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(File Photo: Malaya Business Insight)
(File Photo: Malaya Business Insight)

Yellow alert raised: ERC moves to temper power rate spikes

(PE2 Note: Malaya Business Insight's Jed Macapagal reports on PE2's recommendation to intensify planning efforts toward reducing or shifthing the 3.3 GW peak demand caused by rising temperatures.)

President Ferdinand Marcos Jr. yesterday said the Energy Regulatory Commission (ERC) has issued a suspension on the  operations of the Wholesale Electricity Spot Market (WESM) during red alerts.

In his speech at a Labor Day event yesterday, Marcos said the ERC’s move is meant  to stop the spikes in power rates in the middle of calamities brought upon by El Niño.

This developed as the National Grid Corporation of the Philippines (NGCP) placed the Luzon Grid on yellow alert yesterday despite the expected lower power demand.

Yesterday was a non-working holiday.

Yellow alert was raised in the Luzon Grid yesterday from 8 p.m. to 10 p.m. as 20 power plant units and two more with de-rated capacities resulted in the unavailability of 1,409.3 megawatts (MW) in the region.

According to NGCP, the alert was raised as available capacity in the Luzon Grid was only at 15,026 MW compared to a peak demand of 12,899 MW.

Yellow alerts are issued when the level of power reserve in the grid is low while red alerts are declared when actual power supply against demand is insufficient and power interruptions are imminent.

The ERC said the suspension of WESM’s market operations in Luzon and Visayas was triggered by the series of red alert notices in the past weeks due to the significant increase in power demand owing to the high heat index.

In an order dated April 30, 2024, the ERC said  during market suspension, an administered price shall apply; or if a dispatch interval is subject to both a price mitigation such as the secondary price cap and the administered price, the lower of the two prices shall apply in the settlement of transactions during intervals.

However, the ERC clarified the suspension only applies to the bidding process of electricity sold at WESM as all generators are mandated to offer their uncontracted available capacity in the market.

The regulatory body also cited data from the WESM which showed that for the periods when the high heat index was recorded and alert notices were issued,  prices increased by an average of 11 percent in Luzon and 53 percent in Visayas per day, which will have a significant impact on  consumers’ electricity bill.

ERC’s powers

Under the Electric Power Industry Reform Act of 2001, the ERC is empowered to suspend the operation of the WESM or declare a temporary WESM failure in cases of national and international security emergencies or natural calamities.

The ERC added  based on its Resolution No. 12, Series of 2018, “natural calamity” is defined as an act, event, happening or occurrence due to natural causes, thus, without interference or aid from man. Some examples are flood, earthquake, storms, hurricanes, wildfires, tsunamis, typhoons and volcanic eruption that will gravely affect the power system.

It said  the government’s Task Force El Niño reported there are 103 cities and municipalities that have  declared a State of Calamity due to the extreme heat conditions.

The regulatory body said the suspension of WESM shall only be lifted if the regional available capacity less actual regional demand, reaches above zero for 24 consecutive hours.

Alleviating El Niño’s impact

“The Commission is working doubly hard to alleviate the impact of El Niño on our power system, and we are finding ways to mitigate the impact of the extremely high demand resulting from the high heat index as these ultimately affect our consumers,” said Monalisa Dimalanta, ERC chairperson, in a statement.

Dimalanta added  despite the suspension, distribution utilities sourcing from the WESM must still be “proactive in exploring ways to lessen their exposure.”

The ERC said the impact of high prices can also be alleviated by existing programs, such as the Anti-bill shock lending program of the Land Bank of the Philippines that enables consumers to pay through installment the incremental increases in their electricity bill.

Meanwhile, the Independent Electricity Market Operator of the Philippines (IEMOP) which operates the WESM, said  it “remains hopeful supply levels will improve so the grid may continuously operate under normal conditions.”

IEMOP said the administered price during market suspensions at the WESM will be derived from the weighted average of the last four similar trading days and dispatch intervals prices.

Flatten the peak

The Philippine Energy Efficiency Alliance (PE2) called for a strategic shift in the country’s efforts to address power supply deficits by directing the focus toward management of the peak demand as a prerequisite to planning new generating and transmission capacities.

Alexander Ablaza, PE2 president, said stakeholders must initially exhaust all opportunities to flatten daily and seasonal peak demand curves prior to the planning of new power plants.

PE2 said  the thinning of power reserves every summer has become a vicious cycle: where the end-use economy perpetually requires more energy when ambient temperatures soar.

“The hotter the weather, the more energy is required to provide cooling through air conditioning and refrigeration… PE2 believes that our limited power supply capacities can be optimally planned and dispatched if we try to flatten our steep peak demand curves as an initial step. There is so much talk about beefing up our thinning reserves by accelerating the addition of new power plants but there are no conscious and concerted efforts toward shaving or shifting peak demand toward off-peak periods,” Ablaza said.

PE2 said  a significant portion of the country-wide 3,340 MW rise in summer demand can be flattened through either peak-shaving or load-shifting toward off-peak hours.

The group said  permanent peak shaving can be achieved through aggressive replacement of energy-intensive systems in the commercial, industrial, transport and government sectors with more efficient technologies.

It added ta portion of the current peak demand can also be shifted to off-peak hours or periods through a wide range of energy storage technologies, which now include thermal, kinetic and battery energy storage systems.

“While it would be theoretically impossible to achieve a totally flat demand curve, our energy-use economy should at least aspire to reduce the 3.3 gigawatts bump in peak demand every summer,” Ablaza said.

Through the long-term however, PE2 is optimistic that the virtual generation impacts of scaled-up energy efficiency deployment across various technologies and energy end-use sectors be planned as part of the energy mix which can significantly contribute to building up sufficient power reserve margins in the grid.

Written/Posted by:
Jed Macapagal

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