Filipino consumers save P18.7 B on RE’s priority dispatch

By Myrna M. Velasco – Updated May 24, 2018, 10:49 AM
from Manila Bulletin

Filipino consumers were able to save P18.7 billion or an equivalent P0.087 per kilowatt-hour (kWh) net reduction in their electric bills due to the “priority dispatch” of renewable energy (RE) sources in the Wholesale Electricity Spot Market (WESM), which intrinsically warranted system avoidance of utilizing more costly power plants.

According to WESM operator Philippine Electricity Market Corporation, the cost savings had been due to the “merit order effect” of RE sources’ preferential dispatch call in the market. The figure references were reckoned from November 2014, when the feed-in-tariff incentive scheme kicked off, until August 2017.

PEMC specified that because of the cheaper RE rates first scheduled in the dispatch order, the total reduction in WESM rates had been calculated at P44.3 billion or an average reduction of R0.205 per kWh.

However, as feed-in-tariff allowance (FIT-All) charges amounting to P25.6 billion had also been passed on to consumers, the resulting cost reduction for the period had been pared by P0.119 per kWh.

If based on WESM prices alone, it was emphasized that rate reduction hovered at P1.47 per kilowatt-hour – with PEMC simulating that WESM prices on merit order without FIT could have been at P5.02 per kWh; while spot prices on merit order with FIT had been at P3.55 per kWh.

A “merit order effect” refers to a mechanism wherein lowering of prices at the electricity spot market is achieved due to increased supply of renewable energy sources in the power system.

In having a “priority dispatch policy,” RE will be first on the schedule of plants to be utilized before all the other generation will be made available in the system – starting from the cheapest to the most expensive plants.

PEMC explained that because of the RE technologies – that also often thrive on cheaper-priced offers at the spot market – they normally dislodge other costlier technologies in the order of utilization or dispatch call.

In the review timeframe, there were 1,064 megawatts of qualified RE capacities being traded in the WESM – comprising of 427MW wind; 431MW solar; 28MW of hydro and 179MW biomass.

Within the specified review period of the WESM cost savings calculation, the spot quantity had been placed at 16 percent; while capacities on contract accounted for 84 percent.