Spot sales only eyed for some power plants

THE Department of Energy (DoE) wants foreign investors that signify their intention to enter the power generation business to put up “merchant” power plants, those that sell their output to the wholesale electricity spot market at prices that are determined by supply and demand.

“[For the] new power plants that want to enter, we are encouraging them, we’re inviting merchant power plants, meaning you put up [a plant with] no PSA [power supply agreement], no bilateral [ agreement],” Energy Secretary Alfonso G. Cusi told reporters.

“All you have to do is spot market,” he added.

He said several investors, including Chinese companies, have indicated their interest.

“There are a lot of interest,” he said. “What I’m asking from them is put up a merchant power plant.”

Mr. Cusi said the based on the department’s assessment, about 90% of the country’s power supply contracts were bilateral agreements. The remaining 10% represent electricity output that is traded in the spot market.

“We are looking at 20-30% merchant,” he said.

Sought for comment, Oscar S. Reyes, Manila Electric Co. (Meralco) president and chief executive officer, said the direction sought by Mr. Cusi is fine with the company, which is currently putting up power plants, with some of their future output already contracted.

“I think that’s fine as well. It all depends ... to what extent financial institutions, lenders will require some degree of contractual arrangement or whether banks will be comfortable with merchant risk,” he told reporters.

“His [ Mr. Cusi’s] direction is fine and hopefully the financing community will be comfortable with that,” he said.

Late last year, Mr. Cusi said the country will need 17,338 megawatts (MW) more by 2030. As of the first half of 2016, the country’s existing power plants’ installed capacity was 20,000 MW with available capacity of only 13,877 MW, or 69% of the total.

The statistics highlights the need for critical intervention particularly to address the period where there is peak demand and low availability, he has said.

The department identified the required capacities for each of the country’s electricity grid, with Luzon needing 10,070 MW more by 2030, broken down as 4,320 MW from baseload plants, 4,800 MW from midmerit plants and 950 MW from peaking plants.

The Visayas grid will require 3,618 MW of additional capacity, with 1,968 MW to be sourced from baseload plants, 1,500 from mid-merit and 150 MW from peaking plants. —