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=) ) DEPARTMENT OF ENERGY

Republic of the Philippines

(Kagawaran ng Enerhiya)

DEPARTMENT CIRCULAR NO. DC2018-_ 04 - At Be”

ESTABLISHMENT AND DEVELOPMENT OF COMPETITIVE
RENEWABLE ENERGY ZONES IN THE COUNTRY

WHEREAS, Sections 2(g) and (h) of Republic Act (RA) No. 9136, otherwise known
as the “Electric Power Industry Reform Act of 2001” or “EPIRA”, declare as a policy
of the State, among others, to assure socially and environmentally compatible
energy sources and infrastructure and promote the utilization of indigenous and
new and renewable energy resources in power generation in order to reduce
dependence on imported energy;

WHEREAS, Sections 2(a) and (b) of RA No. 9513, otherwise known as the
“Renewable Energy Act of 2008” or “RE Act”, declare, among others, the following
policies of the State, to wit:

(a) Accelerate the exploration and development of renewable energy (RE)
resources such as, but not limited to, biomass, solar, wind, hydro,
geothermal and ocean energy sources, including hybrid systems to achieve
energy self-reliance, through the adoption of sustainable energy
development strategies to reduce the country’s dependence on fossil fuels
and thereby minimize the country’s exposure to price fluctuations in the
international markets, the effects of which spiral down to almost all sectors
of the economy; and

(b) Establish the necessary infrastructure and mechanism to carry out the
mandates specified in the RE Act and other existing laws;

WHEREAS, Sub-Paragraph (i), Section 37(e) of the EPIRA provides that, following
the restructuring of the electricity sector, the Department of Energy (DOE) shall,
among others, encourage private sector investments in the electricity sector and
promote the development of indigenous and renewable energy sources; and

WHEREAS, in order to enable the efficient and cost-effective integration of variable
RE sources into the existing national transmission systems, the DOE issued
Department Circular (DC) No. DC2015-11-0017, entitled, “Creating a Technical
Advisory Committee and Modelling Working Groups to Enable Variable Renewable
Energy Integration and Installation Targets” with the objective of doing a grid
integration study to determine the following key factors, namely: (i) potential grid
reliability concerns with the scaling up of Variable REs (vREs); (ii) options to
improve system flexibility and power system balance; and (iii) option for new
installation and grid integration targets;

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WHEREAS, in a study entitled “Greening the Grid: Solar and Wind Integration
Study for the Luzon-Visayas Systems in the Philippines” (the “Study’), it was found,
among others, that RE targets of thirty percent (30%) and fifty percent (50%) can
be achieved by the said power system within 2030. These targets, however,
require certain policy changes and regulatory support of the electric power industry;

WHEREAS, in pursuit of its mandate under the RE Act, the DOE is laying the
ground work to implement various RE policy mechanisms such as the Renewable
Portfolio Standards (RPS), establishment of RE Market for the trading of RE
Certificates (RECs), and the Green Energy Options Program (GEOP);

WHEREAS, in planning for new transmission infrastructure and/or upgrades to
existing transmission infrastructure, the DOE deems it necessary to ensure the
cost-effective delivery of electricity generated in regions with abundant RE
resources in order to attain sustainable, stable, secure, sufficient, accessible, and
reasonably-priced electricity supply and services;

WHEREAS, to achieve this goal, the DOE recognizes the need to pursue and
expand the scope of works by the Technical Advisory Committee (TAC) and
Modelling Working Groups (MWG), both created under DC No. DC2015-11-0017,
to further enhance the planning process and strengthen the implementation of the
Philippine Energy Plan (PEP), Power Development Plan (PDP), Transmission
Development Plan (TDP), and the National Renewable Energy Program (NREP),
among others.

NOW THEREFORE, for and in consideration of the foregoing premises, the DOE
hereby adopts the following:

SECTION 1. General Principles and Objectives. This Circular is intended to
identify Competitive Renewable Energy Zones (CREZ) in the country and
complement the Study.

