‘Unfeasible’ prices cause low turnout at green energy auction

MANILA, Philippines — Renewable energy executives have pointed to the prices set by the Energy Regulatory Commission (ERC) as the primary factor behind the low turnout during the second round of the government’s green energy auction.

“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,” Sun Asia Energy chief executive officer Tetchi Cruz-Capellan said.

“We urge the ERC to seriously examine the tariff rates in the green energy auction 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,” she said.

The Department of Energy (DOE), during Monday’s bidding, received only 3,580.76 megawatts of committed capacities, or around 30 percent of the total 11,600 MW available.

This left more than 8,000 MW of unsubscribed capacity.

The ERC is mandated to determine the Green Energy Auction Reserve (GEAR) prices, which are the maximum price offers that are used as the ceiling price in the auction.

The ERC has set the GEAR prices for GEA-2 at P4.4043 per kilowatt hour 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.

“As we have seen during the feed-in-tariff 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,” said Jose Layug Jr., co-chairman of the European Chamber of Commerce’s renewable energy and energy efficiency committee.

“We should look into the setting of the GEAR prices for each renewable energy technology that may expose potential bidders to risk of financial losses, including comparative price levels in Wholesale Electricity Spot Market and other retail markets,” he said.

Layug said developers should also be given a practical timeframe to sufficiently prepare for the bids.

“Nevertheless, we laud the efforts of the DOE in the aggressive transition to renewables with the ambitious renewable energy installation projects, and we fully support their efforts to push for more renewable energy capacities,” he said.

Capellan, for her part, is hoping that future bidding procedures will not follow the same path.

“We are hopeful that the 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 said.

“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,” she added.

The DOE will post the list of winning bidders on July 12. The certificate of award will be issued to the winning bidders upon submission of post-auction requirements within a 60-day period as prescribed under the GEA-2 terms of reference.

The agency intends to conduct the green energy auction on a yearly basis. This aims to encourage developers that failed to win in the second auction round and those that were unable to submit offers to participate in subsequent auction rounds.