Year: 2021

The Philippine power industry is on to exciting times ahead as the Independent Electricity Market Operator of the Philippines (IEMOP) intensifies its preparations for the roster of market developments it plans to implement within the year. One of which is the highly-anticipated launch of the Enhanced WESM Design and Operations (EWDO) that is geared to Go-Live this 26 June 2021.

The commercial launch of the EWDO signifies the transition of WESM to the 5-minute market that is geared towards a more efficient, transparent, and reliable electricity market. Preparatory activities such as the Closed Loop Interface Testing, which concluded on 25 May 2021 along with a series of Focus Group Discussions (FGDs), and the Limited Live Dispatch Operations (LLDO) were conducted to further equip the market participants on the new interface and systems that come along with the EWDO.

With the culmination of the LLDO last 04 June, the Market Operator reported a high and positive participation rate throughout the said endeavor – 99.3% for Luzon, 98.4% for Visayas, and 97.2% for Mindanao. Currently, the Department of Energy (DOE) is conducting the assessment of the results collated during the LLDO and it shall make the final evaluation on the declaration of the Go-Live.

During its media briefing, IEMOP also discussed its market advocacies for the country’s long-term capacity planning and building. This includes the use of market signals to determine the optimal locations of generations and transmission facilities for an overall generation and transmission planning. IEMOP is also preparing for the implementation of the Reserve Market this year. The establishment of the Reserve Market will attract generator investments and ensure a competitive environment for filling up the reserve requirements of the system. Likewise, IEMOP is studying the implementation of a Forwards Market. The  development of draft policies which shall be submitted to policy makers is currently ongoing and it is expected to be completed early next year. Lastly, the a study on Capacity Market has been initiated to create an avenue wherein generation capacity requirements are auctioned off and the winning investors are guaranteed capacity payments through a universal tariff.

As the eventual launch of the Enhanced WESM Design and Operations (EWDO) draws near, the Independent Electricity Market Operator of the Philippines (IEMOP) continues to conduct activities that are aimed to equip the market participants for the five-minute market. Through its recently concluded Market Participants’ Update (MPU), the Market Operator apprised the participants on the remaining activities for the highly anticipated implementation of WESM in Mindanao and Go-Live of the Enhanced WESM Design and Operations prior to its target launch on 26 June 2021.

With the theme “Gear Up: Get Ready for the Switch”, the MPU provided the protocols for the conduct of the Limited Live Dispatch Operations (LLDO) for Luzon, Visayas, and Mindanao which is set to commence on 29 May 2021. The conduct of the LLDO is the final step prior to the commercial operations of WESM Mindanao and EWDO. This effort is also in line with the Market Operator’s pursuit to provide sustainable market solutions and services to its stakeholders and participants.

“We, at IEMOP, have also been taking the necessary measures to keep up with the global trends and to come up with innovative solutions that are geared towards service excellence and overall market efficiency,” IEMOP President and CEO Atty. Richard Nethercott emphasized.

During the MPU, Market Developments and its roadmap as well as updates on the WESM Compliance were discussed by speakers from IEMOP and the Philippine Electricity Market Corporation (PEMC) who joined the open forum to address the concerns and inquiries of the market participants.
The event was also attended by Assistant Secretary Redentor E. Delola of the Department of Energy who addressed the participants regarding the milestones and the other promising programs within the energy industry.

Market Operations Highlights

For the month of May, the Market Operator noted an increasing demand trend as warmer temperature prevails throughout the country. As the dry season ensues, average demand increased from 10,120 MW from the previous month to 11,091 MW this May.

The abrupt increase in demand was coupled by lower supply levels due to generator outages. These resulted to occurrences of high market prices – averaging around P7.72/kWh. Given the sustained high prices, the Secondary Price Cap was imposed on 04-07 May and 20-22 May 2021. The Secondary Price Cap is a price-mitigating mechanism designed to limit the persistent high market prices.

Likewise, IEMOP observed an increase in the volume of customer transactions for the first four months of the year which amounted to 25,129 GWh or an increase of 3% from the previous year’s 24,388 GWh. Furthermore, generation from coal power plants continue to dominate the generation mix which totaled to around 13,885 GWh or 52.7%.
The Market Operator also noted that there are a total of 278 members (138 Generation Companies, 71 Electric Cooperatives, 49 Directly-Connected Customers, and 20 Private Distribution Utilities and Local Government Utilities) who are currently registered in the WESM. As the Central Registration Body (CRB) for Retail Competition and Open Access (RCOA), IEMOP handles all the coordination with the 1,791 contestable customers (CCs), to date.

