Grid constraints shut Visayas out of cheaper

Grid constraints shut Visayas out of cheaper | Daily Tribune

The price spike came as forced outages squeezed supply in the Visayas while constraints on the Luzon-Visayas High Voltage Direct Current (HVDC) interconnection restricted access to additional lower-cost generation from Luzon.

Price separation between Luzon and the Visayas occurred during 85.9 percent of the August billing period, sharply higher than 46.4 percent in July, while the interconnection operated at security-limited levels for about 80.3 percent of the period.

Although cheaper Luzon generation continued to supply part of Visayas demand, high transfers increased loading on the Leyte-Cebu interconnection facilities, requiring limits to maintain grid security.

IEMOP said the constraints reduced the amount of additional lower-cost Luzon power that could reach the Visayas, increasing dependence on available local generation, including more expensive oil-based plants and battery resources.

“August showed how regional conditions can differ significantly from the national supply picture. While Luzon maintained adequate supply margins, the Visayas experienced generation deficiencies due to forced outages, tighter supply margins, and transmission constraints that limited access to additional lower-cost power.

These conditions increased reliance on higher-cost oil-based plants and battery resources to meet demand, pushing market prices significantly higher,” IEMOP said.

The transmission bottleneck compounded an already tight supply situation in the Visayas, where average available supply fell 2.6 percent to 2,201 megawatts (MW) while demand edged up to 2,094 MW.

After accounting for reserve requirements and inter-regional transfers, the region’s average supply margin plunged to just 62 MW in August from 252 MW in July.

Forced outages further strained the grid, prompting the system operator to declare 86 hours of Yellow Alert and 53 hours of Red Alert during the billing period. Sub-regional average prices consequently ranged from P18.44 per kWh in Leyte-Samar to P18.71 per kWh in Cebu.

The regional squeeze contrasted sharply with Luzon, where the average WESM price declined to P4.80 per kWh from P7.30 per kWh as demand fell substantially and sufficient generation remained available despite several plant outages. Luzon’s supply margin increased by 632 MW.

Mindanao also faced higher prices, with its average WESM price jumping to P19.56 per kWh from P10.39 per kWh as available supply declined and demand increased.

Its average supply margin narrowed to 317 MW from 570 MW, increasing the need for higher-cost generating resources.

Higher WESM prices, however, will not necessarily translate into an equivalent increase in consumers’ electricity bills.

Spot-market transactions accounted for about 13.4 percent of total metered energy system-wide during the August billing period, while bilateral contracts represented 86.6 percent.

IEMOP said the actual impact on consumers will depend largely on the mix of bilateral contracts and WESM purchases of their distribution utility, electric cooperative, or supplier, as well as other generation and regulated charges.

Several price-mitigation mechanisms were applied during the period amid the tight market conditions. Administered pricing was imposed during certain intervals in the Visayas, while the Secondary Price Cap was triggered during some trading intervals across the three grids.