School of EECE
EE71: EE Laws, Code and Ethics
Source:
Department of Energy
RA 9136: EPIRA Law
Prepared By:
Engr. John Christian Y. Nicdao
Disclaimer: This lecture notes is an intellectual property of
The Mapua University and its instructor who prepared this module/
Presentation and/or this material. Any unauthorized usage
or replication of this document is punishable by the Law of
The Philippine Government under the RA10173 or the
Data Privacy Act of 2012.
Disclaimer
This lecture notes is an intellectual property of The Mapua University and its
instructor who prepared this module/Presentation and/or this material. Any
unauthorized usage or replication of this document is punishable by the Law
of The Philippine Government under the RA10173 or the Data Privacy Act of
2012.
Introduction to the Philippine
Electricity Markets
Outline
1. WHOLESALE ELECTRICITY SPOT MARKET
OVERVIEW
2. RETAIL COMPETITION AND OPEN ACCESS
OVERVIEW
Wholesale Electricity Spot Market
Section 30 of RA 9136 (Electric Power Industry Reform Act)
Within one (1) year from the effectivity of this Act, the DOE shall establish a
wholesale electricity spot market composed of the wholesale electricity spot
market participants. The market shall provide the mechanism for identifying and
setting the price of actual variations from the quantities transacted under
contracts between sellers and purchasers of electricity
xxx
The wholesale electricity spot market shall be implemented by a market operator
in accordance with the wholesale electricity spot market rules. The market
operator shall be an autonomous group, to be constituted by DOE, with equitable
representation from electric power industry participants, initially under the
administrative supervision of the TRANSCO. The market operator shall undertake
the preparatory work and initial operation of the wholesale electricity spot market.
Not later than one (1) year after the implementation of the wholesale electricity
spot market, an independent entity shall be formed and the functions, assets and
liabilities of the market operator shall be transferred to such entity with the joint
endorsement of the DOE and the electric power industry participants. Thereafter,
the administrative supervision of the TRANSCO over such entity shall cease.
What is WESM?
Centralized venue for trading of large-scale buyers and sellers of electricity where pr
based on the interaction of demand and supply
MARKET OPERATOR
Wholes a le Electricity
Spot Market
joint endorsement of DOE and
electric power industry participants
last Feb 2018
INDEPENDENT MARKET
OPERATOR
Incorporated last
May 2018
WHY WE SM?
6
Why WESM?
“The new thrust is to tap private capital for the expansion and improvement of the industry a s the large government debt and
the highly capital-intensive character of the industry itself have long been acknowledged a s the critical constraints to the
program.To attract private investment, largely foreign, the jaded structure of the industry had to be addressed.” –
Freedom from Debt Coalition v s . ERC (2004)
• Provides an option for customers to buy electricity at a cheaper price
• Provides a venue of generators to sell their power outside Power
Supply Agreements (PSAs)
• Lowers barriers of entry for prospective investors in the energy
industry
• Transparency in the market results and prices for the information of
stakeholders, potential investors, and the public
315 MW
Average Merchant Plant
Production for 2019
2.58% BIOMAS S
64.50% HYDRO
9.69% S OLAR
8.04% COAL
7.13% NATURAL GAS
0.00% WIND
0.02% GEOTHERMAL
8.04% OIL-BAS ED
0.01% BATTERY
WE SM AND RCOA OVERVIEW
INTRODUCTION
W
Wholesale:Pertains to large quantities / volumes.
E
Electricity: Unique commodity being traded.
S
Spot:Transactions settled are only those that are not covered by contracts.
M
Market:A venue for buying and selling (trading) electricity.
07
WE SM AND RCOA OVERVIEW
ELECTRICITY AS A COMMODITY
Demand is highly variable.
Electricity is not economically storable.
Supply
Electricity must be generated when needed.
Demand
Supply and Demand must be balanced
at all times.
08
WE SM AND RCOA OVERVIEW
HOWELECTRICITY IS DELIVERED
Real-time power balancing
P ower P la nt
Wholesale
Electricity
Spot Market
Tra n sm is s ion Lines
(NGCP)
Electricity is traded by sellers (generators) and buyers (DU and other customers) in the
WESM prior to production and delivery.
