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DOE sets formula for RE’s green energy pricing

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By Myrna M. Velasco

The Department of Energy (DOE) is crafting a formula that will establish the “green energy pricing” for renewable energy (RE) based on reference costs from the Wholesale Electricity Spot Market (WESM).

Department of Energy (DOE) logo

Department of Energy (DOE) logo
(MANILA BULLETIN)

The energy department said the “green energy pricing” will serve as a benchmark pricing that the developers of RE projects could leverage on if they will join the government-administered auction for RE capacity that shall be in line with the Renewable Portfolio Standards (RPS) policy.

As prescribed, the green energy price shall be derived based on “initial market values for peak and off-peak baseload power supply on a quarterly basis.”

In Luzon and Visayas grids wherein the WESM is already on commercial operations, the benchmark for the green energy price shall be the average of monthly load weighted average prices (LWAPs) in the spot market – and such shall correspond to the baseload and mid-merit/peaking hours.

As proposed, the figures shall be reckoned in the last five (5) years of the WESM operations or at least 60 billing periods prior to the date of the RE capacity auction.

For Mindanao grid that has no operational spot market yet, the propounded green energy price shall be based on “forecast cost recovery rate (in peso per kilowatt-hour) in the most recent feed-in-tariff allowance (FIT-Allowance)” petition as filed by fund administrator National Transmission Corporation.

The draft rules on green energy pricing further indicated that the cost reference shall be set on peso per megawatt-hour (PhP/MWh) basis “to reflect the value of actual energy generated by the qualified RE project and to be consistent with the compliance requirements of the RPS on-grid rules.”

It has also been proposed that “the initial market values shall be published by the DOE on its website and updated on a regular basis, not later than 30 calendar days prior to each auction.”

Essentially, the department stressed, these shall serve “as pricing indicators for RE developers and customers contracting under the Green Energy Option Program.”

The auction of the initial 2,000 megawatts of RE capacity that may be covered by the “green energy pricing” policy is targeted until early part of next year.

As previously raised, the potential candidates in the first batch would be the “stranded solar capacity” – primarily those sited in Negros; then the biomass developments not covered in the extended FIT incentive system; and the projects that had already been accorded with certificates of commerciality by the DOE or those that are ready to move into construction phases.

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