The Philippine CREZ is intended to enhance the planning process and strengthen
the implementation of the PEP, PDP, TDP and NREP. To achieve this, the DOE,
in partnership with other stakeholders, shall identify and develop Renewable
Energy Zones (RE Zones) and upgrade and expand transmission facilities through
policy initiatives and activities that shall enable the optimal use of the indigenous
RE resources of the country.

(a) The Philippine CREZ Process is hereby defined to support the DOE in the
identification and establishment of the CREZ and preparation of the PDP. It
shall likewise support the NGCP in planning transmission line
enhancements (e.g.,_ infrastructure upgrades, expansions and/or
extensions) by developing a planning framework that shall direct the
country’s transmission development to areas where potential RE resources

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(c)

(e)

are located. At the end of the CREZ Process, several CREZs shall be
identified and established in the country;

The CREZ Process aims to support the DOE in overcoming RE
development obstacles such as transmission constraints and regulatory
barriers to financial investments by the private sector.

The CREZ Process, shall:

(i) Identify candidate RE Zones, which represent geographic areas
characterized by high-quality, low-cost RE potential in addition to
high levels of private-sector developer interest;

(ii) Identify a set of transmission expansion and/or upgrade scenarios
that enhance the deliverability of energy originating from candidate
RE Zones;

(iii) Analyze the economic, operational, environmental, and other costs
and benefits associated with the required transmission enhancement
scenarios; and

(iv) Specify cost-effective transmission line enhancements proposed to
be included in the TDP, as reviewed and approved by the DOE.

Expansions of and upgrades to the existing system shall be evaluated as
part of the reliability analyses and other assessments conducted in the TDP
process.

Any identified transmission line enhancement projects derived from the
CREZ Process may be used as a form of justification in the approval of ERC.

SECTION 2. Scope and Application. This Circular shall apply to all agencies and
entities identified in Sections 4 and 6 of this Circular and to all electric power
industry participants.

(a)

(b)

Study Area: The focus of the CREZ analysis shall include the Luzon,
Visayas, and Mindanao interconnections.

Agencies and electric power industry participants shall provide the

necessary data and information identified in the Study needed to complete
the applicable analyses.

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SECTION 3. Composition of the CREZ Process Study Group. The CREZ
Process shall be undertaken by the TAC. There shall likewise be Working Groups,
to be created to support the TAC in achieving the objectives of the Study.

SECTION 4. Composition of the TAC. Following the structure established in DC
No. DC2015-11-0017, the TAC shall consist of two types of members: the TAC
Core Members and TAC Ad Hoc Members.

(a)

(b)

(c)

The TAC shall provide guidance on the scenarios, methods, assumptions
and interpretation of the results of the integrated clean energy generation
and transmission planning analysis.

The TAC Core Members shall be the regular attendees of all the meetings
and activities related to the conduct of the integrated clean energy
generation and transmission planning analysis, while the TAC Ad Hoc
Members shall only be invited as deemed necessary.

The TAC Core Members shall be comprised of the following

officers/representatives:
(i) | TAC Core Members

Chairperson

Members

DOE Undersecretary, designated by the DOE
Secretary

Director, Renewable Energy Management
Bureau (REMB) or his/her alternate, and
designated technical staff

Director, Electric Power Industry Management
Bureau (EPIMB) or his/her alternate, and
designated technical staff

Director, Energy Policy and Planning Bureau
(EPPB) or his/her alternate, and designated
technical staff

Chairperson, National Renewable Energy
Board (NREB) or his/her alternate, and
designated technical staff

President, National Transmission Corporation

(TransCo) or his/her alternate, and designated
technical staff

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Administrator, National Electrification
Administration (NEA) or his/her alternate, and
designated technical staff

President, National Grid Corporation of the
Philippines (NGCP) — Luzon, Visayas, and
Mindanao Systems Operations or their
respective alternates, and designated
technical staff

President, Philippine Electricity Market
Corporation (PEMC) or _ Independent
Electricity Market Operators (IEMO) or his/her
alternate, and designated technical staff

Chairperson, Energy Regulatory Commission
(ERC) or his/her alternate, and designated
technical staff

Executive Director, Grid Management
Committee (GMC) or his/her alternate, and
designated technical staff

Executive Director, Distribution Management

Committee (DMC) or his/her alternate, and
designated technical staff

The DOE, upon recommendation of the TAC Core Members, shall invite
other Government agencies and stakeholders as resource persons to
ensure the objectives of the Philippine CREZ Process are met.

