POWER-GEN Asia 2018

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Simple Market Reforms for a More Efficient and Future Ready Philippines Power Sector (Room Garuda 8, 1st Floor)

The Philippines has been one of the forerunners in Asia and opened their wholesale electricity spot market (WESM) in Luzon island already in 2006. Since its opening, WESM has brought several benefits to the energy sector and consumers. Transparency of dispatch has significantly increased and there is a clear reference price for each hour. Market has been evolving continuously following global electricity market trends e.g. dispatch interval will be shortened from 1 hour to 5 minutes during 2018. Despite of all these changes the Philippines has still the highest consumer electricity rates in ASEAN region. This paper will discuss simple ideas how efficiency of power sector could be increased to lower electricity tariffs on the same level with other ASEAN countries. One of the key issues seems to be market pricing mechanism and regulation of power purchase agreements which both are valuing only the lowest possible tariff, leading only baseload coal power investments. Examples from other countries have proved that this strategy rarely lead to the optimal power system and the lowest possible tariff. Intermittent renewables have already now sizable portion of capacity mix in certain regions challenging system stability. Reliability and affordability of electricity may even further worsen, if only intermittent renewables and baseload will be built. According the Philippines Power Development Plan, 6 GW of Peaking and Mid-merit capacity is needed already by 2025 to reach optimal power mix. That generation capacity should be enabled either enhanced market pricing mechanism or fine-tuned evaluation criteria of new power purchase agreements favouring more capacity which is most urgently needed in the system. Justifications, advantages and disadvantages of each concept will be discussed in this paper including the quantified value for end consumers.