Low power spot market prices seen to continue

MANILA, Philippines — Independent Electricity Market Operator of the Philippines Inc. (IEMOP), the country’s electricity spot market operator, expects low spot market prices to last for the duration of the quarantine period.

Based on its assessment, IEMOP said the total energy and reserve requirements started to drop significantly as demand consumption from industrial facilities and commercial establishments tapered off at the start of the quarantine period.

This resulted in a drop in the system energy requirement of Luzon and Visayas grids by an average of 2,350 megawatts (MW), down 19.8 percent from pre-quarantine levels.

“As ample generation supply was maintained from both the conventional plants and the variable renewable energy plants, the significant drop in demand translated to a lower effective spot settlement price (ESSP) for customers at P2.47 per kilowatt-hour (kwh) for March 2020,” IEMOP said.

The March ESSP was 28.4 percent lower than the P3.45 per kWh in February.

IEMOP continued to observe lower market prices until April 15, which is expected to persist until the end of April or the end of the quarantine period.

“For the first half of April 2020, prices ranged from P0.0 per kwh to P2.973 per kwh as the total demand for the Luzon and Visayas grids averaged only 9,541 MW while generation supply averaged at an ample level of 13,911 MW (over 4,300 MW supply margin),” it said.

Moreover, IEMOP observed reduced supply sourced from the spot market due to the drop in consumption.

“For March 2020 billing period, 12.97 percent of the total energy requirement was settled at spot market prices. During the first half of April 2020, spot market volume reduced to an estimated 10.98 percent of the total energy requirement most likely due to further reduction of energy consumption in the grid during the Holy Week,” it said.

Post-quarantine, the market operator sees a gradual increase in electricity demand as more businesses and establishment resume operations.

If the quarantine is lifted after April 30, generation supply levels will continue to be adequate but spot market prices will be elevated.

“However, average market prices are projected to be P1.83 per kwh for April 2020 and P6.68 per kwh for May 2020,” IEMOP said.

But if the quarantine is extended, IEMOP projects slightly lower spot market prices.

“Additional scenarios were also simulated wherein the ECQ was extended to 10 May 2020. The result of the simulation indicate that ample generation supply will prevail and this will result to slightly lower prices of around P4.30 per kWh for May 2020,” it said.