Power scarcity during times of low demand

 By Pedro Maniego Jr. May 13, 2021

https://businessmirror.com.ph/2021/05/13/power-scarcity-during-times-of-low-demand/

 

Power demand during the lockdown last year declined by around 30 percent in Luzon and was estimated to fall by 5 percent for the entire 2020. With the imposition of another lockdown since last month, electricity demand for this quarter is expected to be the same as last year. And yet, there were alerts of possible power shortages in the coming months prompting the Joint Congressional Energy Committee to call for a hearing to avert a debilitating crisis.

In the hearing, the reported outages of most power plants exceeded the maximum outage limit set by the Energy Regulatory Commission. The breakdowns in days were way over the maximum limits especially for the large coal power plants in Luzon. The Department of Energy (DOE) has asked for information from the following generation companies which were on outage since March 2021 as to their estimated date of resumption of operation: Asia Pacific Energy Corp., Caliraya-Botocan-Kalayaan Power Co. Ltd, Luzon Hydro Corp. (LHC); First Gas Power Corp., GNPower Mariveles Center Ltd. Co., Petron Corp., and Sem Calaca Power Corp.. The reason given by several independent power producers was the difficulty of securing visas for foreign technicians who are needed to repair their respective units.

Another problem raised by DOE was the failure of the National Grid Corp. of the Philippines to comply with its obligation to provide sufficient levels of Ancillary Services or power reserves for the past two years. Per Department Circular DC2019-12-0018 entitled, “Adopting a General Framework Governing the Provision and Utilization of Ancillary Services in the Grid,” NGCP, as the System Operator (SO), is mandated to procure Ancillary Services through firm contracts, to ensure that the facilities contracted to provide AS are always available whenever needed by the system for reliability of the grid. “The DOE sees the NGCP is consistent on not complying with its responsibility with the firm contracting requirement. The NGCP has been dragging its feet by pursuing insufficient capacity and even opting an unreliable contracting of ‘non-firm’ AS Procurement Agreements [ASPAs],” Energy Chief Alfonso G. Cusi stated. In the 2020 Performance of Transmission Grid of NGCP, the Ancillary Services Availability Indicators which measure the availability of ancillary services against NGCP’s draft services procurement plan are 29.0 percent for Luzon, 23.6 percent in Visayas and 77.2 percent in Mindanao. NGCP justified its failure to provide sufficient power reserves to lack of Ancillary Services Providers. The major problem on lack of AS Providers is that NGCP will only sign a contract with existing power plants that meet their specifications. However, a company will seldom venture into constructing a power plant without a firm contract.

Once again, the power crisis during times of low demand magnifies the need to shift to flexible generation and away from centralized generation dependent on large base-load plants. The breakdown of just one large base load plant usually caused power reserves to drop to yellow or red alert levels. With the global travel restrictions to mitigate the spread of the virus, the lack of foreign technicians required to conduct the repairs and maintenance has resulted to much longer plant outages.

Power system flexibility is the ability of a power system to reliably and cost-effectively manage the variability and uncertainty of demand and supply across all relevant timescales, as defined by the International Energy Agency. In transitioning to a resilient energy system dominated by renewable and indigenous energy, power system flexibility covers not only flexible generation but also stronger transmission and distribution systems, more storage and more flexible demand (IRENA, November 2018). The distribution grid must be enhanced to increase hosting capacity for distributed, small-scale variable renewable energy plants, as well as enhancing control abilities to manage two-way flow (RENAC, 2021). Influencing the rapid shift to flexible clean generation is the removal of coal-fired power plants in the portfolio of large investment and pension funds. The Asian Development Bank has recently proposed to stop financing new coal power plants and support the rapid phase-out of coal among its developing member countries in the Asia Pacific region in its Energy Policy draft.

Secretary Cusi announced that DOE is fully committed to faithfully implement the Renewable Energy Law of 2008 with a target of around 34,000 MW of RE installations by 2040. He added that 44,761 MW of additional RE capacity would be needed to achieve the levels set in the clean energy scenario. Pursuant to this commitment, the DOE declared a moratorium on new coal power plants on October 27, 2020. The Green Energy Auction based on the Competitive Renewable Energy Zones  study for an initial 2,000 MW is scheduled in June 2021. Per the CREZ study, there is potential for new cost competitive capacities of approximately 16,000 MW solar and 19,000 MW wind. The mechanisms in the RE Law such as the Green Energy Option, Net Metering and Renewable Energy Standards are likewise being implemented by DOE.

To support the energy transition, NGCP formulated the TRANSMISYON 2040 in support of the 2018-2040 Philippine Energy Plan (PEP). In his message, NGCP President Anthony A. Almeda enumerated the major programs in the transmission development plan: (1) implementation of grid resiliency program, (2) improvement in transmission planning for the CREZ, (3) integration of emerging technologies, (4) re-focused development strategy for 69 kV facilities, (5) increased electricity access through island/off-grid interconnections, and (6) continuous development of the major transmission backbone. Despite the lower demand since 2020, most of these programs are behind schedule and must be implemented urgently to cope with the expected surge in demand after the pandemic.

The major partner of NGCP, the State Grid Corp. of China, is the largest utility company in the world, and the world’s fourth largest company overall by revenue as of 2020. In 2017, it was reported as having 927,839 employees, 1.1 billion customers and revenue equivalent to US$363.125 billion. (Fortune Global 500) Thus, SGCC does not only have the technical expertise but also the financial capacity to support NGCP’s goal of a more robust, flexible and resilient unified Philippine Grid.

A condition in NGCP’s franchise under Section 8 is for it to make a public offering of at least 20 percent of its outstanding capital stock. The initial public offering (IPO) of at least P50 billion will be bigger than any previous IPO in the country. By owning shares in the company, shareholders will have access to corporate information, be able influence its plans and operations, and share in the profits. As a publicly listed company (PLC), NGCP must comply with the strict governance standards imposed on PLCs. With the funds raised in the IPO, NGCP should be able to fast track its expansion and modernization programs.

If they work in concert, DOE and NGCP will help bring the country nearer to achieving the SDG goal of providing quality, reliable, and affordable electricity for the Filipino people. Doing so also comes with an outsized co-benefit: we get to contribute meaningfully to global decarbonization and help stave off the worst impacts of the climate crisis.