The Ultimate Solution to High Electricity Costs in the Philippines

August 22nd, 2016 No Comments   Posted in cost of power generation

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:

Cost of power generation technologies

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).

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Why Philippine Electricity Reserves are always not adequate?

August 5th, 2016 No Comments   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. More »

HOW TO PLAN AND OPTIMIZE THE ENERGY, OIL, GAS, POWER AND TRANSMISSION INFRASTRUCTURE OF THE PHILIPPINES

HOW TO PLAN AND OPTIMIZE THE ENERGY, OIL, GAS, POWER AND TRANSMISSION INFRASTRUCTURE OF THE PHILIPPINES

My sincerest thanks to the readers, government officials, private investors, power developers, funding institution and non-government organizations that will respond positively to this conversation that I started recently as part of my functions as Senior Power Generation Engineer at SKM.

It is my fervent hope that this conversation will be continued as a result of your endorsement to the right parties and that timely coordination and meetings are done soonest as time is of the essence in having an integrated and optimized energy master plan for the country before year end 2013.

 

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Philippine Oil Pump Price Calculation Model and Oil Company Gross Margin – Annexes

September 13th, 2012 No Comments   Posted in Oil Pricing Formula

Philippine Oil Pump Price Calculation Model and Oil Company Gross Margin – Annexes

The last part of this 3-part series presents the results of applying the oil pump price calculation model into the 1974-June 2012 historical data on pump price, import costs, taxes and government imposts, logistical and transport costs, biofuels, and dealer margin. More »

Philippine Oil Pump Price Calculation Model and Oil Company Gross Margin – Analysis and Conclusions

September 12th, 2012 8 Comments   Posted in Oil Pricing Formula

Philippine Oil Pump Price Calculation Model and Oil Company Gross Margin – Analysis and Conclusions

 

Analysis and Conclusions

 

This chapter presents the evolution and derivation of the oil pump price formula. There is a need to develop an oil pump price formula simply because the oil companies never divulge their oil company gross margin which is the residual or price difference when we subtract from the actual pump price all the importation value adding activities such as supply cost or FOB/MOPS/Dubai, ocean freight and insurance, customs duty, BOC fee, import processing fee, customs doc stamps, bank charge, arrastre charge, wharfage charge, and excise tax or specific tax to arrive at the 12% VAT on all importation activities, and all local value adding activities such as oil company gross margin, transshipment, pipeline, depot operation, biofuels, hauler’s fee and dealer’s margin to arrive at the 12% VAT on local activities. More »

Philippine Oil Pump Price Calculation Model and Oil Company Gross Margin – Introduction

September 12th, 2012 2 Comments   Posted in Oil Pricing Formula

Philippine Oil Pump Price Calculation Model and Oil Company Gross Margin – Introduction

Introduction

This technical paper will present the various oil pump price calculation model (regulated and de-regulated periods) which together with the supply cost, end pump price, taxes (customs duty, special duty or Estanislao Peso, excise tax or specific tax, value added tax or VAT), biofuels (10% ETHANOL gasoline blend and 2% CME BIODIESEL blend), logistical costs (transshipment, pipeline, depot operation, hauling fee), and dealer’s margin will be subsequently used to calculate the residual component (by difference) that goes to the oil company (refiner, importer/marketer). More »

Philippine Oil Pump Price Calculation Model and Oil Company Gross Margin – Executive Summary

September 11th, 2012 No Comments   Posted in Oil Pricing Formula

Philippine Oil Pump Price Calculation Model and Oil Company Gross Margin – Executive Summary

 An Independent Oil Price Review Committee (IOPRC) recently completed its study and submitted its findings to the Philippine Department of Energy (DOE), the print and broadcast media, and conducted a public consultation at the UP School of Economics to interested parties such as NGOs, oil company associations, academe.

The IOPRC concluded that domestic oil prices of gasoline and diesel tracked changes in the international price of oil (Mean of Platts Singapore or MOPS) based on statistical and regression analysis. It also found that the return on equity (ROE) and internal rate of return (IRR) of the oil companies (refiners, importers) on an annual average are reasonable and lower when compared to returns of other utilities and industries such as power generation, telecom, mining and that the oil company gross margin (in % and absolute Pesos per Liter) which was computed by subtracting from the pump price all taxes and government fees, logistical costs, dealers margin and cost of the imported oil were not excessive as generally alleged. More »