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Philippines regulators consider energy storage ownership rules and definition – report

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The Philippines Department of Energy (DOE) and regulators are considering changing rules governing ownership of grid-connected energy storage systems.

The current classification of energy storage as generation could be hindering investment in an asset class the Philippines needs to see more of to ensure stable and cost-effective operation of its electricity networks.

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According to a report by the Manila Bulletin newspaper in the Southeast Asian country this week, the chair of the Philippines’ Energy Regulatory Commission (ERC) said the classification is being studied by DOE and the regulator.

Generation companies in the Philippines are prohibited from owning more than 30% of the installed generation capacity on each of the island country’s grids, or from owning more than 25% of installed capacity across the country.

With major generation companies now also becoming the first Philippines-based investors in large-scale battery storage, they could be discouraged from deploying battery storage if it means that threshold would be crossed.

ERC chair Monalisa Dimalanta said battery energy storage system (BESS) capacity “is counted fully in determining market share limitation,” under the current DOE classification as generation.

Meanwhile, the Manilla Bulletin noted that many in the Philippines energy sector believe a more fittingly up to date definition of energy storage is required.

The debate has echoes of developments in more mature energy storage markets around the world: German regulators only adopted a regulatory definition of energy storage as separate to generation last year after sustained industry pressure.

In the UK, a definition of energy storage was also adopted last year, as part of generation, but as a distinct subset with specific rules.

In both markets, the lack of regulatory definition had meant investment uncertainty and other barriers to investment in energy storage. In Germany, as in much of Europe, energy storage being classified simultaneously as both a consumer and producer of energy meant asset owners were levied fees for using the grid twice – once for charging and again for discharging – known as double-charging.

Regular readers of this site will note that Philippines power companies have been building out large-scale battery storage assets over the past couple of years. San Miguel Corporation has already seen more than 500MW of BESS installed at thermal power plant sites it owns, with the same amount again in development or construction. Aboitiz Power recently announced the completion of a 49MW BESS project at a floating diesel power barge.

In both cases the companies involved are major generation asset owners in the various regions of the Philippines they operate in, meaning DOE and ERC rule changes could impact their future plans.

Big power companies in the Philippines are competing against each other to establish operational efficiencies at their power generation fleets, which is driving the battery storage market forwards, George Garabandic, a principal consultant on energy storage for DNV told Energy-Storage.news.

Global BESS players like Fluence, Wartsila and ABB have provided systems for SMC and Aboitiz, for example. They are being used to provide ancillary services to balance the grid, which they have always been contracted to do with their existing fleets of coal, hydro and other power plants. Like stakeholders in grids all over the world, they are finding they can do it quicker – and cleaner – with BESS.

“They compete between themselves, and they know that the battery technology is a lot more efficient way to conduct the business of ancillary services,” Garabandic said.

The power companies are competing “to have the most efficient technology and be the best in providing the services,” including who can install the most battery storage.

“They all are now going towards batteries within their portfolios and because these are big companies, you have to understand the level of risk exposure is fairly shy,” Garabandic said.

“But all of them are getting into batteries, and all of them are looking at batteries as a potential means to improve their bottom line, their expenditures, their OpEx, their performance, and then eventually scaling that massively throughout asset portfolios.”

Beyond that, as the Philippines targets making renewable energy 35% of the national energy mix by 2035 and 50% by 2040, and a 75% reduction in greenhouse gas emissions between 2020 and 2030, the need for energy storage as a renewable energy enabler will continue to grow.

As of the end of 2020, only a fifth of the country’s energy was renewables, including nearly 4GW of hydropower, just under 2GW of geothermal and about a gigawatt of solar and smaller shares of wind and other sources. The rest came from natural gas and coal, the latter of which the Philippines has committed to a moratorium on building new plants for burning.

The country’s first-ever large-scale hybrid solar PV and battery storage power plant went online towards the beginning of this year through a subsidiary of major Philippine holding company Ayala Group. That project features a 120MW solar PV array with a 40MW/60MWh BESS.

In June, infrastructure group Prime Infra said it is planning a solar-plus-storage project in the country which would be the biggest project of its type anywhere if built today and likely rival almost any plant in the world for scale by the expected 2026-2027 completion dates. It could combine between 2,500MW and 3,500MW of solar PV with a 4,000MWh to 4,500MWh BESS.

Energy-Storage.news’ publisher Solar Media will host the 1st Energy Storage Summit Asia, 11-12 July 2023 in Singapore. The event will help give clarity on this nascent, yet quickly growing market, bringing together a community of credible independent generators, policymakers, banks, funds, off-takers and technology providers. For more information, go to the website.

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