Regional Power Market And Cross-border Interconnections Training12-17 November 2017, Courtyard Mariott Seoul Namdaenmun, Seoul, Republic of Korea

LEARNINGS FROM THE

PHILIPPINE WESM:

POWER MARKET DEVELOPMENT

Clares Loren C. JaloconEdward I. Olmedo

Philippine Electricity Market Corporation

O U T L I N E

PHILIPPINE POWER OVERVIEW THE WESM LESSONS AND

CHALLENGESWAY

FORWARD

PHILIPPINE POWER OVERVIEW

The Philippine Power SystemMajor

Grids

Peak

Demand,

MW

Description of

Transmission System

Luzon 10,022 230 kV System with

500 kV back-bone

Visayas 1,948 138 kV System with

230 kV facilities to

transfer bulk generation

Mindanao 1,653 138 kV System

Luzon and Visayas are interconnected via a 350 kV,

400 MW HVDC Line

Mindanao Interconnection shall be through Visayas

There are still systems that are off-grid

THE WESM

What is WESM?

• The wholesale electricity spot market

(WESM) is a venue for trading of electricity

as a commodity.

• The WESM was created by virtue of Section

30 of Republic Act No. 9136, otherwise

known as the Electric Power Industry

Reform Act (EPIRA) of 2001.

• WESM is a gross pool and mandatory

market.

Coverage of WESM Operations

Region On WESM

Operations?

Since

Luzon Yes 2006

Visayas Yes 2010

Mindanao No Projected on

2018

Other Off-Grid

Areas

No --

Establishment of WESM

Electric Power Industry

Reform Act (EPIRA 2001)

Generation is competitive

and open

Establishment of the

Wholesale Electricity Spot

Market (WESM)

Transmission and

distribution are regulated

services

PEMC – WESM Operator

9

• Philippine Electricity Market Corporation –

acts as the Market Operator (MO) that

administers the operation of the WESM.

• PEMC is a corporation incorporated in

November 2003 upon the initiative of the

DOE with representatives from the various

sectors of the electric power industry to be

the autonomous group market operator of

the WESM

WESM Governance Structure

PEM BOARD

PEMC Organization Committees

EC

O

MA

G

MO

Mar

ket

Surv

eilla

nce

Com

mitte

e

Ru

les

Chan

ge

Com

mit

tee

PE

M A

ud

ito

r

Tec

hn

ical

Co

mm

itte

e

Dis

pute

Res

olu

tion

Adm

inis

trat

or

WESM MEMBERS

Generators Service Providers Suppliers Customers

DOE

• Policy

• Planning

ERC

• Enforcement

• Pricing

10

Guiding Principles of WESM

11

• Maximum Available Capacity is OfferedGross Pool

• Bilateral Contract Quantities are netted out and settled outside the spot market

Net Settlement

• Employs principle of Co-optimization of energy

and reserves

Co-optimized Energy and Reserves

• Maximum capacity and ramp rates are the only

generator constraintsSelf-commitment

• Nodal Prices and Schedules are determined

near real-timeReal-time Market

• Timely and accurate market informationTransparency

WESM Milestones

12

Electric

Power

Industry

Reform

Act

(EPIRA)

(RA 9136)

(Jun

2001)

Philippine

Grid Code

(RA

9136)

(Dec

2001)

EPIRA

Implementing

Rules and

Regulation

(IRR)

WESM Rules

(Jun 2002)

Philippine

Electricity

Market

Corporation

(PEMC)

(18 Nov

2003)

WESM

Market

Management

System

(MMS)

Project

(Mar 2004)

WESM Trial

Operation

Program

Luzon

WESM

Commercial

Operations

(26 Jun

2006)

Visayas

WESM

Commercial

Operations

(26 Dec

2010)

ISO 27001

Certification

Retail

Competition

and Open

Access

(26 Jun

2013)

2001 2002 2003 2004 2005 2006 2010 2011 2013

ISO 27001

Re-

Certification

ISO 9001

Certification

Central

Scheduling

of Energy

and

Reserves

(Dec 2015)

Integration of

Preferential

Dispatch RE

Resources

(Jan 2016)

Enhanced

WESM Design

Enhancements

(Oct 2016)

Enhanced

WESM

Design TOP

(Jun 2017)

WESM

Mindanao

Launch

(Jun 2017)

Enhanced

WESM

Design

Commercial

Operations

2014 2015 2016 2017

WESM Participants

Transmission

Charges

Spot

PaymentGeneration

Charges

Spot

Payment

Generation Charges

Spot

Payment

DU Charges

Transmission

(NGCP)Distribution Customers

Contestable

Customers

(878)

Generators

(110)

