The Energy Regulatory Commission (ERC) reported a decrease in the average cost of electricity traded at the spot market in 2023, ending two consecutive years of increases.
According to ERC’s market analysis, the average effective spot settlement price (ESSP) for all grids across the Philippines was Php 6.505 per kilowatt-hour, which is over Php 1 cheaper compared to the average ESSP of Php 7.885/kWh in 2022.
The ESSP represents the indicative effective price paid by large consumers and distribution utilities for their purchases from the Wholesale Electricity Spot Market (WESM) each billing month.
WESM serves as the centralized venue for buyers and sellers to trade electricity as a commodity, with prices determined based on demand and supply dynamics.
In a report by the Philippine Star, ERC said the decrease in average prices in 2023 is due to the expanding utilization of renewable energy (RE), which resulted in a significant increase in average supply to 15,645 megawatts.
The addition of about 35 generation companies utilizing RE technologies as WESM trading participants in December 2023 contributed to an additional capacity of approximately 749 MW.
As a result, despite a nine percent increase in power demand in 2023, the additional supply helped offset it, leading to an 18 percent decrease in average prices.
Additionally, the completion of the Mindanao-Visayas Interconnection Project (MVIP) played a role in lowering the ESSP. Although its capacity was limited, it allowed WESM in Mindanao to trade supply in the Luzon-Visayas WESM.
The increased supply margin and decreased monthly average prices were attributed to the operationalization of MVIP or WESM Mindanao, which was not yet in place the previous year.
In January 2024, the National Grid Corp. of the Philippines (NGCP) activated MVIP at full capacity, further influencing electricity trading dynamics in the country.
