Department
Circular No. 2004-05-005
STREAMLINING AND
RATIONALIZING THE GRANT OF SUBSIDIES IN THE ELECTRIFICATION OF MISSIONARY AREAS
USING SOLAR PHOTOVOLTAIC SYSTEMS
WHEREAS,
Section 2 of
Republic Act No. 9136, otherwise known as
the “Electric Power Industry Reform Act of 2001” or “EPIRA,” declares that it is the policy of the State to
ensure and accelerate the total electrification of the country as well as to
ensure the quality, reliability, security and affordability of the supply of
electric power;
WHEREAS,
the
Department of Energy (“DOE”), in
pursuance of the above policies of the State has targeted the attainment of 100
percent barangay electrification level by 2006 and energization of 90 percent
of total potential households by 2017;
WHEREAS,
Rule 13 of the Implementing Rules and Regulations of
EPIRA or “EPIRA-IRR”
mandates the
DOE to formulate a Missionary
Electrification Development Plan (MEDP) which shall include a program for the
provision of capital investment and operations regarding capacity additions in
existing missionary areas and the facilities to be provided in other areas not
connected to the transmission system;
WHEREAS,
the same rule directs the
DOE to issue
specific guidelines on how to encourage the inflow of private capital and the
manner whereby other parties including distribution utilities and qualified
third parties (“QTPs”) can participate in the missionary electrification
projects set forth in the MEDP;
WHEREAS,
to achieve the formidable task of providing electricity to unenergized areas,
the
DOE in partnership with other
government agencies and industry stakeholders, has committed to implement the MEDP
in a holistic and sustainable manner, which includes among others,
rationalization of tariff and subsidy policy, opening up areas that cannot be
served by the distribution utilities to alternative electric service providers
such as QTPs;
WHEREAS,
the Government, despite its limited public resources, is currently providing
various forms of subsidies to rural electrification projects and other energy
intensive activities;
WHEREAS,
the
DOE considers Solar Photovoltaic
(“PV”) to be cost-effective and environment-friendly technology in providing
electricity service and other community services to sparsely populated, remote,
unserved and dispersed areas;
WHEREAS,
there are various projects that are currently implementing solar Photovoltaic
(PV) systems to provide electricity services to sparsely populated, remote,
unserved, and dispersed markets that do not give due consideration to economic
efficiency, financial prudence, and institutional capacity;
WHEREAS,
to ensure the effective implementation of the solar PV projects in an
integrated and sustainable manner, there is an imperative need to rationalize
the grant of subsidies to missionary electrification projects using PV systems;
NOW,
THEREFORE, the
DOE hereby adopts and
promulgates the following policies on the grant of subsidies to missionary
electrification projects using PV systems.
SECTION
1. Scope of Coverage.
This
Circular shall apply to
DOE,
NEA, SPUG, and other government agencies as
well as donor entities providing solar PV subsidies in unenergized, remote,
dispersed and unviable areas suitable for solar PV systems.
SEC.
