Amicus Curiae

The Renewable Portfolio Standards (RPS) and Renewable Energy Market (RE Market)

Aileen Charisse P. Cruz

January 24, 2018

The implementation of the Renewable Portfolio Standards (RPS) is an important development for the Renewable Energy (RE) Market, and impacts the public as a whole. Republic Act No. 9513 or the Renewable Energy Law gives both fiscal and non-fiscal incentives to investors in order to encourage the promotion and development of renewable energy in the Philippines. Toward this end, the RPS serves as a market-based policy mechanism which makes use of the RE Market to facilitate and commercialize trading in RE Certificates, the latter which are used to satisfy the RPS requirements and increases RE generation in the country.

On Dec. 30, 2017, Department of Energy (DoE) Circular No. DC2017-12-0015, or the RPS On-Grid Rules, took effect, requiring Distribution Utilities (DUs), Electricity Suppliers, generating companies supplying directly connected customers, and other mandated energy sector participants to source or produce a certain share of electricity from their Energy Mix from eligible RE resources. These eligible RE facilities include the following technologies: biomass, waste to energy technology, wind, solar, hydro, ocean, geothermal, and other RE technologies later identified by the DoE.

The RPS On-Grid Rules mandates energy sector participants to comply with the minimum annual RPS requirement in order to meet the aspirational target of thirty-five (35%) in the generation mix by 2030.

This minimum RE requirement, however, will not be imposed immediately but in 2020. 2018 and 2019 are considered transition years to help mandated participants comply with the DoE Circular. Additionally, the RPS On-Grid Rules implements a Minimum Annual Incremental RE Percentage to be sold by mandated participants. It is initially set at a minimum of one percent (1%) and applied to net electricity sales or annual energy demand for the next ten (10) years, and used to determine the current year’s requirement for RE Certificates (RECs) of the Mandated Participant.

The long-anticipated RPS On-Grid Rules shall be implemented in the Luzon, Visayas, and Mindanao grids. The RPS On-Grid Rules envisions the creation of a RE Market where mandated participants comply with the Minimum Annual RPS Requirement through the allocation, generation, purchase or acquisition, or generation from net metering arrangements, of RE Certificates, one certificate which represents one MWh of generation produced from a registered eligible RE facility. Further, all mandated participants must undertake a competitive selection process (CSP) in sourcing RE generation supply to its customers. RE tracking and compliance shall be done by the RE Registrar, who serves as the market operator of the RE Market, and who keeps and verifies the RECs to monitor compliance.

Upon signing of the RPS, DoE Secretary Alfonso Cusi pronounced that “the Renewable Portfolio Standard (RPS) for On-Grid rules outlined various safety nets to protect the electricity end-users and to ensure that this new venture will not result in higher electricity rates,” a statement reflected in the DoE Circular itself, which provides that any additional cost arising from the compliance of Mandated Participants in the RPS should not result in higher electricity rates to their consumers.

The RPS, along with its other well-known counterpart, the feed-in-tariff (FiT), provide policies used by many countries in promoting renewable energy.

Given that renewable energy is more difficult to develop and produce, however, the impact to the consuming public may ultimately result in higher electricity rates. This is because, in requiring mandated participants source energy from eligible RE resources, energy suppliers are assured that their eligible RE resources will always be in demand, thus allowing them to correspondingly raise their prices.