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Philippine Power Situationer. Joint Congressional Power Commission Ernesto B. Pantangco President Philippine Independent Power Producers Association February 17, 2011. Outline. PIPPA Background Assessing Power Supply-Demand Balance Lowering Power Rates - PowerPoint PPT PresentationTRANSCRIPT
PHILIPPINE POWER SITUATIONERJoint Congressional Power Commission
Ernesto B. Pantangco
President
Philippine Independent Power Producers Association
February 17, 2011
2
OUTLINE
1. PIPPA Background
2. Assessing Power Supply-Demand Balance
3. Lowering Power Rates
4. Revisiting Proposed Amendments to EPIRA
3
Background on PIPPA
PIPPA Philippine Independent Power Producers Association
Organized in mid 90’s as a non stock non profit association
Members have a total Installed Capacity 8,110MW Composed of 9 Board members and 5 officers
representing major players in the industry. Forum to share and discuss common concerns Represent common interests of private sector
power production Coordinate efforts between members and
government institution like DOE, DOF, PSALM, etc.
MEMBERS MWKEPCO 1,850 TeaM Energy 1,953 CBK 793 CE Casecnan 150 HEDCOR 75 FIRST GEN 1,610 QPPL 511 TRANSASIA 50 SN ABOITIZ 360 AES Phils 512 BACMAN 36 ALSONS 150 STEAG 210
TOTAL 8,110
4
OUTLINE
1. PIPPA Background
2. Assessing Power Supply-Demand Balance
3. Lowering Power Rates
4. Revisiting Proposed Amendments to EPIRA
5
LUZON’S SUPPLY-DEMAND BALANCE BARELY MEETS REQUIRED RESERVES, SUPPLY CRUNCH LARGELY AFFECTED BY THE SCHEDULED RETIREMENT OF MALAYA & ENTRY OF COMMITTED POWER PLANTS
2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015
Existing Capacity
10030 9384 9384 9384 9384 9384
Committed Capacity
0 41 41 675 675 675
Reqd Additional Capacity
0 0 374 194 689 1199
Peak Demand
7270 7582 7934 8309 8710 9123
Reqd Reserve Margin
1701 1774 1865 1944 2038 2135
5500
6500
7500
8500
9500
10500
11500
Luzon Supply-Demand Forecast (2011-2015)
MW
Source: Derived from latest DOE forecasts, Demand growth 4.6%
GN POWER: 600MW
BACMAN II: 33.55MWBACMAN II: 40.8MW
6
VISAYAS SUPPLY-DEMAND BALANCE MOVES TOWARDS A SURPLUS WITH 638 MW OF NEW CAPACITIES COMING FROM 2010-2011…
2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015
Existing Capacity
1505 1457 1457 1457 1457 1457
Committed Capacity
240 638 638 638 638 638
Required Additional Capacity
20 0 0 0 0 0
Peak Demand
1430 1448 1486 1545 1603 1666
Required Reserve Margin
335 339 348 361 375 390
250
750
1250
1750
2250
Visayas Supply-Demand Forecast (2011-2015)
MW
CEDC: 240MW
PEDC: 160MWKSPC: 200MW
PANAY BIOMASS: 17.5MWNASULO: 20MW
Source: Derived from latest DOE forecasts, Demand growth 4.6%
7
WITH WESM VISAYAS IN COMMERCIAL OPERATIONS, SINGLE GRID TREATMENT SHOULD SHIFT SURPLUS TO LUZON TO MITIGATE BREACHED REQUIRED RESERVE MARGIN LEVELS
2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015
Existing Capacity
11535 10841 10841 10841 10841 10841
Committed Capacity
240 679 679 1313 1313 1313
Required Additional Capacity
0 0 113 5 572 1160
Peak Demand
8700 9030 9420 9854 10313 10789
Required Reserve Margin
2036 2113 2213 2305 2413 2525
55006500750085009500
10500115001250013500
Luzon-Visayas Supply-Demand Forecast (2011-2015)
MW
Source: Derived from latest DOE forecasts, Demand growth 4.6%
8
MINDANAO IS ALREADY SUFFERING FROM TIGHT RESERVE LEVELS – WILL BE REQUIRING 98MW-401MW IN THE NEXT FIVE YEARS
2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015
Existing Capacity
1682 1682 1682 1682 1682 1682
Committed Capacity
42 50 50 50 100 100
Required Additional Capacity
30 98 179 267 306 401
Peak Demand
1421 1483 1549 1620 1692 1769
Required Reserve Margin
333 347 362 379 396 414
250
750
1250
1750
2250
Mindanao Supply-Demand Forecast (2011-2015)
MW
Source: Derived from latest DOE forecasts, Demand growth 4.6%
SIBULANHYDRO :42MW
CABULIGHYDRO :8MW
MINDANAO III: 50MW
9
HOW MUCH RESERVE CAPACITY DOES A GRID REALLY NEED?
