report in support of their respective positions pertaining to the appropriate new Solar FIT. compared to the interest rates of 10% and 8% for the approved solar FIT. except the above-mentioned parameters.7 Million/MW to US$2. and c) The Peso-Dollar exchange rate is PhP44. 2014-004 RM DECISION/March 27. degressed by six percent (60/0). a rate which is incidentally equal to the PhP9.0 Million/MW.6800/kWh current FIT.00:US$1 compared to PhP43. NREB asserted that. were also given ten (10) days from said date of hearing within which to submit additional documents. respectively. b) Local interest rate and US$ interest rate are 8% and 6. DISCUSSION NREB Updated Market Information NREB submitted the following updated market information1 for consideration of the Commission in the determination of the new solar FIT applicable: a) Equipment Procurement and Construction (EPC).5%.ERC CASE NO. as well as the other Parties. data. NREB supports the following FITs for solar installation of up to 500 MW: 1 As of May 2014 .00:US$1. 2015 Page 4 of 25 NREB.

444/km Parameters Net Capacity Factor Equity IRR Local Inflation Rate Base Peso to US$ Exchange Rate Forward Peso to US$ Exchange Rate Base Local CPI 16.586/kW 22. 2015 to March 15. 2015 Page 5 of 25 Applicable FIT (PhP/kWh) Solar PV Projects Completed as of March 15.8125:US$1 PhP44.0% 3.020 $762.406/kW US$1.958/kW EPC Cost. the Commission deemed it necessary to set a new Solar FIT.954/kW US$1.40:US$1 PhP43.68/kWh Parameters for the New Solar FIT Total Project Cost (US$Mn/KW) US$2.6800 (approved FIT) Completed from March 16. 2016 9. Transportation to the Project Site and Balance of Plant US$1.00:US$1 PhP44.070 Transmission Interconnection Cost $23.256/km $30.5% Switchyard and Transformers $907.91 . 2014-004 RM DECISION/March 27.00 138.0% 18. 2015 9.44% 13.28% PhP47.ERC CASE NO. taking into consideration the following modified key assumptions: Original Parameters for PhP9.1000 (degressed FIT) Solar FIT Parameters With the current data available to the Commission and the updated information submitted by NREB.870/0 4.00:US$1 160.

5% It may be recalled that NREB originally proposed2 a 16% capacity factor. Solar and Wind Energy Resources" 3 ERC Case No. which is reported to have an average capacity factor of 14. which ranges from eleven percent (11%) to twenty-four percent (24%). New PV installations are expected to be more efficient compared to the 2004 CEPALCO PV Plant5 due to the continuing technological innovation and manufacturing process improvements in the PV technology. which was based on PSPA's recommendation for a 1.18. 2 ERC Case No.ERC CASE NO.'s (CEPALCO) 1 MW PV Plant from 2005 to 2009. 2015 Page 6 of 25 Net Capacity Factor .77% reported average net capacity factors of CEPALCO's 1 MW PV Plant for 2010 and 2011 are actually higher than the 16% proposed capacity factor 4. 2011-006 RM. Inc. It approximates average net capacity factor of PV plants in some parts of the world.06% during the five (5)-year period.396 kWh/kWp Annual Specific Energy Yield (ASEY) and in consideration of the following: 1. 2012 4 Generation Company Management Report (GCMR) for 2010 and 2011 submitted by CEPALCO as part of its annual reportorial requirements under the terms and conditions of its Certificate of Compliance (COC) 5 1 MW CEPALCO PV Plant which commenced commercial operations on September 26. The 16. Ocean. 2. The Commission. It is higher than the historical capacity factor of Cagayan Electric Power and Light Company. entitled "In the Matter of the Petition to Initiate Rule-Making for the Adoption of the Feed-In Tariff for Electricity Generated from Biomass. 2014-004 RM DECISION/March 27. Run-of-River Hydropower. 2011-006 RM. and 2. adopted a 22% capacity factor3 based on the following considerations: 1. after referring to available data and independent reports of reputable Renewable Energy authorities. Decision dated July 27. 2004 .

