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

PHILIPPINE POWER OVERVIEW

THE WESM

LESSONS AND CHALLENGES WAY FORWARD

PHILIPPINE POWER OVERVIEW

The Philippine Power System

Major Grids Peak Demand, MW Description of Transmission System 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 Operations? Since Luzon Yes 2006 Visayas Yes 2010 Mindanao No Projected on 2018 Other Off-Grid Areas No

Establishment of WESM

Electric Power Industry Reform Act (EPIRA 2001)

• Generation is competitive

and open

• Establishment
• f

the Wholesale Electricity Spot Market (WESM)

• Transmission and

distribution are regulated services

PEMC – WESM Operator

9

• 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

WESM Governance Structure

PEM BOARD PEMC Organization Committees

ECO MAG MO

Market Surveillance Committee

Rules Change Committee PEM Auditor Technical Committee

Dispute Resolution Administrator

WESM MEMBERS

Generators Service Providers Suppliers Customers

DOE

• Policy
• Planning

ERC

• Enforcement
• Pricing

10

Guiding Principles of WESM

11

• Maximum Available Capacity is Offered

Gross Pool

• Bilateral Contract Quantities are netted out and

settled outside the spot market Net Settlement

• Employs principle of Co-optimization of energy

and reserves Co-optimized Energy and Reserves

• Maximum capacity and ramp rates are the only

generator constraints Self-commitment

• Nodal Prices and Schedules are determined

near real-time Real-time Market

• Timely and accurate market information

Transparency

WESM Milestones

12

Electric Power Industry Reform Act (EPIRA) (RA 9136) (Jun 2001) Philippine Grid Code (RA 9136) (Dec 2001) EPIRA Implementing Rules and Regulation (IRR) WESM Rules (Jun 2002) Philippine Electricity Market Corporation (PEMC) (18 Nov 2003) WESM Market Management System (MMS) Project (Mar 2004) WESM Trial Operation Program Luzon WESM Commercial Operations (26 Jun 2006) Visayas WESM Commercial Operations (26 Dec 2010) ISO 27001 Certification Retail Competition and Open Access (26 Jun 2013)

2001 2002 2003 2004 2005 2006 2010 2011 2013

ISO 27001 Re- Certification ISO 9001 Certification Central Scheduling

• f Energy

and Reserves (Dec 2015) Integration of Preferential Dispatch RE Resources (Jan 2016) Enhanced WESM Design Enhancements (Oct 2016) Enhanced WESM Design TOP (Jun 2017) WESM Mindanao Launch (Jun 2017) Enhanced WESM Design Commercial Operations

2014 2015 2016 2017

WESM Participants

Transmission Charges Spot Payment Generation Charges Spot Payment Generation Charges Spot Payment DU Charges

Transmission (NGCP) Distribution Customers Contestable Customers (878) Generators (110) Suppliers (28 RES, 12 LRES, 21 SOLR)

Transact in the WESM

(PEMC) Bulk User (59)

WESM Membership

14 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

Retail Market Information

15

898

Registered CCs

800 (1MW and above) 78 (750kW – 999)

74

Supplier Switch by CC

Average of 25 switch per year*

% NO. OF CONTESTABLE CUSTOMERS PER SUPPLIER

Note: Details above are as of September 2017

WESM Registered Capacity

MW (Luzon & Visayas only) Total Generators 18,183 Intermittent RE 1,185 Other Generators 16,998 Total Applicant Generators 940 Applicant Intermittent RE 31 Other Applicant Generators 909

WESM Registered Capacities

16

MW (Luzon) Total Generators 15,146 Intermittent RE 659 Other Gens 14,487 MW (Visayas) Total Generators 3,037 Intermittent RE 526 Other Gens 2,511 MW* (Mindanao) Total Generators 4,168 Intermittent RE 200 Other Gens 3,968

*Indicative

Note: Details above are as of September 2017

Type MW Battery 10 Biomass 104 Coal 5,868 Geothermal 890 Hydro 2,489 Natural Gas 3,290 Oil-Based 1,870 Solar 289 Wind 337 TOTAL 15,147 Type MW Biomass 50 Coal 2,061 Diesel 766 Geothermal 109 Hydro 1,130 Solar 53 TOTAL 4,168 Type MW Biomass 102 Coal 1,049 Geothermal 886 Hydro 15 Oil-Based 474 Solar 421 Wind 90 TOTAL 3,037 Luzon: Visayas: Mindanao:

Registered Capacities per Technology

Note: Luzon and Visayas details are as of September 2017. Values for Mindanao capacities are indicative only.