1. AGE AND CONDITION OF POWER PLANTS
2. RELATIVE SIZES OF INDIVIDUAL POWER PLANT UNITS – MORE LARGE-SIZED GENERATING UNITS REQUIRE HIGHER LEVEL OF RESERVES
3. CONDITION/RELIABILITY OF TRANSMISSION SYSTEM
4. GENERATION CAPACITY MIX – HAVING MORE “INTERMITTENT SOURCES” (e.g. HYDRO AND WIND) REQUIRE HIGHER LEVEL OF RESERVES
10
PRESCRIBED RESERVE MARGINS
DOE REQUIRED RESERVE MARGIN
GRID % of PEAK DEMAND
LUZON 23.4%
VISAYAS 23.3%
MINDANAO 21.1%
DOE Supply-Demand Forecasts use a required Reserve Margin based on probabilistic method – Loss of Load Probability (LOLP) or the expected number of days for a specified period in which peak demand is expected to go exceed capacity
GRID CODE AND ERC-APPROVED ANCILLARY SERVICE PROCUREMENT PLAN
TYPE OF RESERVE % of PEAK DEMAND
1. Load following & frequency regulation
2.8%
2. Spinning Reserve* 10.4%3. Back-Up Service 19.6%4. Reactive Support -TOTAL 32.8%
Note: * equivalent to largest single unit for each grid
11
TAKE AWAY POINTS: KEEPING THE LIGHTS ON
LUZON-VISAYAS
THE FOLLOWING WILL SIGNIFICANTLY HELP IN AVOIDING LUZON SUPPLY CRUNCH IN 2011:
1. DELAY/POSTPONE RETIREMENT OF MALAYA2. ON-TIME OPERATIONS OF NEW COAL CAPACITIES IN
VISAYAS3. UNRESTRICTED TRANSFER OF POWER BETWEEN LUZON-
LEYTE HVDC SUBMARINE CABLE LINK4. WESM OPERATIONS IN LUZON-VISAYAS SHOULDCONTINUE,
PRICE SIGNALS INCENTIVIZE POWER PLANTS TO RUN CRITICAL PERIOD STARTS AGAIN IN 2013 COMPLETION OF PROJECTS SHOULD BE MONITORED
12
TAKE AWAY POINTS: KEEPING THE LIGHTS ON
MINDANAO SHORTAGES CAN BE ALLEVIATED THROUGH THE FOLLOWING MEASURES:
1. UTILIZE SELF-GEN CAPACITY – TOTAL OF 50MW-180MW (E.G. DOLE PHILS., PICOP)
2. BRING IN AND UTILIZE IDLE LAND-BASED POWER PLANTS AND POWER BARGES (E.G. ILIGAN DIESEL - 100MW, DURACOM AND EAST ASIA - 200MW)
3. BRING POWER BARGES 117 (NASIPIT, ADN) AND 118 (COMPOSTELA VALLEY, ADN) ON LINE SOON – 200 MW
HOWERVER, WE SHOULD MAKE SURE ANY EXPENSIVE SOLUTIONS TO ADDRESS THE POWER SHORTAGES ARE KEPT SHORT TERM.
