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DEPARTMENT CIRCULAR NO.  DC.2015-03-001

PROMULGATING THE FRAMEWORK FOR THE IMPLEMENTATION OF

MUST DISPATCH ANO PRIORITY DISPATCH OF RENEWABLE ENERGY RESOURCES IN THE WHOLESALE ELECTRICITY  SPOT MARKET

WHEREAS. under Section 2 of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), it is the declared policy of the State to among others, promote  the  utilization , of indigenous  and  new  and  renewable  energy  resources  in  power generation  1i11  order  to r,educe  dependence  on  Imported  energy,  and  ensure  the  quality, reliability, security arid affordability of the supply of electric power;

WH EREAS, Section 37 of EPIRA mandates the Department o,f Energy (DOE) to   encourage private sector investments and broaden the ownership base  jn the electric  power industry   and promote the development of indigenous and renewable energy, resources;

WHEREAS, Section 2  of Republic Act No. 95131   otherwise known as the Renewable  Energy Act of 2008 (RE Act), declares as a policy of the State to:

(a)           Accelerate the exploration and development of renewable energy resources such as,  but not  limited  to, biomass,  solar,  wind, hydro, geothermal  and  ocean  energy resources, 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 dawn  to  almost  all  sectors  of  the economy;

(b)           Increase the utilization of renewable energy by institutionalizing the development of national and local capabilities in the use of renewable energy systems, and promoting its efficient and cost-effective commercial application by providing fiscal and non-fiscal incentives; and

(c)            Encourage the development and utilization of renewable energy resources as tools to effectively  prevent  or  reduce  harmful; emissions  and  thereby  balance  the  goals  of economic  growth an.d  development  with the protection  of  health  and the environment;

WHEREAS,Section 5 of the RE Act mandates  he DOE as the lea, d agency  to implement the provisions,   o f  the  RE  Act,  while  Section  37  of  EPIRA  empowers  th,e  DOE  to  supervise  the restructuring of the electric power industry, in addition to its existing powers and functions;

WHEREAS 1 Section 7 of the RE Act provides for a feed-in tariff {FIT) system for electricity Droduoed from wlnd, solar, ocean, run-of river hydropower and biomass to accelerate the development of emerging renewable energy resources; 

WHEREAS; Section 20 of the RE Act allows qualified and registered RE generating units with intermittent RE resources to be considered as "Must Dispatch" based on available energy and sall enjoy the benefit of priority dispatch;

WHEREAS, the implementation of the Must Dispatch and Priority Dispatch requires guidelines that will ensure maximum injection of intermittent and FIT eligible generation while maintaining system security at all times;

WHEREAS, the DOE spearheaded public consultations and focused group discussions on the Guidelines  for  the Integration  of  Renewable Energy In  the Wholesale  Electricity  Spot  Market (WESM) in the following areas with the corresponding dates:

NOW1  THEREFORE,  for  and  in  consideration of  the  foregoing  premises,  the  DOE  hereby declares the herein framework for the implementation of Must Dispatch and Priority Dispatch  of  RE  resources in  the WESM:

PART 1. General  Provisions

Section 1. Scope .and Application. This Ci cu lar shall apply to all agencies and entities named herein and all electric  power  industry  participants  in the country.

Section2..Purposes.T1hls Circular is being issued to:

(a)  Define Must  Dispatch and Priority Dispatch pursuant  to the RE act including  the high­  level process for the qualification, certification, and registration of generating unJtS­ designated as must dispatch and priority dispatch (collectively referred to .as Preferential Dispatch Generating Units), and

(b) Provide the framework for the integration in the WESM of Preferential  Dispatch  Generating Units consistent with the goals of the EPIRA and the RE Act.

Section 3. Statement of Policy. Pursuant to the RE Act, intermittent RE resources including FIT eligible generation shall be allowed to maximize injection to the grid while:

(a)            Maintainin9 system security at all times:

(b)            Maintaining  economically  efficient  short run dispatch o f energy  and  ancillary services:

and (c)            Holding WESM partlcipants to account for  what they ar,e able to  control.

