* This is my article in BusinessWorld last Monday, April 29, 2019.
After several power plants that experienced unplanned or
forced shutdown went back online, a strong earthquake hit Central Luzon on
April 22 and four power plants with combined dependable capacity of 932 MW were
isolated, with the Luzon grid going back to yellow and red alerts last week.
A huge problem in the Philippines power sector is that
many big power plants are old, above 20 years old, and require frequent or
prolonged maintenance shutdowns or experience frequent unscheduled shutdowns
(see table 1).
There were also four new plants (below 5 years old) that
suffered unplanned outage: Pagbilao U3 by Team (420 MW), Limay U2 by San Miguel
(150 MW), SLGPC U2 by DMCI (150 MW), and SLTEC U1 by Ayala (135 MW). And two
new plants that experienced derating: Pagbilao U3 by Team (420 to 315 MW) and
SLGPC U2 by DMCI (150 to 100 MW).
Now the good news: Six big coal power plants and one gas
plant are expected to start commercial operation this year and next year (see
table 2).
The Senate Committee on Energy held a public hearing
about the Luzon grid last Friday, April 26. IEMOP presentation showed that
electricity spot prices at WESM have been declining: P5,176/MWH in 2014 to
P3,830 in 2015, P2,947 in 2016, P3,349 in 2017, P3,618 in 2018. That’s another
good news.
And so private distribution utilities (DUs) and electric
cooperatives would purchase their peak hours electricity demand from WESM and
not from peaking power plants. There is also price control a.k.a. primary and
secondary price caps at WESM.
One result is that no one would invest in peaking power
plants. And when those unscheduled outages by old plants come, plus earthquake
shaking big plants, WESM cannot produce extra power, nada.
The market-oriented reforms for efficiency (MORE) needed
are to (1) encourage investment in new peaking plants aside from more baseload
and mid-merit plants, and (2) revise upwards if not abolish price control and
price cap at WESM. Let a peaking plant that has zero revenue for 10-11 months
straight, yet has fixed operating costs, makes money on a few days in
April-May, hot months with high prices. People will be willing to pay high
prices for a few days in exchange for zero yellow-red alerts and they can do
business regularly without fear of blackouts. This reform will also make the
DUs rethink their contracting strategies to possibly include peaking power, for
a more stable and reliable power supply.
Blackouts are messy, ugly and costly. The costs are
several times higher than increased prices at WESM for few days and hours.
---------------
See also:
BWorld 317, MORE Senators for rule of law, April 25, 2019
BWorld 318, Earthquakes and MORE sturdy buildings, April 26, 2019
BWorld 319, MORE tourism via PSA liberalization, April 28, 2019
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