EnergyMAX

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Release Date: August 2020

One Year Energy Price Outlook

September 2020 - August 2021

“WESM prices will continue to remain at coal bid prices unless incoming power plants are delayed.”

WESM prices are projected to converge to near coal variable bids (between 1.31 - 2.72 PhP/kWh) for the forecast period (Sept. 2020 – Aug. 2021 WESM Billing months). The main drivers are lower demand levels caused by the coronavirus pandemic and incoming power plants – commissioning and operation of GNPower Dinginin’s plants (1,336 MW of installed capacity for two units) is indicated to commence between late 2020 and the first half of 2021. These two units can supply roughly 13% of projected Luzon demand. [see our full report]

Supply-Demand Forecast

In 2020, due to the coronavirus pandemic causing a DBCC forecast of -5.55% (median) growth in Philippine GDP, an annual average demand reduction of 5.0% for Luzon and 7.1% for Visayas is derived. By 2021, DBCC projects the GDP to recover by 7% (median), leading to an assumed annual average demand increase of 6.2% for the Luzon and 8.1% for Visayas.

The Average Monthly Availability of Power Plants below includes existing and incoming power plants for the forecast period and the planned maintenance outage of the WESM registered power plants. Currently, the supply mix is dominated by coal plants which constitute about 44% of installed grid connected capacity, followed by natural gas plants, which compose about 15% of installed capacity. The Luzon and Visayas regions are connected through the HVDC Leyte – Luzon, which has an assumed line capacity of 440MW (to and from Luzon).

Given the system demand forecasts (Luzon plus Visayas) and required system reserves, total available supply seems sufficient for the Luzon and Visayas grids.

Average Availability of Power Plants vs. System Demand

Supply-Demand

Base Case Price Forecast

See our One Year Forecast

The summary of WESM GWAP prices from the Base Case - Monte Carlo simulation is shown as follows. The chart shows, on a monthly aggregated basis, the average, minimum, maximum prices and a confidence band showing 5% and 95% of the possible price scenarios. Given the Base Case market assumptions, the confidence band indicates what the monthly price would be on a 90% confidence level. Aside from the monthly price (all hours), a similar chart is also provided for solar plant hours.

Monthly Average Price (All Hours)

Monthly Average Price (Solar Hours)

Price Forecast

System Demand Sensitivity

Average WESM prices (all intervals), are generally expected to stay near coal variable bids for +/- 3% changes in demand levels, with the exception of May 2021, due to high demand and low hydro levels compared to other months.

Effect of Incoming Plant Delays

Delays in the projected operation of incoming plants are expected to significantly impact spot prices, especially during the 2nd quarter of 2021, where average WESM prices are projected to increase by more than 1 PhP/kWh if incoming plants have not begun commissioning or commercial operations.