The Philippines could attract $20 billion worth of renewable energy investments over the next decade if rates under the proposed green energy pricing program (GEPP) will be auctioned off, a think tank said.
“Auctions improve transparency on getting access to the grid and make it easier to raise finance at a viable rate, setting record-low generation prices globally. The DOE (Department of Energy) can achieve even better pricing by refining its competitive auctions framework,” said Sara Jane Ahmed, financial analyst the Institute for Energy Economics and Financial Analysis (IEEFA).
Under the GEPP, a special incentive rate for 2,000 megawatts (MW) worth of new renewable energy projects will be introduced.
Preferential rates under GEPP will be auctioned off to power plants based on their ability to run power, either as peaking or mid-merit capacity.
A ceiling rate will be implemented but players will have to compete and offer the lowest rate in order to secure the incentive but developers will not be given a deadline to fill up the entire allocated capacity.
However, Ahmed recommended in the IEEFA report that government can jumpstart the competitive auctions for the program’s 2,000 MW immediate target but also utilize auctions to reach 2030 targets and beyond.
Her report suggested the GEPP can work efficiently if appropriate energy technologies for different locations across the country can be selected apart.
Ahmed also called on the need to improve grid and transmission systems to enable the absorption of renewable energy as well as the revision of foreign ownership restrictions to attract global capital.
She added measures that will improve bankability by ensuring grid access and for the auctions to be facilitated by the Independent Electricity Market Operator of the Philippines will also ensure transparency and competitiveness of the program.
“Emerging markets such as the Philippines are well-positioned to attract low-cost global capital to fund the development of renewable energy infrastructure. The result will be competitive pricing enabling low cost electricity and reduced capital costs,” the IEEFA analyst said.
Ahmed said a program similar to GEPP was implemented in Cambodia and attracted 26 initial global and domestic bidders and landed a final bid of $0.03877 per kWh, equivalent to P1.93 per kWh.
“India, Brazil, Chile and Peru are also doing competitive auctions and have also surpassed their targets. In turn, those countries are able to provide lower than forecasted prices to their consumers and industry,” she said.
