Why Philippine Electricity Reserves are always not adequate?

August 5th, 2016 Posted in optimal load dispatch

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.

Having a capacity surplus, as measured by the difference between peak demand and installed capacity, is not a guarantee that there would be no expensive rotating outage in any part of the country, or in any of the 3 major island grids – Luzon, Visayas and Mindanao.

When an ageing power plant approaches its economic life, it faces not only maintenance problems, obsolescence and frequent breakdowns, but contributes nothing to dependable capacity. The old power plant is just there contributing energy (MWh or kWh), but not contributing dependable capacity (MW or kW).

Thus, when no new plants are built on time to replace these ageing, unreliable, inefficient and costly power plants, the public suffers in terms of high power and energy costs, but also economic losses such as foregone production, lost sales, traffic grid locks when traffic lights conk out, and industry and other commercial establishments as well as government pays salaries and wages with no commensurate productivity from the idle workers and public servants.

Such losses can be estimated from the GNP or GDP output of the country per unit installed or dependable capacity (MW, kW) as well as per unit energy generation (MWh, kWh).

So if we know the MW deficiency or the undelivered MWh, then we can estimate the GNP or GDP lost from the entire Philippine Economy.

So how do we effectively put an end to this infrastructure deficiency in our country?

Well, let me suggest a few things.

The first thing to do is to make a complete inventory of our installed power generation capacity, and classify them according to remaining economic life – the difference between expected economic life and current plant age. This can be determined by knowing when the power plant was built and commissioned (started commercial operation) and the current date today.

The second step is to determine its installed as well as dependable capacity, as well as its capability to operate for prolonged periods when needed.

The third step is to know the maintenance schedule of all power plants – both old and new so we know at any time how much installed and dependable capacity is available for dispatch to meet electricity demand and energy.

Naturally, as part of economic and power planning, the peak demand (MW, kW) at any time of the year (what month, day and hour it occurs), the average demand and thus energy demand (MWh, kWh) are also forecasted in the short-term, medium-term and long-term so that new power plants are built to meet growing peak demand and energy demand.

New power plant construction are usually proposed by power developers and planning agencies (DOE, NREB, NEA, ERC, TRANSCO, NGCP, IPPs, DUs, ECs, LGUs) and part of Power Development Plan (DOE PDP), Distribution Development Plan (NEA DDP), Transmission Development Plant (NGCP TDP), etc. for integration into the Philippine Energy Plan (DOE PEP).

When a power plant project is being planned, it is normally classified as Indicative Power Project by the DOE. Then once financial closure and funds are obtained, it becomes a Committed Power Project and is ready for start of construction, leading to plant trials, acceptance testing, regulatory approval, commissioning and commercial operation.

However, the critical step is the planning stage being orchestrated by the responsible government agencies in coordination with the private stakeholders.

The way the planning tools are run – such as the short-term optimal load dispatch LP program being performed in the WESM by the Market Operator (PEMC) as well as the long-term least cost capacity expansion planning being performed by the DOE using tools such as the MESSENGER (previously WASP) provided by the International Energy Agency (IEA) and optimized using LP problem solving tools such as the IBM CPLEX or GUROBI which solves complex Mixed Integer Linear Programming (MILP) problems using the Integer Simplex Algorithm – need to be scrutinized further as this is where the problem lies. There is nothing wrong in the objective function of each planning tool model – the problem lies in the constraint type assigned to the available capacity constraint that prevents existing and ageing plants from being retired.

The WESM short-term dispatch optimization seeks to minimize the hourly short-run marginal running cost (SRMC) which is the sum of all variable O&M, fuel and lube costs, and is expressed in PhP per kWh or PhP per MWh. This short-term model is constrained to meet power demand, energy demand without exceeding available or dependable capacity.

On the other hand, the DOE long-term dispatch optimization seeks to minimize the long-run marginal running cost (LRMC) which is total annual capital costs of all power plants, fixed O&M costs as well as the SRMC (e.g. LRMC = annualized capital cost per year + fixed O&M per year + SRMC per year). This long-term model also aims to minimize the LRMC as well as power plant emissions and the GHG emission footprint (e.g. pollutants like SO2, NOx, particulates and GHG emission such as CO2). Cost penalties may be provided in the objective function for any pollutant and GHG emission tax (Carbon Tax) may be applied also in the objective function for fossil fuel generation to provide an economic incentive for cleaner and renewable power generation technologies over traditional fossil-fueled technologies.

This is where the problem lies then. The old and ageing power plants should not be fixed (equal “=” constraint) but rather should be free (less than or equal to “<=” constraint) so that it could be shut down or replaced by newer, cheaper, more reliable and more environmentally benign technologies. Traditionally, the DOE runs the old and ageing power plants as given or fixed (“=” constraint), and the opportunity to replace the old, costly, un-reliable power plants is lost in the optimization run because of a wrongly-applied constraint type.

The DOE may have justified this old practice of assigning equality (“=”) constraint for existing power plants so they continue to operate because of its sunk capital cost. But the greater view, I believe, is that old ageing power plants do not add any dependable capacity anymore to the grid and is susceptible to unpredictable outage and thus have hidden costs from frequent breakdowns resulting in capacity deficits and economic loses to the national economy.

So there you have it.

You know the culprit – it is in the planning stage when the wrong constraint type is used in defining the available capacity in the grid.

Old plants must be modeled to be replaceable by newer and more efficient and more environmentally benign technologies, and let the MILP software do the complex calculations to guide us which is the better economic, technical and environmental path for the country to make.

This removes personal judgment in the preparation of the long-term energy plan by using the impersonal results of precise calculations derived from scientific economic theory and practices.

A complete power point presentation on this topic “Why the Philippines is Lacking in Power Supply Always” complete with statistics, supply & demand analysis and scenario analysis can be downloaded by clicking the link below:

Why the Philippines is Lacking in Power Supply Always


Hope you would share your thoughts.

Marcial Ocampo

Energy & Power Consultant

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