In May 2008, the Ministry of Energy began implementing a feed-in tariff system to promote the generation of electricity from renewable energy sources. Grid system operators are obliged to connect plants generating electricity from renewable energy sources and guarantee priority purchase, transmission and distribution of all electricity from wind, biomass and hydro energy sources. Grid operators must pay a tariff agreed upon between them and the power producer, subject to the maximum tariffs and maximum capacities specified below. Power producers and grid system operators may, by contract, digress from the priority of purchases, should this mean better integration of the plant into the grid system. In this case approval must be obtained from the Energy Regulatory Commission.
The maximum tariffs are technology and capacity specific, applying to wind, biomass and hydroelectricity, and will apply for 15 years from the date of the plant's commissioning.
Feed-in tariffs are as follows:
Wind power: USD 0.09/kWh maximum tariff up to 50 MW (single wind farm); for capacity greater than 50MW, tariff to be negotiated on a commercial basis. The tariff applies to the first 150MW of wind power capacity developed.
Biomass derived electricity: Up to 40 MW, USD 0.07 maximum firm power tariff (for the first 150MW developed) USD 0.045 maximum non-firm power tariff (for the first 50MW developed); for capacity greater than 40MW, tariff to be negotiated on a commercial basis. Where biomass is used together with fossil fuels for the purpose of producing firm power it must contribute at least 70% of the annual fuel consumption, otherwise the non-firm power tariff shall apply.
Small hydro power: From 50kW to 1MW, maximum firm power tariff of USD 0.12 and non-firm power tariff of USD 0.10 From 1 to 5MW, maximum firm power tariff of USD 0.10 and non-firm power tariff of USD 0.08 From 5 to 10MW, maximum firm power tariff of USD 0.08 and non-firm power tariff of USD 0.06 The tariff applies to the first 100MW of firm power generated, and the first 50MW of non-firm power generated. For capacity greater than 10MW, the tariff is to be negotiated on a commercial basis.
Investors interested in becoming power producers must submit an expression of interest (EOI) to the Ministry of Energy. The EOI is reviewed by a panel comprising representatives of the Ministry of Energy, the grid operator and the energy regulator. Grid operators recover a portion of the cost from the feed-in tariff directly from electricity consumers, up to USD cents 2.6/kWh (or as may be directed by the Energy Regulatory Commission).