Learning from Developing Country Power Market Experiences : The Case of the Philippines
Deep reforms of the Philippine power sector began in 2001, aiming at competitive wholesale and retail markets. This case study analyzes the Philippine experience with wholesale electricity markets at the generation level, including design, implemen...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/428331548771494859/Learning-from-Developing-Country-Power-Market-Experiences-The-Case-of-the-Philippines http://hdl.handle.net/10986/31189 |
| Summary: | Deep reforms of the Philippine power
sector began in 2001, aiming at competitive wholesale and
retail markets. This case study analyzes the Philippine
experience with wholesale electricity markets at the
generation level, including design, implementation, and
outcomes. The spot market began operation in 2006, amidst
adequate generation capacity albeit highly concentrated
among few players. The reforms have successfully introduced
market-driven forces to system operation and spot price
signals for investments. Investment in new generation has
recently been commissioned; generation concentration has
plunged since the market’s inception (mainly due to
privatization of generation assets); and generation supply
has been generally secure (barring natural disasters).
However, serious conflicts due to market power abuse
occurred in the past; the market remains concentrated in
four major players; and new competitors have slowly entered
through the opaque and largely regulated market of bilateral
contracts. Moreover, following aggressive capacity
additions, baseload coal generation soared over the past
decade, reaching 50 percent of total output in 2017, thus
raising concerns about environmental sustainability, the
optimal capacity mix (due to lack of investments in flexible
mid-merit and peaking power plants), and long-term supply
security of the Philippine power sector (since coal is
imported). The case of the Philippines' power market
highlights the importance of adequate ownership structure
supportive of competition, the need of effective monitoring
and oversight, especially during initial phases of the
market, and the benefits and challenges that open and
competitive wholesale markets can provide over time,
especially in interaction with vertical integration (whether
through cross-ownership or through bilateral contracts). |
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