0 Comments
Table of Contents
The Department of Energy (DOE) plans to auction 3,840 megawatts (MW) of mid-merit natural gas capacity as the government seeks flexible power resources to support the growing share of renewable energy in the Philippine electricity mix.
The auction could begin this year and will cover existing and new natural gas-fired power plants. The DOE is targeting contracts to be awarded by the fourth quarter, according to Energy Secretary Sharon S. Garin.
Energy Undersecretary Mario C. Marasigan said the auction is intended to address periods when solar and wind generation declines, allowing gas-fired facilities to adjust their output as electricity supply and demand change.
“This auction will serve a specific purpose, which is to support renewable energy generation,” Marasigan said at an online media briefing on Tuesday.
Mid-merit plants occupy a role between baseload facilities, which generally operate continuously, and peaking plants, which are dispatched during periods of high demand. Their ability to ramp generation up or down makes them suited to managing fluctuations in renewable power output.
Luzon accounts for the largest portion of the planned capacity, with the DOE targeting 2,900 MW.
Of this amount, 1,400 MW from existing gas plants is scheduled for delivery within the year, while another 500 MW is targeted for 2027. The remaining 1,000 MW is expected by 2031.
For the Visayas, the DOE is offering 940 MW of capacity, particularly for Cebu and Panay, with deliveries targeted between 2028 and 2031.
The figures in the auction plan have been described in some DOE statements as more than 3,800 MW, while the detailed capacity targets add up to 3,840 MW.
Existing And New Facilities
The auction will distinguish between existing facilities and new-build projects. The guidelines issued by the DOE in June also allow existing, uncommitted existing, newly built, and upgraded natural gas facilities to participate.
Marasigan said the separate classifications would have their own target timelines.
The DOE has positioned natural gas as a transition fuel that can provide dispatchable capacity while the country increases renewable energy generation.
Garin previously said gas-fired plants were considered suitable for the mid-merit role because they can ramp up and down faster than coal plants. Diesel plants can also respond quickly but generally have higher costs, while coal plants are slower to adjust despite being cheaper.
“So we want to encourage more mid-merit capacity, and so that will be gas-fired power plants because they are really the most suitable,” Garin said.
The auction forms part of the government’s effort to develop the domestic natural gas industry. Republic Act No. 12120, or the Philippine Natural Gas Industry Development Act, enacted last year, promotes the use of natural gas over imported varieties and other conventional energy sources.
Pricing Mechanism
The Energy Regulatory Commission (ERC) is preparing the pricing framework for the gas auction.
The regulator is drafting a pricing scheme specifically for gas-fired power plants and is expected to issue a gas auction threshold that will serve as the maximum allowable price offer.
The pricing mechanism will be a key component of the auction as prospective suppliers determine the commercial viability of committing capacity under the government’s mid-merit program.
The DOE’s plan reflects the changing requirements of the power grid as renewable energy projects expand. Solar and wind facilities can produce electricity at varying levels depending on weather and other conditions, creating a need for resources that can respond when renewable output changes.
Under the planned auction, gas-fired capacity would provide that flexibility while maintaining power supply during periods when renewable generation is insufficient.
The DOE said the overall target is 3,840 MW of gas capacity to complement renewable energy generation, with the projects distributed across Luzon and the Visayas and phased through 2031.
Source:
https://business.inquirer.net/611205/doe-to-auction-off-3800-mw-natural-gas-projects