Philippines Geothermal Industry Pushes for Reforms in Green Energy Auction Pricing Mechanism

en.Wedoany.com Reported - On September 7, the National Geothermal Association of the Philippines (NGAP) proposed adjustments to the pricing mechanism for geothermal projects under the Green Energy Auction, planning to submit recommendations to the Philippine Department of Energy and the Energy Regulatory Commission before the next round of Green Energy Auction. NGAP has reconvened its technical working group to focus on evaluating the current price determination methodology and to advocate for incorporating project site terrain, road construction, drilling platform setup, and pre-development conditions into pricing.

The third round of the Philippines' Green Energy Auction (GEA-3) previously allocated 100MW of capacity for geothermal projects, but ultimately only approximately 30.9MW was subscribed, representing a subscription rate of about 31%. NGAP believes that a uniform price is insufficient to cover the differences in development costs among various geothermal projects, with mountainous projects typically requiring additional access roads, drilling platforms, and supporting construction facilities, resulting in significantly higher upfront investment compared to projects in flat terrain areas.

NGAP plans to primarily propose to the Philippine Energy Regulatory Commission a methodology for determining prices based on project development conditions, and to submit recommendations for amending the GEA mechanism to the Department of Energy. The unsubscribed geothermal capacity from GEA-3 is expected to be carried over to the subsequent GEA-9. GEA-9 is part of the Philippine Department of Energy's 10-year Green Energy Auction program, which targets 25GW of additional renewable energy capacity by 2035. Winning projects are entitled to a fixed green energy tariff for a period of 20 years.

The Philippine Department of Energy has also recently proposed expanding the development of the country's geothermal resources. The Philippines currently has approximately 2057MW of installed geothermal capacity, with an additional 2100MW of geothermal resources holding potential for further exploration and development. Based on the Department of Energy's estimated development cost of approximately USD 6 million/MW, fully unlocking the aforementioned potential resources would require an investment of approximately USD 12.6 billion. The Philippine government has established a geothermal resource risk mitigation mechanism of approximately PHP 10.7 billion, which can cover up to 50% of drilling costs through convertible loans; existing funds are expected to support approximately 300MW of projects, and fully developing the 2100MW of potential resources would still require approximately PHP 60 billion in additional funding.

At present, at least 12 geothermal service contracts plan to apply for this risk mitigation funding, including the Amacan geothermal project being advanced by Energy Development Corp. in Mindanao. The company currently operates at least 16 geothermal power plants, with installed capacity accounting for more than half of the Philippines' total geothermal installed capacity.