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Republic of the Philippines
DEPARTMENT OF ENERGY

DEPARTMENT CIRCULAR NO. PC 2019-08- OTe 4

PROVIDING 4 FRAMEWORK FOR ENERGY STORAGE SYSTEM IN THE
ELECTRIC POWER INDUSTRY

WHEREAS, Republic Act No. 7838 or the “Deparment of Energy Act of Tag2
established, among others, the power and function of the Department of Energy (DOE)
to establish and administer programs for the exploration, transportation, marketing,
distribution, utilization, conservation, stockpiling, and storage of energy resources of
all forms, whether conventional or non-conventional;

WHEREAS. Section 37 of Republic Act No. 9136, otherwise known as “Electne Power
Industry Reform Act of 2007" or the EPIRA, provides that the DOE shall underaks,
among others, the formulation of policies for the planning and implemeniation of a
comprehensive program for the efficient supply and economical use of anergy
consistent with the approved national economic plan and with the policies on
environmental protection end conservation and maintenance of ecological balance,
and provide a mechanism for the integration, rationalization, and coordination of ihe
various energy programs of the Goverment and ensure the rellability, quality and
security of supply of electric power,

WHEREAS. the EPIRA, following the restructuring of the electricity secior, further
mandates the DOE to: (1) facilitate and encourage reforms in the structure anc
operations of Distribution Utilities for greater efficiency and lower costs; and (ii)
develop policies and procedures and, as appropriate, promote a system of energy
development incentives io enable and encourage elaciric power industry participanis
to provide adequate capacity to meet demand including, among others, reserve
requirements:

WHEREAS, in other jurisdictions, Eneray Storage System (ESS) technologies are
applied to serve 4 variety of functions in the generation, transmission and distribution
of electric energy, among which are Energy Generation, Peak Shaving and Ancillary
Services (AS):

WHEREAS, the increasing penetration of Variable Renewable Energy (VRE)
necessitates the recognition of ESS as one of the technologies io manage intermittent
operations of the VRE-generating plants’ output thereby ensuring system stability,

WHEREAS, E55 will be one of the key elements in the proposed Sman Grid Roadmap
which the DOE is promulgating to guide the Electric Power Industry in the
implementation of respective initiatives to modernize the power system,
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WHEREAS, to ensure optimal utilization of ESS in the Philippines, the DOE conducted
a review of all relevant policies and guidelines and existing practices in other
jurisdictions, and subjected to Focus Group Discussions (FGDs) its concept paper
containing its recommendations in various dates as follows: 21 and 23 March 2048
and 23 April 2016;

WHEREAS, the DOE, in consideration of the inputs gathered during the FGDs,
formulated a draft circular providing for policies on ESS which was subjected to public
consultations in Luzon (18 September 7018}, Visayas (24 August 2018) and Mindanao
(31 August 2018):

NOW, THEREFORE, for and in consideration of the foregoing premises, the DOE
hereby issues, adopts and promulgates this Circular governing ESS:

SECTION 1. General Policies and Principles. The DOE recognizes the applications
and the benefits of ESS as an emerging technology In the improvement of the electric
power system in accordance to the objective of ensuring the quality, reliability, security
and aifordability of the supply of electric power. Hence, to maximize these benefits,
ESS shall operate within the framework of

1.1. Generation Companies whose facilities supply electricity to the Grid or the
distribution system;

1.2. Provision of Caniral Dispatch by the System Operator to Grid-connected and
embedded £55 with material impact to Grid in the interest of achieving
Sconomic operation and maintenance cf quality, stability, reliability and security

oT the transmission system:

1.3. Compliance ta the EPIRA and its IRR, Philippine Grid Code (PGC), Philippine
Distribution Code (PDC), Wholesale Electricity Spot Market (VESM) Rules and
its Market Manuals, Philippine Electrical Code and other pertinent issuances by
the DOE, Energy Regulatory Commission (ERC} and other relevant
government insirumeéntalities having authority over the Grid's reliability and
supply security; and

1.4. Market share and bilateral contracts limitation under Section 45 of the EPIRA
and other relevant regulations issued by the ERC conceming abuse of market
power and competition.

SECTION 2. Definition of Terms. The ferms as used in this Circular shall have the
glowing meaning:

2.1, “Ancillary Services” or “AS* refer to support services such as Primary
Reserve, Secondary Reserve, Tertiary Reserve, Reactive Power Support and
Black Start Capability which are necessary to support the transmission capacity
and energy that are essential in maintaining Power Quality and the reliability of
the Grid:
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2.2:

2.0:

2.4,

2.5.

2.5.

27.