Distribution Lines
(Distribution Utility)
Distribution Lines
(Distribution Utility)
Directly Connected
Customers
Embedded
Power Plants
End-Users
End-Users
09
WE SM AND RCOA OVERVIEW
HOWWESM AFFECTS ELECTRICITY RATES
Generators
- May also sell to the market -
Generation
Company
Power Supply Agreement (PSA)
- agreed contract rate -
Distribution
Utility
Spot Quantities
- WESM Price (changes every interval) WESM
Distribution Utility Monthly Bill
Generation
Charge
Blended Rate
- P S A and Spot Purchases -
010
WE SM AND RCOA OVERVIEW
WHOARE THE WESM PLAYERS
Trading Participants
Service Providers
Generation Companies
Ancillary Service Provider
System Operator
Network Service Provider
Metering Service Provider
Customers
Ancillary Service Provider
011
WE SM AND RCOA OVERVIEW
WHOARETHEWESM PLAYERS
Trading Participants
0.1%
Generation Companies
Scheduled Generating Unit - Nameplate rating is ≥ 0.1% of the peak load in a particular reserve region
Self - Scheduled Generators*
›
›
›
Non-scheduled Generating Unit – Nameplate rating is < 0.1% of the peak load or < 10% of the
size of interconnection facilities, whichever is lower in a particular reserve region
Must Dispatch Generating Unit – intermittent renewable energy resources, whether or not under
the FIT system
Priority Dispatch Generating Unit – uses biomass fuel, that is under the FIT system
At their option, may register a s Scheduled Generating Unit*
FIT = Feed-in Tariff
12
WE SM AND RCOA OVERVIEW
WHOARE THE WESM PLAYERS
Trading Participants
Customers
1. Distribution Utilities
a. Private Distribution Utility
b. Electric Cooperative
2. Bulk Users/End Users – Directly connected to the
grid
3. Retail Electricity Suppliers
4. Contestable Customers
13
WE SM AND RCOA OVERVIEW
HOWIS ELECTRICITY TRADED?
1
Generators submit
energy offers online
2
The Market Operator
(MO), IEMOP, m atches
the energy offers with
customer demand thru
the Market Management
System (MMS)
3
Prices of electricity and
schedules of generators
are determined using the
ERC-approved Price
Determination
Methodology (PDM)
14
WESM GUIDING
PRINCIPLES
WE SM AND RCOA OVERVIEW
WHATARE THE GUIDING PRINCIPLES OF WESM?
Gross Pool
Locational Marginal Pricing (LMP)
Net Settlement
Energy and Reserve Co-optimization*
Demand Bidding
Self-Commitment
*Not yet im plemented
16
WE SM AND RCOA OVERVIEW
GUIDING PRINCIPLES
OF WESM
GROSS POOL
All energy is traded through the WESM (i.e., mandatory
market) regardless of whether the trading participant is:
› Fully Contracted
› Partially Contracted
› Merchant
GENERATOR
TRADING
P ARTICIP ANTS
ENERGY OFFER FOR
FULL CAPACITIES
GENERATOR
DISPATCH
SCHEDULING
17
WE SM AND RCOA OVERVIEW
GUIDING PRINCIPLES
OF WESM
18
LMP at Market Trading Node
(PhP/kWh)
3.639
LOCATIONAL MARGINAL PRICING
(LMP)
Marginal price is computed at each node or
location in the power system to reflect cost of
transmission line loss or congestion, or both.
3.660
3.670
3.640
3.908
LOCATIONAL MARGINAL PRICE =
SYSTEM MARGINAL PRICE +
COST OF LOSS +
COS T OF CONGESTION
Today, there are
more than 600
market trading
nodes in the
WESM
3.645
3.895
3.760
3.740
WE SM AND RCOA OVERVIEW
GUIDING PRINCIPLES
OF WESM
NET SETTLEMENT
Only Spot Quantities are settled at market price
(i.e., LMP)
Note:
Spot Quantities are the energy (in MWh) not
covered by bilateral contracts between generators
and customers.
Spot Quantity
Total Energy
Generated or
Consumed
(based on
meter reading)
Bilateral
Contract
Quantity
Settled based on
WESM prices
Netted out of WESM
and settled outside
by counterparties
based on their
contract price
19
WE SM AND RCOA OVERVIEW
GUIDING PRINCIPLES
OFWESM
No Co-Optimization
Reserve
Capa cities
Optimization of Energy
Capacities
ENERGY AND RESERVE COOPTIMIZATION*
Energy and reserve schedules are jointly determined
under a single solution
Advantages of Co-optimization:
› All available capacities can be seen by the WESM
› Determination of optimal schedules and prices
between energy and reserves with the least
overall cost
› Mitigate artificial under-generation
Total
Capacities
Optimization of
Reserve Capacities
(Energy + Res erve)
With Co-Optimization
Co-optimization of
Energ y a nd Reserve
Capacities
*Not yet im plemented
20
WE SM AND RCOA OVERVIEW
21
GUIDING PRINCIPLES
OF WESM
(P/MWh)
Bids to Buy
DEMAND BIDDING
Loads may submit maximum price that
they are willing to pay.
