Published July 5, 2020,
10:00 PM by Myrna M. Velasco
The operator of the
Wholesale Electricity Spot Market (WESM) announced to power industry players
that a shift to 5-minute trading interval, from currently at one-hour dispatch
interval, will “go live” by December 26 this year.
With a change to the
shorter trading interval, Independent Electricity Market Operator of the
Philippines (IEMOP) President Richard Nethercott said “we hope to keep up the
pace and sustain the momentum of enhancement consistent with our commitment to
provide market participants and stakeholders with efficient, reliable and
transparent market management.”
One key transformation
in WESM trading that the industry will have to grapple with shall include: a
“one price offer” in every duration of 5-minute trading instead of the
two-tiered pricing offers that traditionally roped in ex-ante or price based on
forecast; and then ex-post or the price based on actual results in the trading
which also accounts for market imbalances.
IEMOP Chief Corporate
Strategy and Communications Officer Isidro E. Cacho Jr. explained that there
will be major modifications in the algorithm of the new market management
system (NMMS) of the WESM, because with the 5-minute dispatch interval in
trading “there will be no more gate closure as to when offers shall be
accommodated, and we will just also have one-settlement …no more ex-ante and
ex-post settlements.”
In the existing WESM
set-up, ex-ante offer is based on forecast demand, while ex-post is referenced
on actual demand. From these, the price is determined using the same set of
offers. In the settlement process, the ex-ante price takes reference on the
megawatt-schedule less the bilateral contract quantities (BCQs); while in
ex-post, it uses metered quantity minus the megawatt- schedule.
On the discarded gate
closure, Cacho noted that technically there would still be latitude of at least
a minute, factoring in “latency” in the transmission of data, or the warranted
constraint or delay before a transfer of data begins following an instruction
of data transfer from a market participant.
Even the pricing for
PMin or the minimum stable load of a power plant that used to be a requirement
in the WESM offers shall also be scrapped, he said, and pricing offer
competition now starts with the first megawatt that a trader-generation company
will be offering in the market.
The overarching goal of
the 5-minute interval spot market, Cacho stressed, will be to institutionalize
more efficient and competitive pricing that in turn could spur investments for
additional power capacity in the country.
He emphasized that the
electricity spot market’s shift to new MMS will require changes in the WESM
Rules, then the price algorithm plus the billing and settlement systems. The
new MMS hardware, in particular, has been designed to be for that trading
interval, so the market can accommodate the offers at a faster pace.
“The objective is to
make the market more efficient and more competitive, meaning, the participants
themselves can trade more efficiently. With this 5-minute dispatch, the
computation of offers from participants will turn out simpler because ex-post
prices or imbalances will no longer be there,” the IEMOP executive explained.
For the longer term, he
stressed that a spot market thriving on efficient pricing could be seen as
stimulus for investment flows in the energy sector. “This is really geared at
attracting investments, so in the long-term what that means is security of
supply to the end-users,” Cacho said.
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