ACEF 2017 at ADB, panel on private sector in renewables

Last Monday, June 05, I attended the first day of the four-days Asia Clean Energy Forum (ACEF) 2017 conference at the ADB. I went there to see new discussions and data on how organizers and speakers can help “save the planet”.

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One panel was on PH experience. Speakers were from NREB (Atty. Jose Layug), Ayala Energy, Meralco, and Cleantech Global.

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Atty. Layug showed these targets by the National RE Board (NREB). A new regulation on the implementation of the renewable portfolio standards (RPS) is prepared.

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The guy from Cleantech global says FIT is a success story. For the big wind and solar firms like Ayala and EDC/Lopez, yes. But for consumers, its a failure in bringing down electricity prices.

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I spoke during the Q&A, I said that there is dishonesty in the marketing of renewables. (1) They say that solar-wind will bring down electricity prices because the Sun and wind are free. But look at FIT-Allowance, from 4 centavos/kwh in 2015 to soon 26 this year, 6x increase. And the lobby for faster reimbursement, bigger FIT to other players continue, as shown by this slide from Cleantech.

(2) When the renewable portfolio standards (RPS) was proposed for implementation about 2 yrs ago, DOE and NREB were asked about the price implication to consumers, they have no answer. They just pushed a measure with no idea on impact to consumers.

(3) People say that wind power is green but in many wind farms in mountains like the Nabas, Aklan wind farm, Pililla, Laguna, others, they murder thousands of trees as they flatten mt. ridges so that 10, 20 wheeler huge trucks can pass and erect huge towers.

Atty. Layug responded to my comments, saying that there is no dishonesty in the push for renewables. He cited the roles of (1) RE’s merit-order-effect in the lowering of overall WESM prices, (2) expansion of FIT allocation especially in solar, from 50 MW original to 500 MW, became over-subscribed at around 800+ MW, (3) RPS regulation will not impose any price regulation between DUs and RE companies. I forget other things he said.

I could not make follow up points as more time is given to speakers, there were other hands raised. I wanted to add that RE’s ‘merit-order-effect’ is minimal and cannot be a major explanatory variable for low WESM prices because (a) actual output by solar-wind is small even at noontime when it’s cloudy, raining, and the wind does not blow. So low variable RE output vs very high electricity demand especially at peak hours in the morning, noontime and early evening. And (b) there are many merchant coal power plants, they are the ones that provide really huge power supply at WESM, they displace each other. Like coal plant A bidding at P3.50/kWh is displaced by coal plant B bidding at P3.20, which in turn is displaced by coal plant C selling at P2.90, and so on.

If the various subsidies, priority dispatch at the grid even if they are expensive, other government schemes are not present, no one will build any big solar-wind plants. The building cost (Capex) is high, output is intermittent and unstable, among others.

On reducing distribution system loss

* This is my article in BusinessWorld last Wednesday.

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When matter changes form, there are certain “system loss” that occur. Like a one-kilo dressed chicken becomes less than one-kilo once it is cooked into adobo or tinola. Or a one-kilo green mango or banana becomes lighter than a kilo when it transforms into ripe, yellow mango or banana after a few days.

When electricity is transported or transmitted from a power generation company (genco) some 100+ kilometers away to a private distribution utility (DU) or electric cooperative (EC), there is a transmission system loss. Thus, a 1,000-MW output from a genco may become only 980 MW when it reaches the DU or EC.

Then when electricity is distributed from a DU or EC to houses and offices, there is also a distribution system loss. This loss is divided into (a) Technical loss, inherent in the physical delivery of electric energy including conductor loss, transformer core loss, and technical error in meters, and (b) Nontechnical Loss, energy lost due to pilferage, meter reading errors, meter tampering, others not related to the physical characteristics and functions of the electric system.

o4a_060717The Philippines has a relatively high degree of transmission loss + distribution loss while Singapore, South Korea and Japan have low systems losses, based on World Bank data (see Table 1).

There are several attempts to limit or cap the distribution system loss that is passed on to the consumers. One from the Energy Regulatory Commission (ERC) draft “Rules for Setting the Distribution System Loss Cap and Establishing Performance Incentive Scheme for Distribution Efficiency,” and two from the Senate. Here is a summary of their provisions.

 

 

o4b_060717These three measures are problematic and Sen. Pacquiao’s bill is the worst because of its populist posturing, disallowing private DUs to charge any system loss while pampering the ECs to have their system loss. Check again Table 1 above, it shows that none of the advanced countries like Singapore and Japan have zero system loss.

