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Today in Energy

March 6, 2015

Supply shortages lead to rolling power outages in the Philippines

graph of Philippines electricity capacity by fuel and planned additions, as explained in the article text
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 Asia—issues 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.

map of gross power generation by fuel, as explained in the article text
Source: U.S. Energy Information Administration, based on Department of Energy

Principal contributors: Scott Jell