Philippines: WESM doing wonders for power sector

Philippines: WESM doing wonders for power sector

The Department of Energy (DOE) has approved changes to the Wholesale
Eletricity Spot Market (WESM) rules enhancing the market's design and
operations.

The approved enhancements are 1) shortening of dispatch interval from one
hour to five minutes to lessen intra-hour deviations and imbalances; 2)
single-pricing mechanism as a result of the shortened dispatch interval that
will no longer require ex-post runs; 3) automatic pricing re-runs that will
yield to availability of prices in real-time; 4) reduction of gate closure
from one hour to 30 seconds or less that will provide trading participants
flexibility in managing risks for unplanned events; and 5) co-optimized
energy and reserves that will ensure optimal scheduling of energy and
ancillary services.

These enhancements, the Philippine Electricity Market Corp. (PEMC) said,
will address market operational audit findings and introduce new features
and functionalities, such as simplified compliance-reporting process and
demand-side bidding.

"The DOE's timely action shows the confidence in the WESM in its role in
encouraging efficiency and transparency in the power industry," said PEMC
President Melinda Ocampo.

Enhancements in the WESM design and operations were based on the WESM design
study commissioned by the DOE, and results of the yearly independent audits
of the system and procedures of the market operations.

"We had initial coordination with the DOE, ERC [Energy Regulatory
Commission] and the National Grid Corp. of the Philippines to ensure the
seamless deployment of the enhanced market design and operations. We will be
holding several information drives for our WESM members and relevant
stakeholders to engage them in this market milestone," Ocampo said.

The amended WESM rules will be used for the development of the new
information-technology (IT) infrastructure, and improvements in design will
be, in effect, contingent on the approval of the market manuals by the DOE
and pricing-related methodologies by the ERC.

PEMC now readies itself for the rollout of activities geared toward the
deployment of new market infrastructure.

It has also streamlined processes in the approval of market membership.
Processing time of market membership upon completion of requirements has
been reduced from 15 days to five days.

PEMC has also complied with its task in changing the market rules to reflect
the preferential dispatch status for emerging renewable-energy (RE)
resources, as mandated by the Renewable Energy Act of 2008.

It reported registered capacity of preferential dispatch resources in the
WESM totaling 1,356.6 megawatts (MW).

Preference in the dispatch of emerging RE resources has been implemented
with solar, wind and run-of-river hydro resources classified as
must-dispatch generating units, while feed-in tariff-entitled biomass are
considered priority dispatch generating units.

WESM Mindanao

With a surplus of about 1,000 MW of power-generation capacity in the
southernmost grid, the time for Mindanao to have a spot market is now.

"Mindanao has experienced excess generation supply starting in the 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.

The new power facilities contributing to Mindanao's additional capacity
include the coal plants of Therma South Inc.'s Unit 2 (150 MW) in Davao del
Sur, Saranggani Energy Corp.'s 118 MW in Sarangani, San Miguel Corp.'s Units
1 and 2 (150 MW each) in Davao del Sur, and FDC's three units of 135 MW in
Misamis Oriental.

The flood of new capacity is causing an oversupply of power in Mindanao, the
country's second-largest island that suffered up to eight hours of power
curtailments daily not too long ago.

Mindanao recorded 748 MW of new generation capacity in 2016, and the figure
is expected to increase further by 1,260 MW until 2018.

With an oversupply of power, 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. More important, it will ensure a
reliable and stable
supply of electricity.

"We are pleased that WESM is finally in Mindanao. It's a big move in
Mindanao, but this is the best time to roll out a WESM in Mindanao. So
consumers are in for a significant upside in Mindanao," AC Energy Holdings
Inc. President John Eric Francia commented.

Aboitiz Power Corp. President Antonio 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."

Joseph Nocos, Alsons Power Group vice president for business development,
said a WESM in Mindanao would optimize the utilization of various generating
assets, thus, ensuring system stability.

The Mindanao Development Authority (MinDA) urged electric cooperatives' (EC)
distribution utilities to take advantage of the excess power supply.

"It is now all about achieving a balanced mix of their sources. Electric
cooperatives and distribution utilities must now take advantage of the
abundant supply and cheap hydro power but, at the same time, utilizing their
coal- power supply contracts," MinDA Deputy Executive Director Romeo
Montenegro said.

"Power distributors must balance reliability, sustainability and, most
important, affordability of power," he added.

The MinDA official said the oversupply must also be balanced, as some ECs
have overcontracted. He encourages ECs to properly plan their demand
forecast to better manage their supply.

PEMC pointed out that a WESM in Mindanao will address the supply concern and
clamor from the generation sector in setting up a mechanism that will foster
transparency and rationale pricing of electricity in the region. "This will
be proven beneficial, as this will obviate additional costs in setting up a
separate infrastructure for Mindanao," Ocampo added.

Over the course of many years, PEMC's reliable performance as the
administrator of the country's sole electricity spot market has steered the
power industry into greater efficiency and transparency.

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Link to Original Article:
http://www.businessmirror.com.ph/wesm-doing-wonders-for-power-sector-2/

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com