ERC to set reserve price on auction of RE capacities

Published April 5, 2020, 10:00 PM BY Myrna M. Velasco
https://business.mb.com.ph/2020/04/05/erc-to-set-reserve-price-on-auction-of-re-capacities/

The Energy Regulatory Commission (ERC) will set the reserve price for the targeted green energy tariff to underpin renewable energy (RE) capacities that shall be auctioned and be part of the volume that distribution utilities (DUs) will procure as part of their supply portfolio.

The need to secure RE capacities in the supply cache of the DUs is mandated under the Renewable Portfolio Standards (RPS) that was promulgated and issued by the Department of Energy.

Under the propounded Circular of the DOE, it was stipulated that “the ERC shall determine annually the reserve price for peak and off-peak, or variable and non-variable power supply, for the combined Luzon- Visayas grid and for the Mindanao grid.”

As set forth, the resulting green energy tariff for each winning bidder in the green energy auction shall not exceed the reserve price that was calculated and prescribed by the ERC.

In estimating the reserve price, it was recommended that the regulatory body must consider “parameters based on the pricing model utilized in setting FIT (feed-in-tariff) rates for the relevant technologies and applying, to the fullest extent possible, to the non-FIT RE technologies.”

When it comes to the formula and the resulting reserve price, it was mandated that “the green energy tariff shall be set on a per-kilowatt-hour basis to reflect the value of actual energy generated by the qualified suppliers;” and such must be set not later than May 31 every year.

Additionally, the ERC must issue the reserve price “in strict confidentiality” and this must only be addressed to the Energy Secretary, and disclosure must only be done in accordance with relevant laws and rules.

The auction of RE capacity, as proposed, shall be carried out under the supervision of the DOE – and must be pursued based on the terms that the agency will also lay down.

There would be at least two options how the ‘green energy auction’ shall be undertaken: one is through “supply-only auction”; and the other is via “integrated open and competitive selection process (OCSP) supply auction.”

Under the supply-only bidding, it was explained that “only green energy implementation agreement shall be awarded to the qualified suppliers, and only RE projects already covered by RE contracts.” These must include projects that are under pre-development and development stages.

On the other mode of integrated OCSP auction, “RE contracts shall be awarded together with green energy implementation agreement” resulting from an integrated process of bidding.