Oil tax hike suspension and newbie electricity companies

* This is my column in BusinessWorld last October 18, 2018.

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The government recently announced that it will suspend part 2 of the oil excise tax hike this coming January 2019. So another increase of P2/liter for both diesel and gasoline will be temporarily suspended but the tax hikes in 2018 of P2.50/liter for diesel and P2.65/liter for gasoline (from P4.35 to P7.00/liter) will remain.

The reason given is that both the Senate and the Department of Finance, as well as Malacañang, believe that Dubai crude prices will exceed the $80/barrel this October to December and might reach $100/barrel in 2019. So instead of waiting for January 2019, they already announced it ahead.

But the real reason not admitted by the government is that they are scared to lose votes in next year’s midterm elections because of spiraling inflation. Since they cannot have more tax money and more votes at the same time, they suspend oil tax hikes part 2. Then they can play the “we are sensitive to public sentiment against high inflation” card even if they remain insensitive to retain the oil tax hikes this year, the coal tax hike part 2 will still proceed.

Dutertenomics has been denying for many months now that the TRAIN oil tax hike is a big part of this high inflation problem. This new move is an indirect admission that they were less honest in their denial. And after the elections, Dutertenomics will impose part 2 because they will need more tax money.

Below are estimates of the impact of TRAIN oil and coal tax hikes. The first estimate on WESM prices are from Atty. Saturnino Juan, President of the Independent Electricity Market Operator of the Philippines (IEMOP), made during the Stratbase-ADRi forum on “Energy Outlook” last Sept. 27.

The second estimate is from Dr. Ramon L. Clarete in his paper, “Electricity prices and TRAIN” published by EPDP last February 2018.

The third estimates, on impact on fare hike petition by buses, are mine. The P0.70/km. and P0.55/km. fare hike petitions were made around July this year when domestic oil prices were only around P11-12/liter over December 2017 prices. So the oil tax hike constituted around one-fourth (1/4).

TRAIN_Impact_101818

Also recently in the energy sector, two newbie players sprouted out of nowhere and have become potential dominant players via legislation.

The first is the Solar Para sa Bayan Corp. (SPBC) of Mr. Leandro Leviste, son of Sen. Loren Legarda, seeking a franchise to construct, install, establish, operate and maintain distributable power and minigrid systems throughout the Philippines.

It is a no-or-little track-record corporation that wants to do anything they want — can connect anywhere, can build their own grid anywhere, can carve out to DUs franchise areas. And because they have a “super franchise” by legislation, they can possibly issue a sort of “mini-franchise” on other companies. Clear cronyism.

It will be another anti-EPIRA corporation that can undermine the ERC’s power to regulate the competitive operation of the electricity market.

The other newbie is the MORE Electric and Power Corp. (MORE Power) seeking to take over the current franchise area of Panay Electric Company (PECO) serving the big Iloilo City and other parts of Iloilo province.

MORE Power was previously MORE Minerals Corp., a unit of Enrique Razon, Jr.’s Monte Oro Resources and Energy, Inc. (MORE). The Private Electric Power Operators Association (PEPOA) expressed dismay over this development.

The PECO franchise bill was filed in Congress in July 2017 and after two hearings in November that year, nothing followed. In contrast, the MORE Power franchise bill was filed only in August and a second hearing was already held a month after.

Business uncertainty is obviously created in Iloilo. Congress should be more transparent in its issuance of legislative franchises to minimize this uncertainty and dispel accusations of favoritism.

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Corrupted science to justify renewables cronyism

* This is my article in BusinessWorld last Thursday, October 11, 2018.

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In a letter “Response to ‘Cheap, stable electricity vs climate alarmism’” published in BusinessWorld yesterday, Oct. 10 2018, Mr. Eddie O’Connor of wind-solar lobby wrote the following weird claims:

  1. “Our species emerged over 3 million years when there was a stable quantity of CO2 in the atmosphere, and this was the figure up until industrialization: 270 parts per million.”

