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| Srl | Item |
| 1 |
ID:
169897
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| Summary/Abstract |
Project finance (PF) is a powerful tool for mobilizing capital for renewable energy (RE) projects but faces challenges in developing countries. This paper examines factors driving the financing method choice between project finance (recourse exclusively to project assets) and corporate finance (recourse to parent company assets), including the feed-in tariff (FIT), using the Philippines as a case study for a developing country. After the RE Law was approved in 2008, RE capacity increased but RE share in energy mix decreased. FIT resulted in increased investments in RE, primarily in solar and wind. Results show that PF incidence is higher for baseload, high-capacity utilization, non-intermittent technologies; non-FIT projects with revenue contracts; and larger projects owned by public companies. Contrary to expectation, PF was less utilized for FIT-eligible RE, and projects owned by private or small investors. PF was utilized primarily by well-capitalized investors, and mostly by power and financial companies. The Philippine FIT's tight deadlines and low technology-specific capacity caps increased revenue uncertainty, resulting in high concentration of project ownership and potential erosion of public support. Given the intrinsic uncertainty of RE and developing countries, policymakers need to design policies to minimize revenue uncertainty, enable PF and broaden the investor base.
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| 2 |
ID:
180868
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| Summary/Abstract |
Increasing variable renewable energy penetration, climate change, and global uncertainties will make it harder to stabilize and balance power systems. This situation will be especially challenging for developing economies with limited capital and institutional capacity, poor infrastructure, and rapid economic growth. Using the Philippines as a case study for a developing economy, the paper identified chronic underinvestment in the supply of ancillary services that play a crucial role in balancing energy supply with demand and building grid resilience. To diagnose the cause, the paper created a novel dataset with all ancillary services revenue contracts in effect at the end of 2019 and analyzed their key terms and conditions. The paper concludes that these contracts are not conducive to financing due to short durations, low and soft buying commitments, exclusive focus on incumbent versus new entrants, hour and season constraints, and a poorly implemented remuneration methodology. The literature rarely analysis this topic from a financing perspective and at this level of detail. Revenue contracts need to switch to long-term, firm, and technology-specific cost recovery mechanisms with new entrants, to incentivize financing. Storage technologies such as batteries and hydropower should be prioritized, followed by gas turbines. These changes will result in a more secure, resilient, and affordable power system.
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