THE Department of Energy (DoE) wants the volume of electricity traded on the spot market to increase by encouraging more private entities to put up merchant power plants, or those without an approved power supply agreement (PSA).
“Our objective is to increase the volume (share) of the spot market to 20%,… so there will really be a supply and demand play, there will be real demand and supply interaction,” Energy Secretary Alfonso G. Cusi told reporters.
Mr. Cusi said he was pinning his optimism on China putting up coal-fired power plants in the Philippines as “merchants” or power generators whose energy output is traded at the electricity spot market.
In May, he said he asked China that instead of extending grants, it should urge Chinese companies to come to the country and build power plants. He said companies came over to study the market and were initially looking to build four coal-fired power plants in Luzon and the Visayas with a total capacity of 1,500 megawatts (MW).
“I hope that when [China’s] President Xi Jinping arrives this November, he will have — hopefully, I’m not saying he will — good news for us that there will really be these power plants that will be put up in the Philippines,” Mr. Cusi said.
He said the merchant plants may opt to enter into PSAs later, but in the near term he prefers them to trade their output at the spot market. He had said that PSAs had tied consumers to high power prices in long-term contracts.
“What is the use of the spot market or the WESM (Wholesale Electricity Spot Market) if all the supply is already contracted,” he said.
Mr. Cusi said he understands that it would be hard for a power developer to build a plant without a PSA “because of bankability,” referring to the requirement of lenders that plant builders obtain a signed power supply contract before providing project financing. A PSA ensures a steady stream of revenue, assuring loan repayment.
During the discussions he had with China’s National Energy Administration, the parties signed a memorandum of understanding for a draft a master plan for the country’s power distribution and transmission sectors.
The talks took place during the bilateral meetings during President Rodrigo R. Duterte’s visit to China in April for the Boao Forum for Asia in Hainan province. — Victor V. Saulon