Optimal Supply Mix
Definition
The Optimal Supply Mix (OSM) is the total generation mix in any Off-Grid or Missionary Area derived from various fuel supply technologies that, when integrated with electricity generated from RE generation, results in adequacy of supply and reliability of the grid in the least-cost manner [DC2023-05-0014, SEC. 4(g), 2023-05].
The operative test for optimality: a scenario qualifies as optimal if the savings or reduction generated yields a reduction or savings in the UC-ME subsidy of the particular off-grid area, as supported by financial/simulation results from internationally accepted optimization software or an equivalent locally developed simulation tool [DC2023-05-0014, SEC. 7, 2023-05].
Planning Tool
The OSM is determined per Missionary and Off-Grid Area using any internationally accepted optimization software or equivalent locally developed simulation tool. Two parameters constrain the OSM calculation [DC2023-05-0014, SEC. 7, 2023-05]:
(a) Stability criterion: Stable operation of existing generating units and reliability of the grid with the entry of an RE generation facility, consistent with existing and applicable performance standards; and
(b) Penetration ceiling: The capacity corresponding to the above minimum RE generation shall ensure optimal RE penetration while maintaining stable, reliable and adequate supply of electricity.
The Simplified Planning Tool (SPT), developed under technical assistance from the Access to Sustainable Energy Programme (ASEP) with EU support, was designed to help Mandated Participants in off-grid areas prepare OSM analyses and RPS Compliance Plans [NREP 2020-2040, p.6, 2022].
Institutional Roles in OSM Determination
| Compliance Case | Who determines the OSM? | Source |
|---|---|---|
| Single DU + single GenCo | Generation Company (in coordination with host DU/LGU) | DC2023-05-0014, SEC. 13(a) |
| Single DU + multiple GenCos | Host DU | DC2023-05-0014, SEC. 13(b) |
| Multiple DUs + multiple GenCos | NEA and/or TransCo (in coordination with Mandated Participants) | DC2023-05-0014, SEC. 13(c) |
NEA and TransCo support OSM determination by assessing RE resources, developing/using optimization software, and conducting trainings (Hosting Capacity Analysis, Distribution Impact Study, permitting requirements) at no cost to Mandated Participants [DC2023-05-0014, SEC. 5(b), 2023-05].
OSM as Basis for RPS Compliance
In the off-grid RPS framework under DC2023-05-0014, the OSM is the anchor for all compliance obligations — the required RE generation volume is whatever is needed to achieve the OSM in each area [DC2023-05-0014, SEC. 6-7, 2023-05]. This is structurally different from the on-grid RPS, which uses a fixed annual percentage increment (currently 2.52% per DC2022-09-0030).
The OSM must also be integrated into each off-grid DU’s Distribution Development Plan (DDP) and Power Supply Procurement Plan (PSPP), so that RE procurement timelines feed into the annual DDP submission [DC2023-05-0014, SEC. 15(d)(vi), 2023-05].
UC-ME Link
Because the OSM optimality test is defined as UC-ME subsidy reduction, the concept directly bridges the RPS and UC-ME rationalization policies. Off-grid areas that achieve their OSM should see a lower UC-ME requirement — making UC-ME subsidy reduction the measurable output of the RPS Off-Grid compliance effort. The ERC is mandated to develop cost recovery and UC-ME rationalization frameworks within 60 days of DC2023-05-0014’s effectivity [DC2023-05-0014, SEC. 22, 2023-05].
Wider Application
The term “optimal supply mix” also appears in the broader power planning literature (PEP 2023-2050, PDP 2023-2050) when describing the desired balance of fuel sources at the national or grid level under the REF, CES-1, and CES-2 scenarios. In those contexts, the phrase refers to the output of the PLEXOS capacity expansion model rather than the per-area optimization defined in DC2023-05-0014. The regulatory definition in DC2023-05-0014 is currently limited to the off-grid context; a parallel on-grid concept has not yet been formally defined by regulation.