Mindanao Power Development Program Updates (2014)

ISSN 2467-4966 (Print)

MINDANAO POWER MONITORING COMMITTEE

2014 PROGRAM UPDATES

“

The dream is that, by the time I step down in 2016, this energy situation will be one less worry in the minds of Mindanawons and investors in Mindanao alike - that by then, I can truthfully say that I left you in very good hands and in a better state than what I have found.

DIESEL

President Benigno S. Aquino III Mindanao Power Summit, April 2012

MPMC | 2014 PROGRAM UPDATES

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FOREWORD

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T

he year 2014 was a challenging time for Mindanao, as the island-region continued to find means to mitigate the impacts of an imbalanced power supply. As the demand for power increased, the supply side still needed catching up.

Some areas in Mindanao experienced long hours of brownout as short and long-term solutions were being developed to bridge the power supply and demand gap of the region.

This situation was further aggravated by the Mindanao-wide blackout in February 2014, caused by a tripping of one of the power plants that resulted to the six-hour shutdown of the whole Mindanao grid. An otherwise manageable condition worsened by the forced outage of the 200 MW STEAG Coal Fired Power Plant that caused four to eight hours of rotating brownouts in some parts of Mindanao. The impacts of the dry season also affected the operations of the Agus and Pulangi Hydropower Complexes, which decreased the overall power supply of Mindanao.

But despite these challenges, Mindanao’s power sector, however, saw positive advances during the second half of 2014.

The start of the rainy season and the restoration of the coal-fired power plant allowed the island to experience a better power situation in the remaining months of the year.

Furthermore, the full cooperation, integration efforts and initiatives of the members of the Mindanao Power Monitoring Committee (MPMC) helped alleviate the power situation in the island through the implementation of short, medium, and long term solutions.

Among these solutions included the continued implementation of the Modular Generator Set Program that allowed some areas in the island to experience lesser hours of brownouts. The Interim Mindanao Electricity Market, though under market intervention after the February Mindanao-wide Blackout, tapped unutilized capacity for distribution utilities to use if they are in need of additional supply.

Long-term solutions were also identified by MPMC, one of which is the One Stop Facilitation and Monitoring Center, which aims to hasten the application of 231 pending renewable energy (RE) projects in Mindanao through monitoring, facilitation, and consultation. Efforts were undertaken to ensure the immediate rehabilitation and uprating of the Agus and Pulangi Hydropower Complexes. Once completed, we expect the dependable generating capacity of the “crown jewels” of Mindanao to increase, improving the region’s power situation.

Starting next year, Mindanao will have reserve power supply for the first time in almost 10 years. Baseload power plants are set to connect to the grid by 2015, ensuring Mindanao with a stable supply of power. The entry of new power investors is brought by the joint efforts of the business community and the public sector in our desire to sustain our ideal energy mix or 50 percent fossil-based, and 50 percent RE. A brighter future awaits Mindanao. With the anticipated entry of power investments in the island-region, we expect these to provide better opportunities for Mindanawons and commence a regime of reliable, affordable, and sustainable power in Mindanao. As we look into the future, we are pushing for power investments that will spur inclusive growth as well as maximize Mindanao’s full potential.

SECRETARY LUWALHATI R. ANTONINO Chairperson, Mindanao Development Authority

THE mindanao POWER MONITORING committee

2014 PROGRAM UPDATES

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2014 PROGRAM UPDATES THE mindanao POWER MONITORING committee

M

indanao’s power sector is identified as one of the enabling factors of the region’s overall socioeconomic development. It is a sector considered critical to achieving the goals set by the Mindanao 2020 Peace and Development Framework Plan, or Mindanao 2020 – considered as the island-region’s socioeconomic roadmap for 2011 to 2030. In order to achieve the goals set by the plan, the Mindanao Development Authority (MinDA) emphasized the importance of the increased national government focus on the region’s power supply, with the end goal of facilitating Mindanao’s socioeconomic turnaround.

While the region used to enjoy clean, affordable, and reliable power supply for nearly half a century, an increasing demand for energy, coupled with the declining capacity of the Agus-Pulangi hydropower complex - the region’s main source of energy resulted to deficiencies in power supply and eventually caused massive power interruptions among the region’s key cities and provinces.