Sen. Gatchalian’s bill is not as bad as Sen. Pacquiao’s but like the ERC draft Rules,it suffers from some populism too, pampering the ECs with higher loss cap compared to private DUs.

Giving differentiated loss cap is favoring the ECs while penalizing private DUs and this is wrong. If the real purpose of the proposed ERC regulation and Sen. Gatchalian’s bill is to protect the consumers from high system loss charge in their monthly electricity bill, then they should slap a uniform low cap for all players, whether private DUs or ECs.

The rule of law is explicit in reminding people that the law applies equally to unequal players and people. Thus, a law against traffic counterflow should apply to all vehicles, from buses to cars, jeepneys, armored vans, tricycles and motorcycles. It should apply also to both private and public/government vehicles.

20170607e9125A law with penalty against non-rehabilitation of mined-out area should apply to all mining entities, whether big, medium, small and artisanal mining.

And a law or regulation on system loss cap should apply to all players, from big corporate DUs to medium or small electric cooperatives.

By slapping differentiated system loss cap, new government regulations will not be exactly protecting the consumers but more of protecting certain ECs so that their inefficient if not outright wasteful distribution system is rewarded with higher profit at the expenses of the consumers.

Ultimately, all ECs should be corporatized. They should be registered with and monitored by the Securities and Exchange Commission (SEC) and not by the National Electrification Administration because SEC has more transparent and realistic rules than NEA. But that will be another topic in the future.

For now, the rule of law, of not making exemptions and differentiation in the imposition of system loss cap, should prevail. And the loss cap that government has in mind should be realistic that DUs and ECs should not be burdened with additional high capital expenditures (CAPEX) and operating expenditures (OPEX) which ultimately will be passed to the consumers in the form of higher distribution charge.

E-trikes loan halted

See these news reports about this weird “more tricycles to save the planet” ADB loan.

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From the MB report,

“For the e-trike, I already cancelled the loan – supposedly the funding for 100,000 e-trikes. But for the 3,000 units, since bidding was done and units were already produced by the winning supplier, we’ll go ahead with that – so the canceled loan portion should just be for the 97,000 units,” he explained.

The energy department, under the past administration, had just been looking at a price point of R150,000 to R200,000 per e-trike, but unfortunately, the cost subsequently swelled to R250,000 per unit.

From Malaya ‘ too expensive’ report,

Last February, Bemac Electric Transportation Philippines Inc., a unit of Uzushio Electric Co. of Japan won the contract to build 3,000 electric trikes worth $30 million.

An e-trike costs $10,000 or P500,000 half of which is the cost of battery.

Ordinary tricycles cost from as low as P60,000 for second-hand units and upward from P150,000 for the better quality products.

The e-trike then costs three times more than the ordinary tricycle.

In comparison, new branded vehicles used in ferrying passengers start from P800,000 and they can be bought on instalment with low rates.

From Malaya ‘scaled down’ report,

This time, the e-trike project would involve only 3,000 units of e-trikes from the original plan of  100,000 and the cost is significantly slashed from P21.672 billion to P1.73 billion.

The e-trike project was part of the original $504 million e-vehicle project plan jointly funded by the ADB, the Clean Technology Fund (CTF) and the government as part of efforts to jumpstart the energy-efficient electric vehicles industry in the country by producing 100,000 units of electric vehicles.

From the $504 million, ADB was supposed to shoulder $300 million while CTF will provide $105 million and the remaining $99 million from the government.

From Philstar report,

In an annual audit report recently published on its website, the COA stated that as of Dec. 31, 2016, only P77,791,419.85 or 0.35 percent of the total project cost of P21.672 billion ($504 million) has been disbursed.

Of this disbursed amount, only P14,398,023.17 was allocated for project implementation activities, while P63,393,396.68 was for the payment of commitment charges and interests incurred due to the project’s delayed implementation.

The COA said the sustainability of the project is now “in jeopardy” as the cost per unit of the e-trikes has already increased from around P250,000 to currently around P455,000.

The COA pointed out that this would be “very costly for the local tricycle drivers who will be required to pay the same over a period of five years.”

In its reply letter, the DOE management informed the COA that the National Economic and Development Authority Investment Coordination Committee (NEDA-ICC) has approved the DOE’s request for the cancellation of at least $359.76 million worth of ADB loans for the E-Trike Project.

DOE Sec. Al Cusi made a good decision in cancelling a big portion of this very lousy, very costly project. We have to pay the commitment fee and save us nearly P21 B.

