ERC approves ‘reserve prices’ for RE auction
By Myrna M. Velasco – May 27, 2022, 2:03 PM
from Manila Bulletin
The Energy Regulatory Commission (ERC) has approved the green energy auction reserve (GEAR) tariffs that will serve as “price ceiling” for the targeted bidding of 2,000 megawatts of renewable energy capacities next month.
The reserve rates firmed up by the regulatory body across technologies are P3.6779 per kilowatt-hour (kWh) for solar; P6.0584 per kWh for wind; P5.0797 per kWh for biomass; and P5.4913 per kWh for run-of-river hydro. These reserve rates will be enforced on the qualified RE projects without escalation or adjustment indices.
Sources from the Department of Energy (DOE) said about 125 registrations have been submitted by interested parties for the RE auction as of May 25, but the final list of qualified bidders is slated to be issued on or before May 31 yet.
The first round of RE capacities tendering under the government-designed Green Energy Auction Program (GEAP) is scheduled to be administered by the DOE on June 17 with the award of 20-year power supply contracts to be carried out by June 24 this year – or less than a week before the new Marcos administration takes over.
ERC Chairperson Agnes T. Devanadera explained that “we have set the GEAR prices for each type of technology consistent with the notice of auction of the DOE, setting the auction of capacities on a per technology basis.”
She noted that in the calculation of the final GEAR prices, the Commission employed “discounted cash flow model with 46 parameters and assumptions for each technology.”
Devanadera specified that “the financial model used by the Commission does not allow any escalation or adjustment due to changes in foreign exchange and inflation, therefore, the GEAR prices are fixed during the whole life of the project.”
The ERC chief similarly qualified that the approved GEAR prices “are lower or within the range of the recent power supply agreements (PSAs) for newly constructed plants that are ongoing construction – taking into consideration the approved rates and the escalation/adjustment provisions of (such) PSAs.”
For the final RE auction reserve prices, the ERC indicated that it considered all of the comments, inputs and concerns that were lodged and sounded off by relevant industry stakeholders during the public consultation last April 12.
“In the determination of representative project and the computation of the GEAR prices, the Commission was guided by the principle of efficiency and international benchmarks to ensure that only the cost of efficient plants will be passed on to consumers,” Devanadera stressed.
The setting of the GEAR prices is a key development being awaited by the DOE before it will proceed with the bidding process of targeted 1,260MW of solar capacities; 130MW hydropower; 230MW biomass; and 380MW of wind capacities.
For the winning RE contract developers, the scheduled delivery dates for their generated capacities shall be from December 26, 2022 until December 25, 2025, as stipulated in the bidding terms of reference (DOE) issued by the DOE.
The process to follow will be pre-bid conference on June 1 and that will provide a venue for the prospective bidders to raise their concerns and questions so they can be prudently guided on their offers during the June 17 auction.