Luzon and Visayas [January 2011 to September 2017]

Consumption

Luzon and Visayas [January 2011 to September 2017]

Generation Mix

COAL NAT GAS GEO HYDRO OIL WIND SOLAR BIOMASS

Summary of WESM Operations in the last 3 Years

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

Market Information 2015 2016 2017 % Change 2015 vs 2016 2016 vs 2017 Peak Demand 10,342 11,434 11,833 +10.6% +3.5% Total Energy Volume, GWh 60,734 66,783 65,945 +10.0%

• 1.3%

Spot Market Volume, GWh 4,574 6,186 11,927 +35.2% +92.8% Average Spot Market Volume, % 8% 9% 18% +12.5% +100.0% Average Price, P/MWh 4,983.46 3,731.95 3,107.33

• 25.1%
• 16.7%

Summary of WESM Information

21

256 1003

Registered Wholesale Members Registered Retail Market Members

11,833 MW

2017 Peak Demand

+3.5%

18%

2017 Spot Exposure

× 2 of last year

18,183 MW

Registered Capacity (Luzon and Visayas)

1,177 MW

Registered Intermittent RE

6.5%

4.0%

Share of intermittent RE to total system generation

LESSONS AND CHALLENGES

Challenges

• 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

Integration of RE in the WESM

• 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

Management of Participant Exposure

Challenges

• 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

Issues on RCOA integration

• Approval of the Price Determination Methodology and issuance of

licenses among the market participants

• Approval of the budget for PEMC’s market development activities

Regulatory Delays

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

• f

market mechanisms

• 4. Increasing

the involvement

• f

the market participants in the implementation of market mechanisms

• 5. Maintaining
• rganizational

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:

• Dispatch Scheduling of Contracted Frequency

Control Ancillary Services in the WESM

• Limiting the Dispatch Schedules of RE in a

Constrained Area/Zone

Enhancements to WESM Design and Operations

MMS Infra Development/Enhancement

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Review by the Special WESM Rules Review Committee Annual Operational Audits* WESM Design Study Issuance of DOE DC

• n Enhanced WESM

Design Issuance of DOE DC Approving Changes to WESM Rules NMMS Testing & Audit WESM Commercial Operations in Luzon 26 June 2006 Delivery of MMS on April 2005 WESM Commercial Operations in Visayas 26 Dec 2010

Enhancements to WESM Design and Operations

MMS Infra Development/Enhancement

Major Change Description Shorter dispatch interval Frequency of Dispatch interval from

• ne hour to 5-minute

Ex-ante only pricing and settlements Current Design is two-market settlement scheme (commitment and balancing) New Design shall have only one price to settle the metered quantity Removal of Pmin constraint in the MDOM Generators shall manage their technical Pmin by how they offer their capacities Automatic pricing re-runs CVC-related pricing errors are automatically corrected

VRE Integration in the WESM Luzon

Leyte/ Samar Bohol Cebu Negros

Load Center in Visayas Many Solar Plants

Panay

Conventional Plants With Some Wind Farms Highest Generation from Geothermal

Negros

VRE Integration in the WESM Luzon

Leyte/ Samar Bohol Cebu Negros

Sudden Increase

• f Solar Plants

Not much growth in demand Export is limited causing issues in market transactions RE only submits nomination and is scheduled ahead as a priority Issues: Forecasting & Monitoring

Negros

• 2. Strengthened coordination among the policy-making

bodies and regulators, implementing agencies and the market participants

• Updating of the power and transmission development planning process into a

co-optimized process and issuance of service contracts consistent to these development plans

• Centralized monitoring of licensing and permitting through the EVOS and

initiatives to streamline the process among the concerned government agencies

Licensing and Permitting

• Improved procedures on the project development monitoring and milestone

verification

• Strengthened

protocol among the Project Developers, Network Service Providers And Market Operator during testing and commissioning

Development, Testing and Commissioning

• 2. Strengthened coordination among the policy-making

bodies and regulators, implementing agencies and the market participants

• Ensuring familiarity on scheduling and dispatch protocols and settlement

methodologies

• Coordination of significant events to the Market Operator, System Operator and

customer counterparties.

Commercial Operations

• Regular review of market assessment indices, timely development of audit

standards and conduct of the audit upon observation of a transition period.

• Ensuring familiarity of the market participants to their responsibilities and

imposition of adequate penalties for proven non-compliances.

Market Assessment And Enforcement

• 3. Phased-in and integrative implementation of market

mechanisms

• Phasing the market implementation enables the

participants to familiarize with the protocols and minimizes non-compliances and imposition of corresponding sanctions.

• Integrated market implementation facilitates the
• ptimal use of the resources and infrastructure,

and the coordinated issuances of policies.

