POWER MARKET DEVELOPMENT Clares Loren C. Jalocon Edward I. Olmedo - PowerPoint PPT Presentation

Regional Power Market And Cross-border Interconnections Training 12-17 November 2017, Courtyard Mariott Seoul Namdaenmun, Seoul, Republic of Korea LEARNINGS FROM THE PHILIPPINE WESM: POWER MARKET DEVELOPMENT Clares Loren C. Jalocon Edward I. Olmedo Philippine Electricity Market Corporation

O U T L I N E LESSONS AND WAY PHILIPPINE POWER THE WESM OVERVIEW CHALLENGES FORWARD

PHILIPPINE POWER OVERVIEW

The Philippine Power System Major Peak Description of Grids Demand, Transmission System MW Luzon 10,022 230 kV System with 500 kV back-bone Visayas 1,948 138 kV System with 230 kV facilities to transfer bulk generation Mindanao 1,653 138 kV System  Luzon and Visayas are interconnected via a 350 kV, 400 MW HVDC Line  Mindanao Interconnection shall be through Visayas  There are still systems that are off-grid

THE WESM

What is WESM? • The wholesale electricity spot market (WESM) is a venue for trading of electricity as a commodity. • The WESM was created by virtue of Section 30 of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act (EPIRA) of 2001. • WESM is a gross pool and mandatory market.

Coverage of WESM Operations Region On WESM Since Operations? Luzon Yes 2006 Visayas Yes 2010 Mindanao No Projected on 2018 Other Off-Grid No -- Areas

Establishment of WESM Electric Power Industry Reform Act (EPIRA 2001)  Generation is competitive and open  Establishment of the Wholesale Electricity Spot Market (WESM)  Transmission and distribution are regulated services

PEMC – WESM Operator • Philippine Electricity Market Corporation – acts as the Market Operator (MO) that administers the operation of the WESM. • PEMC is a corporation incorporated in November 2003 upon the initiative of the DOE with representatives from the various sectors of the electric power industry to be the autonomous group market operator of the WESM 9

WESM Governance Structure PEM BOARD DOE Policy • PEMC Organization Committees Planning • Market Surveillance Dispute Resolution Rules Change PEM Auditor Administrator Committee Committee Technical ERC Committee MAG ECO MO Enforcement • Pricing • WESM MEMBERS Generators Service Providers Suppliers Customers 10

Guiding Principles of WESM Gross Pool • Maximum Available Capacity is Offered • Bilateral Contract Quantities are netted out and Net Settlement settled outside the spot market Co-optimized Energy • Employs principle of Co-optimization of energy and Reserves and reserves • Maximum capacity and ramp rates are the only Self-commitment generator constraints • Nodal Prices and Schedules are determined Real-time Market near real-time Transparency • Timely and accurate market information 11

WESM Milestones Electric Philippine EPIRA Philippine WESM WESM Trial Luzon Visayas ISO 27001 Retail Power Grid Code Implementing Electricity Market Operation WESM WESM Certification Competition Industry (RA Rules and Market Management Program Commercial Commercial and Open Reform 9136) Regulation Corporation System Operations Operations Access Act (IRR) (PEMC) (MMS) (EPIRA) (Dec Project (RA 9136) 2001) WESM Rules (Jun (Jun 2002) (18 Nov (Mar 2004) (26 Jun (26 Dec (26 Jun 2001) 2003) 2006) 2010) 2013) 2001 2002 2003 2004 2005 2006 2010 2011 2013 ISO 27001 Central Integration of Enhanced Enhanced Re- Scheduling Preferential WESM WESM Certification of Energy Dispatch RE Design TOP Design and Resources Commercial ISO 9001 Reserves (Jun 2017) Operations Certification (Jan 2016) (Dec 2015) WESM Enhanced Mindanao WESM Design Launch Enhancements (Jun 2017) (Oct 2016) 2014 2015 2016 2017 12

WESM Participants Transmission Charges Bulk User (59) Transmission Customers Distribution (NGCP) Spot Payment Generation Transact in Charges the WESM Spot Payment DU Charges Generators (PEMC) Contestable (110) Generation Charges Customers (878) Spot Payment Suppliers (28 RES, 12 LRES, 21 SOLR)

WESM Membership WHOLESALE Generation Companies 110 Customer- Private Distribution Utilities and Local Government Utilities 16 Customer-Electric Cooperatives 71 Customer- Directly-Connected Bulk Users 59 Sub-total 256 RETAIL Retail Electricity Suppliers (RES) 28 Local RES 12 Supplier of Last Resort 21 Retail Metering Services Providers 44 Contestable Customers 869 Directly-Connected Contestable Customers 29 Sub-total 1003 Note: Details above are as of 25 September 2017 14

