I talked earlier about the good timing for the start-up of the WESM wholesale spot market.
Without reference to the capital markets for the moment and focusing solely on the state of the Philippine power systmem, there are also some good aspects to the timing of the TransCo concession for this year.
Thanks to some very heft investments over the past few years, some of the major bottleneck issues of getting power into metro Manila have been addressed. From a tariff perspective, transmission in the Philippines is not cheap, but neither is it the focus of public outcry over costs.
The role of transmission – or rather its constraints – on the determination of spot market power costs are not yet apparent. The WESM – which is essentially just a more transparent way to manage transmission constraints – will begin making this very clear.
In two to three years, transmission issues will be among the very top public issues in the Philippines as we move into locational marginal pricing (LMP) and generator resource adequacy issues in certain local areas become stressed.
There will be a clammoring for specific local transmission projects, certain IPPs will be raking in interim profits, no one will know how to get the transmission paid for, and the new Transco concessionaire will be imbroiled in hot transmission policy debate that will not remain outside of the national legislature.
2 Comments
I agree with your observation that transmission issues will become more apparent with the operartion of the Philippine spot market. I believe in the principle that ‘risks should be borne by the one most able to manage it’. Unfortunately, there is NOTHING in the spot market rules that incentivizes TransCo to address line congestions that jack up settlement prices in the market. Buyers in the market will just have to bear the additional congestion costs while they wait for TransCo to move.
You hit THAT nail square on its head.