Today in Energy

March 6, 2015

Supply shortages lead to rolling power outages in the Philippines

Source: Platts World Electric Power Plant Database (December 2014 release)
Note: Planned additions reflect projects currently under construction.
As the 12th-largest nation in the world, the Philippines has a population of more than 100 million people spread over
7,000 islands, presenting several electricity infrastructure challenges. Currently, the country is facing growing concerns
over resource adequacy in its power sector, as the nation is challenged to add supply quickly enough to keep up with
growing demand. In late 2014, Philippine president Benigno Aquino requested emergency powers from the Philippine
Congress to enable the government to lease 600 megawatts (MW) of additional capacity and to take other measures to
prevent power outages in Luzon, the largest island region in the southeast Asian nation.
Emergency capacity additions would be mostly met by diesel generators. Other emergency measures include paying
large customers to reduce grid demand by running their own generators, under the government's interruptible load
program. Supply concerns in Mindanao, the nation's second-largest island region, have already led to recurring
announcements of rolling power outages. An announced outage in February 2015 was partly caused by a coal-fired
power plant undergoing preventive maintenance.
The nation's power sector has been through years of transformation. The National Power Corporation (NPC) once had a
monopoly on generation and transmission. Following political regime change in 1986, the Philippine economy
experienced a series of reforms, including electric power sector restructuring. Executive Order No. 215 (1987) led to the
creation of an independent power producer sector to spur private ownership of generation.
Additional emphasis on privatization and restructuring followed, culminating in the Electric Power Industry Reform Act of
2001 (EPIRA), which required functional unbundling of NPC's generation and transmission activities. The EPIRA also
established a wholesale electricity spot market to enable wholesale competition through merit-order dispatch of
generators and market-based pricing. On the retail side, distribution to customers traditionally was mainly through
investor-owned utilities, such as the Manila Electric Company (MERALCO). In 2013, the implementation of retail
competition and open access (RCOA) allowed qualified customers to choose alternate electricity suppliers. Despite
these restructuring efforts, the Philippines continues to face power supply challenges, and Filipinos pay some of the
highest electricity prices in southeast Asiaissues that have been cited as risks to foreign investment.

In addition to the government's short-term emergency actions, the Philippines will continue to expand its electricity
generation capacity to improve system reliability and keep up with economic and population growth. The most recent
data available from the International Energy Agency estimate that 70% of the population has access to electricity.
The three main island regions of Luzon, Visayas, and Mindanao each have distinct generation profiles. In the northern
part of the country, Luzon's capacity is mainly powered by fossil fuels, with anticipated capacity additions of more than
500 MW, most of which will be coal-fired. Visayas, in central Philippines, currently relies heavily on its geothermal
resources, but has plans to add 300 MW of coal capacity by 2017. In the south, Mindanao relies heavily on its
hydropower resources, with plans for both additional hydropower capacity and additional coal-fired generation to
increase system reliability.

Source: U.S. Energy Information Administration, based on Department of Energy

Principal contributors: Scott Jell