Suppliers

(28 RES, 12 LRES, 21 SOLR)

Transact in

the WESM

(PEMC)

Bulk User

(59)

WESM Membership

14

WHOLESALE

Generation Companies 110

Customer- Private Distribution Utilities and Local Government Utilities 16

Customer-Electric Cooperatives 71

Customer- Directly-Connected Bulk Users 59

Sub-total 256

RETAIL

Retail Electricity Suppliers (RES) 28

Local RES 12

Supplier of Last Resort 21

Retail Metering Services Providers 44

Contestable Customers 869

Directly-Connected Contestable Customers 29

Sub-total 1003

Note: Details above are as of 25 September 2017

Retail Market Information

15

898Registered

CCs

800 (1MW and above)

78 (750kW – 999)

74Supplier

Switch by CC

Average of 25 switch per year*

% NO. OF CONTESTABLE CUSTOMERS PER SUPPLIER

Note: Details above are as of September 2017

WESM Registered Capacity

MW

(Luzon &

Visayas only)

Total Generators 18,183

Intermittent RE 1,185

Other Generators 16,998

Total Applicant Generators 940

Applicant Intermittent RE 31

Other Applicant Generators 909

WESM Registered Capacities

16

MW

(Luzon)

Total Generators 15,146

Intermittent RE 659

Other Gens 14,487

MW

(Visayas)

Total Generators 3,037

Intermittent RE 526

Other Gens 2,511

MW*

(Mindanao)

Total Generators 4,168

Intermittent RE 200

Other Gens 3,968

*Indicative

Note: Details above are as of September 2017

Type MW

Battery 10

Biomass 104

Coal 5,868

Geothermal 890

Hydro 2,489

Natural Gas 3,290

Oil-Based 1,870

Solar 289

Wind 337

TOTAL 15,147

Type MW

Biomass 50

Coal 2,061

Diesel 766

Geothermal 109

Hydro 1,130

Solar 53

TOTAL 4,168

Type MW

Biomass 102

Coal 1,049

Geothermal 886

Hydro 15

Oil-Based 474

Solar 421

Wind 90

TOTAL 3,037

Luzon: Visayas: Mindanao:

Registered Capacities per Technology

Note: Luzon and Visayas details are as of September 2017.

Values for Mindanao capacities are indicative only.

Luzon and Visayas [January 2011 to September 2017]

Consumption

Luzon and Visayas [January 2011 to September 2017]

Generation Mix

COAL NAT GAS GEO HYDRO OIL WIND SOLAR BIOMASS

Summary of WESM Operations in the last 3 Years

Note:

2015 - Indicates June 26, 2014– June 25, 2015

2016 - Indicates June 26, 2015 – June 25, 2016

2017 - Indicates June 26, 2016– June 25, 2017

Market Information 2015 2016 2017% Change

2015 vs 2016 2016 vs 2017

Peak Demand 10,342 11,434 11,833 +10.6% +3.5%

Total Energy Volume,

GWh60,734 66,783 65,945 +10.0% -1.3%

Spot Market Volume,

GWh4,574 6,186 11,927 +35.2% +92.8%

Average Spot Market

Volume, %8% 9% 18% +12.5% +100.0%

Average Price, P/MWh 4,983.46 3,731.95 3,107.33 -25.1% -16.7%

Summary of WESM Information

21

256 1003Registered

Wholesale

Members

Registered

Retail Market

Members

11,833 MW2017 Peak

Demand+3.5%

18%2017 Spot

Exposure

× 2 of last

year

18,183 MWRegistered

Capacity (Luzon

and Visayas)

1,177 MWRegistered

Intermittent

RE

6.5%

4.0%Share of intermittent

RE to total system

generation

LESSONS AND CHALLENGES

Challenges

• Compliance of the participants on the submission of projected output

and implementation of the Forecast Accuracy Standards

• Adequacy of the transmission capacities and sufficient system features

to facilitate preferential scheduling and dispatch

Integration of RE in the WESM

• Difficulty of the participants to put-up adequate levels of prudential

deposit to participate in the market

• Limited risk mitigation measures to address volatility of prices and line

rental in the spot market

Management of Participant Exposure

Challenges

• Contestability threshold reduced to 750 kW last 26 June 2016 but was

halted due to the Temporary Restraining Order (TRO) issued by the

Supreme Court (SC) last 21 February 2017

• Harmonized policy and regulation for RCOA participants

Issues on RCOA integration

• Approval of the Price Determination Methodology and issuance of

licenses among the market participants

• Approval of the budget for PEMC’s market development activities

Regulatory Delays

Lessons Learned

1. Implementing innovative measures to addressinfrastructure difficulties

2. Strengthened coordination among the policy-making bodies and regulators, implementingagencies and the market participants

