# DC2019-08-0012 — Providing a Framework for Energy Storage System in the Electric Power Industry ## Department Circular No. DC2019-08-0012 Signed: August 2019 by DOE Secretary Alfonso G. Cusi Effectivity: Immediately after publication in two (2) newspapers of general circulation; copies filed with UP Law Center-ONAR --- ## WHEREAS RECITALS 1. RA 7638 (DOE Act of 1992) established the DOE's power and function to administer programs for the exploration, transportation, marketing, distribution, utilization, conservation, stockpiling, and storage of energy resources of all forms, whether conventional or non-conventional. 2. EPIRA Section 37 provides that DOE shall, among others, formulate policies for the planning and implementation of a comprehensive program for the efficient supply and economical use of energy consistent with the approved national economic plan and with policies on environmental protection and conservation, and ensure the reliability, quality, and security of supply of electric power. 3. The EPIRA further mandates DOE to: (i) facilitate and encourage reforms in the structure and operations of Distribution Utilities for greater efficiency and lower costs; and (ii) develop policies and procedures and promote a system of energy development incentives to enable and encourage electric power industry participants to provide adequate capacity to meet demand including reserve requirements. 4. In other jurisdictions, Energy Storage System (ESS) technologies are applied to serve a variety of functions in the generation, transmission, and distribution of electric energy, among which are Energy Generation, Peak Shaving, and Ancillary Services (AS). 5. The increasing penetration of Variable Renewable Energy (VRE) necessitates the recognition of ESS as one of the technologies to manage intermittent operations of VRE-generating plants' output, thereby ensuring system stability. 6. ESS will be one of the key elements in the proposed Smart Grid Roadmap which DOE is promulgating to guide the Electric Power Industry in implementing initiatives to modernize the power system. 7. DOE conducted a review of all relevant policies and guidelines and existing practices in other jurisdictions, and subjected to Focus Group Discussions its concept paper in various dates: 21 and 23 March 2018 and 23 April 2018. 8. DOE formulated a draft circular which was subjected to public consultations in Luzon (18 September 2018), Visayas (24 August 2018), and Mindanao (31 August 2018). --- ## SECTION 1. GENERAL POLICIES AND PRINCIPLES DOE recognizes the applications and benefits of ESS as an emerging technology in the improvement of the electric power system. 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 Central Dispatch by the System Operator to Grid-connected and embedded ESS with material impact to the Grid in the interest of achieving economic operation and maintenance of quality, stability, reliability, and security of the transmission system; 1.3. Compliance with the EPIRA and its IRR, Philippine Grid Code (PGC), Philippine Distribution Code (PDC), WESM Rules and Market Manuals, Philippine Electrical Code, and other pertinent issuances by DOE, ERC, and other relevant government instrumentalities having authority over Grid reliability and supply security; and 1.4. Market share and bilateral contract limitations under EPIRA Section 45 and other relevant ERC regulations concerning abuse of market power and competition. --- ## SECTION 2. DEFINITION OF TERMS - **Ancillary Services (AS)** — support services such as Primary Reserve, Secondary Reserve, Tertiary Reserve, Reactive Power Support, and Black Start Capability necessary to support transmission capacity and energy essential in maintaining Power Quality and Grid reliability. - **Directly Connected Customers (DCC)** — industrial or bulk electricity end-users supplied through the Grid or Sub-transmission Assets still owned by the National Transmission Corporation (TransCo). - **Distributed Energy Resources (DER)** — smaller power sources that could be aggregated to provide power necessary to meet regular demand; may also refer to demand and supply-side resources deployed throughout a network service provider's system, including renewable energy facilities, managed loads (including electric vehicle charging), energy storage, and other measures to incorporate renewable generation resources. - **Electric Power Industry Participant** — any person or entity engaged in the generation, transmission, distribution, or supply of electricity. - **Embedded Generator (EG)** — generating units indirectly connected to the Grid through the distribution system that supplies power to its host DU or the Grid. - **End-User** — any person or entity requiring the supply and delivery of electricity for its own use. - **Energy Storage System (ESS)** — a facility acting as a load and a generator, designed to receive, store, and convert such