This is corruption and distortion of earth science. Earth’s climate history is one of natural warming-cooling cycles since the planet was born some 4.6 billion years ago. In a paper by Davis, W.J. (2017), “The relationship between atmospheric carbon dioxide concentration and global temperature for the last 425 million years,” Climate 5: 76; doi: 10.3390/cli5040076, this chart shows that atmospheric CO2 levels were up to 400 to 600 ppm some 325 to 450 million years ago and it was characterized by global cooling.

Temp-CO2

  1. “Since 1998 we have trapped the energy of 2,667,000,000 Hiroshima bombs in the atmosphere.”

This is pure alarmism and Frankensteinism, inventing own data to scare the public unless they accept the renewables cronyism agenda.

From the “Global Temperature Report: September 2018” by the Univ. of Alabama in Huntsville (UAH), global average lower tropospheric temperature, Dr. Cristy and Dr. Spencer summarized the data:

“Globally, the coolest September in the last 10 years. Global climate trend since Dec. 1 1978: +0.13 C per decade. September Temperatures (preliminary): Global composite temp.: +0.14 C (+0.25 °F) above seasonal average (departure from average 1981-2010). Northern Hemisphere +0.15 C (+0.27°F), Southern Hemisphere +0.14 C (+0.25 °F), Tropics +0.24 C (+0.43 °F).” (http://www.drroyspencer.com/2018/10/uah-global-temperature-update-for-september-2018-0-14-deg-c/)

Planet Earth is currently experiencing declining temperature in the lower troposphere, data are collected by NASA satellites 24/7.

  1. “Mr. Oplas didn’t talk about the price of coal-generated electricity… CIA estimates that the cost of electricity coming from coal-fired … station is $9.2 cents per unit… my company bid $4.1 cents per unit… Solar came in at a price of $2.92 cents per unit.”

Game, if wind-solar are indeed that cheap, then will the lobby agree to (a) abolish the priority and mandatory dispatch of wind-solar to the grid, and (b) abolish the feed-in-tariff (FIT) scheme of guaranteed high price for wind-solar, other variable REs for 20 years?

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Solar price of P9/kWh at P54/US$ is not 2.9 cents but 17 cents/kWh. Wind price of P8.5/kWh at P54/$ is not 4.1 cents but 16 cents/kWh.

The FIT-Allowance in our monthly electricity bill has been rising from 4 centavos/kWh in 2015 to 12.40 in 2016, 18.30 in 2017, and 25.32 centavos /kWh starting June 2018 billing. This is to cover under-recoveries in 2017 alone.

  1. “Mr. Oplas is associating himself with an invite-only conference where there will be no challenge to his views.”

Ignorance of the private event. That Stratbase-ADRi forum last Sept. 27 has four speakers, Sen. Sherwin Gatchalian, Dir. Mario Marasigan of DOE, Dr. Raul Fabella of EPDP and UPSE, and Atty. Saturnino Juan of IEMOP. I was not a speaker, I was only one of three reactors, and about one-fifth of the audience were media people.

  1. “Let us choose a public auditorium and let us have a debate on energy policy in the Philippines.”

Sure. One projector each, charts vs charts, tables vs tables, with an independent referee who will cut off over-talking and hysterical speaker/s. Let the jokers and inventors of fake energy data be exposed.

Meanwhile, the Nongovernmental International Panel on Climate Change (NIPCC), an independent organization founded in 2003 to fact-check the work of the UN on climate change has released this week the “Summary for Policymakers of Climate Change Reconsidered II: Fossil Fuels.”

In that report, 117 scientists, economists, and other experts show that “Fossil fuels deliver affordable, plentiful, and reliable energy that is closely associated with human development. There is a strong positive relationship between low energy prices and economic prosperity. Wind and solar power are incapable of delivering the affordable, plentiful, and reliable energy that is delivered by fossil fuels.”

