The Energy Transition Dialogues is a series of open discussions that aim to bring together energy stakeholders from the government, industry, academe, youth, and civil society to discuss the latest news, issues, and trends on climate and energy. The dialogue is hosted by CREST in partnership with the German foundation Friedrich Ebert Stiftung Philippines.
The first virtual dialogue for 2023 focused on the Governing Rules on Distributed Energy Resources (DERs). Energy Regulatory Commission (ERC), through its Resolution No. 11 series of 2022, adopted the DER Rules on 19 October 2022. DERs are power sources that are connected to an existing distribution or grid electrical system. The Rules allow electricity end-users with renewable energy systems for own use, to export their excess electricity to their distribution utilities in exchange for credits.
ERC Chief Regulatory Officer Engr. Jayson Corpuz provided the primary discussion for ET Dialogue on DER Rules. More than 40 participants from the power industry, electric cooperatives, RE developers, civil society, youth, and end-users attended the dialogue.
Here are our five takeaways from the dialogue:
Expansion of Net-metering: CREST commends ERC for expanding the coverage of the net-metering program through the DER Rules. The net-metering, one of the mechanisms under the Renewable Energy Law, allows end-users with up to 100kW own-use renewable energy system connected to the grid to export their excess power. ERC’s DER Rules expand this coverage to allow those RE owners with a system capacity of 100kW to 1MW to export excess power. Furthermore, the DER Rules cover systems below 1MW that are connected to off-grid distribution utilities, which benefits end-users located in off-grid areas.
Cap on Export Will Deter Owners to Fully Invest on DERs. The Rules, both for on-grid and off-grid connections, set an allowance for export to only 30% of the system’s nameplate capacity. If the exported electricity exceeds this threshold, e.g. during weekends or holiday breaks, the owner will only be compensated for the credit equivalent of 30% of its capacity. The cap on energy export will impact the return of investment (ROI) of the project, which can be a deterrent for the owner and investors to fully tap their available renewable resources.
The Rules Introduces a More Complicated Pricing. Exported electricity under the net-metering program is credited equivalent to the blended generation rate. ERC introduces more complicated pricing for DERs: exported energy from systems of 100kW to 500kW at 75% of the blended generation rate, and a 60% blended generation rate for systems above 500kW to 1 MW. ERC reasons that the new pricing methodology and cap on energy export will discourage end-users from setting up RE systems with capacity beyond their need.
The aim of the DER Rules is to promote the wide adoption of distributed renewable energy. However, we feel that the Rules is more keen on regulating the actions of those planning to put up RE systems for own-use rather than making the whole process more encouraging for end-users, which leads to the next point.
Stringent DERs Application Makes It More Difficult for Residential and Small RE Owners. Most homes install solar PV rooftop at a capacity of 10kW and below. However, many RE owners opted not to register their system under the net-metering program due to the wide array of permits needed from the ERC, distribution utilities, and local government units, and the costs associated with securing all of these permits.
Under the DER Rules, owners need to secure more licenses, including a permit to operate from the Department of Environment and Natural Resources and an Environmental Compliance Certificate if possible. The Rules put a standard application process regardless if the system is at 1MW capacity or 1 kW capacity. The DER application is therefore burdensome for residential and end-users with small RE systems.
ERC should balance its policy toencourage small end-users and residential owners to adopt renewable energy. The agency shoul make an exemption for many licensing requirements and better pricing for systems with 10kW capacity and below.
Capacity-building for Mandatory Participants. The Rules set a transition period for private utilities and electric cooperatives to identify and publish their capacities to host DERs at a substation level within their franchise area. This is very critical information for planning and preparation for the full implementation of the DER Rules. However, only a few distribution utilities were able to abide before the transition period ended on 14 March 2023. There is a need to greatly improve the capacity of mandatory participants such as the distribution utilities and electric cooperatives for the Rules to be implemented effectively.