Integrated Market Development Plan

2017 2018 2019

2020 Enhancements to WESM Design and Operations WESM Mindanao Full Implementation of RCOA New Market Management System (NMMS) Central Registration and Settlement System (CRSS) Financial Transmission Rights RE Certificates Market Electricity Market Derivatives

Go Live Go Live

Integrate 500 kW customers Demand Aggregation

Integrated Wholesale and Retail Markets

Transmission Charges Spot Payment Generation Charges Spot Payment Generation Charges Spot Payment DU Charges

Transmission Distribution Customers Contestable Customers Generation Suppliers

Transact in the WESM

Retail Competition

Captive Customers

Combined Wholesale and Retail Market Processes

Market Operator

Central Registration Body

Registration Settlement Modeling Forecasting Pricing and Scheduling Customer Switching Retail MQ Warehouse

New Market Management System (NMMS) Central Registration and Settlement System (CRSS)

Stepwise Implementation

37

EDM transitional phase EDM established Training and capacity building Market Structure Devt. Rulebook development Commitment from market participants Standardized contracts Finalization of legal basis Transitional arrangements Dry runs Go live preparations Physical Forward contracts Centralized clearing Required legal changes Full EDM implementation including cash settlement EDM Initial phase

Initial EDM launch Full

EDM Feasibility Study Legal feasibility assessment Policy Options for the EDM Formulation of the Market Development roadmap Preliminary stakeholder consultations

PHASE 3 Initial Market Implementation PHASE 4 Full EDM implementation PHASE 2 Capacity Building and Market Structure Development

Policy Discussions with the Supervisory/ Regulatory Authorities

2017 2018-2020 2021-2023 2023

• nwards

RCOA Competitive Selection Process

Electricity Derivatives Market

Financial Transmission Rights (FTR) Auction CSP 500 kW and above CCs

Demand Aggregation

Household Level FTR Auction

Renewable Energy in the WESM

RE Act Renewable Energy Market (REM) RPS Feed in Tariff/ Installation Targets RE Registrar RE Market Rules

RPS Compliance Mechanism RPS Requirements

NREP

RE Market Policy Framework

4. Increasing the involvement

• f

the market participants in the implementation

• f

market mechanisms

• Extensive conduct of consultations in the

development of the policies for the market mechanisms

• Assessment
• f

participant and infrastructure capabilities, and continuous coordination to facilitate their compliance

• Conduct of capacity building to the market

participants and awareness campaigns to the consuming public.

42

E N H A N C E M E N T S T O W E S M D E S I G N A N D O P E R A T I O N S

43

E N H A N C E M E N T S T O W E S M D E S I G N A N D O P E R A T I O N S

• audits operations of spot market

Recognizing regulatory powers and fortifying self-governance

• 5. Maintaining organizational integrity and excellence

Philippine Electricity Market Corporation

• Autonomous Group Market Operator (AGMO)
• Governance arm of WESM

Suppliers / Aggregators

Metering Services Providers Network Service Providers (NGCP & DUs)

Generators / A / S Providers

Customers PEM Board PEM Auditor

Rules Change Committee Dispute Resolution Administrator Market Surveillance Committee Technical Committee Enforcement and Compliance

Market Assessment Group

Market Operator

Self-Governance & Operations Oversight Regulation WESM Members DOE

• WESM

Establishment

• Policy making
• Planning

ERC

• Enforcement
• Pricing
• Competition
• monitors possible breaches of Rules
• reviews technical matters
• assists in revising and amending Rules

and Manuals

• facilitates mediation and arbitration of

disputes

Implementation of an Integrated Management System

• 5. Maintaining organizational integrity and excellence

Integrated Management System

Quality Management System Enterprise Risk Management Information Security Management System Business Continuity Management System

Implementation of an Integrated Management System

• 5. Maintaining organizational integrity and excellence

Integrated Management System

Quality Management System Enterprise Risk Management Information Security Management System Business Continuity Management System

• 6. Continuous improvement on the engagement to the

stakeholders and the consuming public

A p p r o v a l a n d I m p l e m e n t a t i o n o f P E M C ’ s C o m m u n i c a t i o n s P o l i c y P r o m o t i n g W E S M a w a r e n e s s a m o n g h i g h s c h o o l a n d c o l l e g e s t u d e n t s . Media Relations Social Media Corporate Social Responsibility

• 6. Continuous improvement on the engagement to the

stakeholders and the consuming public

Events Publications WESM Mobile App Feedback Facilities

WAY FORWARD

WESM: Way Forward

Enhanced WESM Design (2018) WESM Mindanao (2018) Reserves Market (2019)

Demand Side Bidding Financial Transmission Rights Electricity Derivatives Market

Enhanced WESM design features:

• Reduced from 1 hour dispatch interval to 5 minutes
• Ex-ante pricing only
• Hourly gate closure reduced to 30 seconds or less
• Co-optimized energy & reserves

U N D E R R E S E A R C H & D E V E L O P M E N T

RE Certificates Market (2019)

WESM Helpdesk Ticketing System www.wesm.ph/wesm-helpdesk +63.2.318.WESM (9376) +63.2.634.0985 www.wesm.ph

E N D O F P R E S E N T A T I O N

WESM Works.