energy to electricity. ESS technologies include: - **Battery Energy Storage System (BESS)** — capable of storing electric energy electrochemically from which it is able to charge or discharge electric energy. - **Compressed Air Energy Storage (CAES)** — uses electric energy to inject high-pressure air into containers; when electricity is required, the pressurized air is heated and expanded in an expansion turbine driving a generator. - **Flywheel Energy Storage (FES)** — uses electric energy to accelerate a rotating mass (rotor) to store kinetic energy; electricity is extracted by drawing down kinetic energy from the rotor. - **Pumped-Storage Hydropower (PSH)** — uses electric energy to pump water from a lower elevation reservoir to a higher elevation reservoir; when required, water flows back powering a turbine with a generator. DOE may identify, adopt, and recognize other ESS technologies developed in the future. - **EPIRA** — Republic Act No. 9136. - **Grid** — the high voltage backbone system of interconnected transmission lines, substations, and related facilities, located in each of Luzon, Visayas, and Mindanao, or as determined by ERC per EPIRA Section 45. - **Hybrid Power Systems** — a combination of two (2) or more different technologies to produce power. - **Market Operator (MO)** — entity responsible for operation of the WESM per WESM Rules. - **Micro-grid system** — a group of interconnected loads and distributed energy resources within clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid. - **Power Quality** — quality of the voltage, including its frequency and resulting current, measured in the Grid, distribution system, or any user system during normal conditions. - **Qualified Third Party (QTP)** — alternative electric service provider authorized to serve remote and unviable areas per EPIRA Section 59 and EPIRA-IRR Rule 14. - **Small Grid** — the backbone system of interconnected High Voltage lines or Medium Voltage lines, substations, and other related facilities not connected to the National Grid in Luzon, Visayas, and Mindanao. - **Small Grid Owner (SGO)** — party owning the backbone Transmission, Sub-transmission, or Distribution System, responsible for planning, operations, and maintaining adequate capacity. - **System Operator (SO)** — entity responsible for generation dispatch, implementation of generation dispatch schedule of the MO, procurement of AS, and operation to ensure safety, power quality, stability, reliability, and security of the Grid. - **System Operator-Small Grid (SO-Small Grid)** — party responsible for generation dispatch, implementation of dispatch schedule, provision of ancillary services, and operation to ensure safety, power quality, stability, reliability, and security of the Small Grid. - **Transmission Network Provider (TNP)** — party responsible for maintaining adequate Grid capacity per the PGC. --- ## SECTION 3. SCOPE This Circular applies to the following Electric Power Industry Participants: - Generation Companies (GenCos) owning and/or operating ESS, including: Battery Energy Storage System; Compressed Air Energy Storage; Flywheel Energy Storage; Pumped-Storage Hydropower; and other emerging technologies identified and approved by DOE as ESS. - Distribution Utilities (DUs) - Directly Connected Customers (DCCs) owning and operating ESS - End-Users owning and operating ESS - Qualified Third Parties (QTPs) - Transmission Network Provider (TNP) - System Operator (SO) - Market Operator (MO) --- ## SECTION 4. DUTIES AND RESPONSIBILITIES **4.1. Generation Companies** 4.1.1. May own and operate an ESS as a stand-alone generating facility or integrate ESS in existing generating facilities. 4.1.2. Register the ESS separately in the WESM, either as a stand-alone generating facility or integrated in its existing generating facility. **4.2. Distribution Utilities** 4.2.1. Develop or enhance internal business procedures for connection of ESS to its distribution network, consistent with the PGC, PDC, and other applicable regulations and guidelines. 4.2.2. Ensure operation of ESS connected to its distribution network is pursuant to standards set forth in the PGC, PDC, and other applicable guidelines. 4.2.3. Coordinate with the SO with regard to connection or disconnection of ESS mandated to register in the WESM. 4.2.4. Report to the MO any ESS within its franchise area mandated to register in the WESM. 4.2.5. Ensure transparent and fair imposition of Distribution Wheeling Service charges per applicable ERC guidelines. 4.2.6. Notify the TNP upon receipt of connection applications from an ESS with sizes of **10 MW and above for Luzon**, or **5 MW and above for Visayas and Mindanao**. 