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“Directly Connected Customers” or “DCC” refer io industrial or bulk
electricity End-Users, which aré supphed through the Grid or Sub-transmission
Assets that are sill owned by the National Transmission Corporation

“Distributed Energy Resources” or “DER” reter to smaller power sources
that could be aggregated to provide power necessary to meet regular demand
These may also refer to demend and supply-side resources that can be
deployed throughout the system cf a network service provider to meet the
energy and reliability needs of the custorners served by ihe system, including
But not limited to, renewable energy facilities, managed loads {including electric
vehicle charging), energy storage, and other measures necessary to
incerporata renewable generation resources, including load management and
ancillary services, such as reserves, voltage contro! and reactive power and
black start capabilites:

"Electric Power Industry Participant" refers to any person or entity engaged
in the generation, transmission, distribution or supply of electricity:

“Embedded Ganerator” or “EG” refers to generating units that are indirectly
connected to the Grid through the distribution system thet supplies power fo its
heet DU or the Grid;

“End-User” refers to any person or entity requiring the supply and delivery of
electricity for its own use;

“Energy Storage System" or “ESS" refers to a facility acting as a load anda
generator, which is designed to receive, store and conven such energy to
electricity:

ESS technologies shall include:

2.7.1, “Battery Energy Storage System” or “BESS” — capabie of stonng
electric energy électrochemically from which {It is able to charge or
discharge électric energy:

2/2. “Compressed Alr Energy Storage” or “CAES” — uses electric
energy to inject high-pressure air containers. When eleciricity is
required, the pressurized air is heated and expanded in an expansion
turbine driving a generater for power production;

27.3, “Flywheel Energy Storage” or “FES” — uses electric energy to
accelerate a rotating mass, called a ‘rotor’, to store kinetic energy.
Electricity is extracted from the system by drawing down the kinetic
enéray from the roter; and

2.7.4. “Pumped-Storage Hydropower” or “PSH” = uses electric energy to
pump water from a lower elevation reservoir to a higher elevation
reservoir. When required, the water flows back from the upper to the
lower reservoir, powering a turbine with a generator to produce elactric
energy.
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2.8,

2.9,

2.10,

2.16,

2.17.

2.18.

ay,
=

Pursuant to this Circular, the DOE may identhy, adopt and recognize any other
ESS technologies that may be developed in the future:

“Electric Power Industry Reform Act of 2001” or "EPIRA" reiers to Republic
Act No. $136:

"Grd" refers to the high voltage backbone systern of interconneciec
transmission lines, substations and related facilities, jocated in each of Luzon
Visayas and Mindanao, or as may be determined by the ERC in accordance
with Section 45 of the EPIRA:

‘Hybrid Power Systems" refer to a combination of two (2) or more diferent
technologies to produce. power:

. “Market Operator” or “MO” reters io ihe eniity responsible for ihe operation

of the WWESM in accordance with the \WESM Rules:

. “iMicro-grid system” rejers to a group of interconnected loads ana distributed

energy resources within clearly defined electrical boundaries that acts a5 a
singla controllable entity with respect to ihe gnd;

. "Power Quality” refers to the quality of the voltage, including its iTequency and

resulting current, that are measured in the Grid, distribution system, or any user
system curing normal conditions;

. “Qualified Third Party” or “QTP" refers to the alternative electric service

provider authorized to serve remote and unviable areas pursuant to Section 59
of the EPIRA afd Rule 14 ofthe EPIRA-IRR:

. “Small God” refers fo ihe backbone system of interconnected High Voltage

linés or Medium Voltage lines, substations and other related facilities not
connected to the National Grid in Luzon, Visayas and Mindanas;

“Smail Gad Owner” or “SGO" refers to the party that owns the backbone
Transmission or Sub-transmission or Distribution System, and is rasponsibdie
for planning, operations and maintaining adequate capacity,

"System Operator" or “SO” refers to the entity responsible for generation
dispatch, or the implementation of the generation dispatch schedule of the MO,
the procurement of AS, and operation to ensure safety, power quality, stability,
reliability and security of the Grid;

“System Operator-Small Grid” or “SO-Small Grid" refers to the party
responsible for generation dispatch, or the implementation of the generation
Dispatch Schedule, the provision of ancillary services, and operation ta ensure
safety, power quality, stability, reliability and sécurty of the Smail Grid;
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¢ ¢

2.19. “Transmission Network Provider’ or “TNP™ refers to the party that is

responsible for maintaining adequate Grid capacity in accordance with the
provisions of the Philippine Grid Code.

