Suppressing the electricity price spikes

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  Recently, the Philippine Electricity Market Corp. (PEMC) is mulling to suspend the operation of the country’s wholesale electricity spot market (WESM) of which it is tasked to operate and oversee, to halt “significant’ spikes in trading prices.
  
  PEMC president Lasse Holopainen threatens to impose such halt if the Energy Regulatory Commission does not intervene to smooth out the sudden price upticks in the market.
  
  “That is an option. But we prefer that ERC do something about it first. The ERC can intervene and correct these prices and affect a time-of-use (TOU) rate,” Holopainen said.
  
  Under the WESM guidelines trading in the market can be imposed in extreme cases such as a wholesale failure of the grid system, threat to system security or a force majeure.
  
  But no such event ever occurred to justify any suspension. The mere threat of a temporary stop to trading in a fully functional, open market sets a dangerous precedent and could ultimately derail the ongoing electricity reforms.
  
  The recent price spike was traced to the failure of the San Jose transmission line in Bulacan which prevents the dispatch of power from the” more efficient” (read: lower priced) power plants. However, the plants referred to by the official are the Sual and Masinloc coal-fired plants, with a combined capacity 0f 1,800 MW are hardly the efficient plants around.
  
  The effect of this breakdown was that based on PEMC’s estimates, the settlement prices – the price the trader pays to WESM- have spiked to as high as P18 per kilowatt-hour which could ultimately redound to a higher price for the consumer.
  
  “This is an unusual occurrence and the congestion will be there until September to October. But National Transmission Corp. (TransCo) said they are now repairing it,”
  Holopainen said.
  
  We beg to disagree.
  
  Equipment maintenance is a necessary part of doing business and with proper execution and timing, the effects of an “unusual occurrence” such as a breakdown of a major high-voltage transmission line could have at least been mitigated. But what caused the spikes is more than unusual. It is more due to inherent and systemic weaknesses of our electricity grid.
  
  On the transmission side, we do not have much redundancy on the main backbone. While a full redundancy cannot be advisable on economic grounds, at least there should be some backup in highly critical nodes along the backbone such that power could be transmitted on an alternate line. At the very least, the effects of such breakdown can be confined to a limited geographic area.
  
  But the worse problem is on the generation side.
  
  In a normal grid, the operator desires to have some reserve capacity at any given time. Which is obvious since not all plants would be running at peak capacities due to maintenance and technical considerations. But what we have is a reserve capacity which is barely useful when a major plant breaks down. While a reserve capacity of say 2,000 MW looks good on paper, it is no more than the capacity of two major coal-fired or natural gas power plants.
  
  The rated capacities of the existing plants may not dependable at all. Many of the older power plants—coal-fired, diesel-fired and geothermal plants— have actual capacities much lower than their rated capacities. Can anybody tell us how much the Bohol and Panay diesel plants –two plants under auction- are actually generating? For all we know, the old Panay plant could be worth more if sold as junk than being operated as a power plant.
  
  Can anybody guess how much the Bacman I plant (rated more than 100 MW) is currently producing? If you say 50 %, your guess is too high. This one is easier: How much is the Northern Negros geothermal plant (the capacity is 49 MW, or 40 MW, or 26 MW, depending on when you got the information) currently producing? You should have gotten it. The answer is nil.
  
  There are also reserves that may not be delivered to where they are needed most. For example, the abundant power from geothermal in the Visayas could be considered a reserve for the Luzon grid because it is connected to Luzon via a submarine cable. But the history of its performance tells a different story.
  
  What we have is what the industry players call “thinning reserves”. The reserve is there but it is so small that a minor disruption in the supply could send electricity prices at the wholesale electricity spot market (WESM) to the heavens. If you are operating cement or a semiconductor plant, you cannot afford a respite in operations. You need to buy power at exorbitant costs for a hopefully short period of time. The alternative is massive losses.
  
  Then there is the ownership structure of the generating plants. Much of the generating power is still in the hands of the Napocor-PSALM combine, so in theory, a collusion among the traders in the same cabal could influence the price at the spot market. This has been alleged to have happened before.
  
  WHICH brings us back to the question of what to do with the price spikes. Dampening the electrical price oscillations, as the engineers would phrase it, cannot be effected by political intervention. A systemic overhaul is required which include:

1. Broadening the ownership of the generation assets. In the near term, it means hastening the privatization process.

2. Improving the transmission grid. With the privatization of the transmission grid, we could only hope that the new owners would improve the system.