4.2.7. Include in its Monthly Operation Report (MOR) and other reportorial requirements the operation of DU-owned and operated ESS. **4.3. Directly Connected Customers** 4.3.1. May own and operate an ESS for managing their energy demands, subject to permitting requirements such as electrical permit from the local government unit and Certificate of Compliance (COC) from ERC. 4.3.2. Provide the following information to TNP, SO, and MO: Type of ESS; Capacity and rate of charge and discharge; Proposed application/purpose/operation; and other information required by TNP, SO, and MO. 4.3.3. Include in its MOR the operation of ESS as an AS Provider. **4.4. End-Users** 4.4.1. May own and operate ESS for managing their energy demands, subject to permitting requirements such as electrical permit from the local government unit and operating requirements of the DU. 4.4.2. Provide the following information to the DU: Type of ESS; Capacity and rate of charge and discharge; Proposed application/purpose/operation; and other information required by the DU. **4.5. Qualified Third Party** May own and operate ESS in conjunction with RE-based generating facilities or as part of a 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. **4.6. Transmission Network Provider and Small Grid Owner** 4.6.1. Shall not own and operate an ESS. 4.6.2. For TNP: incorporate in the annual Transmission Development Plan the recommended sizing and siting of ESS, taking into consideration existing transmission capacity and planned upgrading. 4.6.3. For both TNP and SGOs: consider ESS as an alternative solution to address transmission congestion and transmission facilities upgrade deferment. **4.7. System Operator and System Operator-Small Grid** 4.7.1. Shall not own and operate an ESS. 4.7.2. Within **ninety (90) days** upon effectivity of this Circular, shall develop in coordination with stakeholders: (a) Testing standard and procedure for ESS; and (b) Accreditation process on the approval of ESS. Such accreditation and testing standard and procedure shall be submitted as part of the Ancillary Services Procurement Plan to ERC for approval, with copy to DOE. 4.7.3. Optimize the addition of ESS for AS application and ensure proper allocation for each type of AS consistent with Grid requirements. 4.7.4. Formulate allocations for each type of ESS for AS application with preference to environment-friendly and indigenous sources of energy. 4.7.5. Include in its Daily Operation Report the operation of ESS as an AS Provider. 4.7.6. In coordination with the MO and host DUs, recommend changes to the Dispatch Protocol Manual and other relevant Market Manuals for DOE approval to allow the provision of AS by ESS. For SO-Small Grid, responsibility shall be limited to formulation of the dispatch protocol manual. **4.8. Market Operator** 4.8.1. Submit to the Rules Change Committee proposed changes to WESM Rules and Market Manuals as necessary. 4.8.2. Ensure registration of all ESS mandated to register in the WESM. 4.8.3. Submit regular reports to DOE on the status of registration of ESS in the WESM and their impact to market operations. 4.8.4. Recommend policies to 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 or more of the following purposes: 5.1. **Provision of Ancillary Services** — ESS, on its own or integrated in a generating plant, shall be used to support transmission capacity and energy essential in maintaining Power Quality and Grid reliability. AS provider providing frequency regulation function shall be sized at least **20 MW for the Luzon Grid** and at least **5 MW for Visayas and Mindanao grids**, in compliance with the observed frequency response characteristic recognized by the PGC. 5.2. **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. 5.3. **Manage the Penetration of Renewable Energy** — Generation Companies may integrate ESS in VRE facilities for the purpose of mitigating intermittent generation output and supporting the Grid in maintaining Power Quality and reliability. The installation of ESS to a FIT-eligible VRE shall not increase the VRE plant's capacity and generation entitled to FIT. The ESS may only be charged through the VRE facilities' output. 5.4. **Auxiliary Load Management for Generation Companies** — ESS embedded/integrated in the power system of a Generation Company can be used to supply auxiliary loads during hours of high demand, enabling higher energy dispatch. 5.5. **Transmission/Distribution Facility Upgrades Deferment** — ESS connected to appropriate nodes may defer the need for additional transmission/distribution facility upgrades by supplying peak demand through ESS. 5.6. **Transmission Congestion Relief** — ESS connected to appropriate nodes can mitigate or eliminate congestion when demand for power exceeds the transmission network capability, which may lead to violation of thermal or voltage stability. 5.7. **End-User Demand Management** — ESS can be used to manage end-user energy requirements. 5.8. **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. 