Investors in the offshore wind industry are advancing a proposal to the Department of Energy (DOE) that delays in the availability of critical infrastructure – primarily grid connections as well as port support facilities – shall be declared as ‘force majeure’ events in the terms of reference (TOR) for the green energy auction (GEA) scheduled for this technology by next year.

According to industry sources, the scale of investments for gigawatt-scale offshore wind projects could run into billions of dollars, so if their capacity cannot be transmitted to the grid due to delayed completion of transmission projects or if the warranted port facilities would not be available on time, that could precipitate huge losses from their end.

They noted that if the government could not decide firmly on these elements that are crucial in the full development cycle of offshore wind farms, that may just eventually trigger the exodus of interested investors – especially serious foreign developers.

And in case of load curtailment from the offshore wind plants, project sponsor-firms are similarly pleading for compensation which shall be drawn through a take-or-pay mechanism that shall be decided by the government.

Energy Undersecretary Rowena Cristina L. Guevara conveyed that the department will do consultation with the relevant industry stakeholders before they will firm up announcement for the auction of offshore wind capacities in the months ahead.

In the current GEA for other renewable energy (RE) technologies - such as solar, biomass, waste-to-energy and even onshore wind, the bidding TOR has not explicitly stated that delays in transmission facility development can be construed as ‘force majeure’, although remedial measures had been prescribed in case project completion could not be achieved according to timelines.

On the GEA-awarded power supply agreements (PSAs) that would fail on their capacity delivery commitments, the current TOR mandates the forfeiture of performance bond placement which is equivalent to 20% of the project cost.

Under the prevailing bidding terms for GEA, it was just simply stipulated that “a winning bidder affected by FM (force majeure) or FE (fortuitous events) shall be granted an extension to commence delivery of supply,” emphasizing further that “such extension period shall be equivalent to the duration of FM or FE.”

The rules thus highlighted that “failure to deliver after the proposed extension shall cause the calling of the performance bond in full or in part.”

For the performance bond, in particular, investors qualified that the calculation must be aligned with international practices, because sticking to the 20% of project cost metrics will not be a viable proposition for extremely capital-intensive offshore wind projects.

During a media interview, Copenhagen Infrastructure Partners (CIP), which is among the front-runner developers of offshore wind facilities in the country, indicated that the performance bond must evolve from a different policy stream because installations for this technology require heftier investments compared to onshore wind and other RE technologies.

“Offshore wind is much bigger than onshore renewables, the GEA needs to be tailored for that specific technology,” the Danish firm opined.

When it comes to foreign exchange risk, there are also proposals for partial indexation of the tariff to the Philippine peso-US dollar exchange rate or there shall at least be one-time adjustment to foreign currency.

For inflationary risks, project developers are likewise batting for partial indexation of the Philippine peso-based tariff so investors’ capital infusion can be duly protected against significant swings in the inflation rate.

On the GEAP pricing, investors further propounded that the initial batch of offshore wind projects be accorded with feed-in-tariff (FIT) incentives, instead of having outright green energy auction reserve (GEAR) prices – which was also the strategy employed by other countries in their successful foray into offshore wind developments.