As summer approached in the country under the pandemic, the Wholesale Electricity Spot Market (WESM) encountered an increase in its spot prices during the previous month which was largely attributed to the higher frequency of unplanned generator outages and rise in demand. Averaging at P4.16/kWh, the March 2021 spot prices substantially increased in comparison to Php2.22/kWh last February billing.

From the original planned daily outage capacity of 996 MW for the month, the average generator outage capacity increased to 2,575 MW. As a consequence, the clearing of diesel power plants in the spot market also increased. Notably, 75.44% of outage capacity for March is traceable to coal power plants, resulting to a drop of generation from coal from 54.3% to 53.9% in comparison to the previous month. Generation from geothermal plants also dropped from 11.4% to 10.5% while output from natural gas plants increased from 22.3% to 23.5%. Meanwhile, given the onset of the dry season in the country, hydro and wind plants’ generation decreased from 6.6% to 5.9% and from 2.2% to 1.6%, correspondingly.

For the March market transactions, total generation was recorded at 6,162 GWh which is noticeably higher than the 2020 level by 0.8% or approximately 51 GWh. Spot percentage for the month also slightly increased from 10.6% to 11.3% from the preceding month, while the Effective Settlement Spot Price (ESSP) cleared at 4.51 P/kWh. Thus, the higher spot price will impact only 11.3% spot percentage or 695 GWH of the total requirement for electricity in the Luzon and Visayas grids. Prices for the remaining 88.7% of the requirement in the grids will be settled based on the Power Supply Agreement between the Customers  (Distribution Utilities, Suppliers and Bulk Users) and their contracted Generator suppliers.

During its monthly media briefing, the Independent Electricity Market Operator of the Philippines (IEMOP) stated that the movement in demand also contributed to the resulting spot prices. Last March, the average demand increased by 11% or around 997 MW.  The System Peak Demand was recorded at 12,582 MW last 18 March – a difference of 9.6% or 1,097 MW compared to last month’s data. Consequently, the regional peak demand increased for both grids during the months of February and March – 9,544 MW to 10,487 MW for the Luzon grid and 1,941 MW to 2,146 MW for the Visayas grid.

As portions of Luzon experienced stricter restrictions as a safety precaution to the global pandemic, the Market Operator also observed a decrease in demand following the announcement of the varying levels of community quarantines. Furthermore, a significant drop in demand was recorded during the imposition of the Enhanced Community Quarantine, which incidentally fell on Holy Week during the last week of March and onset of April.

PRICES in the Wholesale Electricity Spot Market (WESM) decreased by 54.8% in 2020 compared with 2019. This is primarily due to the significant reduction of electricity consumption in Luzon and Visayas as a result of the restrictions imposed by the government to minimize the transmission of coronavirus disease 2019 (COVID-19).

The average Effective Spot Settlement Price (ESSP) for 2020 was recorded at P2.450 per kWh which was a significant decrease from P5.425 per kWh last 2019. Meanwhile, the lowest ESSP for 2020 was recorded at P1.502 per kWh during April, while the ESSP peaked at P3.526 per kWh during September.

The decrease in WESM prices was largely attributed to adequate supply coupled with a substantial decrease in demand. Average hourly supply level for 2020 registered 13,609 MW. Meanwhile, the average hourly system demand for 2020 was 9,546MW, which is a 5.4% decline from the previous year. For the first time in 15 years of WESM operations, the market recorded a decrease in the average yearly system demand.

Moreover, unlike the previous years in which the system peak demand occurred during summer months, the system peak demand for 2020 occurred in early March at 13,181 MW. This was lower than 2019’s peak demand of 13,450 MW, which was recorded in June.

The average hourly system demand for the first three months of 2020 increased by 4.5%. However, the imposition of community quarantine and other restrictions by the government resulted in a significant reduction in demand as most industrial and commercial establishments either closed or operated at limited capacity. This translated to an 8.2% decrease in average demand for the rest of the year, offsetting the demand growth recorded during the first quarter of 2020. Natural calamities such as the Taal Volcano explosion and several typhoons also contributed to the reduction of the system demand as some parts of the grid were forced to temporarily shut down.

The reduced demand translated to lower generation production, as actual energy produced decreased by 5.5%, from 83,982 GWh in 2019 to only 79,354 GWh in 2020.