At P455k per e-trike, one cannot even go safely from QC to Las Pinas and back. If battery power runs out due to distance and traffic, there is nowhere to charge for at least 3 hours. Better buy a 2nd-hand car, good running condition with air-con, one can drive up to Baguio, Ilocos or Bicol and back safely.

This $400-M e-trikes loan to help ‘save the planet from fossil fuel’ is a stupid program. Its main function will only be to further expand institutional robbery via loans-then-taxes of Filipino taxpayers.

On Trump withrawal from the Paris Agreement

Finally, US President Donald Trump has officially dumped the Paris Agreement of 2015. He declared yesterday,

“We will cease honoring all non-binding agreements”, and “will stop contributing to the green climate fund”.

“The bottom line is that the Paris Accord is very unfair to the United States”.

“This agreement is less about climate and more about other countries getting a financial advantage over the United States”.

“The agreement is a massive redistribution of United States wealth to other countries.”

“Compliance with the terms of the Paris accord… could cost America as much as 2.7 million lost jobs by 2025.”

“India makes its participation contingent on receiving billions and billions of dollars in foreign aid.”

“We need all forms of available American energy or our country will be at grave risk of brown-outs and black-outs.”

“Withdrawing is in economic interest and won’t matter much to the climate.”

“We will be environmentally friendly, but we’re not going to put our businesses out of work… We’re going to grow rapidly.”

“Foreign leaders in Europe, Asia, & across the world should not have more to say w/ respect to the US economy than our own citizens.”

“It is time to exit the Paris Accord and time to pursue a new deal which protects the environment, our companies, our citizens.”
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The agreement funds a UN Climate Slush Fund underwritten by American taxpayers

  • President Obama committed $3 billion to the Green Climate Fund – which is about 30 percent of the initial funding – without authorization from Congress
  • With $20 trillion in debt, the U.S. taxpayers should not be paying to subsidize other countries’ energy

The deal also accomplishes LITTLE for the climate

  • According to researchers at MIT, if all member nations met their obligations, the impact on the climate would be The impacts have been estimated to be likely to reduce global temperature rise by less than .2 degrees Celsius in 2100.

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When I checked the US stockmarkets yesterday… Did the investors cheer Trump’s decision?

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I am actually an agnostic about President Trump’s policies in many sectors but when it comes to climate and energy policies, I support him. Planet Earth has experienced climate change many times since it was born some 4.6 billion years ago. How can the UN and governments fight something that naturally occurs?

The higher the climate alarmism, the higher the climate extortion becomes. $100 billion/year starting 2020 on top of promised foreign aid to developing. Many governments of developed countries are angry at Trump’s decision because they promised a lot, they raised expectations a lot, even if they do not have such big money or cannot squeeze more taxes from their people to give away. They only expected that US taxpayers will shoulder a big portion of such climate extortion.

Now the annual huge parties and junkets involving thousands of “planet saviours” aka annual UNFCCC meetings will be pared down. No more $ hundreds of millions a year of US taxpayers’ money to bankroll their huge parties and junkets.

As expected, lefties’ and alarmists’ heads blew and hysteria, angst and tantrums were flying anywhere. See a short compilation of such hysteria at WUWT,
The craziest reactions to Trump pulling out of the #ParisAgreement

When I posted this subject in my fb wall, one alarmist stranger Cesar Cifra unloaded a series of personal attacks.

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This Cifra is a friend of my friend and fellow UPSE alumni Romy Bernardo. I asked for data (like below, last 4,000 years global temp.) and this Cifra responded with ad hominems, what a lousy and low-life mind.

Anyway, this Trump decision is a big blow to the climate alarmism and global ecological socialism movement. A big blow to the UN and many governments whose revised purpose of existence is to tax-tax-tax their citizens as much as possible to “fight climate change” even if CC has been happening naturally, cyclically, for the past 4.6 B years.

New nuke power in Japan, India

Some updates on nuke power in Asia here, reposting these two reports.
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nuclear-reactor-japan-afp_650x400_71495021691(1) Japan Restarts Another Nuclear Reactor After Fukushima Crisis
NDTV, Agence France-Presse | Updated: May 17, 2017

TOKYO, JAPAN:  A Japanese utility on Wednesday switched on a nuclear reactor, the latest to come back in service despite deep public opposition in the aftermath of the Fukushima crisis.

Japan shut down all of its dozens of reactors after a powerful earthquake in March 2011 spawned a huge tsunami that led to meltdowns at the Fukushima nuclear plant, causing the world’s worst such accident since Chernobyl in 1986.

But only a handful of reactors have come back online due to public opposition and as legal cases work their way through the courts.