to wit: 6 NREL is the national laboratory of the United States Department of Energy (USDOE). During the January 28. The said higher level was justified by the assumption that the continued improvements in the performance of PV technology resulting from better cell efficiencies and lower electrical conversion losses will further improve the level of Capacity Factors of the new PV installations. the PSPA presented before the Commission the result of the Mott MacDonald study. 2015 Page 7 of 25 3. the appropriate net capacity factor of a Philippine Solar PV Plant should be 18. select Philippine PV Plant Sites". It is commonly expressed as average irradiance in watts per square meter (W/m2) or kilowatt-hours per square meter per day (kWh/m2/day). 2015 public hearing. Italy and Spain .gov 7 Insolation is a measure of solar radiation energy received on a given surface area in a given time. 2014-004 RM DECISION/March 27. The twenty-two percent (22%) capacity factor adopted by the Commission in the determination of the existing Solar FIT of PhP9.ERC CASE NO. and 4. Comparative analysis of the insolation7 levels of AsiaPacific as well as European countries based on the NASA .nrel.5% on the average. National Renewable Energy Laboratory (NREL)6 reported that the capacity factors for PV crystalline technologies in 2011 range from 20% to 24%. 8 Germany.Surface Meteorology and Solar Energy Data Set expressed in kilowatt-hours per square meter per day (kWh/m2/day) disclosed that Philippines has a relatively high insolation level compared to European countries8 upon which the sixteen percent (16%) proposed capacity factor was benchmarked. entitled "Independent Solar Energy Yield Assessment.6800/kWh represents the middle range of the capacity factors for PV crystalline technologies based on NREL's 2011 Report. www. PSPA submitted that. based on the independent expert analysis on the Philippine data. Office of Energy Efficiency and Renewable Energy.

1% 18.6% 1.5% Average *PAG-ASA Station **Candidate PV Plant location The Commission finds merit in adopting the result of the independent study as this was based on specific historical data on the Philippine grounds.5 79.3 79.Kidapawan City.066.498 16.8 79.1% 16.9% 18.4% 16.0% 18.433 15.2 79.9% 19. 2014-004 RM DECISION/March 27.569 16.655.Bayambang.6% 20. Isabela 1.7% Visayas 2** .4% 17.799.476 15.EI Salvador City.634 17. Visayas and Mindanao Islands objectively reflects \a level of capacity factor appropriate for the Philippine setting. Cotabato 1.899. Misamis Oriental 1.1% 1. Years 120 Average ACCF.862. Leyte 1. Years 1-20 Luzon 1*-Santiago City.9% 1.3% 1.1 79. The averaging of the actual data from a location with high irradiation.5 79.5% Mindanao 2** . 2015 Page 8 of 25 Areas Annual Average Irradiance (kWh/m2) Initial PR (%) Plant Energy Yield (MWhNear) Year 1 Average DCCF.8% Luzon 2** .4% Visayas 1** .991. Panay 1. Pangasinan 2.Iloilo.Jaro.4% Mindanao 1* .0% 1.314 14.ERC CASE NO. mid-range irradiation and low irradiation levels in Luzon.5% 1. .

:E •• 0 !at.1 J 1 I 1 .:::! 0.5: GLOBAL lYPlCAtll\'STAtUO COSi.2 11 0.c::.i:l00s9. entitled "Renewable Power Generation Cost in 2014" published in January 2015 .0 -'-' u 0. II I 0. the 18. 2015 Page 9 of 25 To validate further the reasonableness of the 18.AND lCOEI'lAI~~S WITH W~IGHTE:D AVERAGES FOP.9 to wit: FIG. the Commission referred to the reported capacity factor of Solar PV Plants during 2014 by the International Renewable Energy Agency (IRENA). 9 IRENA Report.'O OJ4SKOir: Vltrro PROJEC1S.3 " ~i u- ~ I J 4000 I I 1 'n 0.1 • • •I 0.50/0 capacity factor.I I I I 0.50/0capacity factor based on the study of Mott Mcdonald Independent Solar Energy Yield Assessment on selected PV Plants in the Philippines.LJ. the Commission deems it appropriate to adopt the 18. fRENA RenG'>\'Dl:lIe Cost Dr. ~o (flo. Thus. 8000 ~'.ERC CASE NO. u :s g @ "C. I I I I IlJ 11 TI I o .5 I I I I I I I ." U IT TI n I .lm~ 2.50/0capacity factor is slightly higher compared to the reported capacity factor of Solar PV Plants by the IRENA during 2014. luntl1Y'SCAlE SOlAR' PflOTOVOlTAIC Afo. 2014-004 RM DECISION/March 27.1 201'0 2014'I 20102014 • .201 0 ANO 2014 'Capacity t:actor Total !instaUed costs 2014 USDjl<W . I 6000 03 . Cll. 004 2000 . Gleaned from the foregoing table.0 2014 2014 I Sourcg.1 0.2 ~lll_~ ':. : 1 • I I n 0.1 1 I I .PACITV fACTO!? .

