The Philippine Energy Regulatory Commission (ERC) recently increased the feed-in tariff allowance (FIT-All) to PHP0.20/kWh (USD0.0034/kWh), effective from November 2025, from the previous PHP0.11/kWh. In the Philippines, which does not provide any government subsidies to electricity consumers except for qualified low-income households, the increase in FIT-All appears to be a burden.
To be certain, however, of its advantages, FIT-All reflects the actual cost of generating electricity from renewable energy (RE) resources used by Filipino households. FIT-All is not a subsidy and does not operate under a take-or-pay structure. On the contrary, the FIT system has only contributed to reducing the cost of electricity in the Philippines.
What is FIT?
Jose M Layug Jr
Senior Partner
DivinaLaw
To accelerate the development of emerging RE resources, the Renewable Energy Act of 2008 was enacted with a particular RE mechanism: the FIT system. The ERC then issued two resolutions, in 2010 and 2013, to implement the FIT system (the FIT rules). FIT is a rate determined by the ERC and paid to RE plants declared as eligible under the FIT system by the Department of Energy (DOE). It is not a premium and was approved in accordance with the ERC’s tariff methodologies.
FIT offers guaranteed payments at a fixed rate per kilowatt hour (kWh) for biomass, solar, run-of-river (ROR) hydro, wind and RE hybrid systems, excluding own-use generation. FIT shall be paid to RE plants exporting to the distribution or transmission network, as metered at the high voltage side of the RE plant.
FIT plants are paid by all on-grid electricity consumers through an RE payment agreement with the National Transmission Corporation (TRANSCO) for a period of 20 years. Currently, there are 84 FIT plants declared by the DOE, totalling 1,707.63MW: 34 biomass plants (259.02MW); 25 solar plants (584.93MW); 39 ROR hydro plants (436.77MW); and seven wind farms (426.90MW).
In 2012 and 2015, the ERC granted the following FIT rates per kWh: PHP6.64/PHP6.59 for biomass; PHP9.68/PHP8.69 for solar; PHP5.90/PHP5.87 for ROR hydro; and PHP8.53/PHP7.40 for wind.
Paying the FIT
Consumers who are supplied with RE electricity shall share in the cost of the FITs in part through a uniform charge in Philippine pesos/kWh referred to as the FIT-All and applied to all billed kWh. For example, if a household consumes 1,000kWh/month, it will pay the product of 1,000kWh and the FIT-All rate approved by the ERC for that particular period.
The FIT-All is set by the ERC on an annual basis on petition by the TRANSCO and considers:
- The forecast annual required revenue of eligible RE plants;
- The previous year’s over or under recoveries;
- TRANSCO’s administration costs;
- The forecast annual electricity sales; and
- Other relevant factors.
A key element for FIT-All determination is the projected electricity spot price for a particular period at the Wholesale Electricity Spot Market (WESM).
If the average price of FIT across all technologies for a particular year is expected to be at PHP7/kWh, and the WESM spot price average is only PHP6.80/kWh, then the difference of PHP0.20/kWh would be collected from consumers in the form of FIT-All.
On the other hand, if the average WESM spot price for the period is PHP7.20/kWh (while the FIT average is only PHP7/kWh), then no further FIT-All would be collected from consumers for the actual electricity they purchased from their distribution utility.
Since the implementation of the FIT system, the ERC has approved different FIT-All rates.
Consumers benefits
Due to their must-dispatch nature and based on a study conducted by the Philippine spot market operator, the FIT plants displaced expensive conventional power plants for particular WESM periods by PHP0.09/kWh, or an aggregate net avoided cost of PHP40 billion for the period of 2014 to 2020.
This study has not included 2022 to 2024, when oil, gas and coal prices drastically increased, resulting in even higher savings to households. Because of the fossil fuel surge, FIT-All was reduced to nil from 2022 to 2024.
The Philippines aggressively pushed for RE integration for the past three years, with 10GW of new RE plants to be completed under a similar FIT system, the green energy auction programme, with much lower rates. With the competitive cost of RE technologies, we expect to see more savings from RE plants for the Filipino consumers.
Jose M Layug Jr is a senior partner at DivinaLaw in Metro Manila
DIVINALAW
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Contact details:
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