Energy output from coal and natural gas plants accounted for three-fourths of the energy mix for the year. The rest were sourced from renewable energy resources (i.e., geothermal, hydro, solar, wind, and biomass*) and oil-based plants. Energy purchased from the WESM accounted for 10,560 GWh which is equivalent to 16.2% of the customers’ total consumption for 2020. The remaining energy requirements were sourced from bilateral contracts with generators.

The WESM operates 24/7 in Luzon and Visayas Grids. At present, prices and generator dispatch schedules in the WESM are determined on an hourly basis. Implementation of several market developments is being anticipated for 2021. To further improve overall market efficiency, enhancements are currently being deployed in the WESM to transition market trading from an hourly interval to a five-minute interval. The said transition is targeted for commercial implementation this June 2021, together with the commercial operations of WESM in the Mindanao Grid. Threshold for Retail Competition and Open Access (RCOA) was also lowered from 750kW minimum average peak demand to 500kW on Feb. 26, 2021.

The operation of the Renewable Energy Market is also targeted to go live in June 2021. Other incentive mechanisms for Renewable Energy, such as Green Energy Option Program (GEOP) and Green Energy Auction (GEA) policy are also expected to be implemented within the year.

 

* Based on the categories prescribed in the Renewable Energy Act of 2008 (RA 9513)

The article was also published in Business World Online dated 09 March 2021.

Prices in the Wholesale Electricity Spot Market (WESM) remained low for the first two months of the year, at 2 P/kWh level. The Independent Electricity Market Operator of the Philippines (IEMOP) reported that low prices in the market can be attributed to the sufficient generation supply and stable demand levels, as the imposition of community quarantine protocols continue combined with the persistence of cold weather conditions due to La Niña.

The Spot Price for the beginning of February recorded a decline by around 15% as the price for the first two months decreased from 2.61 P/kWh to 2.22 P/kWh, respectively. This was mainly due to the slight increase in the available supply despite the 3.6% reduction in the generation of coal power plants in January brought about by plant outages. The decline in coal generation translated to a higher generation from Natural Gas, Geothermal, and Hydro power plants.

Coincidentally, an increase in the system peak demand for February has been observed for Luzon and Visayas, but these are still lower than 2020 levels. On a regional level, Luzon registered a peak demand of 9,124 MW for January and 9,544 MW for February; while Visayas recorded 1,910 MW and 1,941 MW, respectively, for the same period.

As for January market transactions, total generation was recorded at 5,973 GWh which is still below the 2020 level by 5.3% or approximately 336 GWh. Spot percentage for January slightly decreased to 9.7% from 10.6% of the preceding month, while the Effective Settlement Spot Price (ESSP) cleared at 2.58 P/kWh.

In preparation for the upcoming summer season, IEMOP also discussed the possible scenarios and outlook covering the periods of 26 February to 25 June 2021. The simulation considered the generator outages from the latest available Luzon and Visayas Grid Operating Program (GOP). Based on the simulation results as well as the premise that no major unplanned outages will occur during the period, prices are projected to remain at 2 P/kWh level during the summer months.

The Market Operator also gave updates on the implementation of 500 kW minimum average peak demand threshold for participating in the Retail Competition and Open Access (RCOA). IEMOP reported the registration of 13 new end-users to the competitive retail electricity market. Previously set to 750 kW, the threshold for RCOA eligibility was reduced to 500 kW by the Energy Regulatory Commission (ERC) effective 26 February 2021.

Under the Retail Competition and Open Access (RCOA), end-users are provided with the option to source their electricity from competitive Retail Electricity Suppliers.

The Independent Electricity Market Operator of the Philippines (IEMOP) noted an increase in the spot price during the onset of this month, which averaged at P4.23/kWh, compared to previous billing month’s P2.22/kWh. This was largely attributed to the gradual surge in demand as the economy continues to recover from the restrictions brought about by the COVID-19 pandemic and as changes in the weather ensue due to the approaching dry season. Generator outages also contributed to the said increase in prices.

Despite the generator outages and hotter weather conditions, supply levels remain to be generally sufficient to support the demand requirements – which only had an increase of around 9.2% in comparison to the previous month. In terms of regional peak demand, the Luzon and Visayas demand levels remain to be lower than the 2020 levels. Although an increase was observed in terms of the month-to-month comparison for both grids – 9,544 MW to 10,340 MW for Luzon, and 1,941 MW to 2,136 from Visayas – for the months of February and March 2021, respectively.

As for the February market transactions, total generation was recorded at 6,176 GWh which remains below the 2020 level by 3.9% or approximately 252 GWh. Spot percentage for the monthly slightly increased from 9.7% to 10.6% from the preceding month, while the Effective Settlement Spot Price (ESSP) cleared at 2.34 P/kWh.