ranges from US$1. the Commission referred to the actual downward trend in the prices of Solar PV modules as reported by IRENA in its Report published in January 2015.906 Million/kW. In 2014. Solar PV modules' high learning rates 10 and rapid deployment11 resulted in PV module prices declining by around 75% between the end of 2009 and the end of 2014. the cost of Solar PV modules declined by between 13%) and 29% depending on the market and manufacturing country source of the modules. It proposed that the Solar FIT be recalculated using an assumed updated EPC Price of US$1. 2014-004 RM DECISION/March 27. price declines accelerated and reductions of 39% to 490/0 occurred. price declines were between 12% and 18%. To validate this. 2015 Page 10 of 25 EPC Cost . the downward trend was restored to a range between 7% for thin film modules and 220/0for German-manufactured modules.0 Million/MW.7 Million/MW to US$2. In 2012. From the said report. inclusive of balance of plant (EPC) prices.586/kW NREB submitted that the current Equipment Procurement and Construction (EPC). In 2011. entitled "Renewable Power Generation Cost in 2014". module price declines slowed down somewhat to between 15% and 29% and in 2013. the reduction In PV module prices is summarized in the table below: Year PV Module Price Reduction Range Minimum 1018% 11 Maximum 2012 15% 29% 2013 12% 180/0 2014 7% 22% to 22% Around 40% growth in cumulative installed capacity in each of 2012 and 2013 . In 2010. According to the IRENA Report.US$1.ERC CASE NO. although exchange rate fluctuations and trade dispute results saw the price of Chinese-made modules actually rising by around 70/0 over the year.

to wit: Year Percentage Decrease in Module Price PV Modules Incidental Cost Total Share of Module to Total EPC Cost Effective Decrease in EPC Cost 0/0 2013 18% 30/0 21 % 48% 10% 2014 22% 30/0 25% 39% 100/0 Applying the Commission-computed effective percentage decrease during 2013 and 2014 to the US$1.586/kW and a total plant installed cost of US$1. the Commission used the US$1 . the Commission considered the upper bound of the reported PV module prices percentage decline during 2013 and 2014.84/kW 2012 price level resulted in an updated EPC Cost of US$1.953. 2015 Page 11 of 25 It will be recalled that the approved PhP9. In order to determine the updated level of the PV module prices.ERC CASE NO.6800/kWh Solar FIT was based on a US$1.953. For purposes of updating the EPC Cost up to 2014 level. 2014-004 RM DECISION/March 27. which accounts for just about 9% reduction from the reported December 2011 Solarbuzz price level.84/kW updated EPC cost as of June 2012.84/kW Cost as the December 2012 level. the Commission arrived at an effective reduction in the PV Module Price equal to 10% and 8% during 2013 and 2014.958/kW. Following the adopted PSPA methodology in applying the effect of the downward trend in the prices of PV Modules to the 2012 EPC Cost level. respectively. A comparison between the Commission and NREB's computation of the EPC Cost and Total Plant Installed Cost is shown in the table below: .953.

.' ConsUltIng. 2014-004 RM DECISION/March 27.343/kW US$1.sCALE AND RESIDENTIAL SOLAR PVSYStEMS A~AG£s.. 1 2 ____~_~ o 1 I 2009 2010 I 20ll 1 I 2012 2013 .. 12 IRENA Report. the Commission referred to the estimated global average 12 installed costs for utility-scale of Solar PV Systems as reported by IRENA..~ and PhotJ).- .I£O COSTS fORUTIUTV-. entitled "Renewable Power Generation Cost in 2014" published in January 2015 . 2015 Page 12 of 25 NREB ERC Difference EPC Cost US$1.9: 'EstiMATED GLOBAL AVERAGE INSTAI.2009 2014USDMI OF OOUNmv TO AND tHE RANGE . to wit: FIGURE 5. -..586/kW US$320/kW Total Plant Installed Cost US$2.906/kW US$1. __ . -'"" .2014 8 6 .ERC CASE NO._m :1 2014 Souroe: IRENA Renew<!b~ Cost Databe.958/kW US$385/kW Particulars To validate the reasonableness of the computed cost levels.• "_ 1 . 2014.

