By Lenie Lectura- January 18, 2017
The Department of Energy (DOE) has formally declared the start of Wholesale Electricity Spot Market (WESM) operation in Mindanao by June this year.
In a draft circular, the agency “declares the launch of the WESM in Mindanao grid on June 26, 2017.”
Established under the Electric Power Industry Reform Act of 2001, the WESM serves as the country’s electricity-trading market.
With an oversupply of power in Mindanao, a power spot market in Mindanao will provide a venue for efficient scheduling, dispatch and settlement of energy withdrawal and injections in the Mindanao grid.
“Mindanao has experienced excess generation supply starting first half of 2016, which increased even further with the entry of other large generation capacities in the latter part of 2016, and shall increase even further in 2017,” the DOE said.
A power spot market in Mindanao, the agency added, will ensure a reliable and stable supply of electricity.
Aboitiz Power Corp. (AboitizPower) President Antontio Moraza said a WESM in Mindanao would ensure that additional supply coming from new power projects would be dispatched economically.
“A spot market in Mindanao would benefit everyone. The sooner the WESM in Mindanao is implemented, the better. There are a lot of new power plants coming in. The new capacity must be dispatched economically,” Moraza said in a text message when sought for comment.
AboitizPower is one of the largest power producers in the country. Along with partners, it currently has 44 generation facilities with an attributable net sellable capacity of 2,402 megawatts (MW). Most of the company’s power facilities are in Mindanao.
Another power firm based in Mindanao welcomed the DOE’s issuance of a draft circular on WESM Mindanao.
Alsons Energy Development Corp. of the Alcantara Group also noted an oversupply in Mindanao.
Mindanao has a peak requirement of about 1,300 MW to 1,400 MW. Supply is seen to almost double, with 1,000 MW more of additional capacity that would come from power producers, including AboitizPower, Alsons Power, SMC Power and FDC Misamis 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.
Energy Secretary Alfonso G. Cusi is aware of Mindanao’s oversupply situation. He, however, downplayed the possible disadvantages.
“I just had a meeting in Mindanao. The generation companies there see that Mindanao already has excess power. The latest peak demand is 1,600 MW and Mindanao is now running at 2,800 MW of power supply, and another 1,000 MW more forthcoming up to late-2017. So they are saying that there could be excess capacity. But I asked this. Which is a better problem? Having a power shortage or excess in power?” Cusi said.
From the point of view of the consumers, having excess power supply, Cusi said, is a “welcome development”.
Alsons Power Group Vice President for Business Development Joseph Nocos said a WESM in Mindanao would optimize the utilization of various generating assets, thus ensuring system stability.
“WESM is not yet operational in Mindanao, thus, its generating capacity that is not yet contracted could end up being stranded. The challenge is how to optimize these assets so that Mindanao would be assured of stable, reliable and affordable electricity,” he said.
Alsons Executive Vice President Tirso Santillan, meanwhile, commented that an oversupply in Mindanao will last for up to three years at most.
“Historically, demand growth in Mindanao is about 3 percent per annum. Mindanao has been one of the fastest-growing regions in the Philippines so we think that 3 percent is very small even with GDP growth rate of 7 percent, it’s still small,” Santillan said. “We think, there will be an oversupply, but it will probably be short-lived,” he said.
WESM operator Philippine Electricity Market Corp. (PEMC), for its part, said it is “very much prepared” to comply with the DOE’s directives.
“In fact, we are just waiting for the DOE’s formal announcement,” PEMC President Melinda Ocampo said in a text message when sought for comment.
Her office, Ocampo added, will comply with the tasks involved in the preparation and commercial operation of WESM in Mindanao.
Among others, PEMC shall conduct trial operations with the Mindanao WESM participants and system operator to ensure their readiness for the WESM commercial operations. PEMC shall submit a readiness assessment to the DOE at least 15 days before the launch date.
Based on the draft rules, all power firms in Mindanao shall be considered registered WESM members and must register to ensure proper accounting of capacities in the Mindanao grid.
All embedded generators with installed capacity of 10 MW and above and those with installed capacity below 10 MW that have a contract outside its host distribution utility, intends to sell to the WESM, or injects power to the grid shall, likewise, be registered in the market and shall be required to submit the necessary information to assist PEMC in providing optimal dispatch schedule and pricing in the market.
The DOE said the commencement of the commercial operations of the WESM Mindanao shall be subject to the fulfillment of certain criteria.
PEMC shall submit a certification to the DOE on the status of the criteria at least 15 days prior to the launch date.
The following are the criteria:
All systems and procures are in place and pursuant with the requirements set under the WESM rules.
The forecasting, scheduling, dispatch, pricing, metering and settlement processes of the WESM are fully operational in the Mindanao grid.
Training programs shall have been conducted for the WESM Mindanao trading participants.
The price determination methodology for the enhanced WESM design has been approved by the Energy Regulatory Commission and duly published.
The Market Dispatch Optimization Model has been certified as compliant with the WESM rules by an independent auditor.
A WESM is being implemented in Luzon and the Visayas. As a temporary measure, an Interim Mindanao Electricity Market (IMEM) was set up as a trading floor for electricity in Mindanao in 2013.
The IMEM was designed as a binding day-ahead market where only the uncontracted or unutilized contracted quantities are traded to enable to immediately address the power-supply shortage in Mindanao.
However, IMEM was suspended in February 2014 following a grid-wide power interruption in Mindanao, preventing power companies with excess generating capacity to offer their output to distribution utilities.