Philippines' reserve market to start commercial operations next year

MANILA, Philippines — The country’s much awaited reserve market is expected to begin commercial operations next year as there are still pending approvals needed to be secured, according to the Independent Electricity Market Operator of the Philippines (IEMOP).

The Department of Energy has set the operations of the reserve market in December this year.

However, IEMOP chief operating officer Robinson Descanzo said the process of implementing the reserve market is longer than what was envisioned in the DOE circular.

“Until such time that we can secure the approvals for the changes in the rules, it’s highly likely that the reserve market will not start to operate by December,” he said.

But the IEMOP, as the independent operator of the wholesale electricity spot market, will work on completing its requirements to implement the reserve market.

“On our part, we’ll try our best to complete it by 2022. Also, the important milestones regarding the preparations, we will do them, including the continuous training of participants, trial operation, registration etc. until market players get used to the mechanics of the reserve market,” Descanzo said.

So far, IEMOP Market Design and Business Development Division senior specialist Valfia Uy-Gregorio said the market operator has filed the necessary applications for the implementation of the reserve market.

It has also submitted the changes in the price determination methodology (PDM) previously approved by the ERC. The amendment includes the energy and reserve co-optimization.

Under its revised PDM application, IEMOP will change the participants from a buyers’ and sellers’ market to a single buyer market, which is the National Grid Corp. of the Philippines in compliance with the Department of Energy policy on reserve market.

By next year, IEMOP forecasts energy demand to reach the 2019 level, making the reserve market a critical mechanism to spur investments in the power sector.

Meanwhile, the IEMOP has conducted supply-demand simulations on the upcoming Malampaya maintenance shutdown from Oct.  2 to 22 following the directive of the DOE.

Based on its simulations, Descanzo said the market operator sees a 4,000-megawatt (MW) supply margin as most of the gas-fired power plants being served by the Malampaya gas facility would be able to run on alternate fuel and the coal plants on shutdown have resumed operations.

The 4,000-MW supply margin is on top of the projected demand during the period and the 2,000-MW reserve requirement, leaving an excess of 2,000 MW in the system.

“So, I think during the period…we’re not seeing any problem in the supply adequacy because the baseload plants previously on shutdown are operating again, and the first unit of the GNPower Dinginin has committed to continue testing and commissioning…,” Descanzo said.

As of the WESM price, the company official said prices are projected to be steady since most of the gas plants running on alternate fuel are under power contracts.

“Since these are covered by contracts, the volatility in the market price will be dampened but we’ll still have to see how much they will price their capacity. Historically, we saw their offer prices were not really high when fired by condensate because they are fully covered by their contracts,” Descanzo said.

“For the price in October, we’re seeing it trend along with the September average of between P3-4 per kilowatt-hour,” he said.

Manila Electric Co. (Meralco) earlier said it expects some upward push in the generation charge in October due to the Malampaya facility shutdown.

This as three of its power generators will be affected by the scheduled shutdown and would need to run on more expensive liquid fuel to fulfil their supply requirements.

These three plants are the 1,000-MW Sta. Rita and 500-MW San Lorenzo gas plants, collectively called the First Gas plants, and the 1,200-MW Ilijan power plant.

The power supply agreements with the First Gas plants require them to run on liquid fuel while the Ilijan baseload and mid-merit power supply agreement requires the generator to provide full capacity notwithstanding the lack of fuel.