2 Bio-power from gasification Planlsize: 1-40 MW Conversion efficiency:3Q-40% Cap=i:yfactor: 40-80% 2.050 (non-OECOl Trough.450/kW in Germany and US$1 .0% (no storage).•. 17.5--'250 MW Capacity facto:: 10-25% (fixed tilt) Conversion efficiency: 10-30% (high end is CPV) Types: parabolic trough.510 (India) 32-38 (OECo) 9-40 (non-OECO) 14-34 (Europe) Trough. Up to 100 k\'I' Average 6.000 (United States). This is also found to be within the range of the capital costs of Ground-Mounted Solar PV Plants according to the REN21 Report.OECO) 16-38 (Europe) 1.0-2. 500kW (industrial) Capaclty factor: 10-25% Resldential costS: 2. diurnal storage 1.000 Pr$cts >2. Projects 20-300 MVoi:750-2.0 4-20 Co-fire: 4.200 (Germany). industry associations.500 Co-fire: 2.SOO(Japan) 23-114 (OECO) 28-55 (non. 2014-004 RM DECISION/March 27.gel Trough and Fresnel: 19-38 (no storage).1-1. US$1. REN21 also reported that the average PV Plant Installed Cost in the United States is US$2. 110-100 MW (Fresnel) Capacity factor: I 20-4.200 8logas: 6-19 Lanolin gas: 4-6. international institutions.9.900-3.500 ]5-23 Wind: Small-scale. 35-45% 4.•.710 (China). run-of-ri'ler Capacity factor:30-GO% Projects >300 MW: 1.000 kW PlanltyP9: run-of-river. it connects .0 Ocean power: Tidal range.500-1.958/kW approximates the reported estimated global average installed costs for utility-scale Solar PV Systems.100-4. 71O/kW in China. Turbine size..350 (China). no storage: 4.:Ype: resel'Voir.900-3800 Binary: 2.5 MW Capacity!actor. 3. Open to a wide variety of dedicated stakeholders.000 5-4.260 (Japan).5-7..200-1.000-7.500 6-24 Blo-.000+ MW Piant .5-3.0 MW: 2-12 Projects <20 MW: 3--'23 Hydropowe~ Off-grid/rural Plant size: 0.470 (China and .0.500-5.2.India) 1.0-6.4 (United States. 100 WI (commercial).950 (typical global). 2.200/kW to US$1.00. tower.5 Geotherma'i Plant size.000 (United states~v.i~hstore. non-governmental organizations.200 MW Comerslon efficiency: 25-35% Capaci:yfDctOr: 50-90% 800-4. dish Ptant size: 50 .Averages: 2.800 Tower: 5.500-7.0-80.0 (Ita1y. high end of range is with storage) power SolarPV: Ground-rtlO\Jnled trtif'rty-scale Concentrating solar thermal power (CSPJ Uixed. REN21 leverages their successes and strengthens their influence for the rapid expansion of renew~ble energy worldwide.000-2.870 21-28 SolarPV: Roof~op Peak capacity: 3-5 kW (residential). the Commission-computed total plant installed cost of US$1.175-6.0-1.290-5. Wind: Onshore Turbine size: 1.380 (Ausirolia}.13 entitled "Renewables 2014 Global Status Report". 15--'20 (United States) REN21 convenes international multi-stakeholder leadership to enable a rapid global transition to renewable energy.800 (United States).040 1. hydrokinetic:.. 3.90. 1.000/kW.900 (China) 13 (United Stntes).950 (elsewhere) 4-16(0£00) 4-16.250-5.5-16. 35-'75% (with storage) 1 ~ ~ ~ .450 (Germany). without storage) 9.l Commercial costs: 3.Ds much as 3.300 (OECO).0-2 . 6 hours storage: 7.500 landfill eas: 1. Plant size <1 to >250 MW capacitY factor: 23-29% 5..400-3.0.ren21.50 MW (tower). It promotes appropriate policies that increase the wise use of renewable energy in developing and developed economies.5MN Capacity factor: 25-40% 925-1.500 Projects <20 MW: 750-4. 2015 Page 13 of 25 Gleaned from the foregoing graph. According to the REN21 Global Status Report.ERC CASE NO.050-5.000 (United States).37 (6 hours storageJ Tavver: 12.800 including Japan. to wit: I TECHNOLOGY POWER GENERATION Bio-power from solid biomass (including co-fidngand organic MSWJ Plant size: 1-.250 MW (trough). 2.tiltl Peak capacity: 2.50. 1. www.51O/kW in India.ind: Offshore Turbine size: 1. and other partnerships and initiatives.950/kW. 4. 3.600 (United States. 2..0 Condensing flash: 5':'13 Binary: 7-14 Hydropower: Grid-based PlantsizEl: 1 MW-18. the typical global PV Plant installed cost ranges from US$1.powerfram anaerobic digestion Plant sire: 1-20 MW Conversion efficiency: 25-40% Capacity factor: 50-90% Biogas" 50. .(non-O£CO) W. US$1.: 1-100 flfM/ Capacily factor: 60-90% Condensing flash: 1.

