76106 CASE STUDY 8: PHILIPPINES – GRID-CONNECTED SOLAR PV – HYDRO HYBRID DEMONSTRATION Barriers Lack of project development experience for grid-connected PV technology Instrument Contingent project development grants Application Loan converting to a grant after 5 years of successful operation Amount US$4 million PROJECT BACKGROUND AND OBJECTIVES Implementing Agencies. The GEF loan was made directly with CEPALCO without an intermediary on-lending The CEPALCO Distributed Generation PV Power Plant mechanism. project involved building a 1MWp solar PV plant on the island of Mindanao in the Philippines. The grid Under the terms of its agreement with the IFC, CEPALCO connected PV plant is located 5km from a business park operates the plant and provides data on performance, on an urban fringe, which provides a local load centre. O&M, and power output, as well as CEPALCO’s custom The plant is designed to provide power during daytime load and the cost and availability of other power peak hours and to be operated in conjunction with a suppliers. The GEF loan can convert to a grant after five 7MW run-of-river hydro plant. By combining the two years of operation if specific conditions are met. plants the project is able to achieve full dispatchability. OUTCOMES The plant began operation in 2004. At the time when the project was conceived it was The objective was to demonstrate the technical and expected that solar PV panel prices would fall in the operational feasibility of a grid-connected PV plant in a future. In that case, projects of this type were expected developing country and to demonstrate its operation in to become viable without subsidisation (which was conjunction with a hydro plant. The convertible loan provided through the GEF grant) and this project would structure was intended to create incentives toward have served to reduce the first-of-a-kind barrier to achieving the demonstration objectives of the project. wider implementation. INSTRUMENTS USED From the start of its commercial operations on The project received a US$4 million convertible loan September 26, 2004, the PV plant has exported to from GEF (administered by IFC) with the remaining CEPALCO a total of 4,169,100 kWh or an average of portion of financing (US$1.8 million) coming from the 1,389,700 annually, which is 10% higher than the utility (CEPALCO). The convertible debt provided debt expected annual energy generation of 1,261,400 kWh. financing through which the debt was forgiven in return At its current generating capacity, the PV plant supplies for successful operation and the sharing of information. the equivalent requirement of no less than 900 CEPALCO residential customers. INSTITUTIONAL ARRANGEMENTS IFC acted as the executing agency for the GEF funds to be disbursed to CEPALCO for this project on behalf of the World Bank as the GEF’s Trustee and one of its three 1 | R E F I N e www.worldbank.org/energy/refine Further reading: CEPALCO website – click here IFC, Selling Solar: Lessons From more than a Decade of IFC’s Experience, 2007 – click here USAID, Philippine Utility-scale Photovoltaic Case Study, 2009 – click here 2 | R E F I N e www.worldbank.org/energy/refine