SECTION 3. Scope. This Circular shall apply to the following Electnc Power Indusiry
Participants:

3.1.

o.2.
3.4.
3.4.
3.5.
3.5.
zt

3.6.

Generation Companies (GenCos) owning and/or operating ESS which include,
but is not limited to, the fellewing technelagias:

Battery Energy Storage System;

Compressed Air Energy Storage:

Flywheel Energy Storage:

Pumped-Storage Hydropower, and

Other emerging technologies that may be identified, qualified, and
approved by DOE 2s ESs.

tn de to no

.

OO Gd eG ad
we kl

Distribution Utilities (DUs};

Directly Connected Customers (DCCs) owning and operating ES3;
End-Users owning and operating ESS;

Quailtied Third Parties (OTFs}:

Transmission Network Provider (TNP}:

system Operator (SO}, and

Market Operator (MO%.

SECTION 4. Duties and Responsibilities. ESS proponents shell have the following
responsibilities:

4.1.

4.2.

Generations Companies

4.14.1, May own and operate an ESS as a stand-alone generating facility or
integrate ESS in its existing generating facilities; and

4.12. Register the ESS separately in the WESM, either as a stand-alone
generating facility or integrate ESS in its existing generating facility.

Distribution Utilities
4.2.1. Develop or enhance appropriate internal business procedures for the

connection of ESS to its distribution network, consistent with the PGC,
PDC and other applicable regulations and guidelines;

us
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4.3.

4.4.

42.2.

4.2.3.

424.

4.2.5.

4.2.6.

4.2.7.

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Ensure that the operation of ESS connected to its distribution network
is pursuant to the standards set forth in the PGC, PDC and other
applicable guidelines:

Coordinate with the SO with regard to connection or disconnection of
ESS that are mandated to register in the WESM;

Report to the MO any ESS within iis franchise area that aré mandated
to register in the WESM:

Ensure ihe transparent and fair imposition of Distribution Wheeling
Service charges, in accordance wih the applicable ERC guidelines;

Notify the TNP upon receipt of the connection application of an Ess
with sizes of JOMVV and above for Luzon, or SMV and above for
Visayas and Mindanao: ard

Include in its Monthly Operation Report (MOR), and other appropriate
reportorial requirements, the operation of DU-owned and operated
ESS

Directly Connected Customers

4.3.1. May own and operate an ESS for the purpose of managing their
energy demands, subject to permitting requirements such as electrical
Hermit from the local government unit, and Certificate of Compliance
(COC) irom the ERC, as may be: applicable;
4.3.2. Provide ihe following information to TNP, SO and MO as part of the
data/documentary requirements:
4.3.2.1. Type of ESS;
4.3.22. Capacity and rate of charge and discharge;
4.3.2.3. Proposed application’purpose/eperation (including supply-
gemand scenarios}; and
4.3.2.4, Other information as may be required by ihe TNP, SO and
MIO,
4.3.3. Include in its MOR the operation of ESS as an AS Provider,
End-users
4.4.1. May own and operate ESS for the purpose of managing their energy
demanas, subject to permitting requiremenis such as electrical permit
from the local government unit, and operating requirements of the DU,
as may Se applicable: and
4.4.2. Provide the following information to the DU as part of the

data/documentary requirements:
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4.5.

4.6.

4.7.

¢ ‘4

4.4.2.1. Type of ESS:

4.4.2.2. Capacity and rate of charge anc discharge;
4.4.2.3. Proposed application/‘puroseoperatian; and
4.4.2.4. Other infonmation as may be required by the DU.

Qualified Third Party

May own and operate ESS in conjunction with RE-based generating
facilities or as part of hybrid power system to provide continuous
electric service to households in the form of either a micro-grid or a
DER, in consonance with the total electrification program of the
government.

Transmission Network Provider and Small Grid Owner

4.5.1,

4.6.2.

4.6.3,

Shall net own and operate an ESs:

For TNP to incorporate in the annual Transmission Developrnert Plan,
the recommended sizing and siting of ESS, taking into consideration
existing transmission capacity and planned upgrading; and

Fer both TNF and SGOs to consider ESS as an alternative solution to
address the transmission congestion and transmission facilities
Upgrade defennent.

System Opereter and System Operater-Small Grid

4.7.4.

4.7.2.

4.7.3.

4.74,

4.7.6,

4.7.6.

