Power oversupply warning from new plants aired

by Myrna Velasco, 21 March 2015
from Manila Bulletin

The Department of Energy (DOE) has announced that its committed power projects to-date now can supply approximately 2,200 megawatts in the Luzon grid alone, prompting industry players to re-assess their investment plans whether to go ahead or defer.

First Gen Corporation, one of the country’s leading power producers, was among those lending voice to the debate, stressing that the decision for some could be to temporarily shelve their planned projects.

According to First Gen executive vice president Ernesto B. Pantangco, the year 2018 will be a transformative year for the power sector – that’s when supply dilemmas would ease up because of the entry of the new coal plants but that will also be the turning point for other players to put the scales on their proposed new projects.

“We still see some of the power plants may be postponed to a later date because we are anticipating a glut 2018 to 2019,” he stressed.

Pantangco has qualified that “if there’s an oversupply, prices would really be low, and it doesn’t make sense for you to invest in a power plant.”

He explained that even if these plants are ‘committed’, a number of them may not have really reached construction phase – hence, they would still have leeway to backpedal on their planned capital outlays.

“When you say committed, it doesn’t always mean you are already constructing and you cannot back out from it anymore. Some of these plants would still need supply contracts, work on EPCs (engineering, procurement and construction) contract …they will look at it on a supply-demand situation,” Pantangco who also sits as vice president of the Philippine Independent Power Producers Association (PIPPA) has reiterated.

First Gen’s forecast of supply glut is shared by the Aboitiz group, which is also visualizing the same situation around 2018.

Luzon is similarly situated with Mindanao grid when it comes to ‘oversupply’ prognosis in the immediate term.

DOE’s power bureau assistant director Irma Exconde averred that it is only Visayas that is seen at the brink of critical supply dilemmas because it has not been attracting as much investment propositions compared to the two other grids.

From years 2016-2020, the energy department is projecting nationwide demand growth in electricity at 8.0-percent, as anchored on the 8.0-percent gross domestic product (GDP) growth rate targeted by economic managers for the period.