 

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers

Response by wind-solar lobby

A European wind-solar developer and lobbyist responded to my column, Cheap, stable electricity vs climate alarmism last September 24, 2018. The letter was published in BWorld last October 10. Reposting it below.
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Response to ‘Cheap, stable electricity vs climate alarmism’

October 9, 2018 | 10:21 pm

AS ONE of the climate alarmists Bienvenido S. Oplas, Jr. refers to in his opinion piece of September 23 (“Cheap, stable electricity vs climate alarmism”), I welcome the debate he has opened.

Opinions are one thing, facts are another. Our species emerged over 3 million years when there was a stable quantity of CO2 in the atmosphere, and this was the figure up until industrialization: 270 parts per million. Now it is 405 and rising rapidly. This means that we are capturing more energy in the atmosphere than we used to. How much, I hear your readers ask? We are capturing the energy equivalent of 4 Hiroshima atomic bombs each second. In fact since 1998 we have trapped the energy of 2,667,000,000 Hiroshima bombs in the atmosphere.

Cause for alarm? I think so.

I notice that Mr. Oplas didn’t talk about the price of coal-generated electricity. The US Agency, the CIA which studies these things, estimates that the cost of electricity coming from coal-fired generation over the life of the power station is $9.2 cents per unit. This figure was confirmed for me, as the cost of new coal generated electricity in the Philippines. This figure includes no clean-up charge.

In bidding for generation in Chile during 2016, where there is no subsidization of renewable energy, my company bid $4.1 cents per unit of electricity for 20 years.

This was for firm power, which means my company had to supply the equivalent of what coal or gas supplies. No variability, no intermittency, pure clean power that releases no CO2.

We will generate firm power from renewable energy at $4.1 cent per unit of electricity, which is less than half the price of coal-fired generation.

Solar came in at a price of $2.92 cents per unit.

Even old coal plants, which had its capital cost paid off, could not compete against new wind and solar. They won no contracts.

There is not a lot of difference between the Philippines and Chile. If a competition were run between coal versus wind and solar in the Philippines, renewables would come in at half the cost of coal.

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I notice that Mr. Oplas is associating himself with an invite-only conference where there will be no challenge to his views. The only way to get to the truth is to issue the following challenge to Mr. Oplas: Let us choose a public auditorium and let us have a debate on energy policy in the Philippines. I guarantee the putative audience that I can prove that renewables are great for the Philippines. Great for firm power, great for price, and great for the environment. I will even pay for the venue.

I would love to see the Philippines cut the price of electricity in half, just as Chile has done, by adopting a competitive system for selecting the next tranche of generation.

Eddie O’Connor is Executive Chairman and Founder of global wind and solar development company Mainstream Renewable Power.

http://www.mainstreamrp.com.

Twitter: @mainstreamrp

 

(my response to it in the next post…)

Cheap, stable electricity vs climate alarmism

* This is my column in BusinessWorld last September 24, 2018.

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Most electricity consumers have that single most important concern and “vested interest” — to have cheap, competitively priced and stable electricity supply. Meaning no brownout even for a minute and yet the price is affordable.

The climate alarmism movement — less rain or more rain, less/no flood or more flood, less storms or more storms, less cold or more cold, people should send more money to many climate and environment agencies, local, national and multilateral — wants to defeat this simple desire by many energy consumers.

They want to kill the stable and reliable fossil fuel, coal and oil-based power plants especially, and promote the most unreliable, most intermittent, battery needed and more costly energy sources solar and wind. Which will make our electricity prices higher and more unstable.

Cheap and stable electricity will be among the topics to be discussed this coming September 27, 2018, in a by-invite only forum “Energy Outlook: Supplying Rising Demand at Lower Cost” at Joy-Nostalg Hotel, Ortigas, to be sponsored by Stratbase-Albert del Rosario Institute (ADRi).

