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Manila Bulletin devider Business devider 'No reserve price' for geothermal could trigger 'regulatory uncertainty' for investors - ERC

'No reserve price' for geothermal could trigger 'regulatory uncertainty' for investors - ERC

Published Oct 23, 2023 06:13 am

At A Glance

  • Without a reserve price enforcement on geothermal capacity bidding, distorted pricing scenario is feared as the unwarranted outcome when this technology is offered to prospective developers. 

The proposal for a ‘no reserve price’ condition on the targeted 3rd green energy auction (GEA-3) for geothermal could trigger unwarranted “regulatory uncertainty’ for project developers and all investors in this technology’s supply chain, the Energy Regulatory Commission (ERC) has warned.  

“If there’s no reserve price, after they (developer-firms) win, they have to go back to the ERC and ask ERC - can you approve this rate? There’s uncertainty, that’s the disadvantage of not setting a reserve price, you introduce a regulatory uncertainty in the process,” ERC Chairperson Monalisa C. Dimalanta noted.

She qualified that the strong point of having a green energy auction reserve (GEAR) price lies in the fact that after cornering an award from the Department of Energy (DOE) for their winning bid, there is no further approval on the tariff anymore that shall be secured from the ERC.

The chief regulator expounded that if there’s no reserve or floor price set, the bidding for geothermal capacity may also precipitate run-away or exorbitant price offers, which will be a bad outcome because this will increase the pass-on cost to consumers.

Conversely, Dimalanta emphasized that the other unwanted result could be some players or sponsor-firms setting the price ‘too low’ for a cutthroat competition; but in the end, the winning bidder may not be able to deliver on its committed capacity.

“If there’s no reserve price, then it can be a run-away price; or some of the bidders might intentionally bring down the price, so that will distort pricing but that bid will have to win because it gives the lower price,” she stressed.

Given the emerging disparate opinions, the ERC chief conveyed that the recommendations of prospective participants in the GEA-3 for geothermal are carefully studied by the regulatory body before firming up the rates that shall be instituted in the auction for the targeted installations.

“We are studying what’s a reasonable extent of risk that these developers will need to face so that we can already put it in the terms that the DOE will use for GEA-3, that way, the investors will not be assuming full uncertainty,” Dimalanta indicated.

She admitted though that the actual tariff-setting for geothermal GEAR has not started yet; and it has not been part of ERC’s consideration to veer away from enforcing a reserve price.

“We haven’t started a formal process for it (setting a GEAR price) for geothermal. We just received the DOE formal notice last week on that one, so we need to conduct a formal process for that,” she stated.

At this point, Dimalanta said they just concluded some focus group discussions (FGDs) with the relevant stakeholders, and the inputs from those processes will eventually help the Commission in its decision-making exercise.

 

 

 

 

 

 

 

 

 

 

Related Tags

Department of Energy renewable energy Energy Regulatory Commission GEAR RE auction
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