Meralco to include RE sources in distribution system

Manila Electric Co., the country’s biggest power distributor, is gearing up for the possible inclusion within its distribution system of at least 144 megawatts of capacity from renewable energy sources, as it admitted to potential difficulties this may pose in terms of its sourcing strategy and rate impact on customers.

In a presentation at the recently concluded renewable energy summit, Meralco’s utility economics head Lawrence Fernandez identified 13 potential renewable energy projects within its franchise area, based on the service contracts approved by the Department of Energy as of January this year.

Of these, seven are biomass power projects, which are expected to produce a combined 25.45 MW; three of the potential projects will be powered with wind for a combined capacity of 25.45 MW; while solar power projects are expected to generate an estimated 60.08 MW of additional capacity.

Currently, Meralco has three renewable energy facilities embedded in its system namely the 8.19-MW biomass plant of Montalban Methane Power Corp.; the 4.2-MW biomass plant of Bacavalley Energy Inc.; and the 1.1-MW hydro facility of Philippine Power Development Corp. (Philpodeco).

When a plant is embedded, it is connected to the distribution system or the system of any user and has no direct connection to the grid.

Recently, Meralco also signed an interconnection agreement with Alternergy Wind One Corp., which is planning to put up a 90-MW wind facility in Rizal.

Fernandez stressed the need for closer coordination among all distribution utilities (DUs) and electric cooperatives across the country and the renewable energy developers in order to prepare the utilities in accommodating an expected 760 MW of RE capacity within a three-year period, once the feed-in-tariff rates have been issued.

However, several challenges are expected once all these capacities start to come in.

According to Fernandez, one of the most crucial considerations will be the rate impact of accommodating the RE facilities to the end consumers.

“DUs are mandated to supply electricity to its market in a least-cost manner. Improvements in the systems, provision of physical connections, changes in operations to accommodate RE plants will entail costs,” he said.

“As the frontliners of the power industry, and with personal experience in having to face the public to explain changes in power prices, DUs are sensitive to the impact of the various RE mechanisms on the bill to end-users. As with any cost along with supply chain — generation, transmission, distribution and taxes — RE-related costs must be scrutinized to ensure that only reasonable costs are to be imposed on end-users,” Fernandez further said.

Another challenge will be the expected “additional complications in forecasting” with the entry of “intermittent” RE sources; adjusting purchases of capacity at the wholesale electricity spot market; and in integrating the embedded RE into the general sourcing portfolio.

Utilities and electric coops are likewise expected to expand, upgrade or reinforce their distribution systems to connect RE plants, some with bi-directional power flows.