DOE seeks ‘serious’ RE players as 105 projects get show-cause letters
By Lenie Lectura – December 3, 2024
from Business Mirror
THE fate of at least 105 renewable energy (RE) projects, which have been endorsed for termination, now lies in the hands of Department of Energy (DOE) Secretary Raphael Lotilla.
DOE Undersecretary Rowena Cristina Guevara said she already signed these and forwarded to the office of the DOE Secretary. “What I know is I already signed the 105. I endorsed to the secretary. He will be the one who will formally sign it,” she said in an interview during BusinessMirror’s Envoys & Expats Night of Appreciation held last week.
In October, the agency said at least 105 RE projects are at risk of losing their contracts, mostly due to the RE developers’ failure to meet committed deadlines.
In reviewing the said contracts, Guevara said the first step was to issue show-cause orders (SCO). The recipients of the DOE show-cause orders have 15 days to submit a reply as to why they should not be penalized.
“We wrote to all 105. They had 15 days to file their answer. They can also file motion for reconsideration. The show-cause orders were not sent at the same time. We have to go through a process. Show cause them first. If they cannot deliver, then that’s the time to terminate,” said Guevara.
Without identifying the RE developers, the agency said 88 of the 105 are either delayed in their predevelopment timeline or not progressing at all. Among these 88 projects, 53 are solar, 17 are hydropower, 10 are wind, five are geothermal, and three are biomass. The majority of these contracts were awarded in 2017 and 2019.
The common reasons for project delays include failure to secure possessory rights (over land proposed to be used for the project) or system impact studies (SIS), indicating inability to connect to the grid.
Guevara said some violators have not even commenced predevelopment works in the past years. “How can you deliver if you are not doing anything at all? No permit, no SIS. We have no choice but to terminate and free it up for other developers,” she said.
She said these terminated contracts will then be reassigned either via the conduct of an Open and Competitive Selection Process (OCSP) or award to qualified applicants.
The DOE has long adopted the OCSP as a mode for the selection and award of RE contracts, particularly for identified predetermined areas (PDas) through a bidding process. PDAs refer to locations with potential RE resources, as supported by sufficient technical data, and are suitable for further development.
“If there are areas where studies have already been conducted, then that has to go though OCSP. For areas where there’s little knowledge, no right-of-way, these are free to somebody who wants to apply for a service contract because we can’t conduct an auction if there’s no service contract, no possessory rights, etc.. Mind you, we are very strict now,” Guevara said.
The DOE is implementing a clear contract termination process for renewable energy projects. In the case of existing solar energy service contracts, developers have two years to complete the predevelopment stage, which includes obtaining permits, conducting surveys, performing feasibility studies and securing possessory rights. Should a developer fail to submit the declaration of completion (DOC) or demonstrate reasonable efforts within this timeframe, the DOE-Renewable Energy Management Bureau (REMB) will issue a show-cause order to request an explanation for the delay. Valid reasons for the delay, such as force majeure, may be allowed for an extension. If the reasons are insufficient or the developer does not respond, the REMB will recommend to the Secretary of Energy the termination of the contract.
The developer will also be required to fulfill all financial obligations, such as performance bond, payments for training commitment and development assistance, as provided under the service contract.
“We have very strict requirements now. While our performance bond requirement is only 5 percent, we made sure to make our other requirements stricter. We want serious developers only, no fly-by night,” said Guevara.
The DOE issued revised omnibus guidelines last June. One significant change is the requirement to obtain a certificate of authority (COA) before signing a renewable energy contract.
The COA is a critical step in the development process, as it empowers developers to secure the necessary permits and conduct essential surveys and prefeasibility activities even prior to the commencement of the official 25-year contract. By allowing these activities to take place earlier, developers can better prepare for project implementation and address potential challenges proactively. This streamlined approach not only accelerates the project timeline but also enhances the overall efficiency of the development process.
The COA is valid for five years for offshore wind projects, three years for biomass, geothermal, hydropower, ocean and onshore wind projects, two years for floating solar, and one year for land based solar projects.
Additionally, the revised omnibus guidelines simplified the process for obtaining incentives for renewable energy projects. Developers may now secure a certificate of registration (COR) from the DOE after confirming the commercial viability of their projects. In the case of biomass and solar energy projects, developers can secure the COR after achieving financing closure.
Latest DOE data shows the agency has awarded 1,435 RE service contracts with a total potential capacity of over 156,700 megawatts (MW).
