Archive for August, 2016:
The Ultimate Solution to High Electricity Costs in the Philippines
Further to my previous blog on How to Reduce Electricity Costs, the following discussion will present the Ultimate Solution to reducing Philippine electricity costs – the highest rate in Asia.
The yardstick for comparing the various technologies of unequal lifetimes and capacity is the levelized cost of energy (LCOE) also called the long run marginal cost (LRMC) which is the sum of annualized capital cost, fixed O&M, variable O&M and fuel/lube costs. On the other hand, the short run marginal cost (SRMC) is the sum of all variable O&M and fuel/lube costs. The LRMC is used in long-term least cost capacity expansion planning by the DOE while the SRMC is used in short-term optimal dispatch such as the WESM hourly dispatch by the market operator (PEMC).
The LCOE or LRMC and SRMC may be computed using a simple cost formula developed by US NREL or by yours truly (RP MTO price formula – the grossed-up US NREL cost formula that considers depreciation and income tax rate). Download this file for data and formulas:
However, in this presentation below, I used the more accurate project finance model similar to the NREB project finance model template approved by the ERC to calculate the first year tariff, LRMC, SRMC, equity and project IRR, NPV and PAYBACK, and DSCR (min, ave, max).
Why Philippine Electricity Reserves are always not adequate?
This is a question perennially asked by ordinary citizens, businessmen, investors, and now legislators. It is happening as if no one is minding the store.
Well, I have some ideas that will open our eyes on the real score.
We lack power reserves, the difference between peak demand and dependable capacity. The key word is dependable capacity, and not installed capacity.
Adequate power reserves are needed so that in the event that the largest single unit in the grid goes off-line, these back-up power reserves kick in with sufficient ramp-up rate to prop-up the supply immediately so that the grid remains stable and does not go into load-dropping mode to equalize supply with demand. More »