The operator of the Wholesale Electricity Spot Market (WESM) announced to power industry players that a shift to 5-minute trading interval, from currently at one-hour dispatch interval, will “go live” by December 26 this year.
With a change to the shorter trading interval, Independent Electricity Market Operator of the Philippines (IEMOP) President Richard Nethercott said “we hope to keep up the pace and sustain the momentum of enhancement consistent with our commitment to provide market participants and stakeholders with efficient, reliable and transparent market management.”
One key transformation in WESM trading that the industry will have to grapple with shall include: a “one price offer” in every duration of 5-minute trading instead of the two-tiered pricing offers that traditionally roped in ex-ante or price based on forecast; and then ex-post or the price based on actual results in the trading which also accounts for market imbalances.
IEMOP Chief Corporate Strategy and Communications Officer Isidro E. Cacho Jr. explained that there will be major modifications in the algorithm of the new market management system (NMMS) of the WESM, because with the 5-minute dispatch interval in trading “there will be no more gate closure as to when offers shall be accommodated, and we will just also have one-settlement …no more ex-ante and ex-post settlements.”
In the existing WESM set-up, ex-ante offer is based on forecast demand, while ex-post is referenced on actual demand. From these, the price is determined using the same set of offers. In the settlement process, the ex-ante price takes reference on the megawatt-schedule less the bilateral contract quantities (BCQs); while in ex-post, it uses metered quantity minus the megawatt- schedule.
On the discarded gate closure, Cacho noted that technically there would still be latitude of at least a minute, factoring in “latency” in the transmission of data, or the warranted constraint or delay before a transfer of data begins following an instruction of data transfer from a market participant.
Even the pricing for PMin or the minimum stable load of a power plant that used to be a requirement in the WESM offers shall also be scrapped, he said, and pricing offer competition now starts with the first megawatt that a trader-generation company will be offering in the market.
The overarching goal of the 5-minute interval spot market, Cacho stressed, will be to institutionalize more efficient and competitive pricing that in turn could spur investments for additional power capacity in the country.
He emphasized that the electricity spot market’s shift to new MMS will require changes in the WESM Rules, then the price algorithm plus the billing and settlement systems. The new MMS hardware, in particular, has been designed to be for that trading interval, so the market can accommodate the offers at a faster pace.
“The objective is to make the market more efficient and more competitive, meaning, the participants themselves can trade more efficiently. With this 5-minute dispatch, the computation of offers from participants will turn out simpler because ex-post prices or imbalances will no longer be there,” the IEMOP executive explained.
For the longer term, he stressed that a spot market thriving on efficient pricing could be seen as stimulus for investment flows in the energy sector. “This is really geared at attracting investments, so in the long-term what that means is security of supply to the end-users,” Cacho said.