On Wednesday, Kansai Electric Power (KEPCO) restarted the No 4 reactor at the Takahama nuclear plant after a court in March cleared the move.

The latest restart at the plant in Fukui prefecture, some 350 kilometres (215 miles) west of Tokyo, came after court battles that lasted more than a year during which a district court near Fukui ordered KEPCO to suspend operations.

(2) India will build 10 new reactors in huge boost to nuclear power
BBC, 18 May 2017

India currently operates 22 nuclear plants, with a capacity of 6,780 megawatts.

India will build 10 heavy water reactors to boost its nuclear power capacity, the government has announced.

India is one of the world’s largest consumers of electricity, and the bulk of it is generated from coal.

The new reactors amount to more than the country’s present installed capacity of nuclear power. But it is not clear when they will begin working.

India currently operates 22 nuclear plants, with a capacity of 6,780 megawatts.

“A total of 7,000 megawatts will be added. It will help produce clean energy,” Power Minister Piyush Goyal told reporters.

The planned nuclear units will generate business worth $11bn (£8.48bn) and create more than 33,000 jobs, the government said.

The homegrown reactors will be built under the ambitious “Make in India” initiative, with the government saying it will boost India’s nuclear manufacturing capability.

More growth needs more Megawatts

Reposting an article in Manila Standard last Monday by a friend, Orly Oxales of Stratbase-ADRi.

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More growth needs more megawatts
posted May 22, 2017 at 12:01 am by  Orlando Oxales

For many Filipinos, there is something visceral about electricity. We know that it is not free, that modern life has grown dependent on it, and that any fluctuations related to its price will affect the way we budget our routine household expenses.

This is why news of the Energy Regulatory Commission’s version of “dagdag-bawas” will hit a nerve in every consumer. News of a nearly P7-billion refund of over-recoveries by Meralco was quickly negated by the announcement of a consequent rate hike, thanks to an approved increase in Feed-in-Tariff rates.

Needless to say, the two issues have generated their own share of intrigues and controversies. The refund stems from over-recoveries incurred between 2014 and 2016. Meralco officials explained that “timing issues” gave rise to such over-recoveries, as the rate used to compute for the generation charge in a current billing month is based on the generation cost incurred in the previous one. This thus creates a lag.

Meanwhile, the increase in FIT rates, ostensibly to help boost the renewable energy sector, represents what some say are “very fast adjustments” from 4.06 centavos/kWh in 2015 to 12.40 in 2016 and eventually 26 centavos in mid-2017. Critics of the initiative have hit what they describe as excessive intervention from the government, not only in price control but also in the grid prioritization of otherwise intermittent and unstable energy sources.

For many, what this does, effectively, is sacrifice consumer interest and cheaper and stable electricity for corporate interest and “saving the planet,” via guaranteed pricing, a slew of fiscal incentives, and other privileges. Because of this skewed prioritization, some even describe it as anti-consumer.

There are also reports of so-called “Meralco midnight deals” between the ERC and Meralco-affiliated generation companies that allegedly allowed some 3,551 megawatts of negotiated power supply agreements with periods of 20 years to evade a mandated competitive bidding policy. Some lawmakers have hit the delayed implementation of this rule and hinted at a collusion, something that both parties have vehemently denied.

For its part, the ERC maintained that the extension was not meant to favor any particular utility or generation company. Some industry observers say the move is to “proactively” assure sustainable power supply; distribution utilities and electronic cooperatives from across the country have planned for such by entering into supply contracts with suppliers early on in order to not only  decrease exposure from uncertainties of the wholesale electricity spot market but, more importantly, to guarantee the supply requirements of their customers.

After all, some say, an initiative that aims to replace bilateral agreements with competitive bidding will not succeed due to a serious lack of power producers that can adequately supply the country’s growing demand for power. In short, the initiative doesn’t address the problem of supply, which the Duterte administration’s build-build- build mantra will also need to confront. That necessary surge will only be possible in a healthy market environment with enough energy players.

According to some forecasts, the Philippine economy has the capacity for robust long-term economic growth of about 4.5 to 5 percent per year over the 2016 to 2030 time horizon. But this level, pace, and consistency of growth will require an additional 7,000 megawatts of power generation capacity built over the next five years.

For this to materialize, there needs to be a concrete plan to improve from mere sufficiency to a surplus of energy supply. The Department of Energy’s power development plan aims to make this a reality. Aside from the invitation of foreign investors, local players are also bullishly gearing up for this scenario. This should appease industry, at least for now.

