By Myrna M. Velasco
Energy Secretary Alfonso G. Cusi has formally corresponded with power utility giant Manila Electric Company (Meralco) directing it to ensure that it can guarantee ample power supply in next year’s summer months and in the long term.
Energy Secretary Alfonso G. Cusi (Source: https://www.bloomberg.com)
“I have written Meralco. I’m asking them on what are their measures to make sure they can cope with the increase in demand – and there is assurance of supply in the summer months and in the coming years,” the energy chief told reporters.
Cusi qualified the major question he raised to the utility firm is on how it can “cover for the increased demand in its franchise area.”
He emphasized the energy department is avoiding the recurrence of a power system reaching breaking points during summer months – when consumers had to be plunged into unwanted double whammy of rolling power outages and electricity rate hikes due to tight supply conditions in the grid.
The energy chief averred that hike in electricity demand in the country presents both bad and good prospects – with him qualifying that it is “good” because “it means that the economy is improving.”
Conversely, Cusi asserted that such scenario is also seen “bad” or ominous because this entails that the project developers and sponsors should act fast on “building up capacity and that is not easy.”
Based on industry forecasts, power supply-demand equilibrium will overwhelm Luzon grid again by year 2022-2023; and at this point, there are no new big-ticket projects that are ready to take off from blueprints yet to satiate the country’s longer term energy needs.
And even in the competitive selection process (CSP) being scheduled for Meralco, there is no specific parameter on how it can entice new capacity addition – especially so since the mandate of the DOE is to set off a contest between brownfield and greenfield (new) capacities, which by design are of differing project economics.
Cusi, at the very least, has sounded off that “we want to promote early construction of power plants,” but the formula he has been batting for is “merchant” development of power projects and not exactly those that shall be covered by power supply agreements (PSAs) at pre-construction phase.
Project lenders, however, are not very keen at supporting new builds because determining revenue stream for capacities without definite markets or PSAs poses market risks that they are not very comfortable yet to deal with.
Cusi stressed “we want those constructed ahead as merchants to be able to participate in the CSP…we want to encourage power plants to be constructed ahead of time even without PSA.”
In the next round of CSP being slated by Meralco for 1,200-megawatt capacity, the energy department proposed that the terms of reference be relaxed – that PSA solicitation shall not just include new plants but also the existing ones; and that the capacity be done on aggregation and not just one plant with that scale of installation.