Shall not own é@nd operate en ESS:

Within ninety (80) days upon etectivity of this Circular, shall develop,
in coordination with stakeholders, the following:

47.2.1. Testing standard and procedure fer ESS; and
47.2.2. Accreditation process on the approval af ESS.

Such accreditation and testing standard and procedure shail be
submitted as part of the Ancillary Services Procurement Flan to the
ERC for approval and furnish copy to the DOE:

Optimize the acdition of ESS for AS application and ensure proper
allocation for each type of AS consistent with the Grid requirement;

Formulate allocations for each type ef ESS for AS application with
oreference to environment-friendly and indigenous sources of eneray,

Include in its Daily Operation Report the operation of ESS as an AS
Provider ang

In coordination with the MO and the host DUs, as to ESS connected
to its distribution system, recommend changes to the Dispatch
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45,

‘4 ‘4

Profocol Manual and other relevant Market Manuals for the approval
of the DOE, to allow the provision of AS by the ESS. For the SO-small
grid, their responsibility shall be limited to the formulation of the
dispatch protocol manual.

Market Operator

4.8.1. Submit to the Rules Change Committee proposed changes io ihe
WESM Rules and Market Manuals in accordance with the policy
provided herein, as necessary;

4.8.2. Ensure registration of all ESS mandated to register in the WESM,

4.3.3. Submit regular reports to the DOE with respect to the status of
registration of ESS in the WESM and their impact to market
operations: and

4.8.4. As maybe necessary, recommend policies ta address issues relating
to market operations brought by ESS adoption and operations.

SECTION 5. Purposes of ESS. ESS proponents shall apply and register their ESS
for one of more of the following purposes:

5.1.

§.2.

5.3.

Provision of Ancillary Services

ESS, on its own or 3s intearated In a generating slant, shall be used te suppor
the transmission capacity and energy that are essential in maintaining Power
Quality and the reliability of the Grd. AS provider, providing frequency
requiation function, shall be sized at least 20 MVV for the Luzon Grid and ai
least 5 MV for Visayas and Mindanao grids in compliance with the observed
frequency response characteristic recognized by the PGC.

Provision of Energy through Bilateral Supply Contracts or Trading in the
WESM

Generation Companies may utilize ESS for selling power through Bilateral or
Retail Supply Contracts, or Trading Energy in the WESM.

Manage the Penetration of Renewable Energy

Generation Companies may integrate ESS in its VRE facilities for the purpose
of mitigating its intermittent generation output and support the Grid in
maintaining Power Quatity and reliability, The installation of ESS to a Feed-in
Tariff (FIT}-eligiblé VRE should not in any way increase the VRE plant's
Capacity and generation entitled to FIT. The ESS may only be charged through
the VRE facilities’ output.
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5.4,

5.5.

5.6.

5.

5.8.

6.8:

C “
Auxiliary Load Management for Generation Companies
ESS when embedded/integrated in the power system of a Generation Company
ean be used to supply io auxiliary loads during hours of high demand enabling
higher energy dispatch
Transmission/Distributian Facility Upgrades Deferment
ESS when connected to appropriate nodes may defer the need for additional
transmission/distribution facility upgrades by supplying the peak demand of
grid/end-users through ESs.
Transmission Congestion Relief
ESS when connected to appropriate nodes can mitigate or eliminate the
congestion when demand for power exceeds the transmission network
capability that may lead to violation of thermal or voltage stability,
End-User Demand Management
ESS can be used io manage end-user energy requirements.
Distribution Utility Demand Management
Involves the process of storing energy available during off-peak periods, and
discharging the stored energy in the power system during peak periods thereby
reducing consumption from the Grid.

Distribution Utiiity Power Quality Management

Involves the process of Using ESS to improve the Power Quality ofa distribution
system,

The abovementioned purposes shall be updated by the DOE, when it may deem
necessary.

SECTION 6. Parmitting and Licensing Requirements. The following shall govern
the licensing requirements of ESS:

6.1,

6.2.

All ESS proponenis shall secure a COC as a Generation Company irom the
ERC pursuant to existing quidelines on licensing of generation facilities:

DUs owning and entering inta Power Supply Agreements with ESS proponents
forthe supply of electricity to its captive customers shall observe, among others,
the following guidelines:

6.2.1. Market share and bilateral contract limitations under Section 45 of the
EPIRA: and
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6.3.

6.4.

C C

6.2.2, Competitive Selection Process Policy pursuant to the DOE
Department Circular No.002018-02-0003 and other relsted
issuances

All £55 shail comply wih the mules and regulations on Safety, Health,
Environmental Standards and Proper Disposal enforced by appropriate
government agencies: and

All ESS proponents shail secure an Environmental Compilance Certificate or
any other equivalent document from the Department of Environmental and
Natural Resources (BENR) and other requirements by relevant government
agencies pursuant to their existing guidelines.

SECTION 7. Connection and Operational Requirements. The following shall
govern the connection and operational requirements af ESS:

T.4,

Tide

ti

T.4,

7.5.

