Gov’t to woo investors for P500-B parallel ‘smart grid’ rollout

The government will be courting foreign and local private investors that will inject up to P500 billion worth of capital outlay for the planned Smart Green and Grid System (SGGS) or the parallel grid that will underpin massive investments in the country’s emerging offshore wind industry.

In a briefing with reporters, Energy Undersecretary Rowena Cristina L. Guevara indicated that for the 50 gigawatts (GW) of offshore wind projects’ buildout until 2040, the scale of investments for needed transmission projects will most likely double the current capacity of the country’s existing power grids.

“It will be P500 billion investment for transmission until 2040 for our 50% target (of renewable energy); and what will be added in the rates will be P0.58 per kilowatt hour (kWh),” she stressed.

The mode of investment enticements, she said, could be done either through direct private sector financing or even public-private partnership (PPP) arrangement, but that shall come with the concurrence of grid and system operator National Grid Corporation of the Philippines.

“We need to have transmission connection that will be smart grid for wind energy…but we are still discussing this with NGCP because we don’t want any conflict arising from this,” the energy official noted.

Guevara emphasized that the warranted grid integration facilities for the targeted offshore wind projects are not included yet in the Transmission Development Plan (TDP) that had been submitted by NGCP to the Department of Energy (DOE), hence, that could still be carved out from the system operator’s own investment pipeline.

She explained that under the existing set-up, some generation companies (GenCos) or power project sponsor-firms have been advancing investments for their transmission connections, thus, the plan of the government is to institutionalize the mechanism for it - including the reimbursement of costs being advanced by the power firms.

“We want the power firms to have their projects completed on time, so we would like to help NGCP with this parallel grid or SGGS, because the private companies are already doing it anyway. Because if the RE (renewable energy) projects won’t have grid connection – say for two years, then the power companies cannot recover their investments immediately,” she expounded.

For the offshore wind industry, in particular, the DOE official stated that if the transmission facilities will be aligned for the initial on-stream completion of the first projects in 2028-2030, then the projects must already take-off from drawing board by next year – primarily on the design phase of the projects.

Guevara said it will likely be the National Transmission Corporation (TransCo) that can bid out the contracts with the interested PPP partners or private investors.

She qualified though that “the design needs to be sorted first with NGCP because this has to be harmonized with its requirement on the operations of the grid.”

Guevara said “by next year, we should already have the design; then we execute in 2025 and we will build by 2026. On the design, we will need to agree with NGCP because it has to go with their specifications.”

The other hurdle being addressed, the energy official pointed out, is on the cost recovery that shall be enforced by the Energy Regulatory Commission (ERC) for these investments to be advanced for SGGS because their development will be pursued at an earlier timeframe instead of pursuing them as cast on later development timelines.