to wit: 14 http://www .ERC CASE NO.eom/articles/read/Solar -Bala nee-of -System-Aeeou nts. likewise. 2013 and 2014 that resulted in the following updated percentage allocation between the PV module component and the BOS component to the Total PV System Cost: 2013 2014 PV Module 48% 390/0 Balance of System 52% 100% 61%) Component Total 100% The updated percentage allocation between the PV Module and BOS components to the Total PV System remains to be reasonable since the Green Tech Media (GTM) even reported in November 2012 that the BOS already accounts to about 68% of the total PV system COSt.for -58-of -PVSystem-Prieing-New-GTM-Report .14This allocation is. the Commission applied the reported percentage price reductions in the module prices during 2012. comparable to the latest reported data on the allocation of PV Module and PV 80S percentage share in the total PV System Cost.greenteeh med ia. 2015 Page 14 of 25 EPC Cost Allocation between PV Module and Balance of System (BOS) In updating the EPC Cost to 2014 level. 2014-004 RM DECISION/March 27.

large CommerGial end Utility Installed Cost (S/Wdc) .00 ~ ~ .00 SLOO $0. Pro. which is equal to NEA's CY 2015 benchmark cost for a complete 15 MVA Substation.00 $7.00 used in the Commission's Decision dated July 27.N N JMIl 0 N cPVBOS - ~ .00 Switchyard and Transformer Cost.US$762.lBN Transmission Interconnection Cost .2 kV line cost from the previous amount of US$23.2014 BOS GiM Re&earCll.00 The Commission adopted a US$762.526.00 .S.2007 60S .$9.. Switchyard and Transformer Cost .00 $$.8$4.069. $ .00 'tl .US$30.444.ERC CASE NO._AllOt I -~ - tom -- - - - - - - - - -- - - -- -- - Source: ModlAe prie1ngand 2007.2012 in ERC Case No.$5100 t::.~ Ss.• 1Ii11ii111 o .00 •.444.32 per kilometer 13. as shown below: .{EtS3.."" :gS2.069.oo . This is consistent with the National Electrification Administration's (NEA) current per kilometer cost estimate for a similar three phase 13.2 kV line project.32/km The Commission updated the transmission interconnection cost to US$ 30. . 2011-006 MC. 2014-004 RM DECISION/March 27. 2015 Page 15 of 25 U.

Power Transformer.00 55.382. OffLoad.13.513.78 15 MVA.00 304. 67/13.869.000.470.854.87% NREB did not propose to change the 16.88 69 kV/15 kV Metering.00 145.000.ERC CASE NO.950. Control and Protection Panel 2. 2014-004 RM DECISION/March 27.00 2. to wit: = 15 at PhP44. the Commission used the following parameters and the Capital Asset Pricing Model (CAPM) Formula.00 11.05 ~OO.486.000.00 762.040.455.2 kV Substation Steel Structures 69 kV Protection Equipment Station Service Transformer kV Power 15 Termination Kit and Metering Distribution Cable and Civil and Other Electrical Works Total Equity Internal Rate of Return (IRR) .00 111.44% Cost of Equity earlier adopted in the setting .51 15 kV Protection Equipment 6.068.OOO.000.63 93.44% Cost of Equity. In the computation of this 16.83 527.854.40/US$ rf + Setae x MRP .OO 18.02 5.000.630.113.500. 2015 Page 16 of 25 Price Particulars In PhP In US$15 13.054.of the current Solar FIT.018.37 4.835.49 33.00 113.000.

600/0is equal to the estimated Default Spread plus the historical risk premium for a mature equity market (estimated from historical US data). the Commission referred to the independent measure of Philippines' Country Risk premium. which is provided by Professor Aswath Damodaran of New York University. From the data published in January 2015.44% However. he estimates the Philippines to have a CRP of 2. .43 6. (CRP). since the 16.010/0 16. Thus. To update the Cost of Equity level. 2015 Page 17 of 25 Where: Setae = = = MRP = re rf nominal cost of equity risk free rate for the Philippines equity beta company for generation benchmark Market Risk Premium (MRP) Particulars Market Risk Premium Multiply by Relevered beta Equals Plus Risk Free Rate Cost of Equity Values 10.44% Cost of Equity was derived based on 2011 data. the Commission deems it appropriate to recalculate the Cost of Equity using the latest parameters/estimates to reflect a fair price for the investment. The Total Risk Premium of 8.600/0based on a default spread of 190 basis points and a country rating by Moodys of Saa2.860/0 and Total Risk Premium of 8.60%. Stern.03 10.ERC CASE NO. the Commission adopted an MRP of 8.13% 1. 2014-004 RM DECISION/March 27.

