[OPINION] Base loads and brownouts 1

[OPINION] Base loads and brownouts

Dean Dela Paz

Posted at Feb 03 2022 12:08 AM

For a vulnerable economy, whose energy officials inaccurately believe the energy mix is comprised of 50% fossil fuels, the prices of imported oil, coal and locally produced gas are critical. Fossil fuel pricing including indigenous gas is volatile, subject not simply to supply and demand, FOREX fluctuations but geo-political vagaries. Unfortunately, the Department of Energy (DOE) has done little to mitigate the instability.

Our total installed energy capacity to which hardly anything was added during the exiting incumbency that did not prioritize investments in additional base load plants despite debilitating outages and yellow alerts is approximately 25,663 megawatts (MW). Almost half is dedicated to demand from Luzon where gas from the Malampaya offshore fields constitute 30%.

The more important metric would be dependable base load capacity. There, the numbers fall significantly as maintenance schedules, breakdowns, plant vintages, seasonal hydroelectric supply, the amount of sludge on water levels and flow, and the critical competence or its sheer lack among officials enter the equation. Dereliction easily comes to mind. Experience, technical competence and a profound understanding of the industry is a must.

The data is the best evidence. Total dependable capacity is 22,954 MW. Actual available capacity has however fallen due to the failure to invest in new base load capacities aggravated by poor maintenance scheduling, consistent shutdowns and derated base load sources.

Allow us to cite actual plant by plant data during recent periods of serial undersupply.

The Luzon grid has been experiencing a series of yellow alerts. Thinned out base load compelled dispatching expensive diesel-fired plants that invariably set power prices following the marginal pricing algorithm at the Wholesale Electricity Spot Market (WESM).

Eight base load plants were the immediate cause. Four units had shut down partially or completely, some offline longer than normal maintenance respites. Four more were derated. Among these are two supplied from Malampaya, 45% of which is under an inexperienced highly leveraged start-up company. For consecutive periods, the derated supply of these were in excess of 700++ MW and way over DOE’s forced outage simulations. That’s not a question of ancillary reserves. That’s a question of base load shortages.

No explanations were given. Never mind that the underrating bloated WESM prices while curiously benefitting a peaking diesel plant owned by an affiliated entity tucked within the same portfolio that owns 45% of Malampaya.

Do the math. Where Malampaya fuels Luzon plants, when those were derated a gross undersupply of 2,200 MW occurred.

Imported dollar-depleting fossil fuels account for 53.2% while indigenous renewables account for 24%. Natural gas as those from Malampaya account for 22% nationwide. Fossil pricing is subject to global vagaries while renewables and Malampaya ensure energy security. But only if they are firmly within technically competent contractors and Filipino hands, and not hocked to hostile economies on the sly.

The foregoing explains the warnings raised by the National Grid Corporation of the Philippines (NGCP) against which the DOE has taken offense, and which paid hacks pilloried employing a demolition bandwagon. Based on a series of yellow alerts proving base load supply has dangerously thinned out, the NGCP warned this summer may experience critical shortages.

The undersupply not only reveals gross base load inadequacies and energy mismanagement, but also long term ineptitude convoluted by unrelated political priorities that officials busied themselves with contributing to an over-arching curse under the Duterte administration.

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(Dean dela Paz is a former investment banker and a managing director of a New Jersey-based power company operating in the Philippines. He is the chairman of the board of a renewable energy company and is a retired Business Policy, Finance and Mathematics professor.)

Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.