Update on the Philippine Wholesale Electricity Spot Market A Presentation to the APEx Asia Pacific Conference New Delhi, India 1
Presentation WESM Overview 2010 Market Results Market Outlook 2
WESM Overview 3
General Features WESM is a real-time energy market Trading of reserves will commence upon approval of the pricing and cost recovery methodology by the Energy Regulatory Commission WESM currently operates in the main Philippine islands of Luzon and Visayas Operations commenced on 26 June 2006 in Luzon and on 26 December 2010 in the Visayas Introduction of the WESM in Mindanao is currently being studied 4
Philippine Transmission System Luzon: 230 kilovolt and 500 kilovolt backbone transmission system -Leyte-Cebu AC submarine cable link -(2x200 MW) - Negros-Panay AC submarine cable link -(100 MW) Leyte-Luzon HVDC link: Interconnects Luzon and Visayas Transmission System Visayas: 138 kilovolt and 230 kilovolt (Cebu Only) backbone transmission system -Leyte-Bohol AC submarine cable link (100 MW) -Cebu-Negros AC submarine cable link -(2x100 MW) Mindanao: 138 kilovolt and 230 kilovolt backbone transmission system 5
Integration of the Visayas Visayas system was integrated into the WESM and commenced commercial operations on 26 December 2010 Inter-connected island sub-systems Entry of new privatelyowned power plants increased supply in the Visayas allowing for greater competition Negros Panay O O O O O O H G G Cebu C O O C Visayas-Luzon +/-350kV HVDC Transmission Line O O O O O H H G G Bohol Leyte-Samar 6
Participants Generators Total registered capacity is 14,208 MW, with12,058 MW in Luzon and 2,150 MW in Visayas D/O 17% Nat Gas 20% Wind 0.19% 45 Generation Companies (24 in Luzon and 21 in the Visayas) Bio 0.23% Hydro 15% Increasingly privately-owned with the privatization of stateowned assets and contracts Coal 31% Geo 17% 7
Participants Customers 178 Customers 89 Distribution Utilities 89 Directly-Connected Bulk Users DUs are either privatelyowned companies or electric cooperatives Directly-connected Bulk Users participate through their suppliers Wholesale Customers (% based on Peak Demand) Others 10% ECs 11% MERALCO 74% Private DUs 5% 8
Operations Philippine Electricity Market Corporation (PEMC) Serves as autonomous group market operator of the WESM Board of Directors serve as the Philippine Electricity Market Board and is chaired by the Philippine Energy Secretary National Grid Corporation of the Philippines (NGCP) Private corporation awarded concession to operate and maintain the Philippine transmission system Serves as the System Operator and is also the Wholesale Metering Services Provider 9
2010 Market Results (Luzon) 10
2010 Significant Market Events Demand Record high peak demand of 7,643 MW on 26 May 2010, which is 10.25% higher than the peak demand in 2009 Supply Tight supply occurred particularly during the first half of 2010 due to forced and maintenance outages of generating plants; outages of transmission facilities; and record low capability of hydro-electric plants to generate power due to the El Niño dry-spell Prices Price spikes particularly during the first half of the year with higher demand and tight supply conditions Effective Selling Price (ESP) was highest in February and March and ranged from PhP10,999/MWh to PhP12,253/MWh. As of December 2010, the Effective Selling Price was PhP6,394/MWh. 11
Luzon WESM at a Glance Market Information 2008 2009 2010 % Change 2009 vs 2010 4 th Yr. vs. 3 rd Yr. Peak Demand, MW 6,681 6,932 7,643 10.2% Average Demand, MW 4,960 5,042 5,599 11% Average Energy Offer, MW 5,993 6,554 6,250-4.6% Total Energy Volume (Generation), GWh 41,153 42,167 46,228 9.6% Spot Market Volume, GWh 5,451 6,180 6,150-0.5% Generator Spot Payments, Million PhP Cumulative Average Buying Price, PhP/MWh 22,267 14,361 50,777 253.6% 4,831 4,205 5,043 19.9% 12
MW P/MWh Demand, Supply & Price 8000 7000 Tight supply as a result of forced + planned outages and low hydro electric plant availability 7-Day Moving Averages Tight supply as a result of plant outages (gas leak at Malampaya on 28 May 2010 and passage of Typhoon Basyang), maintenance of San Jose transformer 1 and South plants generator limitation as a result of line maintenance * 30000 25000 6000 20000 5000 15000 4000 10000 3000 5000 2000 0 1000-5000 0 D J F M A M J J A S O N D J F M A M J J A S O N D 2009 2010 Generation Offers/Supply Actual Demand Hourly LWAP * Line maintenance of Sucat-Biñan 230kV lines, Amadeo-Calaca 230 kv lines resulted in generator limitation of Calaca, Sta. Rita, and San Lorenzo plants. -10000 13
MW Monthly Peak Demand 8000 7500 7000 6500 5.6% 7.1% 6% 7% 10.48% 2010 Peak Demand: 7,643 MW 10.25% 6.19% 3.05% 2.46% 8.34% 3.90% 5.15% 6000 5500 5000 4500 4000 3500 J F M A M J J A S O N D 2009 2010 Note: Luzon Peak Demand (both at 1400H of May 26) 2009: 6,932 MW 2010: 7,643 MW 14
MW Generator Average Offers 7500 7000 6500 7.1% 4.6% 2.1% 2010 Peak Offer: 7,643 MW 3.7% 9.1% 1.3% 7.5% 8.1% 9.9% 5.5% 6000 3.7% 6.3% 5500 5000 4500 4000 3500 J F M A M J J A S O N D 2009 2010 15
