ERC issues preliminary reserve prices for 4th RE capacity auction

Lower tariff set for utility-scale solar, higher for wind The Energy Regulatory Commission (ERC) has dropped its preliminary verdict on reserve prices that will prospectively guide investors on forward decision whether or not to inject capital in the next wave of renewable energy (RE) capacities to be offered in the fourth Green Energy Auction (GEA-4) that the Department of Energy (DOE) will be administering this year. In a notice on Monday, April 14, the regulatory body relatively slashed the green energy auction reserve (GEAR) price for ground-mounted solar to ₱4.1480 per kilowatt hour (kWh), undercutting the last GEA-2 reserve price of ₱4.

4043 per kWh. Rooftop solar similarly took a cut, with GEA-4’s tariff slightly dipping to ₱4.7679 from ₱4.



8738 per kWh—and that could tighten the screws on margins for prospective investors. Conversely, floating solar initially secured the “sweet spot,” scoring a juicier ₱5.9515 per kWh, up from ₱5.

3948 per kWh—the tariff scale then that generally scared off investors from submitting tenders in the last bidding. And in the forthcoming round, it remains to be seen if the final tariff to be prescribed by the ERC will serve as the bait that could hook serious capital from would-be floating solar investors. The new addition in the fourth GEA would be solar plus battery energy storage system (solar + BESS), which was accorded with a curtain raiser tariff of ₱5.

2835 per kWh, although that is seen way lower than the industry expectation in the range of ₱8 to ₱9 per kWh, thus, leaving relevant industry stakeholders to wonder if such bargain-basement price will spark interest that this freshly minted technology offer desperately needs. For onshore wind projects, the ERC had cast an initial GEAR of ₱6.5134 per kWh, which is higher by more than ₱0.

60 per kWh—edging out GEA-2’s ₱5.8481 per kWh and it is also a leap from the first wind capacity auction’s pricing at ₱6.0584 per kWh.

The major parameters considered by the ERC on its GEAR calculations included foreign exchange rate of ₱57.6613 vis-à-vis the US dollar, which swelled by more than ₱2 from the 2023 GEA-2 at ₱55.5886.

The interest rate, which is a major lever for project financing, has been cranked up to 8.8 percent, a hefty leap from the last RE capacity auction’s 7.36 percent, setting a clear signal then that project sponsor-firms will need to brace for higher costs if they’re looking to fund their next major developments.

The ERC is tossing these initial GEAR prices into the public ring to gather strategic feedback from relevant stakeholders—April 24 public consultation for Luzon; and April 25 for Visayas and Mindanao; giving industry players and all interested GEA-4 bidders for their shot to weigh in if the prices will be viable for targeted investments in the RE sector. The submission of industry comments is due by April 21; and these are necessary to help the ERC shape its final decision on the price tags to be levied across RE technologies in the forthcoming RE capacity tender. It’s no secret that in the last GEA-2 two years ago, the bidding outcome was less than desired; with fingers pointing squarely at the regulator’s low pricing, hence this time, investor appetite is similarly expected to be riding high on the ERC’s final GEAR call— that if the numbers don’t hit the mark, interest might stall again before bid submission could even start.

In the GEA-4 announcement of the DOE last month, it is scheduling the bidding for RE capacities hovering 10,478 megawatts (MW) across technologies, and that ropes in a market debut of 1,100 MW of solar + BESS installations. The clock on the next RE capacity bidding won’t start ticking until the ERC issues the final GEAR prices, because without the warranted pricing benchmarks, developers are flying blind on how to price their generated capacities to be underpinned by GEA’s 20-year power supply agreements. The Energy department has apprised investors that the green tariff they will secure for the auctioned capacities will be “subject to indexation” to be determined by the industry regulator.

“This adjustment ensures that tariff rates remain fair, transparent and responsive to market fluctuations,” the DOE emphasized, adding that the targeted indexation could be a way for the government to “reinforce investor confidence in the RE sector.”.