RE plants kept power rates steady at WESM, PEMC says

by Lenie Lectura – January 19, 2016

from Business Mirror

Renewable-energy (RE) plants helped temper power rates in the Wholesale Electricity Spot Market (WESM) from November 2014 to October 2015, the Philippine Electricity Market Corp. (PEMC) said on Tuesday.

In a presentation on the financial impact of the integration of Feed-in-Tariff (FiT)-Qualified Resources in the Wholesale Electricity Spot Market, PEMC said that consumers avoided paying a total of P4.04 billion, or equivalent to P0.0567 per kilowatt-hour (kWh), with the entry of RE projects under the FiT regime during the said period.

“Estimates indicate that the integration of the FiT-eligible RE plants resulted to a cost reduction of P4.04 billion, or 5.67 centavos per kWh, from November 2014 to October 2015. The figures refer to impact on the whole Philippine system,” the market operator said.

In a nutshell, RE plants help temper prices in the spot market as it pushes out the more expensive plants, like diesel, since RE prices are not subject to the volatility of the market.

Jonathan de la Vina, PEMC senior specialist in corporate operations and market development, said the FiT payment tempered the supposed higher price reduction at the WESM. Thus, consumers enjoyed an avoided cost of P4.04 billion, or P0.0567 per kWh, during the period.

He also pointed out that the “priority dispatch” of RE in the spot market displaced the use of power plants that run on expensive fuel, such as diesel.

“The merit order effect may only be estimated by stimulating spot costs without the FiT-eligible plants,” de la Vina added.

These RE-eligible plants include 130.81 megawatts (MW) of biomass capacity, 110.90 MW of solar capacity, 426.90 MW of wind capacity and 14.3 MW of run-of river capacity.

The impact of the integration of RE varies per grid. “The end-user impact is dependent on the spot exposure of the end users. End users pay for the FiT differential based on gross consumption,” de La Vina said.

The FiT-All are given to RE players as an incentive to invest in the more expensive but less lucrative RE sector. RE players are solar, wind, biomass and small hydropower companies.

The FiT-All is charged to all electricity consumers, similar to a universal charge which is a separate line in electricity bills and is used to pay off the debts of the National Power Corp., the state-owned power company.

20,000-MW goal by 2030

The Department of Energy (DOE) remains committed to raise the country’s RE capacity to 20,000 MW by 2030.

As of December 2015, the DOE reported on Tuesday that it has awarded RE service contracts accounting for about 1,700 MW of potential capacities.

These projects are on top of the additional total potential capacity of 12,128 MW recorded in November 2015. If all these projects are aggregated and realized, the country’s installed capacity could reach up to about 20,000 MW by 2030, which is higher than the initial National Renewable Energy Program target.

Energy Secretary Zenaida Monsada said the DOE is aggressively fulfilling international commitments and promoting indigenous sustainable energy to entice RE developers to invest in more RE projects. “We are committed to increase our RE capacity and maintain a minimum of 30-percent share in the power-generation mix in the coming years,” Monsada said in a news statement.

Through this government intervention, the country will be able to achieve its undertaking to triple install RE capacity by 2030, reflecting its 21st Conference of the Parties pledge and proactively responding to the Asia-Pacific Economic Cooperation’s aspiration of doubling RE capacities of member-economies from 2010 level by 2030.

Towards the last quarter of 2015, the DOE has approved the following RE projects: three biomass, nine hydro, 26 solar, and four wind projects.