(ii) | TAC Ad Hoc Members

The TAC Ad Hoc Members shall be comprised of one (1)
representative from each of the following:

a) President, National Power Corporation (NPC), or his/her
designated technical representative

b) President, Philippine National Oil Company (PNOC), or
his/her designated technical representative

Cc) President, PNOC Renewables Corporation (PNOC-RC), or
his/her designated technical representative

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d) President, Power Sector Assets and Liabilities Management
Corporation (PSALM), or his/her designated technical
representative

e) Each of the Renewable Energy developer associations

f) Each of the Electric Power Industry Participants and
associations

g) Academe

h) Grid Experts

i) Other agencies identified by TAC Core Members, as
necessary

SECTION 5. Responsibilities of the TAC. The TAC shall have the following
functions:

(a)

(b)

(e)
(f)
(9)

(h)

Provide direction on the development, review, and validation of an
integrated clean energy generation and transmission planning analysis;

Assist the Technical Assistance Team, composed of the National
Renewable Energy Laboratory and United States Agency for International
Development, in developing analysis parameters, which include but are not
limited to, the vision statement, detailed work plan, scenarios, and
sensitivities;

Review the methods, data sources, assumptions, and other key issues of
the Zone Identification and Technical Analysis and the Generation and

Transmission Modeling Working Groups and provide suggestions as would
be appropriate;

Provide input on criteria for excluding certain areas from consideration for
RE development;

Aid in evaluating candidate RE Zones;
Assist in interpretation of the modeling results;

Provide direction on the Generation and Transmission Modeling Working
Group’s recommendations;

Link model outcomes with policy, regulatory, and planning processes;

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(i) Ensure the technical rigor of the analysis; and

(j) Participate in future workshops and development of recommendations
pertaining to integrated clean energy generation and transmission planning.

SECTION 6. Composition of the Working Groups (WG). There shall be two (2)
WGs, namely: the Zone Identification and Technical Analysis Working Group and
the Generation and Transmission Modelling Working Group. They shall provide
support in the integrated clean energy generation and transmission planning
analysis.

Each WG shall be led by the DOE and shall be comprised of two official
representatives - one (1) permanent and one (1) alternate - from each of the
following:

(a) Zone Identification and Technical Analysis WG

(i) Department of Energy (DOE):
a) Renewable Energy Management Bureau (REMB)
b) Electric Power Industry Management Bureau (EPIMB)
c) Energy Policy and Planning Bureau (EPPB)
d) Information Technology and Management Services (ITMS)
) National Transmission Corporation (TransCo)
) National Electrification Administration (NEA)
(iv) National Grid Corporation of the Philippines (NGCP)
) Philippine Electricity Market Corporation (PEMC) or the
Independent Electricity Market Operators (IEMO)
(vi) Energy Regulatory Commission (ERC)
(vii) Grid Management Committee (GMC)
(viii) Distribution Management Committee (DMC)

(b) | Generation and Transmission Modeling WG

(i) Department of Energy (DOE):
a) Electric Power Industry Management Bureau (EPIMB)
b) Renewable Energy Management Bureau (REMB)
c) Energy Policy and Planning Bureau (EPPB)

(ii) National Transmission Corporation (TransCo)

(iii) National Electrification Administration (NEA)

(iv) National Grid Corporation of the Philippines (NGCP)

(v) Philippine Electricity Market Corporation (PEMC) or the

Independent Electricity Market Operators (IEMO)

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(vi)
(vii)

(viii)

Energy Regulatory Commission (ERC)
Grid Management Committee (GMC)
Distribution Management Committee (DMC)

The DOE, upon recommendation of the TAC Core Members, shall invite other
Government agencies and stakeholders as resource persons or to become
additional members of either of the WGs to ensure the objectives of the Philippine
CREZ Process are met.