ERC SHOULD ASSURE COST RECOVERY OF THESE SOLUTIONS FROM ELECTRICITY CONSUMERS SO THAT GOVERNMENT AND TAXPAYERS NEED NOT SHOULDER THEM
WESM OPERATIONS SHOULD BE PUSHED TO ENABLE OPERATIONS OF UNDERUTILIZED CAPACITIES
DEMAND SIDE MANAGEMENT SHOULD BE SERIOUSLY CONSIDERED, i.e. VECO Interruptible program in Cebu
13
OUTLINE
1. PIPPA Background
2. Assessing Power Supply-Demand Balance
3. Lowering Power Rates
4. Revisiting Proposed Amendments to EPIRA
14
OUR POWER RATES IN MANILA CONTINUES TO BE ONE OF THE HIGHEST IN ASIA…
PHILIPPINES JAPAN SINGAPORE THAILAND MALAYSIA INDONESIA VIETNAM0.000.020.040.060.080.100.120.140.160.180.20
RESIDENTIAL POWER RATES (US Cents/kWh)
SINGAPORE PHILIPPINES JAPAN THAILAND MALAYSIA VIETNAM INDONESIA0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
INDUSTRIAL POWER RATES (US Cents/kWh)
(MERALCO)
(MERALCO)Source: Study conducted by International Energy Consultants , PCCI presentation
15
THIS IS BECAUSE WE HAVE THE HIGHEST INTRINSIC COST OF SUPPLY
1. High dependence on imported fuel sources
2. Higher effective cost of fuel sources (coal, oil) because Philippine government has stopped subsidies – Malaysia and Indonesia use of coal, oil and natural gas for power generation are subsidized
3. Cost of natural gas power generation is priced using a formula which approximates imported Natural Gas price – chunk of which is government royalties
PHILIPPINES MALAYSIA INDONESIA
IMPORT: 34%INDIGENOUS: 66%
IMPORT: 28%INDIGENOUS: 72%
IMPORT: 0%INDIGENOUS: 100%
Source: Study conducted by International Energy Consultants , PCCI presentation
16
COMPARISON OF GOVERNMENT SHARE ON NATURAL GAS DOMESTICALLY USED FOR POWER GENERATION
Sources: 1. US Embassy in Indonesia. Gas sold to domestic market is typically priced 1/3 less than LNG sales.2. Unocal Thailand Fact Sheet. Royalty paid from 1981-2003 is $1.4 Billion for 5.561 Tcf of natural gas.3. Price of gas sold by government owned PVN to government owned EVN is $3.22/MMBtu.4. Petronas. Government subsidy on domestically used natural gas ~$1.72Billion per year.
Gas rate to TNB is RM6.4/MMBtu (~$1.78/MMBtu)*Figures derived 2007
Cost of Natural Gas
Level of Royalties
17
MANY GOVERNMENTS INTERVENE AND SUBSIDIZE – SHIELDING CUSTOMERS FROM PRICE INCREASES
The ECONOMIST. “RECOIL” , “Double, Double, Oil And Trouble” , “Crude Measures”, May 29th 2008
2007 Key Indicators: Inequalities in Asia. ADB
10.92 10.93
Malaysia Indonesia-
2.00
4.00
6.00
8.00
10.00
12.00
14.00
US
$ Bi
llion
Subsidies
-
50
100
150
200
250
300
US $ Billion
7% of GDP
3% of GDP
OUR ASIAN NEIGHBORS HAVE INHERENT ADVANTAGE WITH SUBSTANTIAL AMOUNT OF INDIGENOUS ENERGY SOURCES AND CONSEQUENTLY DEEPER
POCKETS TO SUBSIDIZE DOMESTIC USE OF ENERGY SOURCES…
18
MOREOVER, THE PHILIPPINES ALSO HAS ONE OF THE MORE PROGRESSIVE POWER REFORMS…
1. Operational Wholesale Electricity Spot Market (WESM) in Luzon and Visayas
Excluding market intervention periods, prices reflect full and true cost of power
Nodal Pricing which illustrates high cost of losses caused by archipelagic nature of power grids
2. Generation charges are full pass through with fuel and FOREX adjustments
Removes subsidies and distortions caused by lagged adjustments – e.g. GRAM, ICERA deferred adjustments
Enables financing for new investments
Source: Study conducted by International Energy Consultants , PCCI presentation
OUR “LONG-TERM” POWER REFORM POLICIES ARE MORE SUSTAINABLE - MARKET DISTORTIONS CAUSED BY SUBSIDIES AND “SHORT-TERM” POPULIST POLICES WILL EVENTUALLY EXPERIENCE POWER SHORTAGES AND/OR PRICE SHOCKS
