- The final tariff to be enforced by the industry regulator for offshore wind will have heavy bearing on the investment-decisions of project sponsors, including multinational energy giant Shell
- Differentiation of tariff-setting for fixed-bottom and floating offshore wind facilities are warranted
- Alignment of government policies on project permitting is also paramount
Shell OSW investments hinge on final tariff
At a glance
COPENHAGEN - The final investment decision (FID) of multinational energy giant Royal Dutch Shell for its offshore wind (OSW) ventures in the Philippines will largely depend on the tariff rate that regulators will be implementing, according to a key executive of the company.
In an interview, Sarah Rose Lim, head of Offshore Power of Shell Energy Philippines, indicated that “the key thing that we will need will be the tariff, because that will determine economic viability of the investment.”
Shell has four offshore wind service contracts awarded by the Department of Energy (DOE), and it is pursuing the development of these projects via its partnership with Filipino listed firm Alternergy Holdings Corporation.
Lim added that in the tariff-setting for offshore wind, it is vital for government regulators to separately calculate the rate to be imposed for fixed-bottom offshore wind farms, as well as for floating offshore wind installations.
“The industry is currently looking into the options, because there are various options on these - what’s important is we differentiate between onshore and offshore wind; and even within offshore wind - there’s a difference between fixed-bottom and floating technologies, so all those must be considered in determining the tariffs,” she stressed.
In Denmark, the Danish Energy Agency has presented to the Philippine delegation that there are two ways how project developers can advance on their OSW project implementations within warranted tariff-setting – and such include open-door submission of project proposals which are typical for smaller wind farm facilities; and the other is done via tendering process that typically covers larger offshore wind farm projects.
At the WindEurope 2023 conference, Energy Secretary Raphael P. M. Lotilla announced that “subsequent rounds (of renewable energy auction) would include offshore wind when these are ready,” with him emphasizing that “there is actual increased demand from foreign locators in the Philippines for RE-sourced power which we expect to grow, along with the Green Option program.”
For Shell, in particular, Lim divulged that they are currently undertaking feasibility studies on all four sites of their offshore wind projects – assessing not just the final megawatt-capacities of the projects and environmental impacts, but also the eventual socio-economic support that they can extend as good corporate neighbors of their host communities.
Joe Nai, general manager of Offshore Power Asia Pacific Renewables and Energy Solutions of Shell, highlighted that their deep engineering expertise which they viably applied in their oil and gas business worldwide is also something that they can bring to the table for their fresh venture in the Philippines for offshore wind projects.
“We have been doing this in our oil and gas business in a very, very long time. We believe that those capabilities – engineering capabilities are something that we are familiar with, and we can bring that to offshore wind,” he noted.
Within the Asia Pacific region, South Korea and the Philippines are currently the major focus of investments of Shell when it comes to offshore wind project-developments.
“In Asia Pacific, we’re currently developing South Korea project; that’s a gigawatt-scale offshore wind project that is in mid-stage of development. For the Philippines, our partnership with Alternergy, we’ll be developing our first opportunity in the Philippines,” he reiterated.
On the other policy needs of the evolving OSW sector of the Philippines, Lim underscored that the other critical requirement of investors will be “streamlining of all the government agencies – alignment of all the policies – there should be no conflicts between the policies of the DOE versus those of DENR (Department of Environment and Natural Resources) and other government agencies. The permits that will be needed will be really crucial.”
She asserted that “EO (Executive Order) 21 is a really good move, it shows the support of the government for offshore wind development. So we’re waiting for the details and the policies after that.”