In terms of generation mix, a notable increase in the generation of the coal plants was observed – from 47.6% to 54.3%. On the other hand, generation from geothermal and natural gas plants recorded a drop from 11.9% to 11.4% and 25.0% to 22.3%, respectively; while Hydro plants’ generation also dropped to 6.6% from last month’s 9.5%.

The summer outlook and scenarios covering the period of 26 February to 25 June 2021 was also discussed by the Market Operator during its monthly media briefing. The outlook considered the generator outages as laid down in the Grid Operating Program for the summer period. IEMOP projected that there will be an increase in spot prices for the summer months at approximately averaging at Php 2.22/kWh for April and Php 2.69/kWh for May, subject to emergency outages, government response to the COVID-19 pandemic, as well as occurrences of other force majeure.

Likewise, IEMOP provided updates on the Enhanced WESM Design and Operations as well as the implementation of WESM in Mindanao. The Trial and Parallel Operations Programs are ongoing alongside the conduct of Closed Loop Interface Testing starting 26 March, to test the interface and procedures for scheduling and dispatch.

Afterwards, a Limited Live Dispatch Operations (LLDO) is to be implemented wherein the 5-minute dispatch intervals shall be followed but the prices and settlement will still refer to hourly WESM results. Finally, the target commercial operations of the 5-minute WESM is targeted for Go-Live on 26 June 2021.

Enhanced WESM Design and Operations

The Energy Regulatory Commission’s approval of the WESM Price Determination Methodology (PDM) signals the impending transition of WESM to the 5-minute market as well as the implementation of WESM in Mindanao. The launch date for these developments in WESM is now targeted on 26 June 2021.

To date, IEMOP is continuously implementing the Parallel and Trial Operations Program for all market participants. Participants were also enjoined to participate in several activities in order to ensure that the participation criteria are achieved for the declaration of overall market readiness for the enhanced WESM Design and Operations.

To achieve this, several Focus Group Discussions (FGDs) with Market Participants are currently being conducted by the Market Operator to brief them on the timeline, updates, way forward, and their readiness checklist leading to the target Go-Live.

 

Expansion of RCOA

Pursuant to ERC Resolution No. 12 Series of 2020 which expands the RCOA coverage to end-users with an average monthly peak demand of at least 500 kW in the preceding twelve (12) months, the Market Operator released an advisory to the suppliers regarding the guidelines for the initial switching. It was also noted that starting 26 February 2021, customers under the new threshold can now transact with Retail Electricity Suppliers (RES).

As of 26 January 2021, 10 suppliers have already submitted initial switch requests to IEMOP for a total of 26 contestable customers under the new lower threshold. The list of RES and the contact details of their Regulatory Compliance Officer may be viewed at the ERC website through this link . Information on the retail supply contract parameters for each RES may likewise be viewed at IEMOP’s public website through this link .

 

Market Operations Highlights

As several categories of community quarantines are implemented in some areas in Luzon and Visayas, market prices continue to drop for the last quarter of 2020 with the Effective Settlement Spot Price (ESSP) for December at 1.96 P/kWh.

The price drop can be attributed to the declining rate of customer transaction as compared to the same period in 2019.  Energy consumption for December 2020 also decreased by 2.0% which is equivalent to 126 GWh in comparison to the consumption recorded last December 2019.

Similarly, the decrease in system demand for December is caused by the holiday festivities and the celebration of the Feast of the Immaculate Conception. Although, the Market Operator noted that several instances of high prices were still observed during the month due to several forced and planned outages.

The decreasing temperature in Luzon brought about by the La Niña phenomenon also resulted to a declining peak demand from the period of October up to the present. In comparison to the month of November, the colder weather conditions during December also led to the wind plants’ increasing contribution in the generation mix from 2.1% to 2.6% while hydro plants maintained its generation at around 8.8%.  Meanwhile, geothermal and natural gas plants increased its generation from 9.8% to 10.9%, and 21.3% to 23.2%, respectively. Coal plants’ contribution continue to drop from 54.7% to 51.2%.

Overall, the total generation for the year 2020 (79,354 GWh) reduced by 5.5% as compared to 2019 (83,982 GWh). Similar with the previous years, coal and natural gas plants accounted for more than three-fourths of the generation mix.

In the said briefing, the Market Operator also discussed their market projections for the coming months to provide insights to what the demand and prices may look like under several scenarios.