The integration of energy storage system in the forthcoming batch of renewable energy (RE) capacity auction will hike estimated reserve prices by P5.00 to P6.00 per kilowatt hour (kWh), according to the Department of Energy.

Energy Undersecretary Rowena Cristina Guevara told reporters that the integrated renewable energy and energy storage system (IRESS) in the fourth green energy auction (GEA) next year could drive up tariffs compared to the price offers in the first and second rounds of RE capacity bidding – primarily for solar installations.

“If you’ve seen prices in GEA 1 and GEA 2 -- if we add energy storage, the price will go up by P5.00 to P6.00 per kWh on top of the RE capacity offers,” she reiterated.

If that pricing trend in the RE auction would prevail, she indicated that the end result could be an increase in the feed-in tariff allowance (FIT-All) line item that shall be passed on to all ratepayers.

Nevertheless, the energy official emphasized that the DOE has been recalculating the scale of IRESS to be included in the GEA-4 tendering process; and the main goal of the department is to bring down the potential cost impact of energy storage amalgamation into the RE capacity offers.

“We’re trying to control the price. We’re still talking with our simulators, then we will do public consultation to gauge what is feasible for the generators,” Guevara noted.

She similarly conveyed “the Chinese market has been dumping a lot of battery energy storage, so we’re also looking at that development.”

One of the price softening strategies seen by the DOE would be transition credits by advancing the retirement of coal plants; but since there could only be very few sponsor-firms participating in that initiative, Guevara indicated that alternative measures have to be explored.

“The transition credits, that will take up a little bit of the price of the plant that will be built as renewables,” the energy official explained.

She emphasized that the targeted commercial operations of the RE Market to operationalize the trading of RE certificates may also help ease pricing pressure on the green capacity auction, because project-developers could blend it as part of their market portfolio.

Guevara similarly disclosed that the planned parallel auction for liquefied natural gas (LNG) capacity in GEA-4 shall be for ancillary services to ensure grid reliability even with massive capacity injection of renewables.

The LNG component, she said, will have a five-year contract and the counterparty will be system operator National Grid Corporation of the Philippines (NGCP) -- and that shall be separate from the 20-year power supply agreement (PSA) to be awarded to the winning tenders in the RE capacity bidding.

“We will auction it (LNG-generated capacity), so we have to talk to the National Grid Corporation of the Philippines because that is going to be considered as part of ancillary services,” Guevara stressed.

Ancillary services would refer to the power supply or reserves being procured by system operator NGCP to guarantee the reliable operations of the power transmission network even with the heavy integration of renewables in the power system.