Ma rket
Clearing
Price
Offers to Sell
(MW)
Dispatch Schedule
*Not being exercised in the market
Unscheduled
WE SM AND RCOA OVERVIEW
GUIDING PRINCIPLES
OF WESM
SELF-COMMITMENT
Trading participants are responsible for the
management of their technical operations, unit
commitment decisions and other market risks
through submission of offers to the WESM
TRADING
P ARTICIP ANT
ENERGY OFFER
22
DISPATCH SCHEDULING
AND PRICING
WE SM AND RCOA OVERVIEW
TRADING PROCESS OVERVIEW
Tra ding P a rticipant
Ma rket Operator
Ma rket Network Model
S ys tem Operator
Dema nd Foreca s t
Real-Time System Status
Offers a nd Bids
Individual Schedules
All S c hedules
Ma rket Ma nag ement
System
IEMOP runs the
Market Management System
to determine schedules and prices.
24
WE SM AND RCOA OVERVIEW
MERIT ORDERING PROCESS
PLANT OUTAGE
MERIT ORDERING
The process of ranking generation
capacities from the cheapest offer to the
highest offer.
PRICE
(P/M WH)
DECREASED DEMAND
DEMAND
OFFERS TOS ELL
MARKET CLEARING PRICE
MARKET CLEARING PRICE
MARG INA
PLA L
NT
QUANTITY
(MW)
25
WE SM AND RCOA OVERVIEW
MERIT ORDERING PROCESS
MERIT ORDERING
WITH PRICE TAKERS
PRICE
(P/ MWH)
The process of ranking generation
capacities from the cheapest offer to the
highest offer.
DEMAND
OFFERS TOSELL
MARKET CLEARINGPRICE
Price-takers (Self-Scheduled Generators)
include the following:
• Must-Dispatch Generators – Solar,
Wind, r-o-r hydro (FiT or non-FiT)
• Priority Dispatch Generatrors – FiT
Biomass
• Non-sc heduled Generators – Small
power plants
MARGINAL
PLANT
PRICE TAKERS
QUANTITY
(MW)
26
WE SM AND RCOA OVERVIEW
DETERMINATION OF PRICES ANDSCHEDULES
Tra nsm is s ion
System
EXAMPLE
Generator Offers
IPP A
200 MW
@ P 5.0 / kWh
IPP B
100 MW
@ P 2.0 / kWh
IPP C
300 MW
@ P 1.0 / kWh
IPP D
150 MW
@ P 3.5 / kWh
Offers to S ell
Demand
Price
(P/MWh)
Marginal
Plant
50 MW
@ P 3.0 / kWh
L
200 MW
L
100 MW
L
250 MW
Quantity (MW)
Scheduled to dispatch
Unscheduled
Other
cons iderations :
trans m is s ion
lim itations , real-time s ys tem s tatus
IPP E
Forecasted Demand
s ys tem
Generators are dispatched according to their offer
price from the cheapest to the most expensive
550 MW
27
WE SM AND RCOA OVERVIEW
DETERMINATION OF PRICES ANDSCHEDULES
Tra n sm is s ion
System
EXAMPLE
Generator Offers
IPP A
200 MW
@ P 5.0 / kWh
IPP B
100 MW
@ P 2.0 / kWh
IPP C
300 MW
@ P 1.0 / kWh
IPP D
150 MW
@ P 3.5 / kWh
Offers to S ell
Deman
d
Price
(P/MWh)
Market Clearing Price
Marginal
Plant
50 MW
@ P 3.0 / kWh
L
200 MW
L
100 MW
L
250 MW
Qu antity (MW)
Scheduled to dispatch
Unscheduled
Other cons iderations :
trans m is s ion
lim itations , real-time s ys tem s tatus
IPP E
Forecasted Demand
s ys tem
The Market Clearing Price (MCP) is set by the offer
price of the plant necessary to serve the demand
550 MW
28
WE SM AND RCOA OVERVIEW
DETERMINATION OF PRICES AND SCHEDULES
Ma rket Tra ding Node
Locational Marginal Pricing (LMP)
Locational marginal prices shall consider the marginal
price of generation, transmission losses and congestion,
and is represented a s follows:
Locational M arginal
Price
=
System Marginal
Price
+
Cost of
Loss
+
Cost of
Congestion
3.639
3.645
3.660
3.670
3.640
3.908
3.760
3.740
3.895
3.938
2.550
2.830
2.630
2.670
2.690
29
WE SM AND RCOA OVERVIEW
DETERMINATION OF PRICES AND SCHEDULES
Locational Marginal Pricing (LMP)
System Marginal Price
(SMP) – The price set
by the marginal
generator scheduled in
any interval or period.