Retail Market Information % NO. OF CONTESTABLE CUSTOMERS PER SUPPLIER 898 Registered CCs 800 (1MW and above) 78 (750kW – 999) 74 Supplier Switch by CC Average of 25 switch per year* Note: Details above are as of September 2017 15

WESM Registered Capacities WESM Registered Capacity MW (Luzon) MW Total Generators 15,146 (Luzon & Intermittent RE 659 Visayas only) Other Gens 14,487 Total Generators 18,183 MW Intermittent RE 1,185 (Visayas) Other Generators 16,998 Total Generators 3,037 Total Applicant Generators 940 Intermittent RE 526 Applicant Intermittent RE 31 Other Gens 2,511 Other Applicant Generators 909 MW* (Mindanao) Total Generators 4,168 Intermittent RE 200 Other Gens 3,968 *Indicative Note: Details above are as of September 2017 16

Registered Capacities per Technology Luzon: Visayas: Mindanao: Type MW Type MW Type MW Battery 10 Biomass 102 Biomass 50 Biomass 104 Coal 1,049 Coal 2,061 Coal 5,868 Geothermal 886 Diesel 766 Geothermal 890 Hydro 15 Geothermal 109 Hydro 2,489 Oil-Based 474 Hydro 1,130 Natural Gas 3,290 Solar 421 Solar 53 Oil-Based 1,870 Wind 90 TOTAL 4,168 Solar 289 TOTAL 3,037 Wind 337 TOTAL 15,147 Note: Luzon and Visayas details are as of September 2017. Values for Mindanao capacities are indicative only.

Consumption Luzon and Visayas [January 2011 to September 2017]

Generation Mix Luzon and Visayas [January 2011 to September 2017] COAL NAT GAS GEO HYDRO OIL WIND SOLAR BIOMASS

Summary of WESM Operations in the last 3 Years % Change Market Information 2015 2016 2017 2015 vs 2016 2016 vs 2017 Peak Demand 10,342 11,434 11,833 +10.6% +3.5% Total Energy Volume, 60,734 66,783 65,945 +10.0% -1.3% GWh Spot Market Volume, 4,574 6,186 11,927 +35.2% +92.8% GWh Average Spot Market 8% 9% 18% +12.5% +100.0% Volume, % Average Price, P/MWh 4,983.46 3,731.95 3,107.33 -25.1% -16.7% Note: 2015 - Indicates June 26, 2014 – June 25, 2015 2016 - Indicates June 26, 2015 – June 25, 2016 2017 - Indicates June 26, 2016 – June 25, 2017

Summary of WESM Information 256 1003 1,177 MW 11,833 MW Registered Registered Registered 2017 Peak +3.5% 6.5% Wholesale Retail Market Intermittent Demand Members Members RE 18,183 MW 4.0% 18% × 2 of last Share of intermittent Registered year 2017 Spot Capacity (Luzon RE to total system Exposure and Visayas) generation 21

LESSONS AND CHALLENGES

Challenges Integration of RE in the WESM • Compliance of the participants on the submission of projected output and implementation of the Forecast Accuracy Standards • Adequacy of the transmission capacities and sufficient system features to facilitate preferential scheduling and dispatch Management of Participant Exposure • Difficulty of the participants to put-up adequate levels of prudential deposit to participate in the market • Limited risk mitigation measures to address volatility of prices and line rental in the spot market

Challenges Issues on RCOA integration • Contestability threshold reduced to 750 kW last 26 June 2016 but was halted due to the Temporary Restraining Order (TRO) issued by the Supreme Court (SC) last 21 February 2017 • Harmonized policy and regulation for RCOA participants Regulatory Delays • Approval of the Price Determination Methodology and issuance of licenses among the market participants • Approval of the budget for PEMC’s market development activities

Lessons Learned 1. Implementing innovative measures to address infrastructure difficulties 2. Strengthened coordination among the policy- making bodies and regulators, implementing agencies and the market participants 3. Phased-in and integrative implementation of market mechanisms 4. Increasing the involvement of the market participants in the implementation of market mechanisms 5. Maintaining organizational integrity and excellence 6. Continuous improvement on the engagement to the stakeholders and the consuming public

1. Innovative Measures to Address Infra Limits  Since the WESM is “central scheduling” venue, some limitations of the Market Management System are being addressed by Interim Protocols, such as: o Dispatch Scheduling of Contracted Frequency Control Ancillary Services in the WESM o Limiting the Dispatch Schedules of RE in a Constrained Area/Zone