‘Reserve price’ for 2,000MW RE capacity auction

Published August 9, 2021, 6:30 AM

by Myrna M. Velasco

A ‘reserve price’ will be prescribed for the targeted 2,000 megawatts of renewable energy (RE) capacity that the Department of Energy (DOE) will be placing on the auction block this year.

In a draft circular issued by the energy department, it stipulated that a ‘green energy auction reserve price’ or ‘GEAR price’ shall be applied as the maximum price offer or the price cap that  project developers will be adhering to if they will participate in the RE capacity bidding.

The GEAR price shall be determined by the Energy Regulatory Commission (ERC) based on applicable ‘green energy tariff’ which shall reflect the value of electricity that could result from competitive tendering among RE suppliers.

“The winning bidders shall have the most competitive or cheapest rates for the auction capacity to be determined by the GEAC (Green Energy Auction Committee),” the DOE said.

For each RE auction process, the department emphasized that the ERC shall set an applicable GEAR price, and this will be followed as the ‘price cap’ in the capacity for bidding via the DOE-led auction committee.

The energy department earlier indicated that the initial capacity for auction shall be at 2,000 megawatts, although it qualified that “the number is still up for adjustments” because the year 2020 base being considered has relatively low electricity demand.

In the approval of the supply contracts resulting from the green energy auction program (GEAP), it was set forth that the ERC shall evaluate and approve such based on the price offers of the winning bidders.

“The competitive discovery of prices or the green energy tariff through the green energy auction shall be the basis of the ERC in approving the respective green energy tariff of each winning bidder,” the DOE stressed, adding that the prescribed peso-per-kilowatt hour (kWh) rate shall be in accordance with the feed-in-tariff (FIT) determination process.

The bidding of RE capacity relative to the enforcement of the country’s Renewable Portfolio Standards (RPS) is the most awaited policy development by the investors so the largely anticipated second wave of RE developments in the country could finally flourish.

The RPS underpins the ‘low carbon’ pathway spelled out in the updated Philippine Energy Plan (PEP) which targets to raise the share of RE in the country’s energy mix to 35-percent by year 2030.

Under the RPS edict, mandated participants like the distribution utilities (DUs) will need to source specified percentage of their supply from RE-generated capacities, and this was recommended to be escalating at 1.0-percent increment annually.

The DOE-auctioned RE capacities with underwritten supply contracts serve as alternative market for new RE installations in the country, and will be a follow-through to the FIT system, which was the incentive scheme in the initial wave of domestic RE project developments.