PRICES in the Wholesale Electricity Spot Market (WESM) decreased by 54.8% in 2020 compared with 2019. This is primarily due to the significant reduction of electricity consumption in Luzon and Visayas as a result of the restrictions imposed by the government to minimize the transmission of coronavirus disease 2019 (COVID-19).
The average Effective Spot Settlement Price (ESSP) for 2020 was recorded at P2.450 per kWh which was a significant decrease from P5.425 per kWh last 2019. Meanwhile, the lowest ESSP for 2020 was recorded at P1.502 per kWh during April, while the ESSP peaked at P3.526 per kWh during September.
The decrease in WESM prices was largely attributed to adequate supply coupled with a substantial decrease in demand. Average hourly supply level for 2020 registered 13,609 MW. Meanwhile, the average hourly system demand for 2020 was 9,546MW, which is a 5.4% decline from the previous year. For the first time in 15 years of WESM operations, the market recorded a decrease in the average yearly system demand.
Moreover, unlike the previous years in which the system peak demand occurred during summer months, the system peak demand for 2020 occurred in early March at 13,181 MW. This was lower than 2019’s peak demand of 13,450 MW, which was recorded in June.
The average hourly system demand for the first three months of 2020 increased by 4.5%. However, the imposition of community quarantine and other restrictions by the government resulted in a significant reduction in demand as most industrial and commercial establishments either closed or operated at limited capacity. This translated to an 8.2% decrease in average demand for the rest of the year, offsetting the demand growth recorded during the first quarter of 2020. Natural calamities such as the Taal Volcano explosion and several typhoons also contributed to the reduction of the system demand as some parts of the grid were forced to temporarily shut down.
The reduced demand translated to lower generation production, as actual energy produced decreased by 5.5%, from 83,982 GWh in 2019 to only 79,354 GWh in 2020.
Energy output from coal and natural gas plants accounted for three-fourths of the energy mix for the year. The rest were sourced from renewable energy resources (i.e., geothermal, hydro, solar, wind, and biomass*) and oil-based plants. Energy purchased from the WESM accounted for 10,560 GWh which is equivalent to 16.2% of the customers’ total consumption for 2020. The remaining energy requirements were sourced from bilateral contracts with generators.
The WESM operates 24/7 in Luzon and Visayas Grids. At present, prices and generator dispatch schedules in the WESM are determined on an hourly basis. Implementation of several market developments is being anticipated for 2021. To further improve overall market efficiency, enhancements are currently being deployed in the WESM to transition market trading from an hourly interval to a five-minute interval. The said transition is targeted for commercial implementation this June 2021, together with the commercial operations of WESM in the Mindanao Grid. Threshold for Retail Competition and Open Access (RCOA) was also lowered from 750kW minimum average peak demand to 500kW on Feb. 26, 2021.
The operation of the Renewable Energy Market is also targeted to go live in June 2021. Other incentive mechanisms for Renewable Energy, such as Green Energy Option Program (GEOP) and Green Energy Auction (GEA) policy are also expected to be implemented within the year.
* Based on the categories prescribed in the Renewable Energy Act of 2008 (RA 9513)
Richard J. Nethercott is the president of the Independent Electricity Market Operator of the Philippines, Inc. (IEMOP), a non-stock, non-profit private corporation governed by a professional board of directors composed of individuals not affiliated with any of the electric companies that trade in the WESM. The IEMOP carries out the mandate to pursue the WESM objective to have a transparent, fair, competitive, and reliable market for the trading of electricity throughout the Philippines. As market operator, IEMOP is bound to strictly comply with the EPIRA, its Implementing Rules and Regulations, the WESM Rules and other related issuances of the Department of Energy.