Government to use pricing parameters for green energy auction

MANILA, Philippines — The Department of Energy (DOE) will use pricing parameters in its upcoming green energy auction for geothermal and pump-storage hydro technologies, dropping the price caps that were imposed in the previous auction rounds.

Energy Regulatory Commission (ERC) chairperson Monalisa Dimalanta said the DOE has requested the agency to set pricing parameters instead of setting Green Energy Auction Reserve or GEAR prices for the third round of the green energy auction or GEA-3.

Dimalanta said the ERC and DOE recently met to discuss challenges encountered on the approach of not having a GEAR and setting pricing parameters as a replacement, and were able to find a way forward.

“We went down to the detailed discussions on what those pricing parameters should be and what the steps should be because what we want is once the auction is conducted, the steps that the bidders will undertake after they get awarded are all laid down. We want it to be as clear as possible that whatever rates they won will still be subject to the review,” Dimalanta said.

Dimalanta said the ERC is studying the pricing parameters, with the aim of finishing it by December.

GEA-3 was earlier eyed this November, but Dimalanta said this may now take place early next year.

“It should be November, but the DOE is still fixing a lot of things so it may happen by the first quarter of next year,” she said.

The ERC determines the GEAR prices, which were the maximum price offers in peso per kilowatt-hour. GEAR prices were used as the ceiling prices in the first two rounds of the green energy auction.

The Green Energy Auction Program of the government was designed to continuously trigger the increase of renewable energy capacity in the country.

The first round of auction held in 2022 was considered a success after successfully generating almost 2,000 megawatts (MW) of capacities that were committed to deliver energy from 2023 to 2025 at a competitive price lower than or equal to the GEAR prices set by the ERC.

The second round conducted in July, however, had a low turnout, with several renewable energy executives previously pointing to the prices set by the ERC as the primary factor behind the outcome.

The GEA-2 offered a total capacity of 11,600 megawatts (MW) installation target, but the DOE during an electronic bidding on July 3 received only a total of 3,580.76 MW of renewable energy capacities.

But since the bids were further evaluated by the technical working group, bid bonds of three potential winning bidders were not accepted for failure to comply with the terms of reference, hence the total dropped further to 3,440.756 MW.

As a result, more than 8,000 MW of capacity were left unsubscribed.