0 8.01 % risk free rate (rf).60% Plus Risk Free Rate 5.ERC CASE NO.2702 August 5.5389 5.27% Cost of Eq uity 13. 2014 POST -F (%) January February March April 5. to wit: Particulars Values Market Risk Premium Multiply by Relevered beta Equals 8.3774 5.87%.87% .ph).3887 May 5.8929 November June 5.pdex. the Commission used an updated risk free rate (rf) of 5. 2014-004 RM DECISION/March 27.600/0 1.1903 July 5.3593 5.0.which was bench marked on the daily average of Philippine Dealing System Treasury Fixing (PDST -F) rates for the CY 2014 as published by Philippine Dealing Exchange Rate (PDEx) in its official website (www.1243 December 5.3643 October 4.3604 September 5.1609 Average 5. 2015 Page 18 of 25 From the 6. which was based on the unlevered and re-Ievered betas of listed comparable companies sourced from Bloomberg.2719 The Commission adopted the beta of 1. the Commission derived an adjusted Cost of Equity of 13.270/0. Using the current input parameters and the CAPM Formula.

l[-' c~stofc~~-na.00 for 2015.:~~~=J Wind power 25 Solar PV 25 'CSP OECDandCh:na Restof the world 7.00. PhP43.87% adjusted Equity IRR to arrive at a 9.00/US$ NREB proposed to adjust the approved forward exchange rate to an updated level Commission finds the proposed level reasonable range of the Government17 forecasted exchange PhP45.PhP44. 2015 Page 19 of 25 The foregoing considered. 2015 Budget Briefer.5% 10% 25 Hydropower 30 iBlomassfor power 20 Geothermal 25 Forward Peso to US$ Exchange Rate . Congressional Policy and Budget Research Department .ERC CASE NO.5% WACC16 assumed for GECD and China in the calculation of the levelized cost of electricity of a Solar PV Plant as shown in the figure below: TAQLE [-- 1. the Commission adopted 13.2% pre-tax WACC.00 to US$ of PhP44. 2014-004 RM DECISION/March 27. the The resulting 9.1: ASSUMPTIONS fOR THE CALCUlATION OF !'HE LMLISEO COST OF ElECTRiCITY NOT DERIV£D fROM PROJECT IDATA --: ---_ ----it -----~~~I~o-~Ic~e. The since it is within the rate of PhP42.00- 16 IRENA report entitled "Renewable Power Generation Cost in 2014" published in January 2015 17 Development Budget Coordination Committee (DBCC).2% WACC is reasonable as the same is even higher than the 7.

