NGCP to hold public auction for ancillary services—exec

BY LENIE LECTURA – JUNE 17, 2021
from Business Mirror

THE National Grid Corporation of the Philippines (NGCP) has committed to conduct a competitive bidding process for its ancillary services (AS) requirement to help meet the objectives of the government and secure the best value for power consumers.

Ancillary services are support services needed to maintain power quality, reliability and security of the grid.

“We want to guarantee the best pricing for AS, especially since this is a pass-on cost to consumers. With an open and public bidding process, we ensure full transparency and comply with internal governance imperative of accountability, which all our stakeholders deserve,” NGCP President Anthony Almeda said Wednesday.

NGCP did not say when it could commence the competitive auction. Once done, this would have to be approved by the Energy Regulatory Commission (ERC).

However, the company said procuring AS on either firm or non-firm basis is not a solution to the recurring brownouts in the country.

“What we have is a supply and not a distribution problem. For the grid to effectively address imbalances between supply and demand, we need to increase the power capacity of the country to meet rising demand as we start to recover and fully reopen the economy,” Almeda added.

The Department of Energy (DOE) has already issued a circular governing the procurement of firm AS contracts to help secure the availability of power services during untoward occurrences, such as the simultaneous plant outages and “derating” incidents—which led to the series of red and yellow alerts last May 31 and June 1.

Under Department Circular (DC) DC2019-12-0018, “Adopting a General Framework Governing the Provision and Utilization of Ancillary Services in the Grid”, the NGCP is mandated to procure 100 percent firm power reserves, as well as engage in the forward contracting of reserve requirements to ensure grid reliability.

Almeda said the firm contracting being insisted by the DOE will not “result in additional supply; it will only lead to a change in payment terms where all power, used or unused, will have to be shouldered by the public.”

This take-or-pay arrangement, he added, would only lead to higher electricity cost for consumers.

The NGCP noted that very little progress has been made in developing new energy sources as existing power facilities age and outputs decline.

The annual power consumption in the Philippines is expected to grow by 14.09 percent from pre-Covid-19 levels in 2019 to 2021, when economic activity is expected to catch up and normalize.

‘Vital resource’

A group of power firms on Wednesday stressed an urgent need to fill in the AS requirement of the transmission grid.

On top of this, the Philippine Independent Power Producers Association, Inc. (PIPPA) said this requirement should be complemented with additional capacity coming from new power plants.

“This combination will ensure that the impact of forced outages will be minimal or, at a best case scenario, no blackouts. We eagerly wait for the completion and expedited processing of transmission and connection facilities,” PIPPA said in a statement.

Apart from the DOE circular on AS contracts, the Independent Electricity Market Operator of the Philippines also said it would soon introduce the Reserve Market (RM) to attract investors to put up facilities to cater the requirement for AS.

Under the proposed RM, all generators will offer capacity for energy and reserves to be dispatched by the WESM. This allows investment signals for AS.

PIPPA said it fully supports the policies that will result in stability, security and reliability in the energy system.

The group also said that it awaits the grid interconnection between Mindanao and Luzon as there is currently an oversupply of energy that can be tapped and transported.

“By linking the three grids and with firm contracting as per the mandate of the DOE, we can be confident that we have investors entertaining the build of new plants.”

The solutions, it added, should focus on compliance, security and reliability as each industry sector places a vital role in ensuring continuous nation building and recovery. “Energy is, after all, a vital resource , and it needs to be protected.”