The Department of Energy (DOE) is firming up a policy that will reduce the performance bond requirement for offshore wind projects to a leaner five percent, a departure from the typical 20 percent required in green energy auctions (GEA) for other renewable energy (RE) technologies.

At a year-end gathering of wind industry leaders, including the Wind Energy Developers Association of the Philippines (WEDAP), Pilipinas Offshore Wind Energy Resource Inc. (POWER), and the Global Wind Energy Council (GWEC), Energy Undersecretary Rowena Cristina Guevara made a game-changing announcement. "The DOE has heeded your suggestion," she stated, "so we went from 20 percent to just five percent for the performance bond."

The energy official emphasized that the reduced performance bond will be incorporated into the terms of reference (TOR) for the highly anticipated 5th GEA, a competitive bidding process specifically dedicated to offshore wind projects, to be carried out by the third quarter of next year.

The performance bond is critical for firms participating and winning in the RE capacity auction. The bond is forfeited to the government if they fail to meet electricity delivery commitments based on commercial operations date (COD) requirements. This serves as a strong reminder that only serious investors should participate.

Depending on whether it involves bottom-fixed or floating offshore wind installations, industry players estimate investment costs could range from $3.0 million to $7.0 million per megawatt. Even with a five percent performance bond, this represents a massive financial burden for offshore wind developers.

Project sponsors point out that investment costs can escalate based on a range of factors, from water depth and distance from shore to the complexity of infrastructure deployment and regulatory hurdles, including complicated permitting processes.

They believe that technological advancements and economies of scale in project installations may eventually reduce investment costs for future offshore wind ventures.

Reaffirming the DOE's commitment to the 5th GEA focused on offshore wind, Guevara emphasized that investors must match the government's resolve with their own firm commitment to invest capital in the industry.

“We are now in the thick of preparations for the green energy auction, and we have heard all your suggestions about the performance bond – your favorite topic," she said. "Because we need to ensure commitment from developers, we don’t want fly-by-night investors; so there are a lot of requirements.”

Guevara also noted that 16 industry leaders have already submitted project proposals to the Department of Environment and Natural Resources (DENR) as part of their pre-development environmental compliance certificate (pre-dev ECC) application process.

She further revealed that one of the pioneer players has already received its pre-development ECC and the warranted certificate of confirmation of commerciality (COCOC), signaling that the project can now proceed to the development cycle.