Bidders in renewable energy are constrained by unsustainable prices

– Advertisement –

While the Department of Energy (DOE) has already expressed its disappointment at the small number of participants in the second phase of the Green Energy Auction Program (GEA-2) bidding, it is possible that the initiative was blocked even before the auction was officially opened.

Several renewable energy (RE) executives shared that the Energy Regulatory Commission’s (ERC) price cap for GEA-2 would make it nearly impossible to submit a functional bid, with one describing the rate ceiling as “unrealistic “.

“The structure of the auction is to set a price cap and bid below the price cap. It seems, however, that the regulators set a floor price, “said Tetchi Cruz-Capellan, chief executive officer of Sun Asia Energy. “We urge the ERC to seriously review the tariff rates of the GEA Program . The rates do not reflect the reality of the current demand and supply of electricity in the country, nor do they encourage developers to build,” he added.

During the bidding on Monday, the DOE only received 3,580.76 megawatts (MW) of committed capacity or about 30 percent of the total 11,600 MW available. This leaves over 8,000 MW of capacity unsubscribed. Under GEA-2, the winning bidders must make their committed capacities available by 2024 to 2026.

The ERC set the price of GEA-2 at P4.4043 per kilowatt hour (kWh) for ground-mounted solar, P4.8738 per kWh for rooftop solar, P5.3948 per kWh for floating solar, P5.8481 per kWh for onshore wind, P5.4024 per kWh for biomass and P6.2683 per kWh for biomass waste-to-energy.

Atty. Jose M. Layug, Jr., co-chairman of the Renewable Energy and Energy Efficiency Committee of the European Chamber of Commerce, agreed that setting the price at that level could expose potential bidders to financial losses. “We need to look at setting prices in the Green Energy Auction Reserve (GEAR) for each RE technology that may expose potential bidders to the risk of financial losses, including comparable Wholesale price levels Electricity Spot Market (WESM) and other retail markets. Also, developers should be given a practical timeframe to adequately prepare for bids, “he emphasized. “As we have seen during the Feed-in-Tariff (FIT) regime, the final price is the most important factor in efforts like this, so it must be set at a level that is optimal among all the stakeholder. However, we applaud DOE’s efforts to aggressively transition to renewables with ambitious RE installation projects, and we fully support their efforts to push for more RE capacity,” emphasized by Layug.

For his part, Cappellan expressed hope that future bidding procedures will not follow the same path. “We hope that the ERC will listen to the developers and seriously consider what the market is telling them – that their price cap is lower than the current realities of the market,” he explained. To this end, the Cappellan executive mentioned that the Philippine Solar and Storage Energy Alliance (PSSEA) sent a comprehensive study to the ERC that provided a good framework for green energy tariff structures, but the document failed to convince the regulatory body. .

“We believe that in order for the industry to deliver on the ambitious target of the President, there must be an honest-to-goodness implementation of the current market price. Without it, the future GEAP will fail to attract developers,” Capellan concluded.

As of writing this news, Energy Secretary Raphael Lotilla has not released any statements about whether the 8,000 MW of unsubscribed capacity is up for rebidding or not.