Year: 2024

 

Following the green light given by Department of Energy (DOE) and the Energy Regulatory Commission (ERC) through the issuance of DOE Advisory 2024-01-001-SEC and the ERC’s interim approval of the Price Determination Methodology for the Co-optimized Energy and Reserve Market (Order, ERC Case No. 2023-002 RC), IEMOP announces the commencement of the Full Commercial Operations of the Reserve Market at dispatch interval 0005H on 26 January 2024. The Full Commercial Operations shall allow the participation of ALL certified A/S Providers in the scheduling and dispatch process in the WESM for the provision of regulation, contingency, or dispatchable ancillary services. Additionally, the reserve schedules and prices determined through the WESM shall be binding for scheduling and dispatch, while resulting spot transactions shall be settled through the market.

The key benefits of the Reserve Market include:

• Co-optimization: This refers to the simultaneous optimization of capacities in providing multiple electricity services to get the best energy mix at the most affordable price while maximizing resource use.
• Dynamic Reserve Requirement: This refers to a flexible approach to determining the amount of reserve capacity required at any given time, based on real-time conditions, rather than a fixed or static amount. By not keeping a higher-than-necessary fixed reserve, costs can be efficiently determined, which may benefit end-users in terms of electricity prices. This would also allow the grid to adapt to changes quickly. By adjusting reserves based on real-time conditions, there is a reduced risk of blackouts or other power disruptions.
• Single Buyer Model: Central procurement by the System Operator simplifies operations and streamlines coordination. Having a single buyer also optimizes the procurement of reserves, ensuring the most effective mix of reserve products based on the system’s needs. It also ensures more consistent procurement practices.
• Settlement Net of Contracted Reserves: When settling accounts, the pre-agreed contracted reserves are considered and settled at a contracted price. Any difference between the scheduled and contracted reserve is settled at the reserve market price. This ensures that electricity market participants have a clear and efficient method of reconciling and settling their financial obligations related to reserve capacities.

The Full Commercial Operations of the Reserve Market heralds a new era of competitive power supply procurement with the end goal of ensuring sufficient and reliable power supply for our country.

Manila, Philippines: After the successful integration of the Mindanao grid into the Philippine Wholesale Electricity Spot Market (WESM) last 26 January 2023, the Independent Electricity Market Operator of the Philippines (IEMOP) once again embarks on another milestone with the Pilot Stage Launch of Reserve Market last 26 December 2023. The Pilot Stage of the Reserve Market is pursuant to the Department of Energy’s Advisory dated 22 December 2023 which aims to ensure the continuity of final preparations for the full commercial operations of the Reserve Market by directing the Market Operator (MO), the System Operator (SO) and Trading Participants to observe the Operating Procedures for the Central Scheduling and Dispatch of Contracted Ancillary Services.

“The pursuit of a co-optimized electricity market has been a challenge since the beginning of the WESM. [But] Various institutions, together with IEMOP and other stakeholders, have worked together to finally see the dawn of a co-optimized WESM. This indeed is an important achievement.” IEMOP President and CEO Atty Richard Nethercott said. 

As directed in the DOE Advisory, this Pilot Stage of the Reserve Market will allow for the following – 

1. Optimization of MO and SO interfaces; 
2. Central Scheduling and Dispatch of Contracted AS using Enhanced Systems of the MO and SO; and 
3. Automated Real-time Dispatch of Committed AS  

Prior to having the Reserve Market, the SO secures reserve requirements solely through contracts with ancillary service providers which are submitted, for approval, to the Energy Regulatory Commission (ERC). Upon declaration of the full commercial operations of the Reserve Market, where transactions will become financially binding for settlement through the market, the SO shall then be able to procure reserves from the spot market to meet the reserve requirements of the system.  

Modern grids’ increasing complexity and expanding functionalities require a system capable of promptly addressing grid imbalances. The Reserves, specifically the “Frequency Control Ancillary Services”, are the main products that shall be traded in the Reserve Market. These services provide a safety net to ensure the reliable and stable supply of electricity to meet unexpected changes in the demand and supply of electricity, by balancing power generation and consumption dynamically (Regulation Reserves), acting promptly during sudden generator outages to ensure consistent grid functionality (Contingency Reserves), and stepping in as the subsequent line of action during grid challenges (Dispatchable Reserves). 

Like the energy market, the Reserve Market provides a venue for generators to offer reserve capacities competitively. These reserve offers are co-optimized with energy offers to determine the best mix of energy and reserve supply that will result in the most competitive prices for electricity. The co-optimized scheduling of generators to provide energy and reserve, coupled with the dynamic determination of reserve requirements, will result in an optimal mix of contracted and spot reserve capacities that promises stakeholders and end-users a more reliable supply of electricity.   

The Reserve Market is expected to benefit the nation by ensuring sufficient and reliable power supply. It likewise provides a venue for investors to venture into new generating capacities for both energy and reserves. Ultimately, the co-optimization of the scheduling of reserves and energy has the objective of reducing the overall cost of both energy and reserves. 

“The operation of the Reserve Market in the Philippine WESM is a testament to our shared commitment to the growth of the Philippine Energy Sector; a growth that ensures reliability, embraces innovation, and promotes competition, all leading to transparency and reasonableness of our power rates.“ ERC Chairperson Atty Monalisa Dimalanta emphasized in her message during the Virtual Ceremonial Launch of the Reserve Market Pilot Stage which is also graced by esteemed representatives from the Department of Energy (DOE), National Grid Corporation of the Philippines (NGCP), Philippine Electricity Market Corporation (PEMC) and various ancillary service providers whose continuous support is instrumental to this important achievement.