The three speakers will be Sen. Sherwin T. Gatchalian, Chairman of the Senate Committee on Energy; Mr. Mario C. Marasigan, Director of Electric Power Industry Management Bureau (EPIMB), DoE; and Dr. Raul V. Fabella, Fellow, Energy Policy and Development Program (EPDP).

The three reactors will be Mr. Jose Alejandro, Chairman of Energy and Infrastructure Committee, Philippine Chamber of Commerce & Industry (PCCI); Louie Montemar, Convenor of Bantay Konsyumer, Kuryente, Kalsada (BK3); and yours truly.

Let us review the Philippines’ actual electricity production and generation vs. installed power capacity and potential in 2009 (1st year of implementation of RE law of 2008 or RA 9513), 2013 (1st year of the granting of feed in tariff or FIT provision) and 2017. Power generation is expressed in tera-watt hours (1 TWH = 1 million MWH) while power capacity is expressed in gigawatts (1 GW = 1,000 MW).

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If people are thankful that we have no more blackouts despite rising demand, that generation charges on average are declining through time, coal power is the hero. In 2017 for instance, coal constituted only 35% of installed capacity but provided 50% of total electricity production.

If people are wondering why there is a new item in their monthly electricity bill since 2015, the FIT-Allowance and the rate is rising, blame solar-wind. In 2017, they constitute about 6% of installed capacity yet contribute only 2% in actual electricity generation, and the annual subsidies to them keep rising.

Among renewables, geothermal is the most stable and reliable but its cost is high. Hydro is good but it is weather and season-dependent. High water level and capacity factor during the rainy season when electricity demand is generally low, low water level and low capacity factor during the dry season when electricity demand is generally high.

Solar is unreliable, zero output at night, low output at daytime when cloudy and raining, it has high output only when it is totally cloudless. Wind is another intermittent, no output when the wind does not blow.

If government will listen to the climate alarmism movement, solar-wind will be further forced upon us consumers while coal will be further bureaucratized, and we expect more blackouts. The poor will go back to using more candles and there will be more fires, more deaths and destruction of property. The rich will buy more gensets and there will be more air and sound pollution.

First Gen/EDC’s anti-coal drama

A friend, Vic Saulon of BWorld tweeted this last September 21, 2018:

Lopezes

I replied to Vic with 2 tweets:

  1. Lopezes, allies are dishonest when they show 60s era photos of coal plants. Visit any coal plant now, Batangas, Quezon, Zambales, Pangasinan, Davao, etc., you won’t see black smoke. They’re scared after Malampaya, might be no more business bec imported LNG facility very expensive.
  1. Their gas plants in Batangas are sure money makers, Malampaya gas has priority in the grid. Coal off peak hrs can sell P2/kWh or less, need to keep running even at 0 or neg profit off-peak hours, recover profit daytime. They demonize coal like the Legarda-Leviste solar business.

Malampaya gas is relatively cheap because it goes straight from Malampaya platform as gas to Batangas power plants as gas, no need to convert to liquid, transport via huge ships, store as liquid, then convert again to gas for power plants use.

Imported LNG means multiple cost — gas from abroad is cooled and converted to liquid, transported by huge ships, unloaded and stored in huuuge storage tanks as liquid, then heated and converted to gas again to be used in gas plants in Batangas.

This huge cost prompts the Lopezes and their allies, environmental NGOs, to lobby that government  through PNOC and DOE should be heavily involved, perhaps use taxpayers’ money to build the LNG storage tanks and regassification facilities, then they will use the gas for their gas plants in Batangas. DOE is hesitant to compromise taxpayers money for this so I think this is their game plan, just a raw hypothesis.

The Lopezes and their allies make lots of noise — in media, press conferences, rallies by some street militants, congressional hearings, etc. — to demonize coal, perhaps stop all new coal power plants, which can lead to medium-term power shortage. Government might be forced to use taxpayers money to build those LNG facilities, or private funds to build the facilities but government should give them lots of direct and indirect subsidies, various mandates.