For consumers, the DOE Task Force to Lower the Cost of Electricity in its final report has already identified the main elements contributing to the cost of power along the chain, from generation, transmission, to distribution. Their recommendations include the rationalization of taxes and the removal of bureaucratic barriers to encourage more investments in power plants.

Thus, for both industry and consumers, the issue of supply seems to be the epicenter of our persistent power woes and should guide the rethinking of our energy policies.

Ever increasing burden of FiT

I am reposting this article today in BusinessWorld by a friend, Paco Pangalangan of Stratbase-ADRi.

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Just the other day, the Energy Regulatory Commission (ERC) announced the approval yet again of an increase in Feed-in-Tariff (FiT) rates to be collected from consumers.

Starting next month, the National Transmission Corp. (TransCo), which manages the FiT fund, will begin collecting an additional P0.0590 per kilowatt-hour in FiT rates, bringing the rate up to P0.1830 per kWh. The announced rate increase was conveniently tucked behind the news that Meralco customers would be seeing a reduction of 75 centavos per kWh as part of the distribution utility’s nearly P7-billion refund for over-recoveries. While this may cushion the blow of the increase in collections, the refund will last but three months, while the FiT rates will pretty much stay.

FiT, if you recall, was the centerpiece of the Renewable Energy (RE) Act when it was passed in 2008 (Republic Act 9513). The law, which aimed to accelerate RE development in the country, sought to incentivize RE developers by providing them with a guaranteed power rate for the electricity they produced, a long-term contract and priority connection to the grid. To fund the incentive, beginning in 2012 and until today, every electricity consumer pays a uniform FiT rate which is factored into the computation of your monthly power bill.

The allure of the guaranteed power rate over several years had developers scrambling to qualify for FiT when the first round of certifications were handed out. After two rounds, the Department of Energy (DoE) had already exceeded the target allocations for both solar and wind, and as an effect of the increased number of RE providers that were owed incentives, consumers have seen what some say are “very fast adjustments” in the FiT rates charged to them. Currently, consumers pay P0.1240 per kWh, up from just P.0406 in 2015. By the time the rate increase is introduced next month, however, the FiT rate would have increased by over 300% in under three years.

Despite the DoE exceeding the initial allocations for RE developers, and not to mention the impact of FiT rates on the monthly power bill of consumers, developers, particularly the solar developers that missed out on previous rounds, are clamoring for a third round of FiT.

Thankfully, upon taking the helm of the DoE last year, Sec. Alfonso Cusi quickly thumbed down the possibility of third round, saying that it would only add burden to consumers already paying high electricity rates.

Currently, the Philippines already has among the most expensive electricity prices, ranking third in the region, fourth in Asia Pacific and 16th worldwide. Aside from the high cost of electricity, the thinning reserves and lack of competition in the generation side of the industry remain challenges for the sector.

There is a clear need to create competition in the industry and bolster generation to meet the growing demands of our economy, but surely there must be a way to attract more investments into the power generation sector without having to dole out fiscal incentives that, in the long run, are lopsided against the consumer.

Why not revisit discussions in DoE, the Philippine Senate and House of Representatives to fast track the permitting and licensing of power projects by declaring them projects of national significance. Currently, the process of securing permits and licenses from the various national agencies and local government units remains drawn out, an issue for power developers for the longest time. All this red tape not only prolong the building of much needed power plants, the cumbersome process also wards off prospective investors as well.

Under the proposal of Sen. Sherwin Gatchalian, the chairman of the committee on Energy, power projects of national significance will be given priority by compelling permit-giving government agencies to work within a specific timeframe. Furthermore, a one-stop shop for energy-related projects to cut redundancy in filing documentary requirements could also be created. A policy such as this could also become the subject of an Executive Order from Malacañang; after all, fighting red tape is also a priority of the current administration. But whether done through EO or legislation, the policy should avoid passing the burden on to consumers by creating new incentives.

This policy may not immediately translate into the development of RE as envisioned in Republic Act 9513, but with RE technology continuing to become more and more affordable, it could soon displace traditional sources as baseload generators. When this happens, consumers should be able to benefit from these developments in technology. With FiT rates this won’t happen since they will continue to pay the fixed tariff dictated by the FiT mechanism while RE developers get to hoard its benefits.

This early, the ERC, as the industry regulator, should champion the rights of consumers, review the implementation of FiT, and disallow any proposed FiT rate increase. This stand against FiT and the burden it causes on consumers can further be supported by the DoE by formally rejecting a third FiT round and by supporting Congress in crafting a policy that can spur investment on the generation side.

Francisco Paco Pangalangan Secretary-General of CitizenWatch and an Energy Fellow with the Stratbase ADR Institute.