IEMOP: Dry season demand to drive up spot prices

ELECTRICITY prices in the Wholesale Electricity Spot Market (WESM) are expected to increase during the dry season this year due to a surge in demand, the Independent Electricity Market Operator of the Philippines (IEMOP) said.

“In terms of the WESM prices, I think it will increase at around P5 to P7 [per kilowatt-hour] since as we can see the demand from February going to March is increasing as the… hot weather increases,” Chris Warren C. Manalo, assistant manager of IEMOP’s market simulation and analysis division, said at a briefing last week.

“As demand increases, the prices also increase, and it is also noteworthy some of the plants like the hydro plants are in the limit of the water level,” he added.

IEMOP operates the WESM, where energy companies purchase power when their long-term contracted power supply is insufficient to meet customer needs.

Isidro E. Cacho, Jr., IEMOP’s head of corporate strategy and communications, said that increases in peak demand compared to last year are expected in the main grids.

Demand in the Luzon grid is projected to grow by 6% to 13,273 megawatts (MW); the Visayas grid by 7% to 2,628 MW; and the Mindanao grid by 8% to 2,650 MW.

“Hopefully, if there would be no forced outages, we don’t see any significant increase in prices. But with the increased demand, most likely there would be possible slight increase in price,” Mr. Cacho said.

In terms of supply, forced outages could contribute to the possibility of a yellow alert, as projected by the Department of Energy, especially considering that hydropower plants are operating below capacity levels.

“The possibility of yellow alert will only happen if there are really major plant outages, unplanned or forced outages. Otherwise, we don’t see any issue in terms of supply in the Visayas and Luzon, especially now with the Mindanao augmenting Visayas and to some extent Luzon with 450 megawatts,” Mr. Cacho said.

The Mindanao-Visayas Interconnection was fully energized in January, connecting the Mindanao and Visayas grids via a 184-circuit-kilometer high-voltage direct current submarine cable.

Mr. Cacho said the Luzon grid is expecting the commercial operations of the 1,300-MW liquefied natural gas combined cycle plant of Excellent Energy Resources, Inc., a subsidiary of San Miguel Global Power Holdings Corp.

He also said the full energization of the Cebu-Negros-Panay backbone project’s third stage (CNP3) by the end of March “will provide significant improvement in the reliability and security of supply” particularly in Negros and Panay. The CNP3 will link the islands of Negros and Cebu via overhead lines from Bacolod City to San Carlos City in Negros Occidental and a submarine cable to Toledo City in southwestern Cebu.

“And with the launch ng reserve market, the reliability, well of course security and reliability, it has really significantly augment [the supply],” Mr. Cacho said.

The full commercial operations of the reserve market commenced in January, allowing for the optimization of the market operator and system operator interfaces, as well as the automated real-time dispatch of committed ancillary services. — Sheldeen Joy Talavera