5.9. **Distribution Utility Power Quality Management** — involves the process of using ESS to improve the Power Quality of a distribution system. The abovementioned purposes shall be updated by DOE when deemed necessary. --- ## SECTION 6. PERMITTING AND LICENSING REQUIREMENTS 6.1. All ESS proponents shall secure a Certificate of Compliance (COC) as a Generation Company from ERC pursuant to existing guidelines on licensing of generation facilities. 6.2. DUs owning and entering into Power Supply Agreements with ESS proponents for the supply of electricity to captive customers shall observe, among others: - Market share and bilateral contract limitations under EPIRA Section 45; and - Competitive Selection Process Policy pursuant to DC2018-02-0003 and other related issuances. 6.3. All ESS shall comply with rules and regulations on Safety, Health, Environmental Standards, and Proper Disposal enforced by appropriate government agencies. 6.4. All ESS proponents shall secure an Environmental Compliance Certificate or equivalent document from DENR and other requirements by relevant government agencies pursuant to existing guidelines. --- ## SECTION 7. CONNECTION AND OPERATIONAL REQUIREMENTS 7.1. All ESS connected to the Transmission System shall comply with connection and operational requirements for Generation Companies pursuant to the PGC, WESM Rules, relevant Market Manuals, and other relevant policies and regulations promulgated by ERC and DOE. 7.2. All ESS connected to the Distribution System shall comply with connection and operational requirements for Embedded Generation Companies per the PDC and other relevant policies and regulations promulgated by ERC and DOE. 7.3. All ESS connected to the Distribution System and mandated to register in the WESM shall comply with connection and operational requirements for Embedded Generation Companies pursuant to the PDC, PGC, WESM Rules, relevant Market Manuals, and other relevant policies and regulations promulgated by ERC and DOE. 7.4. All ESS connected or intending to connect to Micro-Grid Systems shall comply with connection and operational requirements as provided by applicable ERC guidelines. 7.5. All ESS connected or intending to connect to Off-Grid Areas shall comply with DOE Department Circular No. DC2019-01-0001. --- ## SECTION 8. MARKET REGISTRATION AND PARTICIPATION 8.1. 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; - 8.1.2. ESS connected to the Distribution System with a capacity equal to or above the following regional thresholds: - **10 MW for Luzon Grid** - **5 MW for Visayas Grid** - **5 MW for Mindanao Grid** ESS connected to the Distribution System with capacity below the above thresholds may register in the WESM on a voluntary basis. 8.2. ESS mandated to register in the WESM shall be classified under the Generation Company category per WESM Rules and Market Manuals. 8.3. All ESS integrated in Generating Facilities of a Generation Company shall be required to have separate registration in the WESM and shall comply with requirements on separate metering and monitoring facilities, among others. 8.4. DOE, in coordination with the MO and SO, shall annually review the criteria for mandatory registration and recommend revision as necessary. --- ## SECTION 9. REGULATORY SUPPORT ERC is directed to assist DOE in implementing this Circular, specifically: 9.1. To issue appropriate and applicable cost recovery mechanism and pricing structure, including power delivery charges, in consideration of reduction in investment attributed to deferred generation, transmission, and distribution capacities, and establishment of appropriate testing and accreditation standards and procedures for ESS deployment. 9.2. To ensure the inclusion of ESS-related rules, procedures, requirements, and standards in the Open Access Transmission Service Rules, Distribution Service Open Access Rules, AS Procurement Plan, PGC, PDC, and Philippine Small Grid Guidelines. 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 The Professional Regulatory Commission, DENR, Department of Labor and Employment, DTI-Bureau of Product Standards, other relevant government agencies, and concerned stakeholders shall be sought to 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 facilities and components in compliance with DENR Administrative Order No. 2013-22 or other related issuances pursuant to RA 6969, otherwise known as the "Toxic Substances and Hazardous and Nuclear Waste Control Act of 1990." --- ## SECTION 12. REPEALING CLAUSE Nothing in this Circular shall be construed as to amend, supersede, or repeal any of the mechanisms or institutions already existing or responsibilities already allocated and provided for under any existing law, rule, or contract. --- ## SECTION 13. SEPARABILITY CLAUSE --- ## SECTION 14. EFFECTIVITY This Circular shall take effect immediately after publication in two (2) newspapers of general circulation. Copies shall be filed with the University of the Philippines Law Center-Office of the National Administrative Register.