3. Increasing the number of generators. With a more dispersed ownership, one can be assured of a more functional spot market. Collusion would be minimized. The thinning reserves would be “thickened”. But then, encouraging new investments is a different question altogether. Our legislators could re-start the process by passing the renewable energy bill.

We hope to delve more deeply into these matters in the near future.

Google search result: geothermal

Google uses its vaunted search engine to find an energy source it wants to support and comes up with this result: geothermal.

Google, through its philanthropic arm Google.org, announced US $10.25 million to fund research on energy technology called Enhanced Geothermal Systems (EGS), according to a report in RenewableEnergyWorld.com.

The amount includes funding for research on next-generation geothermal resource mapping, EGS information tools, and a policy agenda for geothermal energy.

Dan Reicher, Director of Climate and Energy Initiatives of Google.org, considers EGS could be the "killer app" of the energy world, saying it has the potential to deliver vast quantities of power 24/7 and available nearly anywhere on the planet.

In contrast to the usual geothermal approach of finding naturally occurring steam and hot water reservoirs as practiced here, the EGS process finds hot rocks, artificially fractures these and circulates water through the system to extract heat energy which can then be converted to electricity.

The recipients of Google's largess include:

AltaRock Energy Inc.: US $6.25 million investment to develop innovative technologies to achieve significant cost reductions and improved performance in EGS projects.

Potter Drilling Inc.: US $4 million investment in two rounds, to develop new approaches to lower the cost and expand the range of deep hard rock drilling.

Southern Methodist University Geothermal Lab: US $489,521 grant to improve understanding of the size and distribution of geothermal energy resources and to update geothermal mapping of North America.

Other countries which are looking at EGS include Australia and France.

HERE, with abundant circulating water, the systems that have been developed or characterized are water-dominated, natural geothermal systems.

SAS introduces green IT software a.k.a. carbon calculator

SAS, an IT vendor more known for its business intelligence (BI) software and services, has recently introduced in this country a software that supposedly measures a company's eco-friendliness and carbon footprint. Its capabilities, SAS claims, include tracking the level of CO2 emissions of companies and analyzing its impact on its business operations.

Thomas Spiller, SAS senior director for international programs, said the product can be customized to the customer specifications but admitted that since it has just been launched, SAS has yet to sign up a local customer.

Just who are these customers that SAS is targeting, and why should you buy, or not buy, the product?

With the escalating cost of energy and pressures from the environmental movement, big business has started to embrace eco-friendliness and energy efficiency. Going carbon neutral, as the movement is now known, is not just a fad, Spiller assures.

For many companies, moving towards that goal not only enhances their corporate social responsibility (CSR) image, but the bottom line as well from energy savings and increased business.

Usually, the first step towards this direction is to quantify your carbon footprint--that is, how much greenhouse gases (GHG) as typified by CO2, your company is actually producing.

Without saying in so many words, SAS is actually offering a carbon calculator.

A carbon calculator is a device, usually a software, that does what its name implies: calculate the total carbon emission or footprint for a given event, an energy project or a company.

Existing carbon calculators range from order-of-magnitude estimates to fairly sophisticated devices that detail every possible source of emission and the methods backed up by reputable data. There are free carbon calculators usually offered by non-governmental organizations concerned with global warming and government institutions such as the US Environmental Protection Agency (EPA) and there are fairly sophisticated commercial calculators used by carbon market traders, renewable energy project developers applying for carbon credits through the Clean Development Mechanism (CDM) and big business carrying out a corporate program towards carbon neutrality.

Calculating a carbon footprint is not easy. As what any budding software developer is advised, GIGO - garbage in, garbage out. Your results will only be as good as the worst assumption built into the software.

For example, the total carbon footprint of all the employees in a company may be estimated by the average per capita footprint but if the built-in assumption is that for a developed country like Japan or the U.S. where individual energy consumption is far higher, the errors can be very significant.

To be on the conservative side, choose a calculator which is most comprehensive in its coverage. Some calculators for example, fail to take into account such as commuting habit of its employees which can amount to a large number.

If in doubt, ask.

