LNG inclusion in green energy auction alongside RE queried

By Sheldeen Joy Talavera, Reporter

LIQUEFIED natural gas (LNG) should not be included in the Green Energy Auction Program (GEAP), because it is a fossil fuel, an analyst said.

“While the GEAP is a welcome initiative to increase power supply, including LNG in this auction would be inappropriate,” Noel M. Baga, convenor of think tank Center for Energy Research and Policy, said in an e-mail.

“The (program) is designed to implement the Renewable Portfolio Standard under the Renewable Energy Act, which is applicable only to renewable energy resources. LNG, being a fossil fuel, does not meet this definition,” he added.

Mr. Baga said that regulators should strengthen the competitive selection process (CSP) for all energy sources by establishing “uniform, transparent bidding rules and limit distribution utilities’ ability to tailor bid requirements.”

GEA refers to the competitive process for procuring renewable energy supply, while CSPs are a requirement for distribution utilities to select the lowest-cost electricity supplier.

Mr. Baga said that it is crucial to enhance the regulatory power of the Energy Regulatory Commission over the bidding process, as well as “requiring full cost declaration from energy importers in their bids and minimizing exemptions.”

“The ultimate goal is to promote competition and ensure the least-cost electricity for consumers,” he said.

Sam Reynolds, LNG/gas research lead at the Institute for Energy Economics and Financial Analysis, said that the proposal to include LNG in the auction “is likely meant to open up additional avenues for fossil fuel investment.”

This will also “create opportunities” for LNG projects that “have faced extensive delays,” he said.

Mr. Reynolds likewise said that LNG facilities can still compete for contracts through conventional channels, such as the CSPs.

“Inclusion of LNG in the GEAP could complicate these green energy mechanisms and ultimately jeopardize the country’s transition to cleaner, cheaper renewable electricity,” he said.

The Department of Energy (DoE) announced last month that it will conduct the fourth GEA round in the fourth quarter. The auction involves integrated renewable energy and energy storage systems.

The DoE said it is considering offering LNG capacities due to the “anticipated high entry of renewable energy into the grid resulting from the GEA.”

“A series of studies and simulations on several impacts, such as price, dispatch, contracts, energy and capacity, will be conducted,” it said.

In the last two years, the DoE has conducted two auction rounds, awarding bids amounting to 5,306 megawatts (MW) of renewable energy capacity with commitments to deliver power in the 2024-2026 period.

Some energy companies, such as First Gen Corp. and Meralco PowerGen Corp., welcomed the possible inclusion of LNG in GEA-4.

“We welcome the GEA-4 of the DoE and the possible inclusion of LNG,” First Gen Vice-President Ramon A. Carandang said via Viber.

First Gen has four power plants with over 2,000 MW of capacity that run on natural gas.

Emmanuel V. Rubio, president of MGen, said that the company supports the proposed inclusion of LNG in the auction round.

“It’s a recognition for the need of a balancing energy to smoothen the variability of renewable energy supply. This way, new LNG capacities will also have another channel to offer their output,” he said via Viber.

“This proposal will also determine the full cost of electricity for variable renewable energy and not just the levelized cost which is commonly used but does not consider the full system cost,” he added.

MGen, along with Aboitiz Power Corp. and San Miguel Global Power Holdings Corp., is planning to launch the country’s “first and most expansive” LNG facility in Batangas, with the $3.3-billion landmark agreement announced in March.