System Demand
P rice (P /MWh)
System Marginal Price
G3
G1
G4
G2
Quantity (MW)
30
WE SM AND RCOA OVERVIEW
DETERMINATION OF PRICES AND SCHEDULES
Locational Marginal Pricing (LMP) - Cost of Losses
P 3,520 for every 50kg
Metro Ma nila
P 3,500 for every 50kg
B a guio City
Cost of Delivery = P 20 per 50kg
The cost of transporting the commodity (e.g. gas, toll) represents the cost of losses.
31
WE SM AND RCOA OVERVIEW
DETERMINATION OF PRICES AND SCHEDULES
Locational Marginal Pricing (LMP) - Cost of Congestion
P 4,520 for every 50kg
Constraint: NLEX was damaged and Baguio
can not serve all of Metro Manila’s demand
Metro Ma nila
P 3,500 for every 50kg
B a guio City
Additional Cost Resulting from
Constraint = P 1,000
The additional cost of sourcing the
commodity from more expensive
sources due to constraints
represents the cost of congestion.
Metro Manila would have to
source from another place:
P 4,500 for every 50 kg
Quezon
32
WE SM AND RCOA OVERVIEW
33
DETERMINATION OF PRICES AND SCHEDULES
IPP D
Locational Marginal Pricing (LMP)
P 3,500 / MWh
IP P D
Metro Manila
S M P = P 3,500 /M Wh
P 3,510 / MWh
S outh Luzon
P 4,520 / MWh
Congestion
LMP in South
=
Luzon
=
System
Marginal Price
3,500
+
Cost of
Loss
+
Cost of
Congestion
+
20
+
1,000
LMP in South Luzon = P4,520/MWh
02 RETAIL COMPETITION AND
OPENACCESS OVERVIEW
WE SM AND RCOA OVERVIEW
POWER INDUSTRY SECTORS
EPIRA Sec. 30
(Wholesale)
EPIRA Sec. 31
(Retail)
GENERATION
TRANSMISSION
DISTRIBUTION
S UPP LY
35
WE SM AND RCOA OVERVIEW
WHOLESALE AND RETAIL MARKET
WHOLESALE
P ower P la nt
Distribution Lines
(Distribution Utility)
RETAIL
Tra n sm is s ion Lines
(NGCP)
Distribution Lines
(Distribution Utility)
Directly Connected
Customers
Embedded
Power Plants
End-Us ers
End-Users
36
WE SM AND RCOA OVERVIEW
BEFORE RETAIL COMPETITION
Distribution
Transmission
Charges
All transactions
go through the DUs
Transmission
Spot
Pay ment
Generation
Charges
Generation
All Customers
Spot
Pay ment
37
WE SM AND RCOA OVERVIEW
WITHRETAIL COMPETITION
Transm ission
Charges
Customers
(Captive)
Distribution
Trans m is s ion
Spot
P aym ent
Generation
Charges
Transact in the WESM
Generation
Spot
P aym ent
Generation Charges
Contestable
Customers
DU Charges
Spot
P aym ent
Transact through a Supplier
Retail Electricity Suppliers
38
WE SM AND RCOA OVERVIEW
IMPACT ONELECTRICITY COSTS
Primary impact of retail
competition is on the
generation charge in your
bills
Transmission and distribution
costs are regulated by the ERC
39
WE SM AND RCOA OVERVIEW
40
POWER OF CHOICE
Without Retail Competition
With Retail Competition
Electricity cost based on
negotiated terms with suppliers
Electricity cost
based on DU
contracts and supply
management – all
costs are pass-on
References:
WWW.IEMOP.PH | INFO@IEMOP.PH |
@IEMOPINFO
https://www.wesm.ph/