Meralco Lists Embedded Generation Benefits

Manila Bulletin
By MYRNA M. VELASCO
October 19, 2011, 2:57am


MANILA, Philippines — Countering the arguments raised by the National Grid Corporation of the Philippines (NGCP), power distribution giant Manila Electric Company (Meralco) indicated that there are actually several benefits that customers can reap if limits on embedded generation (EGs) are not imposed.


In a position paper presented to the Distribution Management Committee (GMC), Meralco noted that EGs can help reduce transmission congestion, which will then result in lower cost of generation “since it allows the economic dispatch of generators in accordance with the merit order mitigating price spikes.”


Moreover, this will lower line rental charges of the Wholesale Electricity Spot Market (WESM) “as a result of reduction in congestion charges.”


The other EG benefits would be reduction in both transmission and distribution wire losses; delays or avoidance of future investments; and improvements in voltage regulation. The others are on EG’s capacity to contribute


to peak shaving as well as on expectations that they can help ramp up clean energy utilization, primarily for renewable energy technologies.


It can be gleaned in the August 5, 2011 letter of NGCP president Henry Sy Jr. to Energy Regulatory Commission (ERC) chairperson Zenaida G. Cruz-Ducut that the company formally asked the regulator to direct the GMC to set the EG limits, specifically owing to the fact “that a significant number of renewable energy facilities with relatively smaller capacities will be embedded because they are location-specific.”


“Considering the developments in the energy industry and the expected influx of RE developers in the country, NGCP would like to request the ERC to direct the GMC to set the levels of EG, in consultation with NGCP and other stakeholders,” Sy has emphasized.


The company proposed a 4.0-percent of a distribution utility’s peak demand for embedded generators, or must be based on a grid’s level of reserves for load following and frequency regulation. That will then redound to 45 megawatts of EG limit for Luzon and 15MW each for Visayas and Mindanao.


The power grid operator’s arguments on batting for EG restrictions are hinged on: Additional complication in transmission expansion planning; lower transmission asset utilization; complication in managing system balance; and prospects of higher transmission wheeling rates.


Meralco, however, emphasized that the proposed caps on EG capacity will run counter to the provision in Section 20 of the Renewable Energy Act, which states that “qualified and registered RE generating units with intermittent RE resources shall be considered “must dispatch” based on available energy and shall enjoy the benefit of priority dispatch.”


It added that in compliance with the Renewable Portfolio Standards (RPS), it has been prescribed that the DU can utilize “direct generation from RE resources, contracting the energy sourced from eligible RE Resources or trading in the REM (Renewable Energy Market).”


The proposed caps, according to Meralco, will “limit the DUs’ options for compliance” to the RPS.


Meralco further emphasized that with the prospects of reducing transmission and distribution wire losses, overall energy costs for consumers will also go down. This shall then redound to greater efficiency and overall reduction of generation resulting to lower greenhouse gas (GHG) emissions and carbon footprints.”


In the case of peaking plants, the EGs will allow DUs to “experience peak clipping/shaving, which would improve load factors and load profiles as well as improve transmission and distribution asset utilization.”