2. Definition of Terms.
For
the purposes of this Circular, the term:
(a)
“Consumers” refers to
any of the following types of consumers:
(1)
Single household or establishment availing of a solar home system;
(2)
Community groups and public institutions availing of Solar PV systems such as
solar battery charging station and PV street-lights for community lighting,
health clinics, schools, water supply and other community services;
(b)
“Donor Entities” refers
to any of the following:
(1)
Multilateral and bilateral agencies such as
World
Bank,
USAID,
UNDP,
ADB,
JICA, foreign governments and other
similar agencies providing assistance to the government or directly to the
consumers;
(2)
Private and civic groups engaged in rural and community development;
(c)
“Missionary Electrification”
refers to the provision of basic electricity service in unviable
areas with the ultimate aim of bringing the operations in these areas to viable
levels;
(d)
“Missionary Electrification Development Program (MEDP)” refers to the five (5)-year
plan of the
DOE, updated annually, to
implement missionary electrification projects funded through the share of
Missionary Electrification in the Universal Charge (ME-UC). The MEDP serves as the country’s blueprint
for electrification and one of the bases for the determination by the
ERC of the MEUC;
(e)
“Qualified Third Party” or
“QTP” refers to
the alternative electric service provider authorized to serve remote and
unviable areas pursuant to Section 59 of the
EPIRA and
Rule 14 of the
EPIRA-IRR;
(f)
“Solar Battery Charging Station”
refers to a solar PV system consisting of several PV modules that
provides battery charging services to a group of consumers or community for
generation of electricity;
(g)
“Solar Home System” refers
to a scheme of solar PV system consisting of one or more PV modules that
provides electricity services, to a single household or establishment;
(h)
“Solar Photovoltaic System” or
“Solar PV System” refers
to a system that uses a semi-conductor device called Photovoltaic modules to
convert solar energy directly into electrical energy, which include among
others solar battery charging station, solar home system and other similar
solar PV applications;
(i)
“Solar PV Dealer” refers
to a Person engaged in direct dealership business which sells PV equipment to
households in unenergized and remote rural areas;
(j)
“Solar PV Service Provider” refers
to a variant of Qualified Third Party engaged in fee-for-service business that
installs solar PV systems and, in turn, collects fees for services to consumers
in unenergized or remote rural areas;
(k)
“Solar PV Subsidy” refers
to the direct or indirect assistance provided by the government and/or donor
entities for reducing the cost of providing electricity services and other
community services using solar PV systems in unenergized remote, dispersed and
unviable areas suitable for solar PV systems.
SEC.
3. Sources of Solar PV Subsidy.
The
solar PV subsidy shall be funded from, but not limited to, the following:
(a)
Missionary Electrification Component of the Universal Charge (ME-UC);
(b)
Budgetary allocations of
DOE,
NEA, SPUG and other energy related government
agencies appropriated for rural electrification such as but not limited to
grants and aids received from other agencies of the government, private sector
or international institutions and internally-generated funds;
(c)
DOE administered funds appropriated for rural electrification; and
(d)
Funds from donor entities.
SEC.
4. Beneficiaries of the Solar PV
Subsidy.
Consumers
within an unenergized, remote, dispersed and unviable area, suitable for solar
PV systems shall be eligible beneficiaries of the solar PV subsidy; Provided, That priority shall be given to
consumers in areas identified in the MEDP, and/or unenergized areas that have
potential market for solar PV systems.
SEC.
5. Guide, Policies and Strategies on
Solar PV Subsidy.
(a)
The utilization of solar PV systems shall be on a least-cost approach and shall
be consistent with the overall government program for missionary
electrification as formulated and defined in the MEDP.
(b)
The solar PV subsidy shall be made available in a rational, transparent,
predictable and technology-neutral manner in order to make solar PV systems
more affordable to the poor consumers.
(c)
The amount of solar PV subsidy sourced from government shall be determined by
the
DOE in consultation with other energy
related government agencies, donor entities as well as solar PV dealers and
service providers. The determination of
solar PV subsidy shall take into account the following:
(1)
Electricity consumption of consumers;
(2)
Size/capacity and number of installations of solar PV systems;
(3)
Cost of solar PV systems;
(4)
Consumer’s willingness to pay;
(5)
Potential contribution of the household electrification to the Community
development;
(6)
Innovative delivery mechanisms of solar PV systems such as but not limited to
direct dealership and fee-for-service schemes; and
(7)
Cost of developing and marketing solar PV systems.
(d)
The scheme of delivering the solar PV subsidy sourced from the government shall
likewise be designed by the
DOE. The
DOE
shall endeavor to implement an output-based approach (i.e., the provision of
subsidy based on specific accomplishments performance for a specific period of
time) in the use of all available government funds allocated for solar PV
subsidy.
