The Independent Electricity Market Operator of the Philippines (IEMOP) reported an increase in the average electricity prices in October due to a slight hike in demand.
During a media briefing on Tuesday, Nov. 5, the IEMOP noted that last month saw a significant increase in the Wholesale Electricity Spot Market (WESM) operations, specifically in demand and value across Luzon, Visayas, and Mindanao.
The market operator said that Luzon prices grew month-on-month growth from P3.8 per kilowatt hour (kWh) to P3.89 per kWh. Visayas prices went up from P4.56 per kWh to P5.93 per kWh, while Mindanao’s average electricity value rose to P5.20 per kWh from P3.48 in September.
Chris Warren Manalo, IEMOP’s Assistant Manager for Market Simulations and Analysis, explained that this minimal price hike was caused by a demand increment especially with the holiday season fast approaching.
While demand has increased due to the season, Manalo hoped it would decrease as colder weather sets in, as it typically reduces electricity use. He also said, “There should be an improvement in supply, and prices are expected to stabilize around P4.00.”
In October, Luzon saw 9,915 megawatts (MW) in its average demand from 9,746 MW in the previous month. The average demand in Visayas also saw a growth from 1,995 MW to 2,003 MW; while Mindanao increased to 2,054 MW from 1,999 MW.
As of September, Luzon had a peak of 12,551 MW, Visayas at 2,549 MW, while Mindanao recorded 2,609 MW in its average peak in October.
Meanwhile, hydro-based technologies in Luzon and Mindanao have dominated the reserve market, while Visayas continues to rely on oil-based power.
“This capacity mix influenced the regional prices, with higher costs for regulation, contingency, and dispatchable reserves in Visayas,” IEMOP explained.
It noted that, “With the resumption of commercial operation of the reserve market on August 5, 2024, the reserve requirements set by the Grid Code were met, with the exception of Visayas for certain trading dates due to deficit in regulation reserves.”
Prior to this, the available capacity sometimes fell short of its required levels, and because of this, the scheduling of uncontracted capacity or capacity not covered by the Ancillary Services Procurement Agreement (ASPA) became necessary in order to retain the grid’s reliability, security, and stability.
The IEMOP further said that grid reliability comes with a price. This is reflected in the zonal prices for each reserve type and region.
The market operator added that high zonal prices usually indicate reserve shortages and the use of more expensive power plants like oil-based power to meet the reserve market requirements.
“Lower WESM average price is expected with a stable supply and improved demand situation as the colder months approach. IEMOP will continue to closely monitor supply, demand, and prices in the coming months,” it said.