DC2024-09-0028: PSH Settlement Amendment to DC2023-10-0029
Full title: Prescribing Amendments to Department Circular No. DC2023-10-0029 Titled “Providing Specific Auction Policy and Guidelines for Non-FIT-Eligible Renewable Energy Technologies in the Green Energy Auction Program” Issued: 10 September 2024 | Pages: 9 (image-based PDF; OCR via tesseract 5.3.4) Issuing authority: DOE Secretary Raphael P.M. Lotilla Amends: DC2023-10-0029 Effect: Carves Pumped-Storage Hydropower (PSH) out of the general Non-FIT settlement mechanism and gives it a separate, capacity-based settlement framework that encompasses both Energy Market and Reserve Market revenues.
Background
On 25 March 2024, the DOE issued an earlier amendment to DC2023-10-0029 clarifying that the ERC shall promulgate the Price Determination Methodology (PDM) rules for Non-FIT-Eligible RE technologies in the GEAP [DC2024-09-0028, §Whereas, 2024-09-10].
DC2024-09-0028 goes further: it identifies that Pumped-Storage Hydropower (PSH) is structurally distinct from Geothermal and Impounding Hydro because PSH can both inject and draw electricity and provide reliability services to the grid. The energy-based settlement mechanism of §7 (which measures compensation against energy delivered in kWh) is inappropriate for a technology whose primary value is capacity and flexibility.
Legal basis for WESM/Reserve Market settlement: RA 9136 §30 (ERC approval of WESM PDM) and DC2021-03-0009 §13 (ERC approval of Reserve Market PDM) [DC2024-09-0028, §Whereas, 2024-09-10].
What Changed in DC2023-10-0029
Section 1: Definitions (§4 amendments)
Non-FIT GET — amended to add a proviso: the Non-FIT GET for PSH is expressed in PhP/kW/h (not PhP/kWh like geo/hydro) [DC2024-09-0028, §1(b), 2024-09-10].
Price Offer — now split into two sub-definitions:
- c.1 (Impounding Hydro and Geothermal): price in PhP/kWh for energy generated
- c.2 (PSH): price in PhP/kW/h for Available Capacity, excluding pumping cost (net of house load per separate metering) [DC2024-09-0028, §1(c), 2024-09-10]
New definition (e) — PSH Available Capacity: capacity utilizable to inject and/or draw electricity and/or support grid flexibility; excludes non-operational units; capped at total Pmax; based on nominated capacity in kW per trading interval regardless of mode, use, or sub-market [DC2024-09-0028, §1(e), 2024-09-10].
Section 2: §7, 7.2, 7.3 — Scoped to Geothermal and Impounding Hydro Only
The existing WESM energy top-up/flowback settlement mechanism is amended to apply only to Geothermal and Impounding Hydro — PSH is removed and given its own section [DC2024-09-0028, §2, 2024-09-10].
Section 3: New §8 — PSH Settlement
PSH must register in both the WESM and Reserve Market. Until that is complete, PSH settles under the standard WESM PDM.
Payment formula (capacity-based):
Total GEA Amount (PSH) = Σ (ACᵢ × Non-FIT GET × dᵢ)
Where ACᵢ = absolute value of Available Capacity in kW for trading interval i; dᵢ = duration of trading interval in hours (dᵢ = T/60, T = trading interval duration in minutes).
Total Trading Amount (TTA) encompasses both markets:
TTA(PSH) = ETA(PSH) + RTA(PSH)
[Energy Trading Amount + Reserve Trading Amount]
Collection/flowback split:
- Energy Market:
GEASA_energy × (GESQ_buyer / GESQ_customer-total)— allocated to buyers by GESQ share - Reserve Market (SO):
(TTA − GEAA) × (SRQ_PSH / TTQ_PSH)— allocated to the System Operator by SRQ/TTQ ratio
(Flowback follows the same structure with signs reversed.) See Pumped-Storage Hydropower (PSH) in GEAP for the full formula detail [DC2024-09-0028, §3, 2024-09-10].
Section 4: New §9 — PSH Market Integration Rules
DOE to issue specific integration rules for PSH covering: scheduling in Reserve + Energy Markets; AS Capability testing and certification; VRE-to-pumping linkage; single PDS Charge regardless of injection/drawing direction; pumping cost recovery via WESM participants by GESQ [DC2024-09-0028, §4, 2024-09-10].
Section 5: New §10 — Revenue Guarantee Clarification
Winning Bidder revenues = Total GEA Amount only, regardless of actual market earnings. The WESM settlement is the payment mechanism, not the compensation measure [DC2024-09-0028, §5, 2024-09-10].
Section 6: Renumbering
Old §8–15 of DC2023-10-0029 renumbered as §11–18.
Key Implications
PSH bids capacity, not energy. The auction now encompasses two distinct commodity types: energy (PhP/kWh) for geo/hydro and capacity (PhP/kW/h) for PSH. This requires separate GEAR ceiling structures for each.
Reserve Market revenues are guaranteed. By including RTA in the TTA baseline for collection/flowback, the settlement structure ensures that PSH earns from ancillary services as intended — not just from WESM spot sales. This is the single most significant feature of the settlement design: treating PSH as equivalent to a run-of-river hydro generator (compensated only for kWh delivered) would systematically undervalue it.
Single PDS Charge is critical for PSH economics. Charging PSH twice (once as generator, once as load) would make many projects financially unviable — bidirectional operation would otherwise trigger two transmission charges per cycle.
PSH market integration rules still pending. §9 commits DOE to issue these rules but does not set a deadline. The VRE-pumping linkage (using excess solar/wind to pump) is particularly significant for grid balancing under high-RE scenarios.
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