Power spot market prices lower in 2023

The average cost of electricity traded at the spot market went down in 2023, snapping two straight years of increase, the Energy Regulatory Commission said.

Based on ERC’s market analysis, the average effective spot settlement price (ESSP) for all grids across the Philippines stood at P6.505 per kilowatt-hour, more than P1 cheaper compared to 2022’s average ESSP of P7.885/kwh.

The ESSP is the indicative effective price paid by large consumers and distribution utilities for their purchases from the Wholesale Electricity Spot Market (WESM) for each billing month.

WESM is the centralized venue for buyers and sellers to trade electricity as a commodity where prices are determined based on demand and supply.

According to ERC, the expanding utilization of renewable energy (RE) has resulted in “a significant impact” on the increase in average supply in 2023 with 15,645 megawatts. About 35 generation companies using RE technologies were added as WESM trading participants in December 2023, resulting in an additional capacity of about 749 MW.

Thus, the nine percent increase in power demand in 2023 was compensated by the additional supply, resulting in an 18 percent decrease in average prices.

Moreover, the recent completion of the Mindanao-Visayas Interconnection Project (MVIP) has contributed to the decline in ESSP. Its limited capacity still allowed the operation of WESM in Mindanao to trade supply in the Luzon-Visayas WESM.

“As a result, the supply margin increased while monthly average prices decreased compared to the previous year when MVIP or WESM Mindanao was not yet operational,” ERC noted.

In January 2024, the National Grid Corp. of the Philippines (NGCP) activated the MVIPat full capacity.