19
1. More plants should be built: Right mix of assets, Right mix of fuels
Eliminate market distortions – correct price signals
Stable and consistent local government policies
2. Push for Open-Access to start3.
Prevent market dominance - increase number of competing generation/supply companies
Choice for customers, more specific matching of customers and suppliers.
Strengthen/Optimize customer sizes (Electric Cooperative loads)
CONCEPTUALLY, THERE TWO WAYS OF BRINGING POWER RATES DOWN: (1) FISCAL POLICY ; AND (2) MARKET COMPETITION
1. Tax parity among fuels:
Natural Gas Royalty reduction – push for Senator Enrile’s SBN 2 of 2010
2. Remove redundant taxation “Double” taxation on distribution
charges and transmission Push for Senator Enrile’s SBN 3 of
2010 or the Uniform Franchise Tax Measure – flat 3% on the gross distribution income of DUs in lieu of all other taxes
FISCAL POLICY COMPETITION
20
OUTLINE
1. PIPPA Background
2. Assessing Power Supply-Demand Balance
3. Lowering Power Rates
4. Revisiting Proposed Amendments to EPIRA
21
ALTHOUGH WE ARE STILL EXPERIENCING TRANSITION PAINS, OUR POWER REFORMS APPEAR TO BE WORKING…
There is an emerging clarity in the rules governing the industry
More level playing field, market dominance of a single entity removed
Increased private sector participation and capacity improvements large investments, translating to improved supply
Excluding market intervention periods, wesm prices reflect true cost of power – price signals enable economic dispatching and operations of “dormant” power plants and underutilized capacities
22
PSALM HAS BEEN ABLE TO MAKE SIGNIFICANT PROGRESS IN PRIVATIZING NPC’S GENERATION
Talomo HEPP• Atty. Ramon I.
Constancio • $0.48 Million ,1.8
MW
Agusan HEPP• First Generation
Holdings • $1.53 Million,1.6
MW
Barit HEPP• Hydro Electric
Devt Corp• $1.37
Million ,3.5MW
Cawayan HEPP
• SORECOII• $0.41 Million ,0.4
MW
Loboc HEPP• Sta. Clara
International Corporation
• $1.42 Million,1.2 MW
TOTAL = 8.5 MW
2004 2006 2007 2008 2009 2010
Pantabangan-Masiway HEPP
• First Gen Hydropower Corporation
• $129 Million • 112 MW• 11/16/2006
Magat HEPP• SN Aboitiz
Power Corporation
• $530 Million• 360 MW• 12/14/2006
TOTAL = 472 MW
Masinloc Coal-Fired Thermal PP• Masinloc-
Power Partners Co. Ltd.
• $930 Million • 600 MW• 7/26/2007Ambuklao-Binga
Hydroelectric Complex • SN Aboitiz
Power Hydro Inc.
• $325 Million • 175 MW• 11/29/2007
TOTAL = 775 MW
Tiwi-MakBan Geothermal PP• AP
Renewables Inc.
• $446.89 Million
• 747.53 MW• 7/31/2008Panay and Bohol
Diesel Power Plants
• SPC Power Corporation
• $5.86 Million• 168.5 MW• 11/12/2008
TOTAL = 916 MW
Angat Hydro Electric PP• Korea Water
Resources Devt. Corp.
