DoE addresses Luzon grid power reserve needs
Tuesday, July 11, 2006
The Department of Energy (DoE) bared that it is now revisiting the country’s power development blueprint as it is coming to terms that it needs to start addressing reserve requirement even for the Luzon grid, which is widely-believed to be on a surplus mode.
"In the past, we have had thinning reserves like when the Typhoon Caloy hit the Ilijan plant, it resulted in damage to the main transformer and is undergoing repair for almost a month. These are the things we are attending to right now," Energy Secretary Raphael P.M. Lotilla has noted.
Through transparency effected via the Wholesale Electricity Spot Market (WESM), the industry is seeing some of the inequities of the power system; and one of the conditions manifested even at its trial run was the reality that even Luzon, already suffer from thinning reserves.
With one unit of Ilijan down (which meant 600 megawatts taken out from the system), the System Operator cannot turn to alternative power plants that can be readily dispatched; at times that some generation facilities are on scheduled downtime or when hydro facilities are de-rated capacities due to low water level; and the oil plants cannot be run due to surging global prices.
As capital infusion for new power capacity is being encouraged by government, prospective investors articulated that the politically-charged and highly unpredictable business environment of the Philippine power industry, compounded by turbulent turn of events in global electricity markets, will command high risk premium for investments in new power projects.
They further sounded off that putting up new round of power projects would thrive more expensive because of higher premium that they would have to lump in their project financing; and at day’s end, these costs would have to be passed on to electricity consumers.
Given the bitter lessons that the independent power producers (IPPs) have experienced in the initial wave of investments in the 90’s, it was noted that they would be more judicious this time in weighing riskreward ratios in projects; and unless energy officials or the government demonstrates credibility in the sphere of fixing business environments, no capitals will flow for new power projects.
The energy secretary admitted that the "structural problems" have whittled down, and at times even halted, the pace of reforms for the power industry as enunciated under the Electric Power Industry Reform Act. (MMV)
The thinning reserve, which is becoming ominous even for the Luzon grid is seen as a dangerous presage that the market would again lose its leverage to negotiate for lower rates; thus, consumers cannot hope for cheaper electricity being delivered to their homes or businesses from hereon.
Meanwhile, Lotilla stressed that aside from the strike of some circumtances that strain the power system, they believe that new capacities shall still come on stream by 2011. Given the three to five-year gestation period of power facilities, it is pointed that implementation of committed new projects shall already start this year.
Most of the expected capacity additions set forth in the DoE-devised power development program, however, are still indicative; which just meant that there is no firm commitment yet from investors to proceed with the facility’s construction.
Lotilla noted the government still gives preferential bias to natural gas as a fuel for future capacity; thus, it has been advancing discussions with Shell Philippines Exploration B.V. for additional gas production to run another 500-megawatt capacity.
"We’re looking at enough natural gas supply to support an additional 300 to 500 megawatts...The investments to be made would have to be determined at the technical levels, but discussions and exchanges are taking place on the natural gas requirements," he stressed.
By estimate, the country would need an annual investment of $ 1.0 billion annually to sustain reliable power supply in the next 10 years. (MMV)
posted by philpower @ 1:02 PM,
