DOE revamping guidelines for RE capacity auction
By Myrna M. Velasco – February 27, 2023, 7:31 AM
from Manila Bulletin
The Department of Energy (DOE) is in the process of revamping the guidelines on the Green Energy Auction Program (GEAP) or the policy on bidding renewable energy (RE) capacities that shall be awarded to investors with corresponding long-term power supply agreements.
According to Director Michael O. Sinocruz of the DOE’s Energy Policy and Planning Bureau (EPPB), the intent of the policy review is to improve the terms being set for the RE capacity auction under GEAP so it could stimulate greater participation from investors.
He stated “we need to improve (the rules) from the previous GEAP,” although he told media that the department cannot reveal yet the specific parameters that shall be changed in the green capacity auctioning framework.
The first GEAP administered by the DOE was in June 2022 under the Duterte administration – and that warranted the award of 20-year PSAs covering 2,000 megawatts of RE capacities being developed across solar, wind, biomass and run-of-river hydropower technologies by various project developers.
Currently, there are questions and concerns being raised on the prevailing GEAP rules – including the caps being enforced per technology; as well as the award of mammoth capacities to a single player without the government firmly determining the overall technical as well as financial viability of an investor to truly deliver on its commitments.
A failure on the part of the contract-awarded investor to tangibly push projects to commercial fruition will mean regression in the ‘energy transition’ agenda being advanced by the country.
Industry stakeholders further sounded off that in the previous RE capacity tendering, there was no prior publication of the quotas that had been set per technology; and there was not even a public consultation undertaken to at least recognize the issues and apprehensions that the investors have been raising relating to GEAP.
On the green energy auction reserve (GEAR) prices being approved by the Energy Regulation Commission (ERC) for the RE capacity offers, it was also indicated that it has not been accurately capturing recent developments on interest rate hikes, hence, that portends serious implication on developers’ access to project financing.
And since the competitive selection process (CSP) being enforced for PSA auctions across conventional energy resources lean on a technology-neutral approach, the DOE is similarly quizzed why there is no consistency in terms of purportedly enforcing the same approach given the per-technology limit being applied in the RE capacity bidding.
GEAP is considered the anchor to the Renewable Portfolio Standards (RPS) mandate of the Renewable Energy Act – because the contracts awarded in the green capacity auction serves as a market incentive for investors to inject capital in the Philippine RE sector.
RE auctions refer to market-based mechanism designed to promote the development of clean energy facilities by encouraging competition among project developers.
Through GEAP, renewable energy developers are invited to bid for the right to supply specified volume of RE-generated electricity to the grid, with the lowest price offer winning the contract.
The RPS, on the other, mandates participants – primarily the distribution utilities (DUs) – to source prescribed percentage of their supply portfolio from RE generation, thus, that provides an alternative market to project-sponsors following the culmination of the feed-in-tariff (FIT) regime of RE perks in recent years.
Both the GEAP and RPS have been intended to support the Philippine government’s goal of increasing the share of RE in the energy mix to 35-percent by 2030; and a higher base of 50-percent by 2040.
