“Now is the time to come up with solutions that will make RE the wave of the future.”
It is clear by now that due to global warming, renewable energy sources rather than fossil fuel-based ones should be given priority. But the shift to renewable energy seems to be proceeding at a snail’s pace because there’s a big hurdle.
At the recent Senate hearing on the budget of the Department of Energy (DOE), several senators asked the Energy Regulatory Commission (ERC): Why is it taking too long to formulate the pricing mechanism for renewable energy?
Senator Pia Cayetano, chairperson of the Senate energy committee, lamented the seeming lack of urgency on the part of the ERC to set up the mechanism that would open the door for renewable energy (RE) investors to fully explore the realm of pollution-free energy.
“That is one of the priorities I think we need to do because the goal is to make the shift to renewables,” said Cayetano. “I hope we get this done. I understand there are things that have to be done on the part of ERC as well,” she pointed out.
Energy Secretary Raphael Lotilla was there during the budget hearing. So was Jesus Hermogenes Andres, ERC OIC and CEO.
The DOE assured the lawmakers that the Green Energy Auction 3 (GEA-3) for more RE supply to come will already be completed this year. “Our target for Green Energy Auction 3 is to finish it before the end of the year,” said Energy Undersecretary Rowena Guevara.
This is supposed to unlock RE supply of more than 3,000 MW expected in five years. But there’s a missing element here.
For the GEA-3 to happen, the ERC must first release the GEA prices, which is part of its mandate.
“One of the items required there would be the approved pricing methodologies with ERC. We’re coordinating that,” Lotilla said at the budget hearing.
It should be emphasized that it is not only the DOE that’s been waiting for the ERC pricing scheme, but also investors.
Cayetano told the DOE-ERC officials in attendance that many investors are waiting for the next GEA: “I understand we have investors who are ready to get it done.”
The senator told fellow senators, investors and green energy advocates that GEA-3 will add RE capacity but without ERC’s pricing mechanism, the potential will simply remain unrealized. “We keep on saying that is the problem why we cannot fully embrace renewables as fast as we want to,” she said.
The push for RE has moved in fits and starts. In the last two years, the DOE has conducted two rounds of auction which generated a total of 5,306 MW of RE commitment for delivery in 2024 to 2026. GEA-2 yielded only 3,580.76 MW out of the 11,600 MW offered at auction.
The poor output is said to have been the result of several factors: supply limitations, low incentives, delays in grid studies, and lack of viable financial guarantees as shown in low investor turnout.
Industry stakeholders seemed to have been confused by GEA-2 prices. These were said to be out of touch with the realities of demand and supply of electricity, thus failing to excite RE builders.
GEA-3 offers hope as it could unlock the potential of non-feed-in-tariff (Non-FIT) eligible renewable energy technologies like geothermal, impounding hydro and pumped-storage hydro under DOE Circular No. DC2023-10-0029.
The order lists auction policy and guidelines for the non-FIT RE technologies in the GEA program which will also cover run-of-river (ROR) Hydro, a FIT-eligible RE technology.
The estimated capacities for non-FIT Eligible RE technologies are 699 MW from impounding hydro; 3,120 MW from pumped storage hydro; and 380 MW from geothermal.
With pumped storage providing 3,120MW of flexible storage and generation, this ensures the capability of the grid to manage variable RE (VRE) and allow more VREs to be included in the energy mix.
Geothermal and impounding hydro allow dependable RE technologies to serve as baseload for the energy mix. The target start of deliveries for impounding hydro and pumped storage hydro is 2028 to 2030 and 2024 to 2030 for geothermal.
An estimated 200 MW of RE capacity from ROR hydro is expected to be auctioned, with target delivery starting in 2026 to 2028.
These are achievable targets, if only the ERC can act with urgency.
The RE sector has already identified the challenges that stand in the way of progress. Now is the time to come up with solutions that will make renewable energy the wave of the future by ensuring its reliability and affordability. (Email: ernhil@yahoo.com)
