Aesi, good point. I accept your point that bidding may not...

Aesi, good point. I accept your point that bidding may not always be at strict marginal cost. I do however question whether in The case of WESM I might better have said the boss will be put in at MC or in certain circumstances, possibly below MC. Only in situations of collusion or market manipulation would one find bids higher than MC, since in WESM it is the marginal bidder that sets price but all generators receive that SMP for that 15 minute slice. An LNG fired generator would have no incentive to bid higher unless they knew they were going to be the marginal bid, and usually no incentive to bid lower than MC (and therefore risk not even recovering fuel expenses). I do realize that inflexible fuel supply circumstances can force this decision (like the impending arrival of an LNG cargo, before your storage tank has room for it - then your choice is run below MC, or pay demurrage, i.e. the cost of having the delivery vessel wait around). Avoiding have to turn your power plant on and off will also incentivize below MC bids and that driver sometimes results in negative bids. That should be more of a consideration for coal plants where shutdown/restart could cost the equivalent of 250 hours off the economic lifetime of the plant.

The core issue for me is simply practical. Always bidding your MC and almost always bidding your MC is the same thing, from a financial or investor perspective. Never or rarely bidding your MC is a very different thing. This is in the former scenario. The data coming out of the actual market in the Philippines shows that on an MC basis, the plant will rarely be dispatched in large parts of the year and if the operator wants to run more, money will be lost on a cash basis. Capital recovery will be possible only over a long period and returns deferred or impossible. I might change my mind a bit if the price cap was a lot higher than 32 pesos per kWh and there was no secondary price cap. Because operating for even a few hours at something like the $14,400 per MWh I cited in an earlier post can do wonderful things for your P&L. I also reiterate my earlier comment that PEMC with support of international consultants - at one time, PA Consulting from New Zealand, not sure who they have now - monitors WESM specifically for manipulative or collusive behavior. In part that is because they know that once you count standing bids, must run stuff, and other factors that commit certain units, it is only a subset of generators that actually submit daily bids. I do not see the WESM as easily manipulable anymore and certainly doubt that a foreign owned generator would get away with it for long. So absent contracts, what matters here is how this plant would bid - and my bet would be, almost exclusively they will bid their MC (footnote though - they could also bid to supply ancillary services to NGCP; no idea how much upside that offers because that market is not fully formed yet as far as I know).

Based on what I see in Oz with gas supply shortages in the east and liquid fired capacity additions and Mr. Musk's storage project in South Australia, I guess all I can say is that I know of at least one country in the Pacific region that could really use an LNG terminal to help avoid an electricity supply squeeze. Strange that so many savvy investors missed that one!