How to Lower Electricity Costs for All Filipinos
Lower Electricity Prices Through Transparency | Green Tiger Markets
It has been widely reported that the cost of electricity in the Philippines is high compared to its neighbors as well as the world as a whole.
(Retrieved from GlobalPetrolPrices.com. Data includes all items like distribution charges, energy costs, environmental and fuel costs, and taxes)
Is There A Way to Lower Electricity Prices Soon?… Yes!
One solution to lowering electricity prices is to have a well functioning marketplace to hedge the forward price risk of electricity. In layman’s terms, this is a marketplace where participants in the electricity market (i.e., electricity suppliers (generators), distribution utilities, retail electricity suppliers, and large commercial and industrial consumers) purchase or sell electricity for some time period in the future.
The marketplace has a set of electricity products known as “Forward Contracts”. By standardizing the terms of these contracts, the only variable is price, which streamlines the purchasing and selling between the participants. A first generation of this type of marketplace will be viable in the next few months! (greentigermarkets.com)
How Does This Marketplace Lower Electricity Costs?… By Reducing Uncertainty!
No one knows the future. Fuel prices could drop precipitously causing electricity production costs to fall. On the other hand, electricity demand could outstrip supply causing electricity prices to skyrocket.
(Retrieved from greentigermarkets.com/market-data)
Between February and September 2020, the monthly load-weighted average price (LWAP) of electricity ranged from 1,336 to 3,543 PHP/MWh. On average, the monthly LWAP varies by more than 800 PHP/MWh.
- A transparent marketplace, where all participants have access to the same liquidity, allows each firm to hedge their price risk and plan more effectively. In effect, firms are locking in the price they are either paying or receiving for electricity in the future.
- Generators know how much they are making on their investments. They could also sell forward contracts that mimic a new power plant and use this to secure financing. This would assist in accelerating the development of additional electricity supply.
- Large Industrial and Commercial Consumers can purchase a variety of forward contracts that mimic their expected load needs. By locking in the forward price of electricity, firms will be able to free up capital to invest in growth.
We Can Do It!
The Philippines economy and all Filipinos would greatly benefit from supporting a business-to-business platform where participants can hedge the forward price of electricity.
The early adopters of this marketplace would quickly feel the benefits described in this article. The impact to the Philippines economy will increase as the power industry as a whole adopts this proven tool to manage price risk.
Learn more at greentigermarkets.com or email [email protected] to set up a demonstration.
