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.]