3. Phased-in and integrative implementation ofmarket mechanisms

4. Increasing the involvement of the marketparticipants in the implementation of marketmechanisms

5. Maintaining organizational integrity andexcellence

6. Continuous improvement on the engagement tothe stakeholders and the consuming public

1. Innovative Measures to Address Infra Limits

Since the WESM is “central scheduling” venue, some limitations of the Market Management System are being addressed by Interim Protocols, such as:

o Dispatch Scheduling of Contracted Frequency Control Ancillary Services in the WESM

o Limiting the Dispatch Schedules of RE in a Constrained Area/Zone

Enhancements to WESM Design and OperationsMMS Infra Development/Enhancement

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Review by the Special WESM

Rules Review Committee

Annual Operational Audits*

WESM Design

Study

Issuance of DOE DC

on Enhanced WESM

Design

Issuance of DOE

DC Approving

Changes to WESM

Rules

NMMS

Testing &

Audit

WESM Commercial

Operations in Luzon

26 June 2006

Delivery of MMS on

April 2005

WESM Commercial

Operations in Visayas

26 Dec 2010

Enhancements to WESM Design and OperationsMMS Infra Development/Enhancement

Major Change Description

Shorter dispatch interval Frequency of Dispatch interval from

one hour to 5-minute

Ex-ante only pricing and

settlements

Current Design is two-market

settlement scheme (commitment and

balancing)

New Design shall have only one

price to settle the metered quantity

Removal of Pmin

constraint in the MDOM

Generators shall manage their

technical Pmin by how they offer

their capacities

Automatic pricing re-runs CVC-related pricing errors are

automatically corrected

VRE Integration in the WESM

Luzon

Leyte/

Samar

Bohol

Cebu Negros

Load Center

in Visayas

Many Solar

Plants

Panay

Conventional

Plants

With Some

Wind Farms

Highest

Generation

from

Geothermal

Negros

VRE Integration in the WESM

Luzon

Leyte/

Samar

Bohol

Cebu Negros

Sudden Increase

of Solar Plants

Not much growth

in demandExport is limited causing

issues in market transactions

RE only submits nomination and

is scheduled ahead as a priority

Issues: Forecasting & Monitoring

Negros

2. Strengthened coordination among the policy-makingbodies and regulators, implementing agencies and themarket participants

• Updating of the power and transmission development planning process into a

co-optimized process and issuance of service contracts consistent to these

development plans

• Centralized monitoring of licensing and permitting through the EVOS and

initiatives to streamline the process among the concerned government

agencies

Licensing and Permitting

• Improved procedures on the project development monitoring and milestone

verification

• Strengthened protocol among the Project Developers, Network Service

Providers And Market Operator during testing and commissioning

Development, Testing and

Commissioning

2. Strengthened coordination among the policy-makingbodies and regulators, implementing agencies and themarket participants

• Ensuring familiarity on scheduling and dispatch protocols and settlement

methodologies

• Coordination of significant events to the Market Operator, System Operator and

customer counterparties.

Commercial Operations

• Regular review of market assessment indices, timely development of audit

standards and conduct of the audit upon observation of a transition period.

• Ensuring familiarity of the market participants to their responsibilities and

imposition of adequate penalties for proven non-compliances.

Market Assessment

And Enforcement

3. Phased-in and integrative implementation of market mechanisms

•Phasing the market implementation enables theparticipants to familiarize with the protocols andminimizes non-compliances and imposition ofcorresponding sanctions.

• Integrated market implementation facilitates theoptimal use of the resources and infrastructure,and the coordinated issuances of policies.

Integrated Market Development Plan

2017 2018 2019 2020

Enhancements to WESM Design

and Operations

WESM Mindanao

Full Implementation of RCOA

New Market Management System

(NMMS)

Central Registration and

Settlement System (CRSS)

Financial Transmission Rights

RE Certificates Market

Electricity Market Derivatives

Go Live

Go Live

Integrate 500 kW customers

Demand Aggregation

Integrated Wholesale and Retail Markets

Transmission

Charges

Spot

Payment

Generation

Charges

Spot

Payment

Generation ChargesSpot

Payment

DU Charges

TransmissionDistribution Customers

Contestable

Customers

Generation

Suppliers

Transact in the WESM

Retail Competition

Captive

Customers

Combined Wholesale and Retail Market Processes

Market Operator

Central Registration

Body

Registration

Settlement

Modeling

Forecasting

Pricing and

Scheduling

Customer Switching

Retail MQ Warehouse

New Market

Management

System (NMMS)

