MANILA Electric Co. (Meralco) has agreed to source renewable energy for 20 years from Terra Solar Philippines, Inc. for its 850-megawatt (MW) mid-merit requirement starting next year.

In a media release on Thursday, Meralco said the power supply agreement (PSA) calls for the delivery by Terra Solar of 600 MW by Feb. 26, 2026. An additional 250 MW will be supplied starting on Feb. 26, 2027.

The power supply will be at a headline and levelized cost of electricity rate of P5.80 per kilowatt-hour, which the power distributor said was  “based on assumptions at the time when the competitive challenge for the unsolicited proposal was launched.”

“The rate for this renewable energy supply offer is very competitive and lower than fossil-powered generation plants, especially at this time when fuel prices are skyrocketing,” Jose Ronald V. Valles, Meralco’s first vice-president and head of its regulatory management.

Mr. Valles described the supply deal as “strategic” as it ensures the availability of power for its customers.

In a separate press release, Enrique K. Razon, Jr., chairman of Prime Infrastructure Holdings, Inc. said: “This contract with Meralco is our response to help meet the increasing demand for power through a more cost-efficient and sustainable manner.”

Terra Solar is a unit of Terra Renewables Holdings, Inc., the renewable

Mr. Razon noted that Terra Renewables will continue its investments in renewable energy infrastructure to help create long-term economic, environmental and social values.

Terra Renewables President and Chief Executive Officer Guillaume Lucci said that Prime Infra and its partners target to invest about P200 billion into developing Terra Solar.

“We are proud to develop this innovative, solar PV (photovoltaic)-plus-storage project that will contribute significantly to the share of renewable energy in the power generation mix. We are on track in the project development stage and target to provide stable mid-merit power supply to Meralco starting 2026,” Mr. Lucci said.

Mid-merit power supply fills the gap between baseload power, which is needed for continuous operation, and peak power, or the electricity required when demand is at its highest.

Terra Renewables said the 850-MW mid-merit supply can energize 1.55 million houses per year. The power source is a combination of a 2,500 to 3,500 MW solar PV system plus a 4,000 to 4,500 MW-hour energy storage.

Mr. Valles said the PSA also forms part of Meralco’s compliance with the Department of Energy’s renewable portfolio standards (RPS) policy “and at the same time cements our commitment to source up to 1,500 MW of our power requirements from renewable energy.”

The RPS program requires power distribution utilities to source or produce a fraction of their requirements from eligible renewable energy resources.

The agreement between the two companies will be filed with the Energy Regulatory Commission and will be subject to regulatory proceedings and approval before implementation.

Earlier this year, Meralco’s third-party bids and awards committee, held two rounds of competitive selection process (CSP) to challenge Terra Solar’s unsolicited proposal.

Both rounds failed due to a lack of challengers, prompting Meralco’s direct negotiation for its capacity requirement as called for by the rules on CSP, the mandated open and transparent manner in arriving at the least cost of electricity.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Ashley Erika O. Jose