Technology preference to determine next WESM cap

by Myrna Velasco, 22 March 2015
from Manila Bulletin

Technology preference of power developers will be the “determining factor” in the next primary cap for the Wholesale Electricity Spot Market (WESM).

This was indicated by First Gen executive vice president Ernesto B. Pantangco whose power firm is also aggressively expanding.

He stressed that the P32 per kilowatt hour (kWh) cap may still be too high – and based on their gas technology inclination, the desirable rate could still be lowered at the P17 to P21 per kWh range.

“If you look at the P32 per kWh that is really based on a diesel plant – that was based on a power barge in Mindanao …we’re actually looking at a rate of P17 to 20 which include some room for capital recovery already,” he stressed.

For some companies which have been queueing their facilities into serving the peaking needs of the electricity system, the P32 per kWh is still considered too low and almost leaving no room for sufficient cost recovery.

Pantangco has asserted, however, that “the point here is really about trying to find the proper technology for the power plant that you want to build.”

He stressed that in First Gen’s case, “we are building Avion and San Gabriel gas plants…the Avion is a combined cycle plant which is very efficient and so what happens is that in San Gabriel, which is using the latest gas turbines of Siemens, our efficiency is very, very high close to 60-percent.”

Pantangco expounded that their technology deployment would give them leeway to settle for a spot market cap that could even be lower than the prevailing P32 per kWh.

“So P32 (per kWh) is still high, … I think we should look at the P17 to P21 range… so it’s all about trying to find the right technology at the least cost,” he reiterated.

Energy Secretary Carlos Jericho L. Petilla repeatedly asserted though that the primary WESM cap may no longer be as relevant following the enforcement of the P6.245 per kWh WESM secondary cap. That has been anchored on a price threshold of P9.00 per kWh.

The secondary cap was decided upon by a tripartite committee – which counts the ERC, WESM operator Philippine Electricity Market Corporation (PEMC) and the Department of Energy as members – following the drastic spikes in November-December 2013 rates as ignited then by supply tightness because of the Malampaya gas production facility’s shutdown.

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