Section  4. Definition  of  Must Dispatch, and Priority Dispatch.   The terms as used in  this Circular shall have their respecit!ive meanings as follows:

(a) Must Dispatch is  facilitated in the WESM by qualified and registeried intermittent  RE based plants, whether or not under FIT s.ystem, such as wind, solar, run-of river  hydro, or  ocean  energy,  according  to  the preference in the  dispatch  schedule whenever generation is available. The enjoyment of Must Dispatch by intermittent RE-ba·sed plants is based on  th,e  difficulty  to  pr,ecisely  predict  the  availabiHty  of RE  resourde  thereby making  the  energy  generated  variable  and  irregu ar  and  the  availability,   of resource inherently u ncontro  llab le pursuant to   section 20 of  the RE Act

(b)       " Priority  Dispatch"  means giving preference  to biomass  plants, under the Fl   system, in the dispatch schedule pursuant to Section 7 of the RE Act.

PART 2.  QUALIIFICATION AND REGISTRATION

OF PREFERENTIAL DISPATCH GENERATING UNITS

Section  5.   QuaUfication  and Registration,   of  Preferential  Dispatch, Generating Unitis Units. Pursuant to Section 26 of the RE Act, the DOE shall issue certifications to quallfled RE developers who are entitled to avail, of lie incentives under the RE Act. Such  certification together with the Certificate of Compliance (COC) issued by the Energy Regulatory Commission (ERG) for generating facilUies availing of preferential d,ispatch shall be used for purposes of re gistrat ion in the WESM.

PAIRT 3 RESPONSISILITIES OF

THE PHILIPPINE ELECTRICITY MARKET CORPORATlON (PEMC) THE NATIONAL GRID CDIRPORATIONOF THE PHILIPPINES (NGCP.) AND DISTRIBUTION UTILITIES

To ensure the efficient and efFiedive scheduling and dispatching of the Preferentfa.l Dispatch Gener-ating  Units the PEMC,  the  NGCP,  and  Distribution  Utilities  shall  have  the  followin,g general mandate in the implementationof this Circular 

Section 6.  Responslblntiesof PEMC.

(a) Und ertak·e the necessary amendments in the WESM Rules  and  pertinent  Market Manuals to implement Must Dispatch and Priorlty Dispatch  of  eligible  renewable  energy  plants in the WESM

(b) Formulate the pr,ocedures ,on the qualification and regtstration of Preferential Dispatch Generating Units in the WESM;

(c)            Monitor  th1e compliance  of intermittent  RE  generation  companfes  on  the  submission of projected ou(put for each of its generating units pursuan to the WESM Rules and on the approved  forecast  aocuracy  standards  consistent  with the Philippine Grid Code  (PGC). The  annual  compliance  of  the  RE  generation  compantes'  facilities   on  the  forecast accuracy  standards  shall be reported by PEMC to  the PEM  Board  and the DOE;

(d)           Conduct information campaigns on the implementaUon of Must Dispatch and Priority Dispatch in  the WESM; and

(e)       Jointly with the NGCP, implemen  technical mitigation  measures  and improvements  in the system in order to ensure safety and reliability of electricity transmission.

Section 7.  Responsibilities of NGCP.

(a)          Determine, through technical and economic analysis, the maximum penetration limi of 1ntenT1ittent RE based power p'lants or Must Dispatch generating units to the grid, in consultation with stakeholders:

(b)           En sure maximum dispatch of generati:>n from intermittent RE plaints in acoordance with the PGC,  and subjed to the availability of  sufficient  operattng, re erves.   Towards  this end, NGCP is enjoined to obtain sufficient operating reserves at all times.

(c) Joint ly with the  PEMC, implement  technical  mittga:tion measures  and improvements   in thesystem in order to ensure safety and reHabiliti of electricity transmlssion;

(d) Require  and  witness  the conduct  of  technical  t"0sts to ,ensure, generatars' compliance with the performanoe standards as prescribed in the PGC;

(e) Produce  and  submit  to, the PEMC tie   RE  aggregated  generation  forecast  for  each

(f) In terconnected system H operates. These forecasts shall cover at least 24 hours and will be updated with the periodicity which the NGCP considers suitable bu at least, once every trading period  as irndicated in 'the WESM Rules:

(g) Endeavor to operate the Must Dispa:tc:h genera ing units in frae,e active power production control mode. However, if the NGCP considers it necessary for redispatch 1n order to ma· ntain the security and reliability of the grid, the NGCP may fnstrucl. intermittent RE­ based generators to change the Act:1ve Power or immediate disc-0nnection of their generators  as  prescribed in  the PGC;

(h) Submi't to PEMC ,an operational report induding all instructions issued to the generators which resulted in a change in the active power production; and

(i) Determine and lncorpor.ate rn the Transmission Development Plan the necessary upgrading of 1i ts transmission facmlles to ensure non-discriminatory access of all grid­ connected Preferential Dispatch Generating· Units. 

