Energy sector grapples with shortfall

Lights on or lights off?

With the tight supply and elevated prices of fuel, 2022 was a challenging year for the domestic power sector. The country experienced power interruptions.

Even during important national events like the May elections, threats of disturbances in the sector lingered. This 2023, like the year before it, is no different. No less than Energy Secretary Raphael Perpetuo Lotilla himself warned that the country’s power situation, especially during the summer months, would be difficult.

The situation is made more precarious as some generation companies such as the two power plant units of San Miguel Corp. with power supply agreements with Meralco wanted to change the rules of its contract midstream.

The PSAs have a straight pricing scheme that does not allow pass-through costs. SMC Global Power units South Premiere Power Corp. and SMC Energy Corp. have separately applied for cost adjustments with the Energy Regulatory Corp.

The regulator, however, did not have a choice but to deny the petition because of the PSA.

SMC, nonetheless, filed a petition for a temporary restraining order with the Court of Appeals and promptly obtained it.

The conglomerate then subsequently notified Meralco and ERC that its units are suspending the PSAs with Meralco, thus, raising the specter of higher electricity by the start of 2023.

Lotilla, however, was quick to assure that all hands are on deck to ensure that the country will have a sufficient and affordable power supply.

“For 2023, the situation is going to be difficult, especially in the summer months in the scenario assuming that the Ilijan plant will be unavailable. (The forecast) shows several yellow alerts and the possibility of red alerts in 2023,” Lotilla said.

“The capacity usually falls in May and June because of course there are hydropower plants in Luzon that are unable to deliver at this particular point,” he added.

Citing DoE data, he said the country’s year-to-date peak demand in 2022 was 93 percent higher than the previous year.

Likewise, Lotilla also pointed out that on-grid areas remain heavily reliant on fossil fuels, while off-grid islands still depend on oil-based power plants.

According to the Independent Electricity Market Operator of the Philippines, the country’s power generation mix is still dominated by coal, which takes up over half or 57.9 percent of the total mix.

It was followed by natural gas, 17.2 percent; hydro, 8 percent; solar, 2.1 percent; and oil-based, 1.9 percent. Biomass and wind are at the bottom of the hierarchy, each taking up only 1.3 percent of the total mix.

Demand spike seen

Last November alone, the Luzon grid’s capacity was slashed by a whopping 2,648 megawatts after several power plants went on forced outages. The plants’ unscheduled disconnection from the main grid prompted the National Grid Corporation of the Philippines, the country’s lone transmission operator, to raise red and yellow alerts in Luzon.

A yellow alert is raised when the power reserve falls below the ideal levels. On the other hand, when a supply-demand balance worsens, a red alert, which points to severe power deficiency that may lead to rotating power interruptions, is declared.

According to IEMOP corporate communications manager Josell Co, market data showed that the power demand of the country returned to normal and next year, it is expected to surpass the pre-pandemic level.

“We did a comparison of average demand from 2019, we did not include 2020 because that was the height of the pandemic. 2022 was the year when we felt our return to normalcy in terms of demand We would expect that it would be much higher in 2023,” Co said.

“If we reach A very high demand, we have to make more energy so we are working with DOE for the energy efficiency campaign. With several celebrations, we expect that demand will still grow, typical holidays.”

What needs to be done?

To close the gap between power supply and demand, Lotilla said the government and the private sector need to balance out the demand and the supply while considering the inevitable outages of coal-fired power plants and maintenance schedules of natural gas plants.

Likewise, he said the government will also fast-track the development of indigenous resources such as renewable energy to generate additional reserves.

Recently, the DoE announced that the natural gas development in Luzon is on track to help stabilize the power supply in the country amid a projected increase in demand, especially this 2023 as the economy grows.

“There is a need to diversify our power sources including the use of imported natural gas. Given its scheduled availability at the end of the first quarter of 2023, liquefied natural gas is considered an important source for fuel diversification,” Lotilla said.

Lotilla noted that the development aligns with the transition to a low-carbon future and helps stabilize the power supply from variable renewable energy.

It will also complement ongoing efforts of the Malampaya Consortium to optimize sustainably the remaining indigenous gas in the Malampaya-Camago reservoir.