Dynamic market performance
THE PHILIPPINES’ Wholesale Electricity Spot Market ( WESM) has seen a continuous surge of demand in the past year, even witnessing a new all-time high for the system aggregate records of Luzon and Visayas.
According to the WESM’s 2016-2017 Annual Report, last May 19, 2017, the system saw demand peak at 11,833 MW (megawatts), a record high, despite only growing 3.5% from last year’s peak demand of 11,434 MW. Demand levels in Luzon and Visayas also reached all-time highs of 10,022 MW and 1,894 MW, respectively, on May 9 and June 1 of this year.
Owing to the onrush of demand and the typical high demand levels of the summer season, supply levels were low in July of 2016, with a lot of generating units being on either forced or maintenance outage. Low supply levels persisted until the middle of September of 2016 during which supply margins eased up a bit with generating units coming online while demand levels started to drop due to the rainy and colder weather conditions. From then on, mostly the trend of ample supply margins continued until June of 2017.
According to the WESM’s Residual Supply Index, which measures the ratio of effective supply without a generator to the total supply required to meet the demand, supply was sufficient in meeting the demand for about 69.7% of the trading intervals during the covered period.
The WESM, which is a venue for trading electricity as a commodity, serves as a clearing house to reflect the economic value of electricity for a particular period, as indicated by the “spot price.” Due to the interaction of supply and demand during the period, the outcome of spot prices in the WESM reflected the continued growth of demand. Price spikes manifested during periods affected by outages like those in August of 2016 and April of 2017, however, since these high prices were only momentary and did not persist, there was no observation of the secondary price cap being imposed. As of the WESM’s 2016-2017 Annual Report, the imposition of the secondary price cap was last triggered on September of 2014. The trend of low spot prices that started last year continued until June of 2017. Only August of 2016 reflected a monthly average price beyond P4,000/ MWh (megawatt-hour).
Coal and natural gas power plants remained the dominant power producers in the system, accounting for almost threefourths of the monthly generation mix. Coal plants reflected its highest share in the WESM generation mix on June of 2017, accounting for more than half of the generation produced across the Luzon and Visayas grids. According to the report, the contribution of natural gas plants has mostly been “sporadic,” while that of geothermal plants has mostly been consistent. Hydro- electric power plants’ contribution varied from 4.9% to 10.5% of the total generation mix, while oil-based power plants were largely dispatched during periods of tight supply.
With regards to renewable energy sources, their participation in the WESM continued to be relatively high, most especially from November of 2016 until February of 2017, with wind farms still contributing the most to the WESM Generation Mix.
Total transactions for the 12- month period from July of 2016 to June of 2017 amounted to 69,873 GWh ( gigawatt hours), which was higher than last year’s 66,783 GWh (July of 2015 to June of 2016). The past year saw a large amount of energy quantity being transacted in the spot market. In fact, 16% of the total energy quantity for the entire period from July of 2016 to June of 2017 was settled as spot market transactions.
For their spot market transactions, the WESM customers transacted at an Effective Spot Settlement Price of P3,074/ MWh for the period of July of 2016 to June of 2017.
Four major participant groups comprised the bulk of the market share for the July 2016 to June 2017 period, with a combined market share of 62.5% as of June 25 in terms of registered capacity. Market leader San Miguel Corp. (SMC) further grew its market share of 19.8% from last year’s 18.8%, on the back of two additional 150-MW coal-fired units under the SMC Consolidated Power Corp.
First Gen Corp. trailed behind SMC as market leader with a 16.1% share. Aboitiz Power, with 14.4% market share, and Power Sector Assets & Liabilities Management Corp., with 12.1%, followed. All three companies posted decreases in their respective market shares for the period.
The Her findahl- Hirschman Index ( HHI ), which me a s u r e s ma rket concent rat ion taking into account the relative size and distribution of participants in the market, indicated a moderately concentrated market over the 12-month period. HHI calculations based on offered capacity, actual generation and spot transaction were higher compared with results based on registered capacity and registered capacity net of outage, inf luenced by the varying conditions of supply throughout the year.
Fifty-four generating plants qualified as price- setters within the range of P5,000/ MWh and below. Major coal plants Sual CFTPP, Masinloc CFTPP, Pagbilao CFTPP, and natural gas plants San Lorenzo NGPP, Ilijan NGPP and Sta. Rita NGPP topped the list of the most frequent price- setters in Luzon, while coal plants PEDC CFTPP, PCPC CFTPP and CEDC CFTPP were the top pricesetters in Visayas.
The most frequent price-setters for prices above P5,000/ MWh to P10,000/ MWh were mostly hydro and oil-based plants. On top of the list were Visayas oil-based plants EAUC DPP, TPC (Carmen) DPP, and CPPC DPP, followed by Luzon oil- based plant Bauang DPP and Angat HEP.
Meanwhile, Luzon plants dominated the list of pivotal suppliers during the covered period. Natural gas plant Ilijan NGPP topped the list, followed by major coal plant Sual CFTPP, natural gas plant Sta. Rita, major coal plants Pagbilao CFTPP, Masinloc CFTPP, Mariveles CFTPP, natural gas plant San Lorenzo NGPP and hydro plant Kalayaan PSPP. Visayas geothermal plant Leyte A GPP came next, showing the highest number of frequency of being pivotal among the plants in Visayas, followed by coal plants PEDC CFTPP, CEDC CFTPP, and KSPC CFTPP.