As Mindanao’s economic performance continued to grow annually, owing to the strong performance of its agribusiness, manufacturing, and services sectors, the region’s need for electricity also increased at an annual rate of 4.7 to 5.28 percent. The region then faced a daily average shortage of 100 to 300 megawatts (MW) of power caused by the low output of its main power source and the increasing demand for power.

A Mindanao Power Summit was organized by MinDA on April 12, 2012 which facilitated the discussion of the region’s power situation with President Benigno S. Aquino III meeting with the region’s key business leaders, power sector representatives, government officials, and members of civil society groups. One of the key results of the summit was the creation of the Mindanao Power Monitoring Committee (MPMC), designed to facilitate and address the region’s power problems.

Created through Executive Order 81, signed by President Aquino, the MPMC is tasked to coordinate the efforts of national, regional, and local governments, and power industry stakeholders to improve the power situation in Mindanao. MinDA spearheads the committee which is composed of the Department of Energy (DOE), Energy Regulatory Commission (ERC), National Electrification Administration (NEA), National Power Corporation (NPC), Power Assets and Liabilities Management Corporation (PSALM), Mindanao Power Alliance (MEPA), and the Association of Mindanao Rural Electric Cooperatives (AMRECO).

Since its creation, the MPMC has identified several measures ranging from short-term up to long-term solutions that will contribute to solving the energy crisis and ensure stable and sustainable power which aim to avoid a cyclical repetition of power crises within the island-region.

The succeeding pages of this report provide the narrative of the 2014 program updates of the MPMC in performing its mandate to deliver immediate and feasible solutions for the region’s critical power situation.

MPMC | 2014 PROGRAM UPDATES

ABOUT THE COVER MPMC envisions that by 2020, Mindanao is on its way to realizing a regime of reliable, sustainable, and affordable power supply. The cover photo depicts this vision, in which Mindanawons no longer experience power shortage and that the entire island-region enjoys a dependable power system that optimizes the use of renewable energy and efficiently distributes clean, but affordable power.

2012

2016

TABLE OF CONTENTS

4 6 7

About MPMC 2014 Mindanao Power Situation Mindanao Power Outlook (Jan-Mar 2015)

8

Updates on MPMC Identified Measures

9

One-Stop Processing and Facilitation Center for RE Applications

(As of December 2014)

10

Interim Mindanao Electricity Market

12

Rehabilitation of Agus and Pulangi Hydro Power Complexes

14

RE Resource Assessment/ Mapping Project for Mindanao

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Mindanao Modular Generator Sets Program

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Mindanao Supply-Demand Outlook (2015-2020)

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Acronyms

2014 Mindanao Power Situation

1ST QUARTER Outage of the 200 MW STEAG Coal-fired Power Plant 4-8 Hours of rotating outages for four months

3RD QUARTER Increase in the water levels of Lake Lanao and Pulangi River Agus and Pulangi Hydro Complexes maximized their energy output

2ND QUARTER

50-60 MW deficiency peaking at 100 MW, going as low as 15 MW and even experiencing excess capacity during weekends and holidays

Repair and restoration of the STEAG coal-fired power plant which lasted for three months

Scheduled preventive maintenance work of other power facilities

Unit 2 restored in May 2014 Unit 1 restored in June 2014 start of the wet season and the corresponding increase in the water levels of the major hydro power plants in Mindanao

4TH QUARTER

DIESEL

Better power situation for the remaining months of 2014

MPMC | 2014 PROGRAM UPDATES

2014

Mindanao Power Outlook

(January – March 2015)

POWER CAPACITY

2015

2015: 1Q

Excess in capacity for the first time since 2009

2016

2020

2030

500 MW

500 MW

1,600 MW

SUPPLY

2-Unit 300 MW Therma South Inc. coal-fired power plant projected to be on commercial operation by the end of the March and June 2015 Unit 1 of the 200 MW Southern Mindanao Coal-fired Power Plant of Alsons Power Corporation, which is expected to be operational by October 2015

Mindanao MW requirements for the succeeding years (based on a 4.7% annual growth, DOE Philippine Energy Plan)

