The Economics of Net Metering Policy in the Philippines

Abstract

The Philippines is one of the first countries in Southeast Asia that introduced an incentivized self-consumption policy for small scale solar PV systems. Electricity tariffs in the country are the highest in the region and that costs of generating electricity from small scale PV systems have reached above grid parity. Incentivized self-consumption schemes include net billing and net metering arrangements, and in the literature these schemes are loosely described as net metering schemes. Both frameworks allow customers to generate their own supply and export surplus electricity to the grid. Under net billing arrangement, excess electricity receives monetary compensation while under net metering, customers receive energy compensation. The study assessed the two frameworks under Philippine conditions and the results show that net billing provides an attractive rate of return and encourages participants to self-consume rather than export electricity to the grid. Net metering on the other hand generates higher rate of return than net billing and encourages investments on larger systems that could also maximize electricity exports. Since the program implemented under the incentivized self-consumption scheme is supported by distribution utility customers, net metering would result in higher financial burden to ratepayers. The study results affirm that the government policy choice is more balanced, responding to the needs of program participants while not placing unwarranted burden to distribution utility customers.