The feared power shortage: Why it did not happen (Part 3)

by Lenie Lectura, 14 July 2015
from BusinessMirror


Industry data show that a number of power plants that avoided maintenance shutdowns during the summer months will have to undergo such activities from June onward.

“It also helped that power-plant owners heeded the call of the government, the Department of Energy [DOE], in particular, to move the maintenance work from summer to the months of June, July and August,” said Oscar Reyes, Manila Electric Co. (Meralco) president.

In June the following power plants implemented maintenance shutdowns: Pagbilao, 367.5 megawatts (MW), for 27 days up to June 28; Module 40 of Santa Rita power plant, 250 MW, from June 25 to 28; Module 50 of San Lorenzo power facility, 250 MW, on June 13 and 14; and Module 60 of the same power plant, 250 MW, on June 20 and 21.

Based on this, some 600 MW were shaved off from the Luzon grid on certain days. Still, there was sufficient power reserve last month, at 905 MW.

This month Pagbilao 2, 367.5 MW, is scheduled to go offline from July 4 to August 2; Module 10, 250 MW, of Santa Rita power plant, on July 11 and 12; Module 20, 250 MW, on July 18 and 19; and Module 30, 250 MW, on July 14 and 15.

Based on Meralco data, power demand in Luzon could hit  8,680 MW in July as against a supply of 9,719 MW,  leaving 1,039 MW of reserves.

For August, demand is seen to reach 8,647 MW, while supply would reach 9,191  MW.  With only 550 MW of reserves anticipated, a yellow alert would probably be raised by the National Grid Corp. of the Philippines.

In the months ahead, the following power facilities are scheduled to go offline to give way to maintenance work.

These are the Unit-1 of the 1,200-MW Sual coal-fired power plant in Pangasinan (August 8 to September 6) and the Unit 2 of Sual (September 7 to November 5). Each unit has a capacity of 600 MW.

The Pagbilao power station is a 735-MW coal-fired thermal power plant in Pagbilao, Quezon, and is operated by Team Energy Corp.

The 600-MW Ilijan Unit1 is also scheduled for maintenance shutdown up to August  5. The 1,200-MW Ilijan-combined cycle natural gas is one of the country’s largest energy producers, accounting for about 15 percent of Luzon power-grid requirement. Santa Rita Module 20’s (250 MW) shutdown is from August 8 to September 6.

Module 60 of the San Lorenzo power plant will go offline from August 15 to 19 and from October 3 to 7. Its capacity is also 250 MW. San Lorenzo’s Module 50, another 250 MW, will shut down from October 10 to 14.

Last in the list is the 600-MW thermal coal-fired Calaca power plant  in Batangas. The first unit, with a capacity of 300 MW,  will undergo maintenance from August 22 to October 5. Calaca Unit 2, another 300 MW, is scheduled for maintenance shutdown from November 16 to December 15.

“These are the maintenance schedule of the power plants that we have contracts with. We hope that there will be no unscheduled shutdown of power plants coinciding with the list of scheduled maintenance,” Meralco Utility Economics Head Lawrence Fernandez said.

Energy Secretary Carlos Jericho L. Petilla said the Department of Energy (DOE) strongly urged power producers to hold off the maintenance shutdown of their power plants that were originally scheduled from March to May. “And they listened to us, unlike when it was the NGCP that used to tell them that.  We may have a problem of yet another possible tight supply from July onward, but the cool climate in these months will play an important factor in easing demand.”

The country’s largest utility firm assured that it is prepared to deal with yet another possible tight supply in Luzon.

“We have to meet whatever the consumer needs. It’s demand management and in the supply side, we have to
add more capacity. We have the ILP [Interruptible Load Program] on standby in case we are called to activate it,” Reyes said.

“Our view is that, absent any forced outages, particularly overlapping forced outages, we should have enough capacity and reserve in the system to accommodate what we won’t have due to these scheduled shutdowns,” he added.

Power crisis no more

Moving forward, it is anticipated that Luzon will have enough supply, which could mean that it is unlikely for a power crisis to occur in the years to come.

“Onward, as demand is continuously growing, it calls for additional capacity so as to put the Luzon grid at lower risk of power shortage. On the other hand, there are now proven measures taken that would avert any such event happening,” said Lourdes Alzona Alzona, officer in charge of PSALM.

