Power spot market starts operation today
The Philippine Star
06/23/2006
The country’s wholesale electricity spot market (WESM) will start virtual commercial operations today, Philippine Electricity Market Corp. (PEMC) president Lasse Holopainen said, in time with the fifth-year anniversary of the passage of the Electric Power Industry Reform Act (EPIRA) of 2001.
Energy Secretary Raphael P.M. Lotilla said PEMC had actually commenced with its test live dispatch operation (LDO) last June 19 with 25 registered generators and 170 customers consisting of private utilities, rural electric cooperatives, industrial and commercial companies, and government offices.
"The new dynamic and competitive market would surely necessitate adjustment in the way we do business in order to complement and meet the requirements of various clients and stakeholders," Lotilla said. "Despite many challenges, quality of service should not be compromised but instead we should continue to provide better performance, surpassing mediocrity and recklessness in decision-making," he said.
The WESM is the second electricity spot market in the region after Singapore, and the first in a developing Asian country.
When the PEMC, the WESM’s operator and governing body, was established two and a half years ago by the Department of Energy and industry representatives, many observers expressed doubts as to whether the Philippines had the economic and technical expertise as well as the political will to implement the much needed reform measure successfully.
Holopainen, however, noted that over the last two years, the establishment of the WESM had been on-time and on-budget.
In the process of developing the market, the PEMC has also set new international benchmarks for development costs as well as market design and implementation.
The WESM, once operational, will cost generators 1.3 centavos per kilowatthour (kwh), a fraction of the charges of any other electricity market in the world. The WESM is also designed as a locational marginal pricing (LMP) market, considered the most modern and accurate of market designs. A LMP market tracks the true economic cost of electricity to 600 points of delivery in Luzon and the Visayas.
"This design allows for complete pricing transparency and unprecedented efficiency in the dispatch of generation assets, allowing policy makers, industry players and observers real-time information to make decisions," Holopainen said.
Under the WESM set-up, electricity is offered and bought on an hourly basis, with the price of electricity reflecting the true cost of power at each interval.
This set-up should allow for the appropriate response from electricity users that will not only lead to short-term efficiency gains, but also a more robust industry in the longer-term. "Other electricity markets, such as PJM in the US, have achieved generator efficiency gains of up to 35 percent," Holopainen said.
Holopainen said the WESM will have a fundamental impact on electricity reserve costs, generator costs, demand-side management as well as privatization of government assets and future greenfield power plant projects.
"The country as a whole benefits from the competitive pressure and market discipline the WESM brings to the industry," he added.
06/23/2006
The country’s wholesale electricity spot market (WESM) will start virtual commercial operations today, Philippine Electricity Market Corp. (PEMC) president Lasse Holopainen said, in time with the fifth-year anniversary of the passage of the Electric Power Industry Reform Act (EPIRA) of 2001.
Energy Secretary Raphael P.M. Lotilla said PEMC had actually commenced with its test live dispatch operation (LDO) last June 19 with 25 registered generators and 170 customers consisting of private utilities, rural electric cooperatives, industrial and commercial companies, and government offices.
"The new dynamic and competitive market would surely necessitate adjustment in the way we do business in order to complement and meet the requirements of various clients and stakeholders," Lotilla said. "Despite many challenges, quality of service should not be compromised but instead we should continue to provide better performance, surpassing mediocrity and recklessness in decision-making," he said.
The WESM is the second electricity spot market in the region after Singapore, and the first in a developing Asian country.
When the PEMC, the WESM’s operator and governing body, was established two and a half years ago by the Department of Energy and industry representatives, many observers expressed doubts as to whether the Philippines had the economic and technical expertise as well as the political will to implement the much needed reform measure successfully.
Holopainen, however, noted that over the last two years, the establishment of the WESM had been on-time and on-budget.
In the process of developing the market, the PEMC has also set new international benchmarks for development costs as well as market design and implementation.
The WESM, once operational, will cost generators 1.3 centavos per kilowatthour (kwh), a fraction of the charges of any other electricity market in the world. The WESM is also designed as a locational marginal pricing (LMP) market, considered the most modern and accurate of market designs. A LMP market tracks the true economic cost of electricity to 600 points of delivery in Luzon and the Visayas.
"This design allows for complete pricing transparency and unprecedented efficiency in the dispatch of generation assets, allowing policy makers, industry players and observers real-time information to make decisions," Holopainen said.
Under the WESM set-up, electricity is offered and bought on an hourly basis, with the price of electricity reflecting the true cost of power at each interval.
This set-up should allow for the appropriate response from electricity users that will not only lead to short-term efficiency gains, but also a more robust industry in the longer-term. "Other electricity markets, such as PJM in the US, have achieved generator efficiency gains of up to 35 percent," Holopainen said.
Holopainen said the WESM will have a fundamental impact on electricity reserve costs, generator costs, demand-side management as well as privatization of government assets and future greenfield power plant projects.
"The country as a whole benefits from the competitive pressure and market discipline the WESM brings to the industry," he added.
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