All ESS connected to the Transmission System shall comply with the
connection and operational requirements for Generation Companies pursuant
to the PGC, WESM Rules and relevant Market Manuals, and other relevant
policies and regulations promulgated by the ERC and DCE:

AI ESS connected to the Distribution System shall comply wih the connection
and operational requirements, for Embedded Generation Companies, of the
POC end other relevant polices and regulations promulgated by ihe ERC and
DOE;

All ESS connected to the Distribution System and mandated to register in the
WESM shall comply with the connection and operational requirements for
Embedded Generation Companies pursuant to the PDC, PGC, WESM Rules
and relevant Market Manuals and other relevant policies and reguiations
promulgated by the ERC and DOE:

All ESS connected or intending to connect to Micro-Grid Systems shall comply
with comnection and operational requirements as provided by applicable
guidetines of the ERC; and

All ESS connected or intending to connect to Off-Grid Areas shall comply with
DOE Depanment Circular No. DC20719-01-0001.

SECTION &. Market Registration and Participation. The following shall govern the
registration and participation of ESS in the WESM:

a. 1,

The following ESS shall register in the WESM and, thereafter, be subjected to
central dispatch by the SO:

8.1.1. ESS connected to the Transmission System;

$1.2. ESS connected to the Distribution Sysiem with a capacity equal to or
above the following regional thresholds:
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8.1.2.1, 10 MV for Luzon Grid;
5.1.2.2, 5 MV for Visayas Grd; and
6.1.2.3, 6 MV for Mindanao Grid.

ESS connected to the Distribution Sysiem, which has a capacity less
than the above threshold may recister in the WESM on a voluntary
basis:

8.2. ESS mandated to register in the WESM shall be classified under the Generation
Company category, in accordance with the WESM Rules and Market Manuals;

8.3. All ESS integrated in Generating Facilities of Generation Company shall be
required to have separate registration in the WWESM and shall comply with the
requirements on separate metering and monitoring facilities, among others; and

8.4. The DOE. in coordination wih the MO and SO, shall annually review the criteria
for mandatary registration, and recommend revision as may be necessary,

SECTION 9. Regulatory Support. The ERC is hereby directed to assist DOE in the
implementation of this Circular, specifically:

9.1. To issué appropiate and applicable cost recovery méchanism and pricing
eiructura, including power delivery charges, in consideration of reduction in the
investment attributed to deferred generation, tansmission and. distribution
capacities and establishment of the appropriate and applicable testing and
accreditation of standards and procedures for the deployment of ESS:

S.2. 19 @nsure the inclusion of ES6-related rules, procedures, raquirements, ana
standards in ihe Open Access Transmission Service Rules, Distribution Service
Open Access Rules, AS Procurement Flan, PGC, POC, and Philippine Small
Grid Guidelines; and

9.3. To facilitate the entry and participation of Third Party/Parties in the accreditation
and testing standard and procedure for ESS as AS Providers.

SECTION 10. Standards and Safety Codes. Recognizing ihe necessity to ensure
successful and safé deployment of ESS, the Professional Regulatory Commission,
DENRA, Department of Labor and Employment, the Department of Trade and Industry-
Bureau of Product Standards, other relevant government agenciés and concerned
siakeholders shall be sougnt io develop or improve standards and safety codes for
ESS technologies or options/scenarios available for ESS installation, and occupational
safety and health standards.

SECTION 11. Proper Disposal and Recycling of ESS. ESS proponents are
mandated to recycle and properly dispose ESS facilties and component in
compliance with the DENR Administrative Order no. 2013-22 of other related
issuances pursuant to the R.A. No. 6869, othansvise known as the “Toxic Substances
and Hazardous and Nuclear Waste Control Act of 1990".

11
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SECTION 12. Repealing Clause. Nothing in this Circular shall be construed as to
amend, supersede, cr repeal any of the mechanism or institutions already existing or
responsibilities already allocated and provided for under any existing law, rule, or
contract.

SECTION 13. Separability Clause. If any section or provision of this Circular is
declared unconstitutional or invalid, the other parts or provisions hereot which are not
affected thereby shall continue to be in full force and effect,

SECTION 14. Effectivity. This Circular shall take effect immediately after its
publication in two (2) newspapers of general circulation, and copies of this Circular
shall be fled with the University of the Philippines Law Center-Office of the National
Adntnistrativé Register.

Signed this day ot 2019 at DOE, Energy Canter, Rizal
Drive, Bonifacio Global City, Taguig City, Metro Manila.

Chand MZ

U0 HATA LE
AUGO 2019