The Energy World Group (EWG), an Australian energy multinational, built a 650 MW gas plant in Pagbilao, Quezon. No demand for any govt subsidy, direct or indirect, mandatory energy mix, they just build their own gas storage, regassification facilities. They have the technical, engineering and financial muscles to build the facilities and sell gas power at competitive pricing.

In contrast, the Lopezes have about 3,000 MW of gas plants in Batangas and they seem hesitant to build their own LNG storage and regasiffication facilities unless there are govt subsidies, govt-set energy mix where gas power shd be made mandatory, and off-take security similar to Malampaya gas. Meaning even if their gas power becomes expensive, DUs and consumers should continue buying from them. See https://funwithgovernment.blogspot.com/2017/09/bworld-152-cronyism-in-renewable-energy.html

I hope this hypothesis is wrong. Meanwhile, their continued anti-coal drama is lousy and self-serving.

Fossil fuels are good, end the disinformation

I am reposting this press release by the Heartland Institute last Saturday. I believe that the benefit of fossil fuels, like 24/7 electricity with no blackout even for a minute, fast transportation in land, water and air, far outweigh whatever is the imagined social cost and ‘damages’ created by fossil fuels.
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International Panel Calls for End to Global War on Fossil Fuels

OCTOBER 5, 2018 – More than 100 leading scholars from 12 countries have issued a report contending “the global war on fossil fuels … was never founded on sound science or economics” and urging the world’s policymakers to “acknowledge this truth and end that war.”

nipccThe Nongovernmental International Panel on Climate Change (NIPCC), an independent organization founded in 2003 to fact-check the work of the United Nations on the issue of climate change, today released theSummary for Policymakers of Climate Change Reconsidered II: Fossil Fuels. The 27-page Summary provides an early look at a 1,000-page report expected to be released on December 4 at a climate science symposium during the United Nations Conference of the Parties (COP-24) in Katowice, Poland.

In the new NIPCC report, 117 scientists, economists, and other experts address and refute the United Nations’ Intergovernmental Panel on Climate Change (IPCC) assertions that the impacts of climate change on human well-being and the natural environment justify dramatic reductions in the use of fossil fuels. The Summary provides more than 100 references to peer-reviewed literature, while the full report provides nearly 3,000 such references.

Click here to read the Summary for Policymakers report in digital form (PDF).

For more information about the Summary for Policymakers, NIPCC, and The Heartland Institute – and to talk to authors or editors of this report – contact Director of Communications Jim Lakely at jlakely@heartland.orgor 312/731-9364 (cell).

Among the findings reported in the Summary for Policymakers:

  • Fossil fuels deliver affordable, plentiful, and reliable energy that is closely associated with key measures of human development and human welfare. There is a strong positive relationship between low energy prices and economic prosperity. Economic prosperity in turn is crucial to human health and welfare. Wind and solar power are incapable of delivering the affordable, plentiful, and reliable energy that is delivered by fossil fuels.
  • Fossil fuels require the development of substantially less surface area than renewable energy sources, rescuing precious wildlife habitat from development. The power density of fossil fuels enables humanity to meet its need for energy, food, and natural resources while using less surface space, rescuing precious wildlife habitat from development. In 2010, fossil fuels utilized roughly the same surface area as devoted to renewable energy sources yet delivered 110 times as much power.
  • The environmental and human welfare impacts of fossil fuels are overwhelmingly positive.Sixteen of 25 identified impacts of fossil fuels are net positive. Eight are uncertain, only one is net negative. Some of the identified impacts include agriculture, air quality, extreme weather events, human health, and human mortality.
  • Reducing fossil fuel use to achieve dramatic reductions in carbon dioxide emissions would inflict tremendous economic hardship. Reducing greenhouse gases to 90 percent below 1990 levels by 2050 would require a 96% reduction in world GDP, reducing per-capita GDP to $1,200 from $30,600 now forecast. Per-capita income would be at about the level it was in the United States and Western Europe in about 1820 or 1830, before the Industrial Revolution.

