Electricity galore: From shortage to oversupply

By Lenie Lectura – November 30, 2016

from Business Mirror

TOWARD the end of the Aquino administration, the government was scrambling to avert a looming power crisis in Luzon, while Mindanao was already experiencing rotational brownouts. Now, power-industry stakeholders fear there could be an oversupply of power in the entire country starting 2020, given the many energy projects in the pipeline.

This is a big concern among power-generation companies, since investments poured into the power plants need to be recovered as soon as possible. In Mindanao Abotiz Power Corp. said oversupply is already happening, with 1,000 megawatts (MW) more of additional capacity coming in.

“The oversupply in Mindanao is happening now and will get worse next year. It is serious, it’s really huge,” AboitizPower President Antonio Moraza said.

Mindanao has a peak requirement of about 1,300 MW to 1,400 MW. Moraza said supply is seen to “almost double” with the 1,000 MW from Alsons Power, SMC Power, FDC Misamis Corp. and Aboitiz.

This new capacity adds to Mindanao’s installed capacity of 2,414 MW as of 2015, of which 2,044 MW are considered dependable. Luzon and the Visayas, Moraza said, are also at risk of experiencing oversupply. 

“If plants that have announced and have started contracting are built, Luzon and the Visayas will also have increasing oversupply. We’ve seen supply-and-demand projections for all three grids. The most serious oversupply in the
medium term is Mindanao obviously,” the official pointed out.

Welcome development Energy Secretary Alfonso G. Cusi said he is aware of the situation. He, however, downplayed the possible
disadvantages, if any, that may arise from the oversupply of power.

“I just had a meeting in Mindanao. The generation companies there see that Mindanao already has excess power. The latest peak demand is 1,600 MW and Mindanao is now running at 2,800 MW of power supply, and another 1,000 MW more forthcoming up to late-2017; so they are saying that there could be excess capacity. But I asked this. Which is a better problem? Having a power shortage or excess in power?” Cusi pointed out.

From the point of view of the consumers, having excess power supply is a “welcome development”.

“It really depends on who is talking. The one selling power says there is oversupply. From the point of view of the regulators, we would like to have sufficient supply to encourage development in tourism, for
instance. It is also good for the households. Manufacturing plants also need power. We have to factor all of those. Oversupply, in case there is one, will not be a problem,” Cusi said. “I don’t care where power is coming from as long as there is power. Beggars can’t be choosers.”

‘Too early’

AC Energy Holdings Inc., the power arm of conglomerate Ayala Corp., said only when the planned power projects reached financial closure can one tell if these would overlap with other projects scheduled for commercial operation. In other words, Francia said, it is still too early to predict an oversupply in any of the grids.

“Currently, the power plants under construction are just enough to serve normal demand growth. Let’s see how many power plants get to financial close in the next 12 months,” Francia said.

AC Energy is targeting another 1,000 MW of additional capacity from the current 1,000 MW already put in place along with partners.

It will soon start construction of the 668-MW GN Power Dinginin Ltd. Co. coal plant in Bataan. Existing projects with partners include the 604-MW GN Power Mariveles, the 2×135-MW coal-fired power plant in Calaca, Batangas, under South Luzon Thermal Energy Corp., and the 4×135- MW coal-fired power plant in Kauswagan, Lanao del Norte in Mindanao through GN Power Kauswagan Ltd. Co.

AC Energy’s renewable-energy portfolio, meanwhile, includes the 52-MW Northwind Power Development Corp. in Bangui, Ilocos Norte, and the 81-MW wind farm in Pagudpud, Ilocos Norte, through its affiliate North Luzon Renewable Energy Corp., and the 18-MW Monte Solar Energy Inc. (Montesol) plant in Negros Oriental, a joint undertaking with Bronzeoak Clean Energy Inc.

Delay

Semirara Mining and Power Corp. Chairman Isidro Consunji said in a text message that oversupply is not possible if various regulatory approvals for these power projects are delayed.

“In the end, timing is still crucial,” said Consunji whose coal plants are being scrutinized by the Department of Environment and Natural Resources. Coal plant owners now need to secure the go-ahead of the Climate Change Commission for their planned projects.

Distribution utility giant Manila Electric Co. (Meralco) said a power plant with no approved power-supply agreement (PSA) “carries with it the risk potentially of stranded output or power.”

“If these PSAs are not approved in a timely manner, there is a consequence that they get delayed in their buildup plans, then the anticipated surplus may not happen on anticipated calendar. In which case, there is a likelihood of [shortage],” Meralco Chairman Manuel V. Pangilinan said.

PSAs, he said, are key to owners of the power projects. “It underpins their credit. So if there’s no approved PSA, I think it would be difficult to be spending money from starting the project and committing to build it.”

He said oversupply of power does not exist now. “The thing is if the plants,
including Meralco’s own plants that will be built, are carried out as scheduled, then there is potential that by 2021 there will be a surplus, the magnitude of which, we don’t know,” Pangilinan said.

Meralco’s power-generation arm, MeralcoPowerGen (MGen), is involved in a number of power projects. With partners, MGen is scheduled to commission by the middle of 2019 a 455-MW coal plant in Muaban, Quezon. It is also finalizing all development works to enable to achieve financial close and commence construction of a 300-MW coal plant in Subic, Zambales. Construction of the first 600-MW coal plant in Atimonan, Quezon, is targeted by 2020, while the second 600 MW by early 2021. There is also a 700-MW coal plant in Calaca, Batangas, being eyed.

Latest data from the Department of Energy showed that by 2020, the committed projects in Luzon could reach 4,101.375 MW, 1,687.94 MW for Mindanao and 471.58 MW for the Visayas.

The data further showed that some 17,145.415 MW of indicative capacity are listed to come in by 2021 to 2022 across the three grids, with the bulk, or 11,607.505 MW, to be in Luzon.

In the Visayas and Mindanao there are around 3,027.97 MW and 2,509.94 MW of indicative capacity, respectively.