Local power generation companies operating diesel-fired power plants said the government may opt to consider changes in the Wholesale Electricity Spot Market (WESM) settlement rules for such technology as there are features that make its operations unsustainable.
In separate statements and messages, diesel-fired power plant operators Aboitiz Power, Alsons Group and ACEN Corp. decried financial losses suffered by such technology when its capacities are offered at the WESM when secondary price caps are being implemented especially due to the current prices of diesel fuel.
Secondary price cap serves as a consumer protection from unwarranted increase in electricity prices due to the inherent volatile market price movements in the WESM by lowering the clearing price of electricity to P6.245 per kilowatt hour (kWh) when average prices breach the threshold of P9 per kWh over a 72-hour period.
The operators also said policy changes and government intervention are needed to ensure that these diesel plants continue to be viable to prevent them from closing shop that may result in further loss of available capacity in the grid.
Emmanuel Rubio, Aboitiz Power president and chief executive officer, said because of the must-offer rule, the company’s capacity from its diesel units in Luzon and Visayas are offered to the WESM.
“When the secondary price cap is in effect, plants that have fuel costs higher than the cap can file for cost recovery. If there are opportunities to contract at acceptable terms, we would consider. Key is to review the secondary price cap rule to make the market more efficient and to allow for price signals in order for new capacities to be considered,” Rubio said.
However, Rubio said if cost recovery for running diesel-fired power plants while under secondary price cap is approved – which in most cases is delayed – companies can only recover cash costs but not the capital .
As for Aboitiz Power’s diesel capacity in Mindanao, Rubio said these are partially contracted for contingency and dispatchable reserves.
Joseph Nocos, Alsons Group senior vice president for business development and marketing, said the company also has a similar experience in running diesel-fired power plants.
“Alsons Power has 203 megawatts (MW) of diesel power plants that can respond to mandatory dispatch from the system operator to fill supply gaps in the Mindanao Grid during the summer months when hydro availability is reduced. Our ability do so will be partially constrained when the fuel supply of our power plant in Zamboanga City runs out as we will be unable to adequately replenish our stock in that plant with the significant disparity in the WESM price cap and our fuel cost,” Nocos said.
Nocos assured Alsons Group’s power plant in Iligan City, with its contract already approved by the Energy Regulatory Commission, will be able to sustain its operation throughout and continue providing power to the grid.
Also affected is Ingrid Power with its 150 MW high speed diesel plant in Pililla, Rizal that is considered to be one of the largest and newest plant for such technology in the system today.
The plant is a joint venture between ACEN Corp. and Marubeni Corp. while the units are leased from British-based company Aggreko.
Eric Francia, ACEN president and chief executive officer, said the facility was brought in 2019 “due to the impending shortage in the system especially during peak summer months” but the company together with its partner, Marubeni had to pay for standby charges to keep the units deployed until June 2024.
“Given the persistent red alerts and blackouts, it was definitely the right thing to do… But this model isn’t sustainable; the plant needs to be contracted,” Francia said.
Owners of diesel-fired power plants cite that the technology is currently “under appreciated” despite its important role as an “interim solution” especially during summer when demand for power is high and power alert levels are likely to be raised due to the absence of numerous power plants due to unforced outages.
Diesel-fired power plants are also deemed the most ideal solution at present, to help provide supply during peak demand times until the country has enough capacity from flexible natural gas-fired power plants.
According to data from the Department of Energy, total installed on-grid capacity of oil-based power plants including diesel-fired power plants as of end-2023 is at 3,737 MW equivalent to a 13.2 share in the on-grid power mix.
For the similar period, oil-based power plants including diesel-fired power plants’ share in the off-grid power mix is at 612.362 MW which is bulk of the total capacity of power plants not connected to the grid at 89.4 percent.