Scientists and experts will be in Katowice, Poland the week of December 4 to publicly release the full volume of Climate Change Reconsidered II: Fossil Fuels. Credentialed media are invited to attend the December 4 symposium to learn more about the report and question some of the scientists who agree with its findings. Details on where and when that symposium will be held are coming soon.

Inflation, energy prices and mini-greed

* This is my column in BusinessWorld on September 06, 2018.

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INFLATION has further jumped to high levels. Only 2.9% in December 2017 (no TRAIN law yet), it became 3.4% by January 2018 (first month of TRAIN law), 3.8% in February, 5.7% in July, and now 6.4% in August 2018.

While high world oil prices and peso depreciation against the US dollar were among the important factors, it was the energy tax hikes in the TRAIN law — oil, LPG, coal, plus coverage of VAT in electricity transmission charge — that triggered and sustained the inflationary pressure.

And talking about inflation and energy prices, the recent Pulse Asia Research’s “Ulat ng Bayan Survey,” June 15-21, 2018 is among the misleading surveys that will indirectly justify higher electricity prices. How?

See two of their three questions, loaded and leading:

  1. How satisfied or dissatisfied are you with the price of your electricity?
  1. Are you in favor or not in favor of increasing the use of renewable energy in the Philippines such as energy from the sun or solar energy?

On #1, Pulse Asia did not explain to respondents that there are nine different charges in our monthly electricity bill that contribute to higher overall rate: generation charge, transmission charge, distribution charge, supply charge, system loss charge, metering charge, universal charge, feed-in-tariff (FIT) subsidies, taxes. Loaded question with an expected high answer of Dissatisfied.

On #3, another loaded question as it does not clarify that even with more solar energy, the eight different charges will remain and worse, the FIT subsidy for solar will further rise.

So the result of their survey was: Question #1, 64% dissatisfied and only 27% satisfied, 14% undecided. Question #3, 89% in favor, 9% not in favor and 2% volunteered/undecided.

Having more intermittent, unstable and unreliable solar and wind power in the national grid can lead to higher prices because of the higher need for backup power, ancillary services that are mostly oil-based, and huge batteries. This is shown in both Europe and the US where in many cases, countries and states with high reliance on wind + solar also have higher electricity prices.

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Then two House bills sprang up out of nowhere. HBs 8013 and 8015 entitled “An Act Granting Solar Para sa Bayan Corporation a Franchise to Construct, Install, Establish, Operate and Maintain Distributable Power Technologies and Minigrid Systems throughout the Philippines to Improve Access to Sustainable Energy” were filed only last month, Aug. 6, and were quickly approved by the House committee on legislative franchise on Aug. 29. The committee report was approved last Sept. 3 and will go to plenary this week or next week.

This is a very anti-EPIRA bill and, hence, an attempt to legalize many illegal provisions. While all players in the generation, distribution and supply sectors comply with specific requirements of the EPIRA law, this newbie, no track record corporation wants to do anything they want — can connect anywhere, can build their own grid anywhere, can carve out to DUs franchise areas, will pay only 3% franchise tax in lieu of all taxes, exemption to universal charges, COC and local taxes.

In a position paper by the Philippine Rural Electric Cooperatives, Inc. (PhilRECA), some parts reported in BusinessWorld last Sept. 4, PhilRECA observed that:

“Solar para sa Bayan Corp. said that it could offer electricity at an equal or much lower cost compared with the ERC approved rates of ECs… Paluan was cited as an example with P8.00 per kWh. However… the company is actually charging more at P10.37 to P15.29 per kWh… such misrepresentation… that corporation could not afford to offer lower rates.”

This newbie corporation whose franchise is all ready for a congressional plenary is owned by a son of a sitting “environmentalist” senator.

To have cheaper and more stable electricity, we need more competition, less government cronyism and favoritism, and less energy taxation.