Rate cap for green energy auction set

MANILA, Philippines — The Energy Regulatory Commission (ERC) has set the ceiling rate for the first round of Green Energy Auction Program (GEAP) next month.

The ERC has issued the Green Energy Auction Reserve (GEAR) prices for solar, wind, biomass and run-of-river hydro technologies, which will serve as the ceiling price for the first round of GEAP to be conducted by the Department of Energy (DOE).

Approved by the commission en banc on Thursday, the GEAR price set for solar was at P3.6779 per kilowatt-hour (kWh), wind at P6.0584 per kWh, biomass at P5.0797 per kWh, and run-of-river hydro at P5.4913 per kWh.

The GEAR price for solar and wind are higher that the preliminary price cap of P3.6248 per kWh and P5.2887 per kWh, respectively, issued in March.

Meanwhile, the final rice cap for biomass and run-of-river hydro are lower versus the initial rates of P5.548 per kWh and P5.8705 per kWh, respectively.

“We have set the GEAR prices for each type of technology consistent with the Notice of Auction of the DOE setting the auction capacities on a per technology basis, and using the Discounted Cash Flow Model with 46 parameters and assumptions for each technology,” ERC chairperson and CEO Agnes Devanadera said.

The ERC said the approved GEAR prices considered the stakeholders’ comments, inputs, and concerns before and after the public consultation last month.

With the issuance of the GEAR prices, the DOE can now proceed with its GEAP timeline of activities, which include a pre-bid conference on or before June 1, the conduct of auction for 2,000 megawatts (MW) on or before June 17 and the notice of award by June 24.

Last January, the DOE started inviting power developers last January to bid for 2,000 MW of renewable energy (RE) capacity under GEAP.

On a per region basis, the agency will bid out 1,400 MW in Luzon, 400 MW in Visayas and 200 MW in Mindanao.

The ERC, in accordance with its mandate under Section 25 of the Electric Power Industry Reform Act (EPIRA) is tasked to allow the recovery of prudent and reasonable economic costs incurred, consistent with the declared policy to ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability, in order   to achieve greater operational and economic efficiency and enhance the competitiveness of Philippine products in the global market.

The financial model used by the Commission does not allow any escalation or adjustment due to changes in forex and inflation, therefore, the GEAR prices are fixed during the whole life of the project.

Further, the GEAR prices set by the Commission are lower or within the range of the recent power supply agreements (PSA) for newly constructed plants or plants that are ongoing construction, taking into consideration the approved rates and the escalation/ adjustment provisions of these PSAs.

“In the determination of a 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 said.

The GEAP will be conducted in support of the government’s thrust to accelerate the development of renewable energy systems, including the promotion and commercialization of its applications.

It will support and facilitate the compliance of industry players to the Renewable Portfolio Standards’ (RPS) Rules.

RPS is a mechanism under the RE Act of 2008 where distribution utilities (DUs), electric cooperatives (ECs) and retail electricity suppliers (RES) are prescribed to source a percentage of electricity requirements from RE sources. Currently, the RPS level is currently set at one percent until 2022.