Share of fossil fuels in the energy mix is rising, which calls for strengthened efforts to fully tap clean, renewable and indigenous power sources to minimize foreign exchange and environmental costs Distribution Utilities (DU) especially electric cooperatives are expected to look closely at their current contracting of power supply to ensure that they no longer experience deficiency

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Updates on MPMC Identified Measures

(as of December 2014)

One-Stop Facilitation AND MONITORING Center FOR RE Applications

T

he One-Stop Facilitation and Monitoring Center (OSFMC) was created to speed up the approval of application permits for renewable energy (RE) projects in Mindanao. Through the center, the MPMC aims to achieve a seamless Integration and interfacing between and among permitting agencies to facilitate and accelerate the processing of RE applications. The center is also designed to cut down the processing and approval of RE power projects to one or two years from the average of three to five years.

A total of 231 RE projects in Mindanao are being facilitated by MPMC through the OSFMC with targeted completion of permits by year 2016. This batch of RE power project applications comprises 2,419.17 MW of potential capacities with the following breakdown:

hydro power

GEOTHERMAL ENERGY

178

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Projects

1,631.09 MW Potential Capacity

Projects

170 MW

Potential Capacity

231 RE projects monitored and facilated by OSFMC with completed permits by 2016

MPMC | 2014 PROGRAM UPDATES

solar ENERGY

32 Projects

358.95 MW

Potential Capacity

BIOMASS ENERGY

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Projects

144.65 MW

Potential Capacity

2,419.17 MW potential capacity available by 2020

OSFMC Web Portal The OSFMC’s Web Portal was launched in October 2014, in line with the goal to achieve a balanced mix of fossil-fueled and RE resources across the island-region of Mindanao. The five government agencies that are primarily involved in the permitting process namely, DOE, DA, DAR, DENR-NWRB, and NCIP together with MinDA signed the joint Memorandum Circular on the inter-agency monitoring fo the web portal. As of January 2015, the OSFMC is alread in full operation and is currently monitoring all pending RE power project applications in Mindanao. DOE is also proposing the establishment of the Energy Virutal One-stop Shop (EVOSS), which will be implemented nationwide and will be patterned after the OSFMC.

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IMEM

INTERIM MINDANAO ELECTRICITY MARKET

T

he Interim Mindanao Electricity Market (IMEM) was designed as a medium-

term mechanism and solution to Mindanao’s power supply shortage until supply and demand improves with the entry of new capacities in 2015.

IMEM was designed as a stop-gap mechanism for power producers to sell unused power supply to consumers for a very limited duration. It is designed to help distribution utilities and electric cooperatives in the preparation of reliable data forecasts that are crucial to the implementation of the system.

Once fully implemented, IMEM has the potential to serve as a practice ground for the Wholesale Electricity Spot Market (WESM) which is presently being implemented in Luzon and the Visayas.

IMEM is planned to eventually transition to WESM, as more power plants come online and Mindanao has an excess of power supply which can then be made available in the open electricity market.

MPMC | 2014 PROGRAM UPDATES

Photograph courtesy of Davao Light & Power Co.

In support to the mechanism’s full implementation, DOE passed the Department Circular 2014-05-0010, amending its rules and providing for transitory arrangements. The circular also incorporated into the IMEM rules the inputs from the stakeholders regarding the operations of the market.

The ERC on the other hand conducted several public hearings on the proposed changes to the IMEM Price Determination Methodology (PDM) and is expected to submit a resolution to the petition for the change in the IMEM PDM by the first quarter of 2015.

Since IMEM is still under market intervention, the commercial aspect of the interim market is currently suspended.

According to the NGCP, once the proposed changes to the IMEM PDM are in place, coupled with the entry of committed generating capacities in Mindanao, IMEM will resume its normal operations.

Mindanao Electric Cooperatives through AMRECO have expressed their support to the proposed changes to the IMEM rules and have indicated interest to participate in the market.

As part of its commitment to inform stakeholders on Mindanao’s power situation, MinDA provided local partners in several parts of the region with monthly power updates. The agency, through MPMC also participated in dialogues that tackle discussions on the improvement of IMEM’s full implementation.

