Melbourne, Australia—The World Bank Group is helping the Energy Regulatory Commission (ERC) tighten cost controls, primarily for indexation, on firming up a financial model that will make offshore wind projects commercially viable ahead of the 5th green energy auction (GEA-5) that will be administered by the Department of Energy (DOE).

Sharon Ocampo-Montañer, director of the Market Operations Service (MOS) of the ERC, told attendees at the recently concluded APAC Wind Energy Summit that the regulatory body is still grappling to pin down a viable pricing structure for the first wave of fixed-bottom offshore wind projects that are slated for the auction ring later this year.

“We’re also being assisted by the World Bank, updating on the cost parameters, looking into the financial model. We have to go back to the financial model mainly because under the draft TOR (terms of reference) of the DOE, it now allows for indexation one-time,” she said.

Montañer expounded that “the developers can avail of this indexation adjustment from the time of award to commercial operations – so we have to put that also in the model.”

As stipulated under the draft TOR for GEA-5, “the GET (green energy tariff) shall be subject to a one-time adjustment,” which was specified to be aligned with Section 17 of the Green Energy Auction Program (GEAP) guidelines.

The TOR further prescribed that “the adjustment shall account for the period between the date of COA (certificate of authority) and the DCD (delivery commencement date) of the offshore wind facility.”

The ERC official explained that the World Bank supports establishing precise cost parameters for indexation or identifying the critical levers that can safeguard investment viability and ensure project developers can finance offshore wind installations with confidence that they can recoup a reasonable return on their invested capital.

“We need to update most of the parameters and go back to the financial model because we have to take into account all those provisions in the TOR,” she stressed, qualifying that these are all still under careful evaluation by the ERC.

Ann Margret Francisco, country manager of Global Wind Energy Council (GWEC)-Philippines, noted “we have to be honest that the first offshore wind projects will cost more than other onshore RE technologies…but with the right policy design, we can cut financing costs and bring tariffs down over the next GEA rounds.”

She added “what’s equally important is transparency: showing consumers not only the overall cost impact (based on DOE presented simulation) …but also the socio-economic benefits – local jobs, new industries and knowledge transfer. If people can see that they are paying a small premium today to secure cheaper, more reliable power tomorrow, acceptance will follow.”

In more advanced offshore wind markets, pricing structures typically integrate economically-grounded cost indexation parameters—ranging from inflation and foreign exchange rate risk to O&M (operation and maintenance) escalations, financing or capital costs, commodity price shifts, site-specific challenges, regulatory volatility, as well as performance guarantees.

To shield developers from eroding margins, some markets have tied strike prices directly to consumer price index (CPI) swings—most notably in the United Kingdom’s contracts for difference (CfD) scheme, where inflation-driven adjustments are factored into their pricing.

In terms of project financing, this remains a major pressure point for offshore wind financial models, given their sharp sensitivity to interest rates, inflation, and shifting risk profiles. Thus, it is imperative that escalation mechanisms are woven into the financial structure to keep projects bankable even under volatile market conditions.

And while indexation is not directly tied to project siting, cost escalators are also conventionally embedded into base pricing structure—primarily those on capital expenditures (capex), operating expenses and the overall levelized cost of electricity (LCOE)—because some financing models could escalate costs as the distance stretches from the shore or the water depth increases or the required foundation for the project would become more challenging.

Beyond shaping the financial model for offshore wind pricing, Montañer divulged that the World Bank is also sharpening the ERC and DOE’s capacity in firming up non-price criteria as a core component in the tender process—as that is targeted to account for 20 percent in the evaluation of the winning bids.

As initially laid down in the DOE’s initial TOR, the non-price criteria shall be anchored on the developer’s technical readiness, progress on permitting, grid connection status, project delivery timeline, and a robust risk management plan—particularly addressing biodiversity safeguards and the rights of host communities, including the often-overlooked fisherfolk.

Francisco primarily asserted that “it is imperative to engage the fisherfolk and coastal communities early to identify all the opportunities for co-existence.”