‘Unfeasible prices’ deter renewable energy bidders

By Francis Allan L. Angelo

Energy industry stakeholders are “discouraged” by unfeasible prices in the recent round of the Green Energy Auction Program (GEA-2) of the Department of Energy (DOE).

The DOE earlier expressed disappointment with the low turnout in the second round of the GEA-2 bidding, but energy sector players claimed “the initiative may have been hindered even before the auction officially opened.”

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

“The framework of the auction is to set a price cap and bid below the price cap. It seems, however, that the regulators are setting a floor price,” noted Tetchi Cruz-Capellan, chief executive officer of Sun Asia Energy, in a statement.

“We urge ERC to seriously examine the tariff rates in the GEA Program. The rates are not reflecting the realities of the current demand and supply of electricity in the country, nor is it encouraging developers to build,” Capellan added.

During the bidding on July 3, 2023, the DOE received only 3,580.76 megawatts (MW) of committed capacities, or around 30 percent of the total 11,600 MW available. This leaves more than 8,000 MW of unsubscribed capacity.

Under the GEA-2, winning bidders must make their committed capacities available by 2024 to 2026.

The ERC pegged the prices for GEA-2 based on sources:

-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.

POTENTIAL LOSSES

Atty. Jose M. Layug, Jr., co-chairman of the European Chamber of Commerce’s Renewable Energy and Energy Efficiency Committee, agreed that “setting the price at that level may have exposed potential bidders to financial losses.”

While they laud the program that will help boost the RE sector, Layug said the DOE and ERC should reexamine the prices to avoid loss exposures on the part of the bidders.

“We should look into the setting of the Green Energy Auction Reserve (GEAR) prices for each RE technology that may expose potential bidders to risk of financial losses, including comparative price levels in Wholesale Electricity Spot Market (WESM) and other retail markets. Also, developers should be given a practical timeframe to sufficiently prepare for the bids,” he emphasized.

Layug said price is always an issue for bidders and even the consumers, ultimately.

“As we have seen during the Feed-in-Tariff (FIT) regime, price is ultimately the most significant factor in endeavors like this, so it should be set at a level that is most optimal to all stakeholders. Nevertheless, we laud the efforts of the DOE in the aggressive transition to renewables with the ambitious RE installation projects, and we fully support their efforts to push for more RE capacities,” Layug underscored.

Capellan said they hope that future bidding procedures would not follow the same path.

“We are hopeful that ERC will listen to the developers and seriously consider what the market is telling them — that their price cap is way below the current market realities,” she explained.

She added that the Philippine Solar and Storage Energy Alliance (PSSEA) sent a comprehensive study to the ERC providing a sound framework for green energy tariff structures, but the document failed to convince the regulatory body.

“We believe that for the industry to deliver the ambitious target of the President, there has to be an honest-to-goodness realization of the current market prices. Without this, future GEAP will fail to entice developers,” Capellan concluded.

Energy Secretary Raphael Lotilla has yet to issue any statements about whether or not the 8,000 MW of unsubscribed capacity would be up for rebidding.