With the expected long shutdown next month of Malampaya to undergo preventive maintenance from October 2 to 22, the government must cushion the impact and avoid long blackouts which could severely affect the already struggling Filipinos.
WITH the expected long shutdown next month of Malampaya to undergo preventive maintenance from October 2 to 22, the government must cushion the impact and avoid long blackouts which could severely affect the already struggling Filipinos.
Avoiding rotating blackouts and spikes in generation charges once the Malampaya natural gas field shuts down next month are the government’s immediate concerns.
But the greater challenge of ensuring the country's long-term energy security still lies ahead, says a Philippine Star news commentary today.
Just a few weeks before it was set to shut down for preventive maintenance, the Malampaya gas field suddenly stopped supplying fuel to natural gas plants in Luzon.
With natural gas output restricted, several large power plants were forced to switch to more expensive fuel sources, reduce output, or stop operating altogether.
Among the plants affected by Malampaya's abrupt stop were First Gen Corporation's Sta. Rita (1,000 MW) and San Lorenzo (500 MW) power plants, which both shifted to a high-cost liquid gas alternative.
The company's San Gabriel plant (414 MW) was also temporarily shut down, while KEPCO's Ilijan power plant operated at reduced capacity.
Watchers of the Philippine power and energy sector feared that Malampaya's supply restrictions created conditions that would drive up the prices and the volume of spot transactions on the Wholesale Electricity Spot Market (WESM).
At the same time, they also worried that this, coupled with the shift to liquid fuel to keep plants up and running, could lead to higher generation chargers in consumers' next electricity bills.
Luzon’s power needs
Because natural gas from Malampaya fuels 30 percent of Luzon's electricity requirements, or about 20 percent of the entire country's power, there are also serious concerns that when the gas field's supply is halted, restricted, or much worse depleted, prolonged rotating blackouts and increasing generation charges may become even more frequent.
This, in turn, could have severe implications for low-income families, and more broadly, on the country's economic recovery.
Malampaya's recent natural gas restriction only lasted three days. However, this was not the first time, nor will it be the last, that the Malampaya natural gas field supply has caused concern.
More expensive
No doubt, this much longer shutdown will again lead to power plants switching to more expensive fuel sources, reducing output, or stopping their operations.
This leaves us with a sizeable 20-day window for the feared power shortages and increased cost of electricity to come to fruition.
However, the recent and upcoming Malampaya situations only speak to the more considerable and precarious challenge of addressing the Philippines' long-term energy security.
The Philippines has faced reoccurring generation supply tightness for years.
In 2019 alone, the Luzon grid dropped below reserve levels and sounded yellow alerts 51 times. Red alerts were also issued 15 times, indicating that the Luzon grid had an insufficient power supply.
In recent years, the supply has been tightest during the summer months. Demand peaks during these hot months, so when plants shut down for maintenance during this period, this immediately triggers grid alerts, if not rotating blackouts.
With the regularity at which these forced and planned outages have triggered alerts over the years, energy regulators and policymakers should no longer view these outages as exceptions to the rule. Instead, they should consider these outages and regular occurrences and plan for them accordingly.
Old inefficient plants
The reality is, sometimes, energy industry outlooks on paper do not reflect what happens on the ground.
To this point, many of the power plants in Luzon are 16 years and older. These older plants generate much less than their installed capacity and require more frequent maintenance and repair.
So, while existing power plants may technically have the available capacity to meet demand, history shows that the shutdown or the reduction in output capacity of just a few power plants can already cause power outages.
The generation supply tightness experienced by the Philippines was expected to worsen before the pandemic hit in 2020.
However, there was a significant decrease in demand due to the lockdowns and commercial and industrial operations restrictions.
That said, as restrictions were relaxed, power demand has increased and recovered. And as of earlier this year, it has even surpassed pre-pandemic levels.
Demand to increase
For sure, as the economy continues its recovery, demand will only increase. But, as demand increases and supply tightens, the risk of rotating blackouts and spikes in generation charges will also increase.
If this happens, it could spell disaster for Filipino families already struggling to make ends meet.For low-income Filipino families, electricity is a significant household expense.
The burden of rate hikes
Indeed, many Meralco customers are feeling the recent increase in power costs, which was caused by a 25 percent rate increase of First Gas plants that provide a third of the distributor's energy requirements.
The situation of the low-income families will only worsen if long-term solutions for the country's energy supply are not found.
Furthermore, a stable and reliable energy supply is also essential for job-generating industries to recover. Many Filipino families struggling to make ends meet may have seen their breadwinners become unemployed or underemployed when the pandemic hit. Hence, ensuring industries have enough power to ramp up their operations will also have a direct impact on these Filipino families.
With so many struggling, jobless, and hungry, the government should ensure that the country's energy situation sets the foundation for economic recovery rather than be the cause for even more distress.
Malampaya asked to explain
Energy Secretary Alfonso Cusi has directed the operator of the Malampaya Natural Gas Field to explain the supply gas restrictions to gas-fired power plants which could prop up electricity prices.
“These restrictions affect the electricity prices that consumers pay and they will have to be informed on the causes of price increases,” Cusi said.
Cusi asked the Independent Electricity Market Operator of the Philippines (IEMOP) to simulate the impact on prices of the gas restrictions, as well as the upcoming Malampaya maintenance shutdown, during which period there will be no gas production scheduled from Oct. 2 to 22.
“While there is sufficient supply of electricity during this period, consumers need to know the effects of all these on their power bills,” Cusi said.
The DOE is set to call a coordination meeting with the consortium operator, natural gas power plants, Meralco and market operator, among the other industry players, to address all the issues.
It earlier said it was preparing for the impending shutdown of the Malampaya natural gas facility in October as this is expected to put an upward pressure on electricity prices.
DOE Undersecretary Felix William Fuentebella said there would be a cost impact with the Malampaya shutdown since gas-fired power plants relying on the facility’s supply would have to run on more expensive liquid fuel.
Tags: #electricity, #Malampayaplant, #powerinterruptions, #DepartmentofEnergy