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The Department of Energy’s Green Energy Auction Program paves the way for a Greener Energy Sector

green energy auction

On 03 November 2021, the Department of Energy (“DOE”) issued the Revised Guidelines for the Green Energy Auction Program in the Philippines (“GEAP Guidelines”).[1]

The GEAP Guidelines establish the framework to facilitate the selection of eligible renewable energy plants through a competitive process or auction. It also provides for the principles observed in the conduct of a Green Energy Auction (“GEA”) and the development of specific Terms of Reference for each auction round. Further, it prescribes pricing principles in the determination of Green Energy Tariff and introduces an Opt-In Mechanism to reduce FIT-All[2] charges to electricity end-users and to meet any distribution utility (“DU”) supply and Renewable Portfolio Standard (“RPS”) requirements.

Qualified facilities under the GEAP Guidelines

New and Existing Capacities[3] may be offered for bidding under the GEA, which includes the following:

1) Renewable energy facilities that were built and will be built after Republic Act No. 9513, otherwise known as the Renewable Energy Act of 2008 (“RE Act”) provided, that said facilities have no legal impediment, such as the existence of a power purchase agreement/power supply agreement with any DU or other off-takers at the time of the agreed delivery date/s; or

2) Renewable energy facilities that were built and commercially operating prior to the effectiveness of the RE Act but have undergone expansion or upgrading projects. Provided, that such capacity is independent of the facilities’ existing units, and therefore shall be separately installed with its metering facility. The incremental or additional capacity and corresponding power generation brought about by the expansion or upgrading of the legacy plants shall be deemed eligible for RPS compliance by the Mandated Participants.

3) Other emerging renewable energy technologies may be included in the GEAP and the feed-in-tariff (“FIT”), consistent with the RE Act, as determined by the DOE.

Green Energy Auction Guiding Principles

The following principles shall be observed in the conduct of GEA and the development of specific Terms of Reference for each auction round:

1) The auction shall be conducted for qualified facilities under the GEAP Guidelines;

2) Participating entities shall be allowed full recovery of prudent and reasonable economic costs incurred, provided, that the Winning Bidders’ bid offers shall be considered their prudent and reasonable economic costs;

3) Efficiency and competitive prices of electricity shall be promoted;

4) Fair and transparent processes will be observed in all stages of the GEAP; and

5) Clean and sustainable forms of energy will be harnessed.

Transitioning to a greener future

The GEAP Guidelines implement the mandate of giving preference to renewable energy sources for a cleaner and sustainable environment. It promotes the growth of renewable energy as one of the country’s primary sources of energy to achieve energy security and self-reliance. Moreover, it ensures the utilization of efficient renewable energy technologies for low carbon shift in the energy sector.

With its issuance, qualified renewable energy companies can now participate in a competitive selection process for the supply of energy exclusively from renewable energy sources, with full recovery of prudent and reasonable economic costs. This not only ensures the presence and increase of renewable energy in the country’s power generation mix, but it also makes the rates of electricity from renewable energy competitive with the rates of electricity from fossil fuels.

The GEAP Guidelines pave the way for more renewable energy facilities to supply energy at reasonable rates. That said, our over-reliance on fossil fuels for power generation must come to an end. It is an opportune time to build a future with cleaner and greener energy.

Written by: Atty. Kyle Baser

[1] Department Circular No. DC 2021-11-0036: Providing the Revised Guidelines for the Green Energy Auction Program in the Philippines.

[2] FIT-All or feed-in-tariff allowance is a uniform charge that is calculated annually and is applied to the kilowatt-hours billed to all on-grid consumers that are supplied with electricity through a distribution or transmission network.

[3] The GEAP Guidelines refer to New and Existing Capacities as Renewable Portfolio Standards (“RPS”) eligible facilities as defined in DOE Department Circular No. DC2017-12-0015 or the RPS Rules for On-Grid Areas.

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