DAVAO CITY, Philippines—The Mindanao power spot market will start its commercial operation by June 2017, according to ranking official from the Mindanao Development Authority.
Speaking at Wednesday’s Habi at Kape press conference, MinDA Deputy Executive Director Romeo Montenegro said that it is the high time for Mindanao to have its own market for electricity.
As of now, electricity in Mindanao is being sold and bought through a bilateral contract between generating companies and distributing utilities and electric cooperatives.
The existence of excess power and energy mix such as solar, fossil, coal, and hydro power plants would make it the conditions for the power sectors to open the spot market.
“With the kind of energy mix, and excess of power supply. It is high time to look at possibly transitioning Mindanao from a bilateral regime to market-operated regime,” Montenegro said.
This year, Mindanao already has 400-600 megawatts excess power, ”which is a complete reverse of the situation five years ago that caused the rotational brownouts in various areas in the island.”
Setting up WESM in Mindanao, according to Montenegro, would be a high time also for “small players,” that could produce renewable energies.
“With the market, renewable energy gets the priority dispatch,” he said. “So they will really earn even they will just produce one megawatt, and even if there has been an excess of 1,000 megawatts of diesel because they have to be dispatched first.”
The Philippine Electricity Corporation will operate the WESM in Mindanao. The corporation will be working with the Department of Energy on the prerequisites and preconditions on setting up the Mindanao WESM.
But some conditions should be followed by the electric cooperatives in order to start the spot market, and it includes electric cooperatives to upgrade their technologies in terms of forecasting.
“You could not just guess the forecasting that if one (cooperative) would wrongly nominate, if they will nominate 10 megawatts and used 5 megawatts more, they have to pay penalty. Or if they will nominate 10 megawatts and just used 5 megawatts, they also have to pay for that,” Montenegro said.
Montenegro said that overuse and underuse of power supply would be an exception in the bilateral contracts, but not if there will be a market in place.
The second condition would be for the electric cooperative to scale up their financial capabilities, because they will be buying from the market, not through credit or long term bilateral contracts.
“These are real-time spot purchase of electricity in the market where there is already a settlement,” Montenegro said.
“Unlike bilateral contract that it needs to go through months or years before being paid,” Montenegro added.
Last condition for the electric cooperative is to have technological improvement in terms of internet connectivity.
The electric cooperative should be connected electronically to the market in order to see the behavior and performance of the demand and supply fluctuations.
“Without then being connected in the system, then they could not participate in the market,” Montegro said. “It is a challenge for we have cooperative that have poor internet connectivity.”
The conditions have to be addressed first to be able to scale up the ability of the electric cooperatives to participate in the market.
Having a new thing in the power sector in Mindanao, MinDA said there is a need for them to assist the participating electric cooperatives.
“This is a new thing, a new reality that our electric cooperative has to face in Mindanao. That is why we have to assist them,” Montenegro said.
No effect on energy cost
The market for electricity, according to MinDA, would not affect the end-users or the consumers; or those who paid monthly electric bills.
The market is placed to serve electric cooperatives, distributing utilities, and the small energy players.
“We have to understand that the market is not being put in place to lower the cost of the electricity,” Montenegro said.
Montenegro said the cost of electricity is based “on the number of several computations as we see in our electric bills.”
This includes the generation cost, transmission cost, distribution cost and several other cost.
“So if the electricity cost that the consumer is paying is high, it depends on the electric cooperative,” Montenegro said.
The cost of electricity on consumers may vary on the electric cooperative’s choice of source. If one cooperative chose to contract from diesel sources, higher price is to be expected; if it is from hydro power plant, it would be way cheaper.
The pricing standards of the electric cooperatives in reselling energy sources will still be regulated by the Energy Regulatory Commission.
ERC will also approve the price determination mechanisms for the market.
“The pricing in our power sector has been always regulated by the ERC. So there is no any pricing determined without ERC approving it,” Montenegro said.
The said conditions will still be factored in the timeline until June 2017 which also requires the 28 electric cooperatives and four distributing utilities connected in Mindanao grid to pass the conditions to be able to determine if WESM can be feasible to set up. (davaotoday.com)