In the dawn of Manila Bay in the Philippines, engineering ships are preparing to set sail. For Sharon Montaner, Director of the Energy Regulatory Commission (ERC) in the Philippines, this week's announcement marks the "ice breaking moment" for the country's energy transition. After months of public consultation and cost estimation, ERC has officially finalized the "ceiling" price for the country's first commercial offshore wind power project, injecting commercial vitality into this sea area with 178 gigawatts of offshore wind potential.

Fine tuning from draft to final draft

The Philippine Energy Regulatory Commission (ERC) officially announced this week that the maximum price for offshore wind projects (i.e. Green Energy Auction Reserve Price, GEAR) in the fifth round of Green Energy Auction (GEA-5) will be set at 11 pesos per kilowatt hour.

This final pricing is slightly higher than the preliminary estimate of 10.3859 pesos per kilowatt hour (approximately 1.35 yuan). ERC pointed out that this adjustment is mainly based on the revision of project output estimates, reflecting changes in the latest project cost structure, inflation expectations, and exchange rate assumptions. Although some cost components such as equity costs and retirement expenses have been reduced or removed, the inclusion of new costs such as port leasing, fisheries compensation, and land acquisition has pushed up the overall price limit.

To ensure the fairness and feasibility of the mechanism, ERC is conducting additional public consultations on the "electricity price indexing" rule. This mechanism aims to serve as a one-time tariff adjustment tool to offset the risks caused by cost fluctuations (especially exchange rate fluctuations) from project bidding to commercial operation. ERC stated that feedback from stakeholders will help improve the framework, reflecting the reality of project costs while effectively safeguarding consumer rights.

Hard indicator of 3300 MW

It is reported that GEA-5 plans to purchase 3300 megawatts of fixed offshore wind power capacity, with the goal of delivering it between 2028 and 2030. Jose M. Layug, Jr., President of Developers of Renewable Energy for Advancement, Inc., commented that the price set by ERC is "prudent and reasonable". He hopes that this rate will motivate more bidders to participate and encourage the Department of Energy (DoE) to register as many serious bidders as possible, thereby forming a final winning price that benefits consumers through full competition.

The Philippine government hopes to launch offshore wind power generation in 2028 to optimize the energy structure and reduce dependence on fossil fuels. Offshore wind power is seen as a key pillar in achieving the country's goal of achieving a renewable energy share of 35% by 2030 and 50% by 2040. The winning bidder will receive a 20-year power supply delivery period, and the payment of green energy tariffs will begin after the project is debugged and registered in the electricity spot market.

The window to go global with the advantage of the entire industry chain

The establishment of the electricity price ceiling and the exploration of the index mechanism this time are both significant benefits and higher professional requirements for Chinese companies interested in entering the Philippine market.

Firstly, clear price signals enhance investment certainty. The upper limit of 11 pesos per kilowatt hour provides a clear ceiling for project profitability, combined with a 20-year long-term power purchase agreement, providing a measurable return model for Chinese wind turbine manufacturers, engineering general contracting (EPC) companies, and investment institutions. Especially Chinese enterprises have global leading cost control capabilities and full industry chain advantages in the field of offshore wind power, and are expected to stand out in fierce international bidding with high cost-effectiveness.

Secondly, the mechanism for hedging exchange rate risks is crucial. The "electricity price index" rule that ERC focuses on consulting is directly related to the foreign currency loan portion in project financing. For Chinese companies that typically use US dollars or Chinese yuan for financing, if the final rule can reasonably cover the risk of exchange rate fluctuations, it will greatly reduce financial uncertainty and improve the bankability of the project.

However, compliance and localization challenges cannot be ignored. The newly added cost items such as port leasing and fishery compensation require Chinese companies to have a deep understanding of the complex laws, regulations, and community relationships in the Philippines. The simple low price strategy may no longer be applicable, and companies need to strengthen due diligence in the early stage, properly handle relationships with local fishermen, landowners, and environmental organizations to avoid project delays or cost overruns.

The Philippine offshore wind power market is on the eve of an explosion. For Chinese companies with technical, financial, and international operational experience, now is a strategic window period for expanding into this market. By accurately grasping policy guidance, optimizing cost structure, and actively participating in the rule making process, Chinese companies are expected to occupy an important share in this emerging blue ocean market, helping the Philippines' energy transformation while achieving new breakthroughs in its own global development.Editor/Yang Meiling