pcci energy committee - twg on power

7/27/2019 PCCI Energy Committee - TWG on Power

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Ensuring

Energy Security, ReliablePower Supply and AffordablePower Rates

PCCI Energy Committee


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Energy Security

International Energy Agency (IEA) Definition1. A dequate

2. A ffo rd ab le

3. Reliab le

European Commission Definition

Uninterrupted physical availability of energy products

on the market, at a price which is affordable for all

consumers (private and industrial)

Consider ing the above defin i t ion, one can say that the Phi l ippin e

energy is NOT SECURED because we have been experienc ing the

cyc le of power capacity def ic iencies and high pr ices


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Source: R. del Mundo, et. al., Philippine Electric Power Industry Market and Policy Assessment,

University of the PhilippinesNational Engineering Center, 2011

1 day/yr LOLE = 28.7% Reserve

LOLEnumber of days

that there will be powercurtailment

(Daily peak demand will

exceed available

generating capacity due to

simultaneous scheduledand forced outages of

power plants)

1 day/year Loss-of-Load

Expectation to meet the

optimal level of reliability ofpower supply in the

Philippines [Viray & del Mundo,UPNEC, 1991]

Adequate and Reliable Power Supply


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Luzon Grid

Year

Capacity

(MW

Demand

(MW)

Reserve

(%)

LOLE

(Days/Yr)

2011 9583 7581 26.41% 5.07

2012 9624 7827 22.96% 12.08

2013 9657 8085 19.44% 5.27

2014 9657 8356 15.57% 82.27

Generation deficiency started

in 2010. WESM prices reflects

this first stage of power crisis.

There will be generation

deficiency even with BacMan

rehabilitation (2012) and

GNPower new 600 MW Power

plant in (2013)

Worst situation in 2014

Malaya and Limay Oil ThermalPlant cannot be retired

(uneconomic dispatch)

Assuming Malaya Oil Thermal Plant

will not be operated

New Power Plant

Capacity added courtesy

of PPAs signed in 1990s

US & European criteria



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Luzon Grid (in addition to 600MW Mariveles CTPP) 200 MW Peaking Plant (2013)

600 MW Baseload Plant (2015)

600 MW Baseload Plant (2015 for Malaya Retirement)

Visayas Grid 50 MW Intermediate Plant (2017)

100 MW Intermediate Plant (2018)

Mindanao Grid 600 MW Baseload Plant (ASAP)




Minimum Requirement to maintain 1 day/year LOLE

Source: R. del Mundo, et. al., Philippine

Electric Power Industry Market and Policy

Assessment, University of the Philippines

National Engineering Center, 2011


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Visayas Grid had power crisis in 2009 after whichDistribution Utilities signed power supply contracts withGencos to build new power plant.

Mindanao Grid is currently in crisis. Modular Diesel plantswere recently procured by ECs for emergency power andpower supply contracts signed to build new capacity (20152017).

Luzon Grid will soon experience power crisis

DUs signed contract only with existing plants

DUs hesitated to sign power supply contract for newcapacity because of threat of Open Access and Retail

Competition [Concern on contracted capacity that will be

stranded]



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Power Generation is liberalized and competitive(deregulated) sector of the power industry DOE Power Development Plan only provides outlook.

Private Generation Companies will decide what capacity, what type

of plant, when and where to build power plants

NPC no longer allowed to build new power plants or sign new PPAwith IPPs

EPIRA in 11 Years :

Plan d id no t con vert to Plant on t ime

Power Rates also went up ins tead o f reduct ion

Lack of po l icy, regulat ion and implementat ion mechanism that

wi l l ensure new power plant capacity w i l l be avai lable on tim e to

meet grow ing demand in the l iberalized and com peti t ive

electr ic ity market .

Energy Security under EPIRA


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SanMiguel27%

Aboitiz

18%First Gen20%

PSALM14%

AES6%

SEMCalaca

5%

NPC2%

Others8%

Luzon Grid

Global28%

Salcon15%First

Gen12%

Aboitiz6%

NPC2%

PSALM

34%

Others3%

Visayas Grid

Aboitiz18%

NPC52%

PSALM28%

Others2%

Mindanao Grid

Ownership of Installed Power Generating Capacity, 2011

Source: DOE

Big 3 in Electric

Power Industry

control 65% of supply

in Luzon Also owners of

Distribution Utilities


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Source: MERALCO


AVERAGE POWER RATE OF MERALCO


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0

5

10

15

20

25

30

Brunei Cambodia Indonesia Lao PDR Malaysia Myanmar Philippines Singapore Thailand Vietnam

Residential Commercial IndustryUS/kWh High

Electricity Prices of SEA countries


Source: JICA (Sep. 2013)


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Report of

MERALCO

Consultant onSubsidies:

