Shell calls on DOE to recognize mid-merit load before CSP implementation

By Juzel L. Danganan

MANILA, Oct. 11 (PNA) — Pilipinas Shell Petroleum Corporation (PSPC) called on the Department of Energy (DOE) and the Energy Regulatory Commission (ERC) to recognize mid-merit load to be part of the energy mix policy — before implementing the competitive selection process (CSP) or DOE circular No. DC 2015-06-0008.

”Furthermore, the (CSP) guidelines only identify base load and peaking demand, missing mid-merit demand tranche altogether. Inclusion of the mid-merit demand will ensure that the current practice of cycling coal plants which lead to higher costs and lower reliability can be mitigated in the future,” PSPC vice president for External Relations Ramon del Rosario said in a comment to the circular, released by the DOE.

The oil company explained aggregation by demand type will estimate how much mid-merit demand the country needs, allowing the gas investments to grow by meeting the requirements.

Shell also pointed out that the absence of an energy mix policy will lead to a dependence on coal-fired generation, which is estimated to reach 75 percent by 2030 – the highest in Asia.

PSPC said the implementation of an energy mix policy, which includes mid-merit demand that often comes from natural gas plants, should be mirrored in the CSP.

”While a Competitive Selection Process will provide more transparency and potentially lower cost of electricity, it needs to be anchored on a firm energy policy. Shell supports the DOE aspiration of a 1/3 generation mix for each of coal, natural gas and renewable, recognizing the different role each of the technologies has to play in a balanced and optimized generation system,” it added.

The CSP is a policy that requires distribution utilities (DUs) to aggregate their power demand and bid it out, allowing the DUs to have the least cost of power.

Through avoiding bilateral agreements or PSAs, the combined costs of aggregated capacity is lower as the DUs have more choices on the pricing.

The oil company said that a portfolio of generation technologies is vital to achieve the least cost of power generation and supply.

Shell also said that the country is missing its opportunity to optimize at a portfolio level, as power supply agreements (PSAs) are currently approved on a per contract basis.

The firm added that the Oct. 27 deadline for a decision on the policy is too aggressive and unlikely to be met with a robust process in place.

PSPC stressed the annual third party selection will likely fail given the rigid timeline, adding it suggests the third party should have a three to five year process.

The company also said the CSP guidelines should specify the mechanics on how ERC will approve the contracts and who will be the generation companies that will contract with upon winning the bid.

Shell further said the cost of externalities is not included in the current mix, such as health costs and environmental costs. (PNA)