SECTION 7. Responsibilities of the WG. The Zone Identification and Technical
Analysis and the Generation and Transmission Modeling WGs shall be responsible
for the following:

(a) Zone Identification and Technical Analysis WG

(i)

(ii)

(iii)

(iv)

(v)

(vi)

Support the identification and sharing of the best-available data sets
for energy planning analyses:

Support the identification and analysis of geographic areas, or
“CREZ Study Areas”, with high technical potential for RE
development, including the identification of criteria for exclusion of
certain areas for RE development:

Conduct economic resource analyses to generate clean energy
supply curves for the study areas to assist developers and the
regulatory authority in quantifying the resource that could be
developed at certain costs in each study area;

Develop the parameters, collated from the inputs of various private
sector developers themselves, to aid them in their decision to invest
in CREZ;

Develop a candidate CREZ map that presents zones with significant
levels of high-quality clean energy potential in addition to a high
levels of developer interest in a spatial format; and

Perform additional analyses as deemed necessary.

(b) Generation and Transmission Modeling WG

Identify a set of transmission development scenarios that enhance
the deliverability of energy originating from candidate RE Zones;

Analyze the costs and benefits associated with transmission
development options. Benefits shall include, but are not limited to,

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(iii)

(iv)

operational cost reductions (as determined through production cost
modeling), environmental benefits, and economic development
opportunities, as determined by the TAC Core Members and TAC Ad
Hoc Members;

Submit a recommendation to NGCP on candidate CREZs and
transmission enhancements to consider for inclusion in TDP; and

Perform additional analyses as deemed necessary.

(c) CREZ Technical Secretariat

(i)

(ii)

(iii)

(iv)

(v)

Coordinate with TAC and WG members for meetings, request for
inputs/comments and other related activities of the CREZ program;

Compile all documents/data used in the study as requested from
concerned agencies/entities for safe keeping and future reference;

Prepare highlights of meetings and disseminate the same to all
members of TAC and WG;

Provide other technical and administrative support to the TAC and
WG members as required; and

Technical Secretariat shall come from REMB-NREB-Technical
Services and Management Division.

SECTION 8. Responsibilities of Energy Stakeholders. All electric power
industry participants, Government agencies and other energy stakeholders shall
contribute to the attainment of the objectives of this Circular.

(a) Energy stakeholders shall provide data and information needed for the
conduct and development of the integrated clean energy generation and
transmission planning analysis;

(b) | The DOE shall ensure the confidentiality of proprietary and commercially
sensitive information, and the data provided shall solely be used for policy
and planning purposes; and

(c) Once the CREZ has been identified, the DOE shall pursue, in coordination
with other government agencies, craft the policies on the integrated clean
energy generation and transmission planning analysis.

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SECTION 9. Separability Clause. If for any reason, any section or provision of
this Circular is declared unconstitutional or invalid, such parts not affected shall
remain valid and subsisting.

SECTION 10. Repealing Clause. All previous circulars, orders, instructions, and
other issuances inconsistent with the provisions of this Circular are hereby
repealed or amended accordingly.

SECTION 11. Effectivity. This Circular shall take effect fifteen (15) days following
its complete publication in two (2) newspapers of general circulation and shall
remain in effect until otherwise revoked and certified true copies thereof shall be
filed with the University of the Philippines Law Center — Office of the National
Administrative Register.

b= Republic of the Philippines
ae DEPARTMENT OF ENERGY
Le AI IN REPLYING PLS. CITE:

Secretary Z

DOE-AGC-18011274
SEP 13 2018 WMO OU0U NNN
Issued on at Energy Center, Bonifacio Global City, Taguig City.

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