• $440.88 Million
• 218 MW• 4/28/2010BacMan
Geothermal PP• Bac-Man Geothermal Inc.
• $28.25 Million
• 150 MW• 5/6/2010TOTAL = 368
MW
Amlan HEPP• ICS Renewables
Inc. • $0.23 Million ,0.8
MW Batangas (Calaca) Coal-Fired Thermal PP
• DMCI Holdings, Inc.• $361.71
Million ,600 MWPower Barge 118
• Therma Marine Inc.
• $14 Million,100 MW
Power Barge 117• Therma Mobile Inc• $16 Million,100
MWLimay Combined-Cycle PP
• SMEC• $13.5 Million,620
MWPalinpinon-Tongonan Geothermal Power Plants• GCGI
• $220 Million,305 MW
Naga Land-Based Gas Turbine Power Plant • SPC Power
Corporation• $1.01 Million, 55
MWTOTAL = 1781 MW
TO DATE, PSALM HAS PRIVATIZED 4320 MW OR 98% OF NPC GENERATING ASSETS IN LUZON AND VISAYAS – SATISFYING 1 OUT OF 2 REMAINING PRECONDITIONS FOR OPEN ACCESS
23
PSALM HAS ALSO BEEN ABLE TO GATHER MOMENTUM IN PRIVATIZING NPC-IPP CONTRACTS IN LUZON AND VISAYAS
2009 2010Ilijan Combined Cycle Power Plant
• San Miguel Corporation• USD870 Million, 1200 MW
TOTAL = 1200 MW
Pagbilao Coal-Fired Power Plant• Therma Luzon Inc.• USD691 Million,700 MW• 8/28/2009
Sual Coal-Fired Power Plant
• San Miguel Energy Corporation• USD1.07 Billion,1000 MW
San Roque Multipurpose Hydro
• Strategic Power Devt. Corp.• USD450 Million,345 MW
Bakun-Benguet hydro plants• Amlan Power Holdings
Corporation• USD145 Million,100.75 MW
TOTAL = 2145.75 MW
PSALM HAS PRIVATIZED 2220 MW OR ~68 % OF NPC-IPP CONTRACTS, WITH CONVERSION OF MALAYA FROM AN IPP-CONTRACT (ROM) TO AN NPC ASSET, ALL
REQUIREMENTS FOR OPEN ACCESS ALREADY MET
24
IMPROVEMENTS IN DEPENDABLE AND AVAILABLE CAPACITES WERE MADE BY PRIVATE COMPANIES WHO TOOK OPERATED POORLY MAINTAINED NPC PLANTS
PERIOD AVE MAXIMUM DEPENDABLE
CAPACITYPEAK DEMAND
AVERAGE RESERVE MARGIN
PRE-PRIVATIZATION(2006-2007) 7,948 6,650 15%
POST PRIVATIZATION(2008-2009)
8,467 6,900 23%
SOURCES OF SUPPLY IMPROVEMENT: PANTABANGAN-MASIWAY, MAGAT, AMBUKLAO-BINGA AND MASINLOC
25
TOTAL NPC FIRST GEN ABOITIZ QPPL OTHER PRIVATE
INSTALLED CAPACITY 12491.195 1493.031 361.979999999999
511 869.388
1,000.00
3,000.00
5,000.00
7,000.00
9,000.00
11,000.00
13,000.00
NATIONAL INSTALLED GENERATING CAPACITY - 2006
(MW
)
IN 2006, THE PLAYING FIELD WAS CLEARLY DOMINATED BY NPC, CONTROLLING ~82% OR 12,491 MW OF THE TOTAL INSTALLED CAPACITY
Source: ERC Res. No. 53, Series of 2006National Market Share Cap – 3, 808 MW
82%
25% NATIONAL MARKET SHARE
CAP
26
NPC SAN MIGUEL
ABOITIZ FIRST GEN
AES DMCI QPPL SALCON
INSTALLED CAPAC-ITY
4217.89 3148.48 2294.29 2066.59 635 600 511 220.5
1,000.00
3,000.00
5,000.00
7,000.00
9,000.00
11,000.00
13,000.00
NATIONAL INSTALLED GENERATING CAPACITY - 2010
