Solar photovoltaic policy review and economic analysis for on-grid residential installations in the Philippines

Abstract

The Philippines is an emerging solar photovoltaic (PV) market, installing ∼1 GW in the span of last 2 years. This growth was enabled by the enactment of supporting policies: feed-in-tariff (FIT) and net-metering (NM), despite increasing criticism on the latter. This study addresses the terms, conditions and effectiveness of these policies reflected as the interannual growth in PV power production with respect to the potential realizable capacity in the country. Additionally, a life cycle cost and greenhouse gas (GHG) emission reduction analysis is presented to demonstrate the economic viability and environmental impact of implementing an on-grid residential PV installation in the country – in the context of these policies. Financial results showed that theoretical 100 kW-FIT/1.89 kW-NM PV projects were attractive and would lead to a GHG emission reduction of 102.9 tC02e and 1.9 tC02e, respectively. The FIT case had a Net Present Value (NPV) of PHP 4.7M (∼EUR 84k), a benefit-cost ratio of 4.17, and a simple payback period of 4.1 years. Net-metering had a positive NPV of PHP 27k (∼EUR 482), a benefit-cost ratio of 1.50, and a simple payback period of 7.8 years. The main profitability drivers were found to be the initial capital cost for FIT and the avoided retail electricity costs for NM. Project development can be further promoted by providing financial grants on top of FIT/NM and by modifying high-risk conditions such as FIT’s “first-come-first-served” basis. The theoretical minimum viable FIT Phase 3 rate was also calculated to be 4.20 PHP/kWh (∼0.07 EUR/kWh).