RE developers subject to bid bond cancellation

Published June 27, 2022, 4:00 PM

by Myrna M. Velasco

Renewable energy (RE) developers, which have been awarded with 20-year power supply agreements (PSAs) under the Green Energy Auction Program (GEAP), face bid bonds cancellation if they will fail to deliver the committed capacity.

Energy Senior Undersecretary Felix William B. Fuentebella cancellation of bid bonds awaits RE developers who cannot meet the targetted commercial operations date (COD) as well as subsequent capacity delivery required from their projects.

The bid bond, which accounts for 20 percent of the RE project cost, is one of the major requirements to be submitted by a qualified bidder, as stipulated under the terms of reference (TOR) of the RE auction being administered by the Department of Energy.

“If (the RE project developer) can’t deliver, we will not pay. We will call on the company’s bid bond,” he said.

The awarded PSAs to the RE developers, he explained is anchored on “pay as you deliver basis,” meaning, payment for capacity shall be based on generated capacity to be delivered and the payment price reckoned on the winning price offer of a specified developer.

The energy official also explained that in the award of 1,966.93 megawatts of RE capacity last June 24, the Green Energy Auction Committee has allowed oversubscription for solar technology based on the TOR of the RE bid process.

Primarily, the solar capacity auctioned for Luzon grid had been pegged at 900MW, but awarded contracts covered total capacity of 1,070.38MW; and it goes the same way for Visayas grid, of which the solar capacity set for auction was at 260MW, but awarded capacity reached 300MW while for Mindanao grid, the auctioned capacity was set at 100MW but the awarded capacity hovered at 120MW.

Under Clause of the RE auction’s TOR, it was stipulated that “in case the quantity offered by a bidder becomes the marginal offer, but the offered quantity breaches the auction capacity requirement after ranking and stacking of offers, the bidder’s full offered quantity will be included as a winning bid, provided that the excess quantity offered by the bidder shall not be more than 20 percent of the auction capacity requirement of the RE facility per grid.”

If the marginal offer will be beyond the prescribed 20 percent allowance, Fuentebella stated that the winning RE developer shall be asked “to reduce its capacity” within the allowable capacity of oversubscription.

The other option for the bidder, he noted, is for it to “withdraw from the auction”, without forfeiture of its bid bond.

The bidding terms further specified that in case the bidder opted to withdraw, “the next bidder shall be considered subject to the same conditions.”

The initial auction of 2,000MW of RE capacity under the exiting Duterte administration is just the first round in a series of biddings being programmed for the Renewable Portfolio Standards (RPS) compliance of the mandated participants, primarily the distribution utilities (DUs) that are required to secure certain percentage of their supply from RE-generated sources.

As emphasized by the energy department, the RE capacities to be slated for tender in the short term would be in the range of 4,000 to 5,000 megawatts.