It is also important to choose a provider accredited with a top accepted standard to ensure getting a comprehensive calculator. Some of the stringent standards include the Gold Standard, the Greenhouse Gases Protocol, the International Organization for Standardization (ISO) ISO14064, The Voluntary Carbon Standard (VCS) and The Climate, Community and Biodiversity Standards (CCBS).

You may be passionate about making your company green. Just make sure that you have the right tools in realizing your dream.

Are we ready for CDM?

Kreditanstalt fur Wiederaufbau (KfW), the German Development Bank, is opening doors for Philippine companies to tap financing for Clean Development Mechanism projects under the Kyoto Protocol during a presentation at a seminar held August 19, 2008 at the Renaissance Hotel in Makati.

Karin Sittler, vice president of the KfW Carbon Fund, said the financing modes could include direct loans, equity investments, assistance in the project preparation or even in helping consolidate small CDM projects.

The latter is required for small projects taken individually which may not qualify under the mechanism.

CDM is a mechanism under the Kyoto Protocol whereby countries that have committed to reduce their greenhouse emissions, but are unable to immediately do so, may buy so-called carbon credits generated by green energy and environmental projects in other countries.
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The Bangui Bay wind project:

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However, Environment and Natural Resources Undersecretary Manuel Gerochi's opening remarks which stressed the need to ensure that such CDM projects truly benefit the developing country and his distrust over the eventual beneficiaries of the Certified Emissions Reduction (CER) credits underscore the general lack of understanding by our policy makers

“Don’t look at it as an economic good to be traded,” Gerochi said, as quoted by the Philippine Star, adding that such endeavors “must be mutually beneficial to us.”

To put it at a right perspective, the United States, the most industrialized country on earth as well as the United Kingdom, I believe, did not ratify the Kyoto Protocol. This is understandable as the U.S. is responsible for some 22% of greenhouse gases (GHG) emissions worldwide. Despite the reluctance of the federal government to ratify the treaty, many individual states have forged ahead with their green projects initiatives in the energy sector.

The offsetting of GHG emissions is premised on global warming, which means that no matter where the GHG are emitted, these could contribute to climate change. The countries who have ratified the protocol have committed to reduce their GHG emissions by 5.2% p.a. from a baseline level in 1990 until 2012.

The CDM is not a permanent fixture; it is a stopgap measure which arose from a practical realization that GHG emission cannot be done overnight. All the CER certificates generated from such projects will be retired by then.

The CDM allows financing of green projects such as solar, wind, geothermal, or even reforestation, which must be Gerochi's concern, which otherwise would have been prohibitive without it.

The resulting carbon trading offers an upside for the financing entities--that is, it allows them to recover part of the cost of money used in financing. Many of the financing institutions such as the Asian Development Bank or the International Finance Corporation of the World Bank, as well as private Carbon Funds usually arrange to buy the carbon credits generated from these green projects.

The prices of these tradable financial instruments have been rapidly increasing during the past two years owing to increased demand.

That Germany takes a lead in carbon financing is hardly surprising. It pioneered in putting in place renewable energy initiatives starting 1n 1990 which resulted in the explosive growth of solar and wind energy systems in that country.

The report also indicates Gerochi shares the concern the technology for such projects has to be acquired at a substantial cost from the developed countries who themselves do not or are not willing to incur the cost to reduce their own emissions.

We are not sure what the technology Gerochi is talking about. Examples of local projects qualified under the CDM are the 24.75 MW Bangui Bay wind project in northern Philippines, the 20-MW geothermal project of Energy Development Corporation in Negros Oriental and the various small biomass projects at various stages of developments--projects that hardly need expensive technologies. For the case of geothermal, the technology relies on local expertise.

If Gerochi is typical of our policy makers, then it underlines our general lack of appreciation of, and readiness to embrace the CDM and the resulting growth in carbon trading both at the regulated and the voluntary (over-the-counter, or OTC) markets.

Sittler could have merely scratched her head in disbelief.

Vanadium battery catches the sun and the wind

By J R Ruaya

When the wind dies down or the sun stops shining at night or during cloudy days, the solar collectors and wind turbines stop working. There is just no cost effective way of storing energy from these sources.

Not anymore.

A recent development of energy storage using vanadium electrochemical cells is now about to break into the commercial realm.

In a solar installation photovoltaic solar panels catch the sun’s energy and convert it into electricity. This is then stored into the vanadium battery so that the energy can be used at a later time or pumped into the grid.

