Measures to solve Mindanao power problems proposed

One of the country’s largest business organizations on Wednesday urged the government to put in place the necessary support and infrastructure that will create a conducive business environment to encourage investors to put much-needed power facilities in electricity-starved Mindanao.

In a position paper issued Wednesday, the Management Association of the Philippines said the government must pursue the privatization of its remaining assets in Mindanao and put in place the necessary infrastructure, such as the wholesale electricity spot market (WESM) and the Leyte-Mindanao Interconnection Project.

A spot market, it said, would provide a platform for electricity trading in the area.

These medium- to long-term solutions are expected to help shore up power supply on the island, which has been experiencing hours-long brownouts since the beginning of the year. In the long run, these will help increase the baseload capacity of Mindanao, which has been heavily reliant on the hydropower facilities.

“For the next four to five years, the Mindanao grid needs additional baseload power generation capacities. Given that it only has 37 percent baseload capacity, it will need about 300 megawatts to 400 MW to meet the minimum baseload demand that will assure reliable power supply during summer months,” MAP said.

Baseload capacity refers to the power generated by facilities that can provide adequate and reliable electricity supply 24/7.

MAP said the privatization of the remaining government-owned facilities such as the Agus-Pulangui hydropower complex was critical as this would eliminate distortions in market pricing caused by government ownership and subsidies.

It will also help ensure the successful commercial operation of the WESM, which will provide power generation companies an avenue to sell their capacities at market-driven prices, without the need to enter into contracts with utilities. This is being implemented in Luzon and Visayas.

“It was because of WESM that excess or uncontracted generation capacities in Luzon and Visayas were made available to the grid for trading. Having true market price signals is the best way to call forth new supplies,” the paper stated.

MAP is likewise pushing for the much-delayed Leyte-Mindanao Interconnection Project (LMIP), estimated to cost P24 billion, to allow sharing of reserves among the country’s three major islands. At present, only Luzon and Visayas are interconnected.

MAP said this interconnection project would enable the (Mindanao) grid to properly make use of and share its hydro resources with other grids and benefit from the reserves of other grids.

“Without this ability to share reserves, Mindanao will need to provide reserves equivalent to almost the whole capacity of the Agus and Pulangui plants or a reserve level of 50 percent of supply compared to a more prudent level of 23 percent. This situation will make electricity prohibitively expensive on the island,” it added.