(MW
)
BUT BY 2010, THE PLAYING FIELD HAS IMPROVED SIGNIFICANTLY WITH MORE PRIVATE PLAYERS COMPETING IN THE MARKET
Source: Derived from ERC Res. No. 4, Series of 2010National Market Share Cap – 3, 648 MW
25% NATIONAL MARKET
SHARE CAP
27
CURRENT WESM PRICES REFLECT TRUE SUPPLY-DEMAND SITUATION
Jan-
09
Feb-
09
Mar
-09
Apr-0
9
May
-09
Jun-
09
Jul-0
9
Aug-0
9
Sep-0
9
Oct-09
Nov-0
9
Dec-0
9
Jan-
10
Feb-
10
Mar
-10
Apr-1
0
May
-10
Jun-
10
Jul-1
0
Aug-1
0
Sep-1
0
Oct-10
Nov-1
0
Dec-1
0
Jan-
11
-6.00
-2.00
2.00
6.00
10.00
14.00
18.00
22.00
P/k
Wh
WESM WEEKLY AVERAGE PRICES (JANUARY 1, 2009 TO JANUARY 31, 2011)
Source: Philippine Electricity Market Corporation
Average Peak Prices Average Prices
High WESM prices due to tight supply caused by: (1) Malampaya outage; (2) DOE mandated Power Plants to conduct maintenance before May elections, (3) Prolonged El Nino lowered hydro power generation
Lower Demand due to Cold Season and Extended
Holidays
Lower prices due to “Limay Must-Run”
situation
Lower prices with normalized supply in the
grid
Baseload Plant Outages
(Masinloc, Calaca, Sual)
Drop in demand due
to colder temperature and holiday
season
28
FULL IMPLEMENTION OF EPIRA SHOULD BE PURSUED BEFORE ANY AMENDMENTS ARE CONTEMPLATED AND EFFECTED. THE INDUSTRY SHOULD ADDRESS OPERATIONAL ISSUES FACED IN THIS TRANSITION:
1. Creation of Independent Market Operator and Independent System Operator
2. Stable Policy Framework – Real Property Tax and Local Government Assessments
3. Industry’s “Readiness” for Open Access 4. Public Ownership of Generators (e.g. Masinloc) – non
coverage of limited partnership5. ERC ruling on TOU pricing specific to GRAM and ICERA
applications6. ERC assistance on VAT issue on BIR7. ERC’s issuance of final approval of Power Supply Agreements 8. WESM Mindanao commercial operations – Agus Pulangi
Privatization
29
END OF PRESENTATION
THANK YOU!!!
30
SUPPORT SLIDES
31
GENERATION MIX: LUZON, VISAYAS AND MINDANAO
LUZON VISAYAS MINDANAO
32
Dep Cap Actual Cap March 2010
Geothermal 108.48 98.7168
Coal 210 210
Hydro 861.798000000003 288.6293
Oil Based 517.678 436.860199999999
100.00
300.00
500.00
700.00
900.00
1,100.00
1,300.00
1,500.00
1,700.00
ALTHOUGH 2011 IS FORECASTED TO BE A WET YEAR, MINDANAO IS STILL MORE VULNERABLE TO CLIMATE AND WEATHER PATTERNS DUE TO ITS HIGH DEPENDENCE ON HYDRO POWER
1,698 MWTOTAL 1,034 MW
DEFICIENT POWER PLANT
CAPACITY MW REASON
UNPLANNED
AGUS 1-7 538 LACK OF WATER – EL NIŇO
ILIGAN DIESEL 100SHUTDOWN – NEEDS SPARE
PARTS
TOTAL – 638 MW
423MWDEFICIT
PEAK DEMAND: 1,457 MW
MARCH 16, 2010