A vanadium battery, which works similarly as the familiar battery used in toys and flashlights, has distinct advantages over the other battery cells in the target application. The main advantage is it uses the same elements in both half-cells which eliminates cross-contamination of the two half-cell electrolytes during prolonged use. The positive and the negative half-cells are separated by a proton exchange membrane.

It has high efficiencies of 80 – 90 % in large installations. Furthermore, the costs rapidly goes down as the installation is scaled up. And maintenance is easy.

The battery can also be fully charged or discharged. In cases where time is the essence, the electrolyte solutions can simply be replaced rather than waiting for recharging.
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Sidebar:

The electrochemistry involved is not too difficult to understand even by undergraduate students of chemistry. The schematic is shown below (courtesy of the University of New South Wales):

The half-reactions are:

At the positive electrode:

VO2+ + 2H+ + e = VO2+ + H2O E° = 1.00V

At the negative electrode:

V3+ + e- = V2+ E° = -0.26 V

The standard cell potential E° (cell) is 1.26 Volts at concentrations of 1 mole per litre and at 25°C, but under actual cell conditions, the open circuit cell voltage is 1.4 Volts at 50% state-of-charge and 1.6 Volts at 100% SOC (Skyllas-Kazacos, 2002, p. 2).
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Early demonstration projects include a solar-powered housed in Thailand, an electric golf cart, and a back-up power system for a nuclear submarine.

In the United States, which is playing catch up with the technology, a 15-kW photovoltaic installation has just been put up at the Lowry Park Zoo in Tampa, Florida jointly by Tampa Electric and the University of South Florida’s (USF) Power Center for Utility Explorations (PCUE) at a cost of approximately $ 575,000 (Tampa Electric, 2008).

Earlier in June, two similar 5 kWx4hr systems have been installed at the downtown St. Peteresburg campus of USF and at Albert Whitted Park in the same city by the university and Progress Energy of Florida (VRB, 2008).

The vanadium redox battery has been developed and its use pioneered at the University of New South Wales. An engaging historical and scientific account of its development has been presented by Skyllas-Kazacos (2002).

With the technology now available what remains is the development of policy initiatives as embodied in the renewable energy bill still pending in Congress for the solar and wind power to take off in the Philippines.

References

Skyllas-Kazacos, M. (2002, July). An historical overview of the vanadium redox flow battery development at the University of New South Wales, Australia, 13. Retrieved August 19, 2008, from http://www.vrb.unsw.edu.au/overview.htm

Tampa Electric (2008, August 4 news release). Tampa Electric, USF partner with Tampa’s Lowry Park Zoo to develop new renewable energy project. Retrieved August 19, 2008 from http://www.tampaelectric.com/news/article/index.cfm?article=466.

VRB Power Systems Inc. (2008, June 9 press release). Progress Energy and University of South Florida’s Power Center for Utility Explorations unveil two 5kW x 4hr VRB Energy Storage Systems as part of SEEDS project . Retrieved August 19, 2008 from http://www.vrbpower.com/docs/news/2008/news_20080609.pdf

Reducing electricity systems losses : hard but doable

Early this month, the Energy Regulatory Commission (ERC) issued a draft resolution for public consultation mandating that, among others, the electricity of a distribution utility (DU) is to be treated as an expense and not part of a systems loss, and lowers the maximum recoverable rate of system loss from 9.5 percent to 8 for DUs and from 14 percent to 11 for electric coops, based on the total kilowatt-hour (kWh) generated, purchased and distributed.

This is a welcome development, for the ERC and previous electricity price regulatory bodies have not adjusted the systems loss caps for almost a decade. The high systems loss cap was also pinpointed as one of the reasons for the high power costs exposed during the high of the controversy between GSIS president Winston Garcia and Meralco.

Earlier, we have proposed a stretch target of 5% and an implied reasonable target of 7%, based on the average systems loss of European Union countries. We also maintain that the cooperatives should be treated like any other private DUs which means that they should also have the same caps.

We also reiterate that these business dinosaurs be sold off to private investors.

As to be expected, the distribution utilities cry wolf, saying that this could lead to huge losses.

Aboitiz Power Corp. president Erramon Aboitiz said that its unit the Visayan Electric Company, the DU servicing Cebu City and province, is within the current 9.5% cap, but reducing this to 8 % the company would have to book losses of some P 100 million.

