IEMOP sets stage for reserve market

The Independent Electricity Market Operator of the Philippines Inc., or IEMOP, the operator of the Wholesale Electricity Spot Market, or WESM, had set 26 December to launch the Reserve Market which will trade supply commitments from electricity producers.

IEMOP said the Department of Energy, or DoE, and the Energy Regulatory Commission, or ERC, have issued the green light following the issuance of DoE Department Circular DC2023-09-0026 and the ERC's interim approval of the Reserve Market Price Determination Methodology.

The Reserve Market launch would feature the collaboration among DoE, ERC, IEMOP, Philippine Electricity Market Corporation, National Grid Corporation of the Philippines, and market participants to make the WESM more competitive and transparent, according to the IEMOP statement.

IEMOP said modern grids' increasing complexity and expanding role in the electricity market require a system capable of promptly addressing imbalances.

The reserves, specifically the "Frequency Control Ancillary Services," are the main products that will be traded in the Reserve Market.

These services provide a backup to ensure a reliable and stable supply of electricity by balancing power generation and consumption that can be tapped during sudden outages and as standby electricity.
The Reserve Market provides a venue for ancillary service providers, or ASPs, to offer their capacities.

Buyers of electricity can optimize reserve offers with supply deals to determine the best mix for competitive electricity prices.

IEMOP enumerated the key benefits of the Reserve Market:
•Co-optimization referring to the simultaneous optimization of multiple electricity services to get the best capacity mix at the most affordable price while maximizing resource use.

•Dynamic reserve requirement refers to a flexible approach to determining the amount of reserve capacity required at any given time, based on real-time conditions, rather than a fixed or static amount.

By not keeping a higher-than-necessary fixed reserve, costs can be determined efficiently and, thus, will benefit end-users in terms of electricity prices. This would also allow the grid to adapt to changes quickly. By adjusting reserves based on real-time conditions, there's a reduced risk of blackouts or other power disruptions;

•Single buyer mode in which the central procurement by the system operator simplifies operations and streamlines coordination. Having a single buyer provides an efficient procurement of reserves, thus ensuring the most effective mix of reserve products. It also ensures more consistent procurement practices; and

•Settlement net of contracted reserves means that settlement of reserve transactions in the WESM considers the netting out of the reserve capacities contracted by the system operator.

The contracted capacities are paid by the System Operator based on their ancillary service procurement agreements, while the difference between the scheduled and contracted reserve capacity is settled using the reserve market price. This ensures that the reserve market adopts a "gross pool and net settlement" model like the energy market.

The commercial launch of the Reserve Market would first involve the final preparations stage from the end of September 2023 until 25 December 2023, wherein the market, the system operators, and the registered ancillary service providers will conduct a series of trial runs. Transactions incurred will not be binding for settlement.

Full commercial operations are set on 26 December wherein the Reserve Market's schedules and prices will become financially binding.

Ultimately, the launch of the commercial operation of the Reserve Market heralds a new era of grid reliability and competitive power supply procurement toward the goal of attaining inclusive and equitable economic growth for every Filipino, according to IEMOP.