The roadblock to renewable energy progress

THE lack of urgency from the Energy Regulatory Commission (ERC) regarding the transition to renewable energy is evident in the prolonged process of determining prices, a key factor that renewable energy (RE) investors are eagerly awaiting.
Why is the pricing mechanism so vital for the burgeoning renewable energy sector in the Philippines? Because it would just be chaotic without it.
There are two primary objectives in the shift to renewable energy: reliability and affordability. Although it is a complex process, achieving these two goals simultaneously should not be an insurmountable challenge, regardless of how daunting the technical issues may seem.
During a recent Senate hearing on the Department of Energy (DoE) budget, several senators questioned the ERC on the delay in formulating a pricing mechanism. However, they received only excuses, not answers.
Sen. Pia Cayetano, chairman of the Senate Energy Committee, expressed confusion over the apparent lack of urgency from the ERC in establishing a mechanism that could open the doors for investors keen on pollution-free energy.

Priority

“Establishing a pricing mechanism should be a priority because the goal is to encourage the shift to renewables, which is directly related to this issue,” Cayetano stated during the hearing.
“I hope we achieve this. I understand there are tasks the ERC needs to complete as well,” she added.
Jesus Hermogenes Andres, acting officer in charge and chief executive officer of the ERC, and his superior, Energy Secretary Raphael Lotilla, attended the hearing.
The DoE assured that the Green Energy Auction (GEA) 3 for increasing renewable energy supply will be completed this year. “Our target for the Green Energy Auction 3 is to finish before year-end,” said Energy Undersecretary Rowena Guevara.
This promise could unlock more than 3,000 megawatts (MW) of renewable energy supply expected over the next five years. However, it remains an incomplete process, as the ERC must first release the Green Energy Auction Reserve (GEAR) prices, which is part of its mandate.
“One of the necessary items is the approved pricing methodologies with the ERC. We’re coordinating on that,” Lotilla told the budget hearing.

DoE

The DoE isn’t the only entity waiting for the ERC’s pricing scheme; investors are as well.
GEAR prices are essential — similar to water needed for cooking rice. Without these, projects cannot proceed. Cayetano noted that many investors are poised to move forward.
“I understand there are investors ready to proceed,” she stated. She supported other senators, investors and green energy advocates by emphasizing that without the ERC’s pricing mechanism, the potential of GEA 3 will remain unrealized.

“We repeatedly acknowledge that pricing issues prevent us from fully embracing renewables at the desired pace,” she stated.
Progress in renewable energy has been gradual. In the last two years, the DoE conducted two auction rounds that resulted in commitments for 5,306 MW of renewable energy for delivery between 2024 and 2026. However, GEAR 2 only produced 3,580.76 MW from the 11,600 MW offered.
Excuses abound: supply limitations, low incentives, delays in grid studies and the viability of financial guarantees, which deter investor turnout.

Bewildered

Industry stakeholders were bewildered by the GEA 2 prices, which seemed disconnected from the realities of electricity demand and supply, thereby discouraging potential renewable energy projects.
GEA 3 holds promise. It could unlock the potential of non-feed-in-tariff (non-FIT) eligible technologies like geothermal, impounding hydro and pumped-storage hydro under DoE Circular DC2023-10-0029.

The slow pace of the ERC in establishing pricing mechanisms was thrust into the spotlight during the Senate’s DoE budget hearing.
Without utilizing local alternative energy sources, the country remains dependent on imported fuel for power generation, which inevitably becomes costlier as imports increase.
Cayetano highlighted this concern: “Achieving security is impossible when we’re importing. Just look at Philippine agriculture — a glaring example of Filipinos abandoning locally available resources in favor of imports.”
She compared the situation to rice production, emphasizing how years of delayed action resulted in the Philippines shifting from a top rice producer to the world’s largest rice importer.

“This must not happen in the energy sector,” Cayetano warned.

Indigenous

Energy Secretary Lotilla admitted that, beyond those ready for immediate implementation, there are at least 1,000 pending renewable energy projects that could exploit indigenous resources.
However, Cayetano noted a troubling practice among proponents — acquiring service contracts, permits and other requirements but hold off their projects.
“They park it, they secure it and then nobody else can develop. So, what can we do about that? I mean, that’s a problem,” Cayetano said.
This is one of the major impacts of the ERC’s lack of urgency in setting price mechanisms for alternative renewable technologies like hydro impounding.

The DoE has already issued an order outlining auction policy and guidelines for non-FIT RE technologies within the GEA program, also encompassing run-of-river (ROR) hydro, a FIT-eligible technology.
The estimated capacities for non-FIT-eligible technologies are 699 MW from impounding hydro, 3,120 MW from pumped storage hydro and 380 MW from geothermal.
Pumped storage, providing 3,120 MW of flexible storage and generation capability, aids the grid in managing variable renewable energy (VRE) and allows more VREs to be integrated into the energy mix. Geothermal and impounding hydro serve as reliable baseload for the energy mix.
The target start for deliveries is 2028 to 2030 for impounding hydro and pumped storage, and 2024 to 2030 for geothermal. Approximately 200 MW from ROR hydro is expected to be auctioned, targeting delivery from 2026 to 2028.

Indeed, these are lofty targets. But we fall back on the ground to see ERC falling to act with urgency.
We have been bombarded by identification of problems or challenges. We simply have been deprived of the ammunition of solutions that will make our RE dreams come true.

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The roadblock to renewable energy progress
Source: Breaking News PH