Price cap to be prescribed on renewable energy certificates

By MYRNA M. VELASCO – January 4, 2020, 10:00 PM
from Manila Bulletin

A price cap has to be instituted in the renewable energy certificates (RECs) that shall then be sold via the RE Market (REM) trading layer of the country’s Wholesale Electricity Spot Market.

In a draft Circular of the Department of Energy (DOE), it has been set forth that the Philippine Electricity Market Corporation (PEMC) “shall develop the RE certificate price cap,” which has to be approved subsequently by the Energy Regulatory Commission.

There had been no formula laid down yet on how PEMC will arrive at the price cap; and it was not also specified how the trading of RE certificates shall be carried out via the WESM.

PEMC is the governing body of the WESM; while the operator of the spot market is another entity called the Independent Electricity Market Operator of the Philippines (IEMOP) that was incorporated and spun off from PEMC in 2018.

The energy department just stipulated that the RE market shall be established “to facilitate the compliance of the mandated RE participants with the RPS (Renewable Portfolio Standards).”

The RPS is a policy prescription under the RE Law which requires distribution utilities (DUs) to secure certain percentage of their supply portfolio from RE sources such as solar, wind, geothermal, hydro, biomass and ocean thermal or tidal technologies.

There are no clear policy directions and rules yet how the trading of RE certificates will be done and how they are credited as compliance of the RPS-covered entities.

Nevertheless, in other power markets, RE certificates often take the form of “market-based instrument that certifies the bearer of the certificate as the owner of the megawatt-hour of electricity generated from RE resource and is to be traded in the RE market.”

Once the RE power producer feeds its capacity into the grid, its RE certificate can already be sold in the open market as an energy commodity.”

In various electricity markets, RE certificates are often called with different names or terms, such as: Renewable energy credits, green tag, renewable electricity certificates or tradable renewable certificates.

The RE market is the next level of innovation that the DOE has been pushing for to incentivize further flow of investments in the country’s RE sector – including those in the off-grid areas.