Embarrassing power shortages

Nothing could be more embarrassing for the President going into his last 28 months in office than to be rained by yellow and red alerts during the summer months. And as if power shortages were not damaging enough, insufficient generating load forebodes only of higher electricity prices.

Yellow and red alerts, in the current lingo of the power sector, refer to levels of power supply deficiency. A yellow alert says that the system does not have enough reserves to cover for the largest power generator, while a red alert points to a severe power supply deficiency in the grid.

Last year, the National Grid Corp. of the Philippines (NGCP) raised at least 15 red alert warnings and at least 50 yellow alert notices in the Luzon grid, with most of them occurring during the summer months.

The alerts may not significantly dent the President’s popularity rating, but it wouldn’t leave good memories either. As we enter the summer months, we are hearing the same warnings that were aired last year of rotating brownouts and power outages.

While there has been no shortage of investors interested in putting up power plants, the stunting legal blocks posed by advocacy groups and the incompetency of our regulatory bodies are delaying new power plants from coming on stream.

Only one big power plant is expected to come online this year and it may not make it on time for the summer months to serve the increased demand for electricity needed by consumers to cool homes and commercial establishments.

The first 668-MW Dinginin power plant unit by Aboitiz Power Corp. in Bataan is slated for commissioning middle of this year, while the second 668-MW unit is expected to come online early next year. Still, these two units may not be enough to stabilize the system during the summer months.

Reliability concerns

The Department of Energy is heeding the warnings of the NGCP, the National Electrification Administration, and the Independent Electricity Market Operator of the Philippines, Inc. (IEMOP) of a pending tight power supply situation this year by calling on Meralco to come up with a plan to mitigate power outages.

Meralco, being the biggest distribution utility of electricity in Luzon is still concerned about the continuing tight margin between supply and demand during the critical summer months since the old base load power plants have proven to be unreliably especially at peak times.

Last year, San Miguel Corp.’s 135-MW Limay coal power plant and Meralco Powergen Corp.’s 455-MW San Buenaventura coal plant in Quezon effectively added almost 600 MW to the Luzon grid. Apparently, they were not enough to stave off brownouts.

It did not help that Meralco was delayed in honoring power supply agreements with third party power generation companies until later in the year after the Supreme Court nullified earlier contracts for not having gone through competitive bidding.

With a brownfield supply agreement for 10 years for 1,200 MW and a mid-merit capacity of 500 MW for five years successfully sealed and signed last September, Meralco is crossing its fingers that it will be able to manage any major outage caused by a tripping base load plant.

Among the slew of measures being eyed to manage supply and demand especially during critical times is the interruptible load program (ILP) in which companies with stand-by generation capacities are asked to run their embedded power generators sets when necessary.

Meralco will also encourage customers to adopt energy efficiency measures during the summer months, as well as to join its Peak-Off Peak program during big power consumers are encouraged to transfer their usage to the nighttime when demand for electricity is lower.

New projects needed

While the tightrope act in balancing power supply and demand is expected to continue until 2022, things can only get worse if no big new power projects are started this year.

Last year, Meralco initiated a bid for a power supply agreement of 1,200 MW of new capacity for delivery by 2024, but was unsuccessful after only one company qualified. The lone bidder was Atimonan One Energy Inc. of Meralco PowerGen Corp., the power-generation arm of Meralco.

A second bidding is expected soon, after Meralco supposedly agreed to revise its bidding conditions. The DOE has been encouraging Meralco to allow merchant power plants to join the bidding by relaxing the supply terms and conditions.

Existing power generation companies like San Miguel Corp., Ayala, and AC Energy are looking forward to the revised bidding terms. Hopefully, the second round will bear positive news in time to avoid any serious power supply shortage.

The Atimonan One coal-fired power plant would have been an ideal one-time, big time solution to a looming power supply crisis, but it has been caught up in too many issues including local community acceptance and environmental sustainability.

Meralco PowerGen’s proposed 600-MW Redondo Peninsula (Subic) power project is also on hold because of technical and environmental problems. Energy World Corporation’s 600-MW liquefied natural gas (LNG) power project also shares a similar fate.

The DOE may have to think harder – and soonest – on how to improve the regulatory process for coming up with new projects.

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