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Rehabilitation of Agus and Pulangi Hydro Power Complexes

E

fforts were made to ensure immediate rehabilitation and uprating of Agus-Pulangi complex with the allocation of P4.96 billion.

P1.72 billion has been allocated for the uprating of Agus 1 and 2, specifically for the Flood Control Project for Balo-i Plains. This uprating will increase the hydro power plants’ combined generating capacity by 30-40 MW and will prevent flooding among communities in the area.

(Status: The DPWH Project team already concluded initial parcellary survey and initiated the right of way negotiations. Both activities form part of the detailed engineering stage of the project)

P2.6 billion was approved for the rehabilitation and replacement of plant components for Agus 6, units 1 and 2. The uprating will increase the plant’s generation output by 19 MW and will extend its economic life for another 30 years.

(Status: PSALM has awarded the project to Guangxi Hydro Electric Construction Bureau; Project now in the design phase and expected for completion by January 2016)

MPMC | 2014 PROGRAM UPDATES

P495 million was endorsed by MinDA to PSALM for the approval of the proposal of NPC for the uprating of Agus 6 Unit 4. This proposal is expected to improve the plant’s generating capacity by 15 MW once completed.

(Status: PSALM has awarded the project to Guangxi Hydro Electric Construction Bureau of China under a joint venture with IPP Construction Inc. of the Philippines; project currently in design phase and is expected to be completed in July 2015)

P265-Million was allocated for the Pulangi 4 Selective Dredging.

MinDA endorsed the NPC proposal to PSALM to address the siltation problem and increase the plant’s generating output.

(Status: PSALM currently processing the viability of the project for funding; NPC requested to provide additional information).

Another NPC proposal for Pulangi 4 uprating was endorsed by MinDA particularly the installation of hybrid integrated turbine generator assembly to tap the flow of water at head-race canal intake of the plant.

The proposed uprating will generate an additional 16MW over and above the 250 MW Pulangi 4 output.

(Status: PSALM referred the proposal to DOE for advise, with regard to impact on privatization of Agus-Pulangi, if ever; Project treated as Independent Power Producer (IPP project) and shall go through normal application process as a new generating facility).

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RE Resource Assessment| Mapping Project for Mindanao

1 MPMC MPMC ACCOMPLISHMENT | 2014 PROGRAMREPORT UPDATES 2014

T

he Resource Assessment | Mapping Project for Mindanao was

implemented in collaboration with USAID’s CEnergy Project to identify potential areas for RE power development specifically biomass and hydro power projects in the on-grid areas of Mindanao.

For the hydro resource assessment, a total of 1,308.3 MW of potential capacities were identified in two sites located in the Autonomous Region in Muslim Mindanao (ARMM). One of the sites is the Tran River in the province of Maguindanao with a potential capacity of 30.6 MW. The other site is the Kanapnapan Falls in the province of Lanao del Sur, which has a potential capacity of 9.6 MW.

A total of 18 potential sites with a combined capacity of 875 MW for biomass power plant development were identified for possible biomass resource development. Of these potential sites, one is located in the ARMM, specifically in the municipality of Datu Unsay in Maguindanao.

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Mindanao Modular Generator Sets Program

T

he DOE co-chair of the MPMC, proposed the

use of modular generator sets as a short-term solution to the intermediate electricity needs of Mindanao.

An executive order (EO No. 137, series of 2013) entitled “The Mindanao Modular Generator Sets Program” was issued by the Office of the President on July 12, 2013 in support to the initiative. On August 5, 2013, DOE issued Department Circular No. DC2013-08-0019 which provides the implementing rules and guidelines for the program.

P4.5B Program Fund

MPMC | 2014 PROGRAM UPDATES

An amount of P4.5 billion sourced from DOE’s Malampaya Fund was allocated by the Department of Budget and Management for the implementation of the program. The funding was made available through Section 2 of DC201308-0019.

Photograph courtesy of Davao Light & Power Co.

AMRECO

11 Mindanao electric cooperatives enrolled in the program

NEA, in consultation with MinDA, sought the assistance of the Association of Mindanao Rural Electric Cooperatives (AMRECO) and other Mindanao power stakeholders for the program’s full implementation.