Central

Registration

and

Settlement

System (CRSS)

Stepwise Implementation

37

EDM transitional phase EDM established

Training and capacity

building

Market Structure Devt.Rulebook development

Commitment from

market participants

Standardized contracts

Finalization of legal basis

Transitional arrangements

Dry runs

Go live preparations

Physical Forward contracts

Centralized clearing

Required legal changes

Full EDM implementation

including cash settlement

EDM Initial phase

Initial EDM launch

Full EDM launch

EDM Feasibility Study

Legal feasibility

assessment

Policy Options for the

EDM

Formulation of the

Market Development

roadmap

Preliminary stakeholder

consultations

PHASE 3

Initial Market Implementation

PHASE 4

Full EDM

implementation

PHASE 2Capacity Building and

Market Structure Development

Policy Discussions with the Supervisory/ Regulatory Authorities

2017 2018-2020 2021-20232023

onwards

RCOA

Competitive Selection Process

Electricity Derivatives Market

Financial Transmission Rights (FTR) Auction

CSP

500 kW and

above CCs

Demand

AggregationHousehold

Level

FTR Auction

Renewable Energy in the WESMRE Act

Renewable Energy Market (REM)

RPSFeed in Tariff/

Installation Targets

RE Registrar

RE Market RulesRPS

Compliance

MechanismRPS

Requirements

NREP

RE Market Policy Framework

4. Increasing the involvement of the marketparticipants in the implementation of marketmechanisms

•Extensive conduct of consultations in thedevelopment of the policies for the marketmechanisms

•Assessment of participant andinfrastructure capabilities, and continuouscoordination to facilitate their compliance

•Conduct of capacity building to the marketparticipants and awareness campaigns tothe consuming public.

42

E N H A N C E M E N T S T O

W E S M D E S I G N A N D

O P E R A T I O N S

43

E N H A N C E M E N T S T O

W E S M D E S I G N A N D

O P E R A T I O N S

- audits operations of spot market

Recognizing regulatory powers and fortifying self-governance

5. Maintaining organizational integrity and excellence

Philippine Electricity Market Corporation

• Autonomous Group Market Operator (AGMO)

• Governance arm of WESM

Suppliers /

Aggregators

Metering Services Providers

Network Service Providers

(NGCP & DUs)

Generators /

A / S ProvidersCustomers

PEM Board

PEM Auditor

Rules Change

Committee

Dispute Resolution

Administrator

Market Surveillance

Committee

Technical CommitteeEnforcement and

Compliance

Market

Assessment GroupMarket Operator

Self-Governance & Operations

Oversight Regulation

WESM Members

DOE• WESM

Establishment

• Policy making

• Planning

ERC• Enforcement

• Pricing

• Competition

- monitors possible breaches of Rules

- reviews technical matters

- assists in revising and amending Rules

and Manuals

- facilitates mediation and arbitration of

disputes

Implementation of an Integrated Management System

5. Maintaining organizational integrity and excellence

Integrated Management System

Quality

Management

System

Enterprise

Risk

Management

Information Security

Management SystemBusiness Continuity

Management System

Implementation of an Integrated Management System

5. Maintaining organizational integrity and excellence

Integrated Management System

Quality

Management

System

Enterprise

Risk

Management

Information Security

Management SystemBusiness Continuity

Management System

6. Continuous improvement on the engagement to the stakeholders and the consuming public

A p p r o v a l a n d I m p l e m e n t a t i o n o f

P E M C ’ s C o m m u n i c a t i o n s P o l i c y

P r o m o t i n g W E S M a w a r e n e s s a m o n g h i g h

s c h o o l a n d c o l l e g e s t u d e n t s .

Media Relations Social MediaCorporate Social

Responsibility

6. Continuous improvement on the engagement to the stakeholders and the consuming public

Events

Publications

WESM Mobile App

Feedback Facilities

WAY FORWARD

WESM: Way Forward

Enhanced WESM

Design

(2018)

WESM Mindanao

(2018)

Reserves Market

(2019)

Demand Side

Bidding

Financial

Transmission

Rights

Electricity

Derivatives

Market

Enhanced WESM design features:

• Reduced from 1 hour dispatch interval to 5 minutes

• Ex-ante pricing only

• Hourly gate closure reduced to 30 seconds or less

• Co-optimized energy & reserves

U N D E R R E S E A R C H & D E V E L O P M E N T

RE Certificates Market

(2019)

WESM Helpdesk Ticketing System

www.wesm.ph/wesm-helpdesk

+63.2.318.WESM (9376)

+63.2.634.0985

www.wesm.ph

E N D O F

P R E S E N T A T I O N

WESM Works.