For this purpose, intermittent RE resources is defined, under Section 20 of the RE Act and also refe, rred to  as  intermittent  RE-based  power plants  or  Must  Dispatch  generating  units  which include variable RE resources or VRE as described in the revised PGC.

Section 8.   Responsibilities of Distribution Utilities.

a)     Determine and inc-0rporate in the Distribution Development Plan the .necessary upgrading of its distribution facilities to ensure non-discriminatory access of  all embedded Preferential Dispatch Generating Units: and

b)    Ensure that embedded Preferential Dispatch Generating Units shall be given priority to inject into the distributions network.

Section  9.   Compliance- to  WESM  Rules.  All  Preferential  Dispatch  Generating  Units  shall

Strictly comply with:

(a)            The submission of projected output for each of its generating units for each trading Interval in each trading day of the week In accordance with the timetable;

(b)            The revision of projected output for any trading interval , if hey no longer represent  a   reasonable   estimate   of:   (i)   the   expected   availability   of   the   relevant generating unit for that trading ,interval;  or   (ii) the offers ,likely to apply for the real time dispatch optimization of that tradi1n g interval and

'{c)                       Other  relevant  provisions  d   the  WESM Rules  and  its Market  Manuals  that may  be established or revised in  relation  to the provisions  of preferential' dispatch.

Section 1o. Dispatch 'Prioritization. Jointly and in consultation with the WESM Members, the PEMC and the NGCP shall update the Dispatch Protocol established in the WESM Rules and its Mari<et Manuals to consider the ionowing hierarchy of dispatch schedule and implementation:

(a)            Minimum stable load or Pmin of all Conventional Generating Units;

(b)           Must-Dispatch  Generating Units;

(c)            Priority Dispatch Generating Units ;

(d)            Non-scheduled Generating Units; and

(e}       Scheduled Generating Units;

Notwithstanding  the  aforementioned  hierarchy,  the  NGCP'  shall  al ways  consid1er  technical parameters and limitations ,of the transmission facilities giving priority to the  reliability  and  security   of   the  Grid  during  its   dispatch   implementation in case  the   Preferential    Dispatch

Generating Units are connected to a common constrained transmission facil1ty1 the following hierarchy of scheduling and dispatch shall be implemented:

(a)            Preferential Dispatch Generating Units under commissioning and testing; and

(b)            Pm-rated sharing based on available transmission capacity and Day-Ahead Generation Forecast of all Preferential Dispatch Generating Units.

PART4.TRANSITORY PROVISIONS

Section 11. Interim Protocol. Taking into account line !limitations and loading at the different NGCP substations, the PEMC and the NGCP shall develop the interim protocol for the dispatch of  Preferntial  1al Dispatch Generating Units to address prioritization of the existing a11d upcoming operation of new wind power projects. The Interim Protocol shall be submitted to the DOE within ten (10) days  from the effectivity  of  this Circular.

PART 5. FINAL PROVISIONS

Section 12 lmposition of  Fines  and  Penalties.  All  Preferential  Dispatch  Generating  Units shall comply with the WESM Rules and Market Manuals and faHure of which shall subject them to the investigationprocess under the WESM Rules.

Any violation of this Circular, inclu ding he failure t-0 abide by the framework defined herein, shall be subjec to administrative fines and penalties to be developed  by the DOE pursuant to Section  36 of the RE Act

Section  13.  Regulatory Support  The  ERG  shall  ensure  the  provision of  support  in  the egulatory requirements particularly in the promulgation of the amended PGC and PDC far consistency With the RE Act and the EPIRA.

Section 1,4. Retroacth,e !Eff ect. Consistent wUh Secti'on 20 of the RE Act. the effects of the incorporated guideUnes for the Must Dispatch and Priorlty Dispatch ln the WESM Rules shall retroact to the date of the effectivity of the 'RE Ad insofar as the intended incent1ves given to the Preferential Dispatch Generating Units are concerned.

Section 15. Amendato:ry Clau se. The provisions of other department circulars which are inconsistent with the provisions of this Circular are hereby repealed , amended or modified accordingly.

Section 16. Separability  Clause. If, for  any reason. any section or provislon of this Circular 1 is, declared unconstitutional or 11n vaiid, such parts not affected shall remain in tun force and effect

Section 17. :EffecHviity. This Circular shall take effeot immediately upon publicatlon in two (2) newspapers of general circulation and will remain in effect until otherwise revoked by the DOE.

Issued this              March 2:015 at the DOE, Energy Center, Rizal Drive. Bonifacio Global City,