(e)
The
DOE shall optimize the use of the
solar PV subsidy sourced from the government through appropriate schemes such as
joint undertakings with donor entities and/or with private capital from solar
PV dealers and service providers.
(f)
To ensure consistency with the MEDP and optimized use of solar PV subsidies,
all donor entities that shall provide direct or indirect assistance in the
provision of electricity and other community services using solar PV systems
shall be enjoined to coordinate all plans and programs with the
DOE from its inception. To this end, the
DOE shall coordinate with
NEDA and concerned government agencies the
implementation of all new projects related to the use of solar PV systems.
(g)
The entry of solar PV dealers and service providers shall be encouraged to
develop and market solar PV systems in unenergized, remote, dispersed and
unviable area. The
DOE shall issue accreditation guidelines for
solar PV dealers and service providers.
(h)
The
DOE shall establish and issue
business/operating guidelines for all accredited solar PV dealers/service
providers in a manner that shall foster market competition for solar PV
systems, promote commercially available products and services using solar PV
systems in unenergized and remote rural areas and ensure that solar PV subsidy
is passed on to consumers in the form of a lower price.
SEC.
6. Administration of Solar PV Subsidy.
(a)
The
DOE shall have the overall
responsibility in the implementation of the solar PV subsidy program, which
shall include, among others, the following:
(1)
Formulation of the overall framework and clearinghouse for all initiatives
related to solar PV system electrification;
(2)
Setting of technical and performance standards for all solar PV Systems;
(3)
Accreditation of solar PV systems dealers/service providers;
(4)
Establishment and oversight of solar PV dealers/service providers network;
(5)
Identification and specifying the source of solar PV subsidy which shall be
based on the amount of subsidy required to implement solar PV systems projects,
extent of installation of solar PV systems, specific programs of donor
entities, etc.;
(6)
Establishment of a computerized database/information system to track and
monitor the recipients of subsidies for use of solar PV systems;
(7)
Coordination with various government agencies implementing solar PV systems
projects; and,
(8)
Project monitoring, evaluation and impact analysis of solar PV subsidy.
(b)
The
DOE, in consultation with other
concerned government agencies, donor entities and the solar PV industry, shall
formulate implementing guidelines for the administration of solar PV subsidies
within one (1) month from the effectivity of the Circular.
The
implementing guidelines shall contain the following, among others:
(1)
Methodology for the determination of solar PV subsidy for various types of
consumers, applications and sources of subsidy;
(2)
Procedure of availing solar PV subsidies; and
(3)
Accreditation procedures for solar PV dealers and service providers.
(c)
The
DOE, in partnership with the solar PV
industry and donor entities shall embark an information campaign to hasten the
market acceptability of the solar PV systems within two (2) years upon the
effectivity of this Circular. The said
information campaign shall be directed to prospective solar PV systems
dealers/providers and targeted consumers.
(d)
A Unified Electrification Subsidy Committee is hereby established to operate
under the Expanded Rural Electrification (ER) Program Team, created pursuant to
Department Circular No. 2003-04-004 issued on
April 01, 2003. The
DOE shall chair the said Committee which
shall have the following functions and responsibilities:
(1)
Identify all rural electrification projects including solar PV systems
installations for inclusion in the MEDP; and,
(2)
Formulate, recommend and regularly update appropriate guidelines for the
provision of subsidy to rural electrification projects including those using
solar PV systems.
SEC.
7. Separability.
If
for any reason, any section of this Circular is declared unconstitutional or
invalid, the other parts or sections hereof which are not affected thereby
shall continue to be in full force and effect.
SEC.
8. Repealing Clause.
All
rules, guidelines and issuances or parts thereof which are inconsistent with
this Circular are hereby repealed or modified accordingly.
SEC.
9. Effectivity.
This
Circular shall take effect one (1) week following its publication in a
newspaper of general circulation.
VINCENT S. PÉREZ, JR.
Secretary
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