Analysis of the Visayas Power Situation

Recent newspaper reports indicated that the Department of Energy (DOE) has deferred the launching of the commercial operations of Wholesale Electricity Spot Market (WESM) in the Visayas region due to the report of an Australian firm, Intelligent Energy Systems (IES) (http://www.philstar.com/archives.php?aid=200804157&type=2&). IES was commissioned by DOE to assess the readiness of the said region in having an electricity market operation.

IES reports the following:

• Visayas region is not ready to have its own electricity market due to the inadequacy of power supply.
• Upgrading of transmission lines as one of the remedial measures to prevent any power shortages or interruptions.
• Market participants must have long-term contracts for their power supply.
• The estimated peak demand for Visayas is 1300MW while the available generation capacity is 1700MW plus the High Voltage Direct Current (HVDC) link output of 150MW.
• Visayas is suffering from scarce of generation reserves.
• Involuntary load shedding or manual interruption of power is practiced regularly in the Visayas grid.

Here are my thoughts based on the newspapers’ and news websites’ reports:

1. Inadequacy of generation is one main reason why an electricity market should not be established. DOE knows this even beforehand since they report power statistics in their website (http://www.doe.gov.ph/EP/Powerstat.htm). Electricity market brings competition to the generation sector thus with scarce of power supply this will not be true further.
2. Upgrading of existing transmission lines to prevent power shortages may fall short to solve the problem. Imagine having a two bus system with a transmission line of good capacity where the amount of load is almost equal to the generation. Here’s the scenario, if some of the generation may be out for maintenance or some plant trouble, then reserves is not sufficient and may impact the reliability and quality of supply at the loads. If we add another transmission line this will increase the transfer capability of generation to the load but will not increase the amount of generation and reserves since the system is out of power generation! Though generation competition requires transmission capacity, this does not solve generation scarcity in the Visayas grid.
3. Long term contracts will freeze the electricity price whether in a market situation or regulated conditions. This is a good approach for hedging in markets.
4. The evaluation of the real power generation (MW) is a welcome approach but may not be complete since reactive power (MVAR) should be integrated. Visayas grid suffers from voltage problems with generation deficit plus insufficient MVAR sources. Note that the 1700MW generation can help to provide MVARs but having mostly 69kV systems, in case of Visayas, this reactive power may be not enough.
5. Reserves are needed for operating a power system. These are resources that can be relied upon in the event the power system experiences untoward disturbance. In an electricity market, these resources are allocated and paid accordingly. Having insufficient reserves will fail the spirit of competition in an electricity market.
6. Load shedding or dropping may be cause by underfrequency or undervoltage. This is a result of under generation. Payment to the dropped loads must be given since they help out in alleviating operational constraints in the Visayas grid. Loads that are shed are acting as “reserves” in this case, so incentives must be attributed to them.

Overall, to solve the Visayas power situation, the regulation and politics of power generation investment in the Philippines must be set aside. Generation sector is a competitive business; the energy regulator must keep itself from a distance with the power generation business. Cross-ownership in the power sector must be seriously looked into since this will impact incoming generation investments. The government must show its integrity and strong support to generation investments and keep its hands clean toward unwanted corruption in the electric power industry.