In a report, the DOE said the following power projects are set to be commissioned this year: the 150-MW SLPGC coal plant Unit 1; Anda Power Corp.’s 82-MW coal-fired power plant; the 150-MW SLPGC coal plant Unit2;
the 67.5-MW Pilila wind farm; the 150-MW SLTEC Putting Bato coal-fired plant Unit 2; the 87-MW Burgos wind; the 81-MW Caparispisan; 12-MW SJCI Biomass Unit 2; the 18-MW IBEC Biomass; the 10.8-MW Green Biomass; the 13.2-MW Sabangan hydro; and the 100-MW Avion.

Moreover, PSALM is implementing projects that are geared toward increasing and stabilizing power supply, which includes the overhauling of Malaya Thermal Power Plant (MTTP)-Unit 1.

The STX Marine of Korea recently completed the rehabilitation of Malaya Unit 1.

Now that Malaya1 has been rehabilitated, the entire power facility can run at its full capacity of 650 MW. “There will be an additional 300 MW to be used as reserved. Malaya, being a must-run plant, operates at time of plant outages, Malampaya in particular,” Alzona said.

The DOE earlier designated the MTPP as a must-run unit to address any instability or supply deficiency that may occur as a result of sudden unavailability of any of the operating power plants in the grid.

“The CBK [727-MW Caliraya-Botocan-Kalayaan], Casecnan and Malaya are the only plants remaining in Luzon. The Kalayaan [unit] of the CBK plant complex acts both as regulating and contingency reserves. The CBK will continuously provide the ancillary requirement in the Luzon grid. Malaya, meanwhile, will be continuously operated as a must-run plant. These are all in support of power supply security initiatives of the DOE,” Alzona said.

When Petilla was still in office, he identified a long-term solution to avert a power crisis. He labeled this as the Demand Aggregation and Supply Auctioning Policy (Dasap).

Under Dasap, all distribution units (Dus) and electric cooperatives (Ecs) will present their demand and
existing contracts.

In a nutshell, the agency’s draft memorandum circular was envisioned to be the platform for a yearly venue to auction the electricity demands—future and current—of all DUs and ECs.

In this way, it can easily be predicted if supply is enough or lacking. More importantly, consumers will be assured of a secured and reliable supply of electric power.

Petilla said the draft circular, if implemented, is going to be a landmark policy under his term. “We should not wait for their contacts to end before DUs and Ecs contract another power supplier.  We need to secure their requirements today and not when their contracts expire,” Petilla said. “With aggregate demand, this will
not only assure consumers of lower prices but also assures them that the power plants are always there when they are needed.” The draft policy was later enhanced to what is now called as Competitive Selection Process (CSP). The DOE was able to issue a circular on this before Petilla stepped down.

DOE Circular 2015-06-0008 mandates all DUs and ECs to undergo CSP in securing their power-supply agreements (PSAs). They would have to bid out their power requirements from a pool of interested power firms, thereby, eliminating bilateral negotiation, which, industry observers say, is “not a transparent way to do it because it involves pass-through cost.”

The CSP will be conducted by a third party. The circular applies to future contracts. It does not apply to existing PSAs that have been approved or have been filed for approval before the Energy Regulatory Commission (ERC).

Petilla said he expects some industry players to oppose the implementation of the circular. It may, he said, even be brought all the way to the courts.

“Why will you object if you have nothing to hide? The objective of the CSP is transparency and reasonable rates for consumers. This is a pass- through cost, which means consumers will pay for it. So, the more it is important for a bidding to take place rather than negotiate,” he said.

“We can be challenged. This is policy direction. Now, if they will question this they have to tell the public why transparency is not good for the public. This is a sure way to prevent any repeat of a possible power crisis and, more important, shield the consumers from any unnecessary charges. If you have nothing to hide then why oppose this? Prove that the CSP is not going to benefit the public,” the former energy chief dared.

The guidelines for the CSP have yet to be crafted by the ERC. Expectations are high that the implementing rules and regulations will be issued within the year, eventually paving the way for this land-mark policy of Petilla to finally come true.

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