_.28 ..74 0..lS .5 by December 2015 and PhP45.71 0. for consistency.:52 1. _.81 lL92 12.40/US$ Considering that the cost estimates were updated up to 2014 level..pinePeso USDP""P 44.-u~s-O-o'-II-aT'----' ------~ [ • __ . .SDl:/ltR 1 J L . USOBRI.__.eeasts lrastprice 'CulT..a..2 70.mnc.04 -:=1 L __ ~_..68 0.G5.!GS 3.5 0.sF. _ ._-"_____ LOS BrW!oi1PoundGBPUSD Jun~. 11 :1. the Commission.S 12.21 1. .0'1 14.-.74 0.70 NeWZealand NZDUSO 0.' .G9 :LG9 3. [~A.ll'ncy ~G-l. USDet"" O:9g O.-.144 "1.13..10 ::LOS 15.04 11...n OoUl'lr USOnNO 31.S\!! lRenmlnibl USDCNY 14ongKong llSDt1t{O ItldoncsianRupiah 'USO:IDR Indian Rupee U.79 7.6..6 Singapore USDSGO :LElS 1..'50 :1.3G :S\'Jh.-o.29 6.45 1.r-:lS • • J _.ERC CASE NO.06 3.50 15.25 1.1. ~ .07 .09 '-'5 .4 33-S Talw3.0.S'! Ko:reanWon . 3.. __.1.:12 3.5 Base Peso to US$ Exchange Rate . used a base Peso Exchange Rate of PhP44.'-_-._~ .32 1. 2014-004 RM DECISION/March 27. Russian Rub'le:! USORUiB :SouthAfriean~and t~ lat:~~_~ Brazflian Real __ USOZAP.08 1.._.. lower than the Philippine Peso exchange rate projections by independent international experts.0 64.2G --. 1..4.24 7. which is equal to the average exchange rate during 2014.6.G6 canadian IDollla!" llSDCAD :1..1LS Oce-:1S Mar.71 0.7.78 1l3.67 Phmp..__-.2.8 14.4S 13..1S OG-fV.'10 Do'll:u' Thai Baht USI>TI'IS :!l2.1G 0.9 1c.. -.1. 2015 Page 20 of 25 The proposed PhP44.44 32.._.. likewise. __ Malaysian Ringgit USOMY"R3..9 • __ •.29 1..5 45._. I 6.?-2 •..6 1.70 ..1 69._.5S 33..0 1'\.30 ----- __ .AustnlUan Donal' ALJDUSO 0.J __ "-'-' __ ' lMar.39 1.76 1.. Euro EURU._-_-_.:142 '[. 4 45.40/US$.SO Japanc se yen USOJPY120.. to wit: Curr:ency Forecast For.02 0. N._.71 0.G7 0.. which is PhP45._-_~___-_.79 7 ..04 :1.8 L_ . USOMXN 12.S 69 .30 1.•182 .'=-=~=~'~-=~-_=~ Sep.4 32.-~~..:12 .6 by March 2016.6 .6 (£MEuropc ~-.73 0.-.99 1<1~ 123 128 130 :1...49 1.PhP44.147 7.98 1•..Sia __ Chlne.00 forward Peso to US$ Exchange Rate is..-_._..2.• _ •• _ 3. _.297G G2 USDKIRW 10gS.

280/0inflation rate is the average increase in inflation for the past three (3) years covering the years 2012 to 2014. the Commission.6900/kWh PhPO. which is 2%. likewise. for consistency. Philippine Medium Term Development Plan 2011-2016 .0 percentage point inflation target for 2015-2016.28%. The 3.19 Base Local CPI . 2015 Page 21 of 25 Local Inflation Rate .6800/kWh PhP8.91 Considering that the cost estimates were updated up to 2014 level. 2014-004 RM DECISION/March 27.4%.ERC CASE NO. falls within the range of the Government's forecasted inflation for 2015 and 2016. the Commission derived a Solar FIT of PhP8.6900/kWh: Particulars Solar FIT Existing Solar FIT New Solar FIT Difference PhP9.PhP138. The 3.28%. The 3.9900/kWh 18 SSP 4th Quarter Inflation Report 19 NEDA.91.28% The Commission modified the assumed local inflation from the originally approved 4% to 3. used a base local CPI of PhP138. which is equal to the average CPI during 2014. New Solar FIT Applying all the foregoing assumptions.3.28% is consistent with the recent pronouncements of the Bangko Sentral ng Pilipinas (SSP) 18 that the country is expecting to maintain a three percent (3%) :t 1.

ERC CASE NO.• sla • !!:""Ol>~ I I Wind WinG offSnor<i!' .onsnore ..•. 2015 Page 22 of 25 This FIT is comparable with the typical global Levelized Cost of Electricity (LCGE) for Solar PV plants as reported by IRENA and REN21. 2014-004 RM DECISION/March 27. to wit: IRENA US DjkWh Jl r C~ =H= u I I Stomass I I HYdt(JSOlar CSP Photovoltaic 1'3 """tid'" • Elll1lt :t--tcn::n Amarklti tJ O«'.>~ iii SlMlttl "'mt1<feZ} • I'''•.