On November 6, 2013, the NEA Board of Administrators issued Board Resolution 153, series of 2013 or also called as the “Policy on the facility for the modular generator sets program for Mindanao ECs” establishing a loan facility for Mindanao’s electric cooperatives (EC). A memorandum circular was released on July 9, 2014 to all Mindanao ECs about the policy on the facility for the modular generator sets program for Mindanao ECs. As of January 2015, a total of 11 Mindanao electric cooperatives have enrolled in the program with an estimated 241 MW of additional capacity supplied by the modular diesel generator sets.

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Mindanao Supply-Demand Outlook

2015-2020 2014

2015

2016

580 MW

720 MW

150 MW

40 MW

MARCH

FEBRUARY

150 MW

25 MW

Therma South 1

LEGEND

Therma South 2

Biomass

Lake Mainit HEP

MARCH

MAY

Available Capacity

30 MW

135 MW

Peak Demand

SEPTEMBER

JUNE

100 MW

135 MW

Committed Capacity

Puyo HEP

Regulating Reserve

FDC Coal U1

Sarangani Coal 1

Contingency Reserve

FDC Coal U2

SEPTEMBER

SEPTEMBER

150 MW

150 MW

SMC Davao P1-1

SMC Davao P1-2

DECEMBER

SEPTEMBER

Dispatchable Reserve

100 MW Sarangani Coal U2 NOVEMBER

135 MW

POWER SOURCES

HYDRO ELECTRIC

MPMC | 2014 PROGRAM UPDATES

COAL

FDC Coal U3

BIOMASS

DECEMBER

2017

550.6 MW

2018

9.0 MW

1.6 MW

9.0 MW

Phil Bio

Limbatangon HEP

JANUARY

JANUARY

9 MW Limbatangon HEP MARCH

2019

Indicative Power Projects

11.1 MW

11.1 MW

Hydro Power Projects

2020

Indicative Power Projects

5.5 MW

5.5 MW

Hydro Power Projects

540 MW

PSAGCORP MARCH

NOTES

a. b.

c. d. e.

Required Reserve Margin (RM) i.e. 4% regulating reserve and contingency and dispatchable reserve 5.6% peak demand growth rate resulted from observed 0.8 elasticity ratio of demand for electric power with national economic growth applied to 7 percent GDP growth rate (GR) target for 2014-2015 12.8% peak demand growth rate resulted from observed 1.6 elasticity ratio of demand for electric power with national economic growth applied to 8 percent GDP growth rate (GR) target for 2016 8% peak demand growth rate resulted from observed 1 elasticity ratio of demand for electric power with national economic growth applied to 8 percent GDP growth rate (GR) target for 2017-2020 Assumed 3.3 percent average forced outage of the total dependable capacity SOURCE: DEPARTMENT OF ENERGY

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2015: MINDANAO SEEING BRIGHTER DAYS Mindanao’s power sector expects to see brighter days at the onset of 2015, with the entry of new power projects that will enable the island-region to have an excess in power capacity for the first time since 2009.

A total of 580 MW in additional capacity from committed power projects is expected to boost the Mindanao grid’s existing available capacity of 1,496.22 MW, starting second quarter of 2015.

First to come online is 300MW Coal-fired Therma South Energy Project in Davao City, with the commissioning of the first of two 150 MW units in March, while the second 150 MW unit is targeted to start operations by June.

with the 4.7 percent annual increase in the energy demand of Mindanao, as projected by DOE in its Philippine Energy Plan of 2012 to 2030.

The island-region is projected to require at least 500 MW of new capacity by 2016, another 500 MW by 2020, and then 1,600 MW by 2030.

The El Niño Phenomenon, forecasted in late 2014 and predicted to last until mid-2016, is also expected to temper Mindanao’s energy outlook, as the low amount of rainfall due to the phenomenon will affect the generating capacity of the Agus-Pulangi Hydropower Complexes which accounts for 49 percent of the total generating capacity in the island-region.

