December 26, 2016 By Lenie Lectura
THE Duterte administration’s campaign “Change is Coming” has, indeed, brought change in a positive way, as claimed by stakeholders in the energy sector.
Six months after President Duterte was sworn into office as the 16th President of the Philippines, a former energy secretary noted that competition has improved for the better.
“Yes, competition has flourished, had attracted and is continuing to attract more investors and players,” said Francisco Viray, who is also the concurrent president and CEO of Trans-Asia Oil and Energy Development Corp., when asked to provide insights of the changes he has noticed as the year 2016 ends.
“Prices are relatively lower compared to previous years. Sufficiency of supply is assured up to 2020 in all grids,” Viray added.
The Manila Electric Co. (Meralco) noted that innovation and technological transformations, increased productivity, international quality product and service offerings, and resilient brick-and-mortar business remain high on the business agenda of the company and its subsidiaries.
“The new administration’s indicative openness to unsolicited offers for major projects is very encouraging,” Meralco Chairman Manuel V. Pangilinan said.
Meralco’s power-generating arm, MeralcoPowerGen (MGen), is involved in a number of power projects. With partners, MGen is schedule to commission by middle of 2019 a 455-megawatt (MW) coal plant in Mauban, Quezon. It is also finalizing all development works to enable to achieve financial close and commence construction of a 300-MW coal plant in Subic, Zambales. Construction of the first 600-MW coal plant in Atimonan, Quezon, is targeted by 2020, while the second 600 MW by early-2021. There is also a 700-MW coal plant in Calaca, Batangas, being eyed.
A former energy undersecretary and now the CEO of GE Philippines said the country is “in good shape” in terms of power-generating capacity.
“This year we saw new power capacity coming online and more projects getting sanctioned for development. From a supply security standpoint, it is very encouraging to note the positive signals being sent by the market to power developers,” Jose Victor Emmanuel de Dios said.
Power supply in Mindanao, for instance, is seen to almost double with 1,000 mW more of additional capacity that would come from power producers, such as Alsons Power, SMC Power, FDC Misamis Corp. and Aboitiz Power Corp. This new capacity adds to Mindanao’s installed capacity of 2,414 mW as of 2015, of which 2,044 mW are considered dependable.
More power projects are also lined up in Luzon and the Visayas, as well.
Latest data from the DOE incidate that by 2020 the committed projects in Luzon could reach 4,101.375 mW for Luzon, 1,687.94 mW for Mindanao, and 471.58 mW for the Visayas.
The data further show that some 17,145.415 mW of indicative capacity is listed to come in by 2021 to 2022 across the three grids, with the bulk, or 11,607.505 mW, to be located in Luzon.
In the Visayas and Mindanao there are around 3,027.97 mW and 2,509.94 mW of indicative capacity.
With abundant capacity, this could translate in lower electricity prices.
According to the Philippine Electricity Market Corp. (PEMC), operator of the Wholesale Electricity Spot Market (WESM), prices at the electricity spot market have been on a downtrend this year owing to the continued stability of power supply and lower demand caused by the cooler temperature.
There is also adequate capacity from old and new power generators, particularly from renewable-energy (RE) projects.
In fact, the effective settlement spot prices (ESSPs) on the WESM in November plunged to P2.27 per kilowatt-hour (kWh), the lowest since January 2011.
ESSPs refer to the average prices paid by wholesale customers for energy purchased from the spot market.
PEMC President Melinda Ocampo said the decrease in WESM prices was driven by higher energy volume offers in the market and colder temperature. Such a sharp decline in the market prices is welcome as long as wholesale customers, like distribution utilities, pass on the historically low market prices to their end-users.
“You can see that there is a lot of available capacity. Plus, RE also has a big impact in lowering prices, because of the must dispatch and priority dispatch,” Ocampo said.
She said this trend would continue in the early part of 2017, mainly on account of a cooler temperature in January and February, which normally results in lower demand.
The WESM is a centralized venue for buyers and sellers to trade electricity as a commodity where its prices are based on actual use (demand) and availability (supply).
Meanwhile, Alsons Executive Vice President Tirso Santillan said business has never been this good for the company.
“Our own business is on track. Our expansion plan has been on track for the last few years. We’ve done very well. All our plants are duly contracted. We think this is the right approach. Before you build, you should be fully contracted. Others build first and contract later, that’s expensive,” Santillan said.
AboitizPower President Antonio Moraza said power firms are aggressive in investing into more power projects as they see demand picking up in the years to come. “I think the drafters of the Epira [Electric Power Industry Reform Act] should be very proud. Power plants of all sizes and types are being built by the private sector where power sufficiency is positive and prices coming down.”
Just recently, the DOE has cleared 16 power projects with nearly 2,500 mW in capacity for grid impact studies (GIS).
Eleven projects are seen to generate 1,877.9 mW of power. The GIS for these 11 projects were cleared by the agency in October.
The remaining five power projects, with a total installed capacity of 566.7 MW, received the green light from the DOE to proceed following the approval of their GIS.
A clearance for the conduct of a GIS is necessary for a power company before it can proceed with the construction of its power project. It is necessary in determining if the electricity to be generated by the power project can be absorbed by the grid.
Among the planned power projects include the 600-mW coal-fired thermal power plant of SMC Global Power Holdings Inc. in Sariaya, Quezon; the 344-mW subcritical coal-fired power plant of Masinloc Power Partners Ltd. in Masinloc, Zambales; and the 64-mW Power Barge 103 of Phinma Energy Corp. in Lapu-lapu City, Cebu.
As of November 2016, the DOE issued GIS clearance to the 4.5-mW Sawaga River mini-hydro power plant; the 6.2-mW Katipunan River mini-hydro power plant; the 500-MW LNG-fired power barge; the 24-mW biogas power plant; and the 32-mW SPC Power Barge 104.
On the policy side, the DOE is working on a comprehensive and responsive energy mix policy to support and sustain the growing economy, while also guiding energy developers on the business environment.
In the power sector, for instance, Energy Secretary Alfonso G. Cusi mentioned about having to classify power plants into baseload (running on 24/7 basis), midmerit (running on long hours but not 24/7) and peaking (with easy start-up and can be used during peak hours). In this regard, power developers can compete with one another accordingly and can picture the situation in each of the main grid for the kinds of investment needed.
According to Cusi, the Philippine energy sector offers a number of investment opportunities, especially that incentives, sound policy mechanism and regulatory framework are in place.
“We are supporting the advancement of the Philippines national social and economic agenda, by undertaking policy and market reforms complemented by an active stewardship of the public interest in the country’s energy resources and industries.” Cusi further stated.