800 lnctucling Japan. 51alO5).000--2. 3. 2014.OECDI R~1cler:UJl costs: 2.050-5. 2015 Page 23 of 25 REN21 ----"----"--------------------TECHNOLOGY 1 TYPICAL CHARACTERISTICS CAPITAL COSTS USD I kW TYPICAL ENERGY COSTS LCOE .175-6.of.510 ftndia) <Europei 12-38 (OECOl 9-40 (non.BO()(Uniled Slates).250 Projecls >20 MW.5-250 Groond-mounled 1l1~. dillfnalsloragl! .900-3800 CondensmgCzsl'.000 (llaly) I) CapaClly factor: 10-25% (Exed 11m SolarPV: Peak c. fire: 200-800 4-20 .ocean pOIver: : Plant size: <110>250 MW Capacilyfaclor. cents / kWh PliJntsl7.380 (A:Jslra:lal. the New Solar FIT of Is C r:\Il ERC (PhP/kWh) 8. as mOOt'!as 3. run-of.800 (Japan) i.40 Peso to US$ Exchange Rate Effectivity of the New Solar FIT of PhP8.1-1.500-7.power :from 3:laerllblc digestion Pl"nl slle: 1-20 ""'Ii' CDIlVelsion e:rrdency: 25-40% Cl!patl.4. Averages: 2. 10. 2014-004 RM DECISION/March 27.150 500 kIN (industria (China). 2-12 Projecls <20 MW: 3-23 Capat:llyfaclor: 30.scale CapaCilyfactor: JD-25%(flxecl Ull COI1Vl!l'&:on ~x::etlCy: 10--30% (higl'.Peak c".500 Binary: 7-14 MW Plant type: reservol.river.6900/kWh shall apply prospectively.l).ERC CASE NO.3.S.000 MW j6-38 CommerclalO:lsls: 3..200 Blogas:6-19 l. 2016. 50-90% " 'Geolhe~mal power Hydropower: Grid. b::sed Hydropower: Off-gTid/Mel .OOO(Un.: 5-13 Binary: 2.e: 1-200 M1N Conve:s!onlff~efICY: 25-3~ 800-4.l': 3-5 ~N (residenlla\).pacf. Series of 2012.-60% Plant slle: 0. To align the same with the DOE's Certification dated April 30.900-2.l'yfaclor.2.450 (Gt:ma!l'jl: i.500 Co.OOO 5-40 5.260 (Japan).o-12 MSW) Bi().400-3. the New Solar FIT shall be valid until March 15. i.3280 to 16.U.6900 2i-44 (OECD) 28-55 (non. river Projecls >300IlfN: 1.900-3.8720 *at 44.OECD) 14-34 (Europe) t Global Solar PV LCOE (PhP/kWh)* IRENA20 REN21 7.5480 5.000 WI Plantlype: run.:pacity: 2. 2.200-1. 23-29% . For the 20 Asia Solar PV LeOE (PhP/kWh) . It shall be effective immediately after the publication of the Resolution adopting the same. Projects <20 MW: 750-4. 2.80% Bi().power from solid biomass (incfud Ing Projects 20-300 MW: 7S0-2.500 i.000 POWER GENERAnON Bi().500 6-24 'Biog3S: 500-6.6900/kWh So as not to impair vested or acquired rights under ERC Resolution No.firing 371doraan!c cepatl1yfaclof: 50-90% "'~w Co.950Hyplccl11lobalJ. rKlalrange :SolarPV: Roollop (United 100 kW (commerct.200 (Germany).'power rrom Plarll slxe: i-IIO g<lsiflcatlon Convers.710 (01:nill. 2.5 Condensfngl1ash: 1.~n eF.ledSla:esl.250-5.870 2i-28 I1Ydroldnellc.:cil!ne)f: 3(1-40% Cep3c!ly{actor: 40..290-5. 1.:Y. .andfal p.(.500 landllllgzs: 1. Plantsize: i-IOO MW • Capaellyfaclor: 60-90% PlJnl slle: 1 MW-18..

WHEREFORE. GL~ICTORIA n tv-' C. fAp-TARUC Commissioner AGPALE-ASIRIT ioner . the SO ORDERED. Commission hereby sets the New Solar FIT at PhP8. the foregoing premises considered. ~)t. 2015.68/kWh shall apply.. CRUZ-DUCUT Chairperson 0&/ ALFREDO J. 2015 Page 24 of 25 Solar Plants that have been commissioned prior to its effectivity.C~ ~ ENAIDA G..~(L. March 27. :7if.. 2014-004 RM DECISION/March 27.6900/kWh. as indicated in the Certificate of Endorsement issued in their favor.ERC CASE NO. the original Solar FIT of PhP9. NON Commissioner JOSEFINA PATRI Co MJ~FAS/SOMlNJS/~CJ O. Pasig City.

2014-004 RM DECISION/March 27. SaCasol 6. RASLAG Corp. PEMC 5. PSPA 7.ERC CASE NO. SOLEQ 13. Astroenergy 10. MERALCO 4. All parties in this case . VECO 9.2015 Page 25 of 25 Copy Furnished: 1. National Renewable Energy Board (NREB) 3. 12. NV VOGT Philippines 11. EDC 8. Department of Energy (DOE) 2.