ERC still firming up ‘price ceiling’ for RE auction under RPS

Published January 18, 2021, 6:00 AM

by Myrna M. Velasco

The Energy Regulatory Commission (ERC) is still firming up the pricing formula for the targeted ‘tariff ceiling’ that shall be instituted for the 2,000 megawatts of renewable energy (RE) capacity auction targeted by mid-June this year.

Sharon Montaner, director of the Market Operations Service (MOS) and chief of the Renewable Energy Division of the ERC, said the regulatory body has yet to set the price ceiling for the Renewable Portfolio Standards (RPS) auction, and it is not also certain at this point if the pricing will be prescribed per technology or if there would just be one price ceiling across RE technologies.

Energy Regulatory Commission (ERC FACEBOOK / MANILA BULLETIN)

She qualified the industry regulator “is still undergoing continuing studies” on the pricing mechanism to be enforced, hence, calculations are still “at very initial stages.”

Previously, the ERC indicated that the proposed ‘green energy tariff’ benchmark that will serve as the price ceiling for the RE auction will likely be lower than the prevailing feed-in-tariff (FIT) for the RE technologies.

In the second wave of FIT-incentivized RE developments, the tariff set for solar had been at P8.69 per kilowatt hour; wind was at P7.40 per kWh; while the degressed rate for biomass was at P6.5969 per kWh; and hydro at P5.8705 per kWh. There is no FIT rate yet for ocean or tidal in-stream technologies.

The ERC said it is likewise studying the experience of other countries on RE pricing; while in parallel referencing on the recent settlement prices yielded by capacity trading at the Wholesale Electricity Spot Market.

In other RE markets in the Southeast Asian region – Vietnam in particular, even its FIT for solar is already comparatively low compared to the Philippines at 9.35 US cents or P4.48 per kWh equivalent at current peso-US dollar exchange rate; and wind at 8.50 US cents or an equivalent of P4.08 per kWh.

Prospective RE investors are keenly looking forward to the ‘green pricing’ that the regulator will set forth for the RPS tender because this will guide them in crafting their offers/bids if they will participate in the mid-year auction.

According to Michael Sinocruz, chief of the Planning Division of the Department of Energy (DOE), “the price (for the RPS auction) will only be revealed upon the opening of the sealed envelopes, and whoever will provide the lowest price will be the winning bidder.”

A consigned body at the DOE will administer the RPS competitive tendering, and Sinocruz said the qualified RE developers “will be notified through email and the auction will be conducted through electronic bidding.”

As targeted, the initial RPS bidding for 2,000MW will first cover the stranded RE capacities, or those that had not been qualified under the FIT system of incentives – and these are generally solar and biomass plants.

The RPS is an incentive mechanism that will provide market to RE projects, because this mandates the distribution utilities to source prescribed percentage of their supply from RE capacities – currently set at 1.0-percent increment annually, although there is a proposal from the National Renewable Energy Board to increase it to 2.0 to 2.2-percent annual increment.