Preparation

The Southern Mindanao Coal-fired Power Station of Sarangani Energy Corporation in Sarangani and the Puyo Hydroelectric Power Project of First Gen Mindanao Hydropower Corporation in Agusan del Norte will add 100 MW and 30 MW, respectively, to the Mindanao grid in September.

San Miguel Consolidated Power Corporation’s 300 MW SMC Davao Power Project Phase I will fire up its first 150 MW unit

by December, completing the total of 580 MW of capacity from committed power projects expected to come online in 2015.

In light of these challenges, distribution utilities, particularly electric cooperatives, will have to closely review their existing power supply contracting arrangements to avoid deficiencies in service.

Although the outlook is generally positive across the islandregion, a few service areas are still foreseen to experience rotational power outages due to issues in securing power supply contracts by the electric cooperatives from existing and upcoming power plants already in the pipeline.

Outlook

While the anticipated additional capacity is not enough to comply with ideal power reserve requirements, these will be sufficient to end the series of rotational power outages across Mindanao for the first time in five years, and the overall power supply situation in the island-region is going to be in an upward trend with the completion of more power projects already in the pipeline in the succeeding years.

Challenges Despite the positive outlook for 2015, challenges remain in terms of sustaining the growth of the power sector in line

Mindanao’s power sector is expected to be in a better state by 2015 compared to the past five years, where many areas of the island-region experienced rotational power outages ranging from one to eight hours in duration.

Starting in 2016, Mindanao is expected to have enough generated capacity to comply with power reserve requirements on top of catering to projected power demand.

This new era for Mindanao’s power sector will allow the island-region to realize its full potential as the main driver of growth in the Philippines in the coming years.

DIESEL

MPMC | 2014 PROGRAM UPDATES

mpmc members acronyms AMRECO

The Association of Mindanao Rural Electric Cooperatives Inc.

CEnergy

Climate Change and Clean Energy Project

DOE DU ERC

MEPA

Department of Energy Distribution Utilities Energy Regulatory Commission

MPMC Members (L-R): Mindanao Development Authority, Department of Energy, Energy Regulatory Commission, National Electrification Association, National Power Corporation, Power Sector Assets and Liabilities Management, Association of Mindanao Rural Electric Cooperatives, Mindanao Electric Power Alliance, National Transmission Corporation, National Grid Corporation of the Philippines

IMEM

Interim Mindanao Electricity

MEPA

Mindanao Electric Power Alliance

MINDANAO POWER MONITORING COMMITTEE

MinDA

Mindanao Development Authority

ACCOMPLISHMENT REPORT 2014

MPMC

Mindanao Power Monitoring Committee

NEA

National Electrification Administration

NGCP

National Grid Corporation of the Philippines

NPC

National Power Corporation

OSPFC OSFMC PEMC PSALM RE

One-Stop Processing and Facilitation Center One-Stop Facilitation and Monitoring Center Philippine Electricity Market Corporation Power Sector Assets and Liabilities Management Renewable Energy

Editorial Board and Staff Secretary Luwalhati R. Antonino Publisher

Undersecretary Janet M. Lopoz, CESO I Director Reyzaldy B. Tan Director Romeo M. Montenegro Editorial Board

Leoncio M. Rodaje Editor-in-Chief

Bryan D. Diosma Editorial Consultant

Kathy Mar S. Mateo Writer

Marcos Paulo C. Risonar Layout and Design

Raymond Peter D. Esperat Fritz E. Flores Reuel John F. Lumawag Iris F. Quizo Mary Ann C. Quisido Production Staff

Davao Light & Power Company Raymond Peter D. Esperat Fritz E. Flores Reuel John F. Lumawag Photographs

© 2014 Mindanao Power Monitoring Committee

Mindanao Power Monitoring Committee Mindanao Development Authority 4th Floor, SSS Building J.P. Laurel Avenue Bajada, Davao CIty Telephone No.: (082) 221-7195 Telefax No.: (082) 221-8108 Email: info@minda.gov.ph Visit: www.minda.gov.ph Facebook: /MinDAgovphOfficial Twitter: @MinDAgovph

DIESEL

Photograph courtesy of Davao Light & Power Co.

MPMC | 2014 PROGRAM UPDATES