Generation Mix Year Hydro Geo Coal Nat Gas D/O Wind 2008 12.5% 10.3% 28.8% 45.3% 2.9% 0.1% 2009 12.7% 9.1% 29.8% 45.3% 2.9% 0.1% Jan-Jun2010 6.2% 7.8% 41.7% 37.7% 6.4% 0.1% Jul - 2010 8.7% 6.5% 35.7% 41.2% 7.8% 0.0% Aug - 2010 11.3% 6.5% 35.4% 41.4% 5.3% 0.1% Sep - 2010 11.4% 6.6% 33.2% 44.2% 4.6% 0.1% Oct - 2010 9.9% 7.5% 33.2% 43.9% 5.5% 0.1% Nov - 2010 12.1% 7.5% 34.9% 42.5% 2.6% 0.3% Dec - 2010 9.7% 7.7% 37.6% 42.7% 2.0% 0.3% J F M A M J J A S O N D J F M A M J J A S O N D D/O Nat Gas Coal Geo Hydro Wind 2009 2010 November 2010 data is based on Final run data 16
Price, P/MWh Effective Settlement Prices 20,000 Effective Buying Price Effective Selling Price Cumulative Ave. Buying Price 18,000 16,000 14,000 12,000 10,000 8,000 6,000 P5,043/MWh 4,000 2,000 - J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 2006 2007 2008 2009 2010 Customer Buying Price Generator Selling Price NPC Effective Rate Dec2010 (FINAL) 6,824.19 6,394.00 4,648.40 Effective Buying Price with 100% surplus Effective Selling Price without surplus 17
Energy Volumes (MWh) Customer Market Transactions 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Spot Market Volume Bilateral Contract Volume Spot Market Value 16% 17% 12% 8% 12% 13% 10% 16% 13% 16% 10% 12% 16% 15% 13% 18% 11% 14% 15% 13% 14% 23% 17% 21% J F M A M J J A S O N D J F M A M J J A S O N D 2009 Average Spot Quantity 2010 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Spot Transaction Value (Millions) Jan Dec 2010 14% 18 Jan Dec 2009 15%
January 2011 Market Results (Luzon & Visayas) 19
MW Market Results SYSTEM SUPPLY & DEMAND CONDITION 10000 Tight supply margins due to limited offers and dispatch Improved level of market offers 9000 8000 7000 6000 5000 4000 3000 * Market Intervention * * * ** Market Intervention Market Intervention Market Intervention Market Intervention 2000 1000 Lower demand level due to cold/rainy weather condition resulted in higher supply margins 0 12/2612/2712/2812/2912/3012/31 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/10 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 1/19 1/20 1/21 1/22 1/23 1/24 1/25 1/26 1/27 1/28 1/29 1/30 1/31 EFFECTIVE SUPPLY ENERGY OFFERS DEMAND 20
PhP / MWh Market Results EX-ANTE SYSTEM LOAD WEIGHTED AVERAGE MARKET PRICES (LWAP) 30000 25000 Dec 26 Jan 25 Price Level (PhP/MWh) LWAP Minimum Maximum System 3,370.2-410 40,600 20000 15000 10000 5000 0 12/26 12/27 12/28 12/29 12/30 12/31 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/10 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 1/19 1/20 1/21 1/22 1/23 1/24 1/25-5000 21
PhP / MWh Market Results EX-ANTE LOAD WEIGHTED AVERAGE MARKET PRICES (LWAP) 30000 25000 20000 Luzon Prices were cleared by a Diesel Plant in Luzon Dec 26 Jan 25 Price Level (PhP/MWh) System Luzon Visayas LWAP 3,370.2 3,426.7 3066.5 Minimum -410-502 0 Maximum 40,600 46,098 12,423 15000 10000 5000 0 12/26 12/27 12/28 12/29 12/30 12/31 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/10 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 1/19 1/20 1/21 1/22 1/23 1/24 1/25-5000 SYSTEM LUZON VISAYAS 22
PhP / MWh Market Results 2010-DEC-26 TO 2011-JAN-25 PRICE DURATION CURVE 20000 5% 10% 20% of the time 18000 16000 14000 12000 10000 8000 80% of the time the Ex-ante Load Weighted Average Price is below PhP4000/MWh 6000 4000 Visayas NPC Effective Rate 2000 0-2000 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% LUZON-VISAYAS LUZON VISAYAS Note: Visayas NPC Effective Rate was based on December 2010 information from the NPC website. 23
Market Results LUZON-VISAYAS GENERATION MIX, SETTLEMENTS Nat Gas 33.06% D/O 1.13% Wind 0.31% Bio 0.01% January 2011 Hydro 8.33% Effective Selling Price, P/MWh Spot Market Volume, GWh 4,186 322 Coal 39.12% Geo 18.04% Bilateral Contract Volume, GWh 3,743 24
Market Outlook 25
Market Outlook Retail Electricity Supply Final conditions set by the law for commencement of open access and retail competition are nearly met. Retail market will initially cover bulk users with at least 1 MW demand. PEMC is appointed as the Central Registry Body Renewable Energy Market Renewable Energy law passed in 2008 provides for establishment of a renewable energy market by the Department of Energy. Ongoing public consultations on implementing rules and regulations. 26
Market Outlook Reserve Market WESM design includes co-optimization of energy and reserves. Tradable reserves include regulating dispatchable reserves. Other ancillary services are procured through long term contracts by the System Operator. Regulatory approval of pricing and cost recovery methodology is still pending. 27
Market Outlook Transition to Independent Market Operator Law requires eventual transfer of market operations functions to an Independent Market Operator Philippine Department of Energy is responsible for selection and appointment Development of new Market Management System Hardware obsolescence Enhancements needed to address regulatory and rule changes and auditor recommendations 28