Posterous has been a great and professional platform for me. 

But I'm going to change.

I'm headed to Tumblr. There are almost no good reasons for that, and quite a few against that. So in my typical contrarian manner, looking for an advantage, I'm all over this change. Heh.

If you are subscribed via e-mail (which you should be!), you don't need to do anything. The email of each post will still keep going out to you regardless of where I'm blogging from at the moment. The RSS will change, however, for those subscribing via RSS.

The new site is at Philippine Energy Markets.

 

And frankly I don't see anything on the horizon slowing this down for 2012 or 2013. Except a possible La Niña. Continued moderation in fossil fuel prices could also impact it. An economic downturn would moderate it also. But other than that, you might want to hold on to your hat.

[Statistical warning: this particular data analysis arbitrarily starts with Jan-2011 data]

I have about 13 months of daily WESM data for Load Weighted Average Price (LWAP) - January 2011 through most of January 2012. LWAP is approximately the average price paid to generators and is reflective of the overall market price level. 

Prices are very volatile, so I plotted the trailing 30-day average of the prices to smooth it out.

I drew a trend line through the 30-day trailing average prices. The slope of that line is reflective of an annual increase of about 70% year on year.

Believe it or not, WESM prices are primarily determined by demand and supply. All other things being equal, if we get an increase in the installed base of available generators, these prices will go down.

The 2012-2013 Squeeze

We may get a little bit of capacity additions this year. If I'm not mistaken, we may get about 60 MW from the Tiwi rehabilitation project and maybe as much as 150 MW in third quarter from the BacMan rehab. But average daily load is growing at almost 400 MW a year. And if load keeps growing (we don't expect a downturn) then that will put a squeeze on existing reserves and prices will continue rising. Unless, of course, we get additional water this year compared to last year.

And there's no capacity additions on the horizon for 2013 (if I'm not mistaken).

Depending on hydrological conditions, we may be looking at a substantive increases in 2012 and 2013 bulk power market prices before they moderate with the large baseload additions that people are trying to bring online in 2014 and 2015.

Observation on Peaking - Upside Down Strategy by Utilities?

Most Philippine distribution utlities today have (for some very good reasons) focused heavily on hedging their baseload exposure through bilateral contracts for baseload units and have left their peaking positions exposed until later rounds of procurement. But looking at the pricing in the graph, it's plain to see that it's the peaking prices driving the average market price upward. It most certainly is not the off-peak prices, which may even be drifting downward.

[Disclosure: Existing clients include some enitities with intersts as buyers of both base and peaking resources and some with interests as sellers of both. I'm not trying to promote anyone's position here. I'm a student of the market. I'm wondring out loud. I continue to analyze this on behalf of all my clients.]

Here's one article.

Here's the NRC press release.

This is a 2 x 1,100 MW plant. It is expected to cost $14 billion.

That's over US$ 6,400 per kW.

 

Georgia Power Company will own 45.7%

38 electric cooperatives in Georgia will own 30% in aggregate through Oglethorpe Power Corporation which is their jointly-owned and controlled power supply cooperative.

40 municipal electric systems will own the remaining 24.3%, mostly through their joint-action agency Municipal Electric Authority of Georiga.

Singapore Bunker prices took a one-month 9% jump in January (over December).  

I don't have final Australian coal prices yet, but it looks like that increase is going to be about 6.5%.

Interestingly, we saw hardly any movement in average WESM prices between Dec and Jan. Not yet sure why that is, as one would think IPPs price on opportunity cost and reflect the market price of fuel in their bids, regardless of any fuel cost price hedges they may have in place.

But bidding behavior is complex and there are also other things going on in the market such as demand-supply that I havent' yet looked at.

Quezon Power topped the average monthly capacity factor list at 74%. The average coal plant capacity factor was 60%.

Capacity factor is a measure of how much the plant generated relative to its installed capabilty.

But the behemoth Sual is still king when it comes to absolute monthly kWh generation output.

I'm currently expecting 2012 prices to average $117.50/MT on the Newcastle Index. If that outlook holds, it would be a 3% drop from 2011 prices.

Periodically I take a look at closing prices in Futures trading of the Newcastle Index on the Ice Exchange to get an idea of where the markets on a day to day basis are expecting prices to go.

The first chart below shows the raw closing prices on the various Futures contracts on 1/30/2012.

I use these to generate various Forward Curves for coal. So the next two charts are my own concoction and I'm using my own deflator estimate to move from Futures prices to Forward prices.

Futures, of course, are prices you would pay today for delivery in the future. But more useful to us in the physical power sector are Forward Curves - i.e. what you would pay in the future for delivery at that point in time. So Futures and Forwards are different.

The second chart shows my estiamate for average prices in each month of 2012, based off of the Futures settlements.

The third chart extends this out to an annual basis. Futures are most helpful for gaining insights on very near term price movements. And even then unexpected market events can intervene to upset the apple cart. Futures become less useful as you move out beyond one or more years. So I have superimposed the upper and lower price volatility lines on the third chart. Historically, we have seen that the average annual prices in the Newcastle Index have a volatility of 30%. So you shouldn't be surprised if annual prices bounce around by +/- 30% from the Forward Curve.

Of course, they could bounce (and historically have bounced) more than 30%, but then that would be a surprise.

 

It's the cost of fossil fueled electricity that got us to the highest prices in Asia. It's the specter of run-away costs of fossil fuels that is driving us us toward renewables. Not the specter of falling fossil prices.

There is nothing naive or uninformed about insisting the DOE and ERC implement the renewables law as intended. It's totally rational.

Nobody knows for certain whether over the next few years the carefully measured and modest steps of phasing in the Feed-in-Tariff and Renewable Portfolio Standards will have lowered or raised or had any effect at all on our electricity prices relative to where they might have been without them. But that choice has already been considered - and made.

Here are a couple of end of the year charts with 12 months of data for 2011.

The first chart shows monthly capacity factor dispatch by technology. The second one shows total monthly energy dispatch by technology. I also updated the bubble chart.

I've published a tiny e-book on Electricity Price Risk subtitled: "What You as a Rate Payer Didn't Know About WESM and the IPPs"

It's probably mistitled.

My objective is to helpfullyl communicate with the non-experts on power markets. I've likely failed in that.

In three pages of text it goes too far in some areas, not far enough in others.

But I'd rather get something out than nothing. And I'm learning.

So here is a pdf version. 

And here is a link to download an iBooks version for the iPad. But I don't have an iPad, so I don't know if it works there.

Update: Here is a link to the pdf which is always the updated version, which I continually tweak.

Here's a chart I made from the fourteen most recent monthly reports available from WESM.

For the Luzon grid, I plotted the "Customer Effective Spot Settlement Prce" from the WESM report against the "NPC Effective Selling Price" taken from the NAPOCOR site.

The average NPC price over this period was the same as the average WESM price.

Even apart from the volatility issue, however, they are not the same animal. The Buyer's contractual obligations for each were quite different. From a Buyer's perspective, these were totally different products with different types of flexibility and risk profiles. And, except in the abstrat (which is indeed useful) they are not, generally, Either/Or choices for a utility.