However, he didn't say that it is not doable. In fact, he said that you can reduce systems loss by investing, but one has to make a decent return. Of course.

This was echoed by another Aboitiz firm Davao Light & Power Co. (DLPC) vice president Bienamer Garcia said the proposed lowering of the system loss "would entail a lot of cost” , but the firm's system loss level as of end-June 2008 already stood at 7.91 percent, just within the proposed 8 % cap.

The Aboitiz units want incentives. Fine. But the incentives (e.g., tax breaks for capital importation) should be for improvements specifically targeting reduction of systems losses at the same time that the systems loss caps are lowered.

Garcia said that there is already a performance-based mechanism in place and all that ERC should do is to align the proposed new cap with this.

“Let businesses figure out how to reduce those losses, then give incentives. When you give incentives, you start seeing what people can do. For me, it’s better to provide incentives to companies to reduce system loss,” Aboitiz said.

Amen.

DOE plans yet another energy plan extending to 2030

THE GOVERNMENT, through the Department of Energy, is at it again.

In a recent briefing, Energy Secretary Angelo T. Reyes told the media that the Philippine Energy Plan (PEP) would be extended to 2030 as the 2005-2014 plan was "not applicable to some regions" which can be interpreted as an oblique admission that the original plan was full of holes, to put it kindly.

We are only three years into the original plan, yet we are effectively dumping it in the guise of extending it far into the future when nobody wouldn't, or couldn't, validate the plans.

The 2005-2014 PEP targets a 60% energy self-sufficiency level by 2010 and pursues effective reforms in the power sector. In effect, these aims are no longer valid.

The major problem of such a plan is not so much on the length of time, but on the soundness of the content. If one looks back at the 2005-2014 PEP plan, some are bordering on the grandiose bereft of solid fundamentals. Even a simple assessment of the electricity supply and demand situation for the next few years was off the mark.

Some aims were more of motherhood statements than concrete plans. For example, the plan aims to make the Philippines the number one producer by 2014 I believe, yet no rigorous verification was made whether such listed areas were in fact capable of producing the indicative MW outputs. If one were to compare our geothermal program with those of others such as the US and Indonesia, the gap between our production with US will widen by a huge margin, and we would be eating the dust of Indonesia even if we only count the committed and ongoing geothermal projects of the latter. We will surely slide to third, or even fourth worldwide.

For another example, the plan declares that we would be the premier wind energy producer by the end of the period, yet there is not even a comment whether the infrastructure to achieve such aim is in place. The Department cannot even push for the passage of a renewable energy bill which could be a springboard of a nascent renewable energy industry to significantly grow. The renewable energy bill itself, which is pending in congress for ages, does not have much substance.

The Department even relies on a study by the U.S., National Renewables Energy Laboratory (NREL) for the inventory of our own wind energy resources.

What the Department could do for example, rather than making yet another grand plan that stretches far into the future, is to set down and carefully study the implications of the renewable energy bill's provisions.

The end product could be white papers on renewable portfolio standards, how to set up the net metering infrastructure, or even the pros and cons of a feed-in tariff system which jumpstarted the wind and solar power industries in many areas of the world, but did not merit any mention at all in the RE bill.

Our legislators are too busy politicking to come up with really outstanding pieces of legislation that could help shape our energy policy. At the very least, the Department could pitch in to educate our lawmakers. Whatever comprehensive energy policy we have, if any, would now be sorely antiquated.

In the meantime, the international energy industry is in a swirling vortex, with energy and commodity prices in a wild roller coaster ride, and all our policy makers could do is watch helplessly in the dust, and wonder what has happened.

Capital intended for energy infrastructure around the world has been zigzagging across national boundaries, looking for worthwhile projects, but most are bypassing the country. Why, the DOE should ask.

Trading of carbon credits and other energy related financial instruments has been swelling at a blistering pace for the last two years, with the voluntary carbon market-- as opposed to the regulated carbon market-- tripling each year in value with hardly anyone from our energy policymakers noticing. The generators of these trad able instruments come mostly from renewable energy projects from developing countries, the Philippines included, only if we have put the right infrastructure in the first place.

There are many other worthwhile projects for our DOE other than crafting yet another nebulous energy plan.