Other cou ntr ies

are usin g

subsidy for

strategiccompeti t ive

advantage in the

shor t term


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Source: JICA (Sep. 2013)

9.92

7.14

14.28

20.8

6.21

0

5

10

15

20

25

Thailand Indonesia withSubsidies

IndonesiaWithout

Subsidies

Philippines Vietnam

USCents/kWh

Comparison of Tariff with Indonesias subsidies

(2011)


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Long-Term Power Supply Security Framework

UncontractedDemand

Long-termPS

Contract

PowerPlant

Project

Financing

Power PlantDevt. &

Construction

Qualified

GENCOBid

LenderFinancing

InvestorCapital

Baseload: 3-5 Years Peaking: 1-2 Years

New Power Plant

Demand

Forecast & PSContracts

Additional

GeneratingCapacity

Competi t ive Electr ic i ty

Market wi l l only work if

Supp ly def ic iency is avoided

Long-Term Contract for New Capacity

Short-Term Contract for Existing Capacity

166 Permits & Licenses


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Options for Energy Security

1. Aggregation of Electric Cooperatives

20 ECs in Mindanao bidded 330 MW of baseload.

Signed long-term power supply contract at

Php4.09/kWh requiring Genco to supply from new

power generation capacity (405 MW in 2017)

12 ECs in Central Luzon bidded (October 18,

2013) 300 MW of uncontracted demand starting

2018. Genco is also required supply from new

capacity. Lowest bid less than Php4.00/kWh

Lessons: Economy-of-scale, Competi t ive Select ion

Process, and Lon g-term contract ing fo r new capacity!


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2. Aggregation of Large Customers in RetailCompetition and Open Access (RCOA)

Industry associations and Economic Zones to

organize power supply aggregation similar to

Electric Cooperatives Minimum of 100 MW (preferably at least 300 MW) Long-term contract (at least 10 years). The longer the

term, the lower the price.

Unbundled transmission and distribution wheelingfees are already in place. Hence, will require only

metering, billing & settlement protocol to

implement


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3. Embedded Combined Heat and PowerSystem in Economic Zones for Self-sufficiency and affordability

Economics of CHP based on waste heat utilization

(for heating/cooling) after gas turbines (for power).Efficiency at least 60% compared to 30% of

conventional thermal plant

Avoids transmission wheeling charges

(~Php1.00/kWh) Needs Liquified Natural Gas Terminals in

Batangas and Bataan and Transmission pipelines

to Metro Manila through the economic zones


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Options for Energy Security4. Distribution Utilities Mandatory Bidding of

Uncontracted demand of Captive Customers

Lesson from Latin America (Brazil and Chile) wherespot market did not produce new capacity.Government designed auction of Long-Term Power

Supply Contracts as mechanism. Mandatory for all DUsto submit forecast and auction uncontracted demand.Winning Gencos in auction will build power plants

Limit Open Access for Large customers only (at least 1MW demand) for 10 years. Possible Declaration of ERCof lower threshold and eventually full retail competitionwill continue to threaten DUs.

This will also solve cross-ownership between

generation and distribution under EPIRA!


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Policy and Regulatory Measures

1. DOE to mandate and oversee a regular internationalpower generation supply bidding for DUs and largecustomers.

2. ERC to use market-based rules as default inapproving power supply contracts of DUs (for captivecustomers) with reserved price such as the pricesBest New Entrant (BNE). Cost-based rules to be usedonly if price from competitive selection process didnot achieve competitive results (i.e., higher than

BNE).3. Declare Power Projects and Fuel Explorationas

National Major Strategy Programs (Shovel Ready).Streamline & shorten Permitting and Licensing


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4. Certify as urgent the following pending bills inCongress:

Uniform Franchise Tax on DUs in lieu of any and all taxes

Reduction of electricity rates through utilization of government

share in the discovery, exploration, development, and/or

production of indigenous resources

5. Fastrack the establishment of ancillary reservemarket and provide mechanism for transparentprocurement and rules on determining optimal level

required and dispatching.

6. Fastrack Natural Gas program (e.g., accelerated PPP)and establish regulation (technical and price) tomake LNG for power and industries available ASAP.

7. .


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7. DOE to tighten the power program in Mindanao thatwould assure adequate, reliable and reasonablypriced power supply and total electrification for smalland large utilities and consumers.

8. ERC to simplify and make more transparent andunderstandable the Rate Setting Methodology fortransmission and distribution utilities.


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PROF. ROWALDO Wali DEL MUNDO

National Engineering Center

University of the Philippines

Diliman, Quezon City 1101

Tel/Fax (02) 981-8500 Loc. 3014 / Fax (02) 926-1516

Email: [email protected]

Cellphone: (0929) 564-2772

EnsuringEnergy Security, Reliable Power Supply and

Affordable Power Rates

pcci energy committee - twg on power

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