Solar can never power the PH and Asia

* This is my 3rd article in the special issue, BusinessWorld Anniversary Report last July 25, 2016. Due to limited space, the table was not shown but the arguments and texts are retained.

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The rapid pace of economic growth in East Asia over the past two to three decades coincided with, or was facilitated by, high energy capacity largely coming from coal power plants.

This is shown by the numbers below covering two decades. Electricity generation and solar power consumption are expressed in terawatt hours (TWh, 1 TW = 1 million MW), coal consumption is expressed in million tons oil equivalent (mtoe), and GDP size is valued at Purchasing Power Parity (PPP).

The table on the right shows the following:

  1. The Philippines has a small electricity production, only 83 TWh in 2015 or just one-half (1/2) that of Vietnam and Thailand and only one-third (1/3) that of Indonesia. This is a reflection of its low installed power capacity relative to its neighbors.
  1. China and Vietnam have significantly expanded their electricity production in the last two decades by nearly 500% and 1,000%, respectively. This coincided with, or significantly contributed to, their high GDP expansion of 769% and 426% respectively for the same period. China has a very high level of coal use, 1,920 mtoe in 2015 while Vietnam has a very high % expansion of coal use, 616% in just two decades.
  1. Of the 12 Asian economies listed, only three — Japan, Thailand and Hong Kong — did not experience 200+% expansion or quadrupling of GDP size after two decades. They are also the three economies plus Pakistan, that did not experience high expansion in electricity generation and coal use.
  1. The eight other Asian economies have benefited from higher electricity generation, higher coal use, and coincided with or facilitated higher GDP size expansion in just two decades.
  1. Solar power consumption in Asia remains very small. Less than 0.05 TWh in 2015 for six of the 12 economies — Vietnam, Hong Kong, Malaysia, Philippines, Singapore and Thailand. Thus, statements that many Asian economies have (a) significantly embraced new renewables like solar, and (b) their use of coal power is declining as they shift towards more solar and wind power – are preposterous.

During the BusinessWorld Economic Forum last July 12, 2016, the subject of Philippines’ power and energy policies was mentioned several times by different speakers.

In his keynote speech, First Pacific Co. Ltd. managing director, said that “The recent heightened interest in renewables is understandable. But let me say this: for now, renewables cost more than conventional power, which means higher power prices. There’s a cost to protecting our environment — no such thing as free lunch.” He added that we are heading towards sufficient power capacity and majority of these power plants are coal.

DoF Secretary Carlos Dominguez III partly mentioned the importance of a realistic energy mix that will not burden the consumers with high electricity prices.

In the panel on Disruption, Solar Philippines’ President Leandro Leviste argued that “solar is now cheaper than coal.” He added that batteries to stabilize solar output that currently costs an additional P2.50 per kWh to solar power can significantly drop by one-half by 2020. Still, he argued, that solar + battery prices, solar can replace all gas, oil, and diesel in the Philippines.

In the panel on Infrastructure Capacity, Eric Francia, President & CEO of Ayala Corporation Energy Holdings, Inc. showed one slide where the Philippines’ power capacity 2014 was only 15.6 GW vs. Vietnam’s 40+ GW.

Finally, in the same panel on Capacity, Erramon Aboitiz, President & CEO of Aboitiz Equity Ventures, Inc. (AEVI) said that the Electric Power Industry Reform Act of 2001 (EPIRA, RA 9136) is working. It stopped the financial drain of government with heavy NPC monopoly losses and debts, attracted investments from the private sector and competition has driven down power rates. He rightfully argued that in deciding the energy mix, affordability to consumers and stability of power supply should be a priority for the government. The open access and retail competition provision give customers the power of choice.

There are several ways that expensive solar energy will burden the consumers in the coming years. One, the high feed in tariff (FiT) of P8.69/kWh in 2015, that becomes P9.69/kWh in 2016, that will become roughly P10.70 by 2017, and further rise in 2018 and beyond as indexation to inflation rate and other factors are inserted. Two, this ever-rising solar price is assured for 20 years for each FiT-eligible solar company. Three, even consumers in Mindanao who are not connected to the Visayas-Luzon grids and not part of WESM energy trading are forced to pay this expensive FiT. Four, the priority or mandatory dispatch into the grid even if cheaper sources like coal that can be sold at marginal price of only P1 to P1.50/kWh during off-peak demand hours and days are available. And five, the impending renewable portfolio standard (RPS) will force, coerce and arm-twist many or all the distribution utilities (DUs) in the country to buy a minimum percentage from expensive renewables, the additional cost will be passed on to the consumers.

The government should step out of energy rationing and cronyism. Consumers should be given the freedom to choose, to buy from cheaper energy and avoid expensive electricity. Current legislation via the RE law of 2008 (RA 9513) that institutionalizes energy cronyism should be amended or abolished. This is one policy measure that President Duterte and DoE Secretary Cusi can consider in the next six years.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a SEANET Fellow.

The PH solar confederation, electric coops and Meralco

From the DOE website, some group photos showing some of the major players in the PH energy sector. Below, one solar group, the Confederation of Solar Developers of the PH, Inc. (CSDP).

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From left: DOE Chief-of-Staff Jesus Cristino Posadas, Engr. Arwin Ardon, Ret. Admiral Reuben Lista, Central Tarlac Biopower Inc. President Don Mario Dia, Equis Manager Craig Marsh, NV-VOGT Phils. President Vivek Chaudhri, North Negros BioPower, Inc. President Arthur N. Aguilar, Reynaldo Casas CSDP President, Aboitiz Equity Ventures Inc. Senior Vice President Juan Antonio Bernad, Carlos Aboitiz of Aboitiz Power, Solar Philippines President Leandro Leviste , SolarPacific Energy Corp. Senior Business Development Officer Dyna Enad, DOE Spokesperson & NASECORE President Pete Ilagan.

There is another solar lobby, the Philippine Solar Power Alliance  (PSPA) headed by Ms. Tetchie Capellan. Meanwhile,…

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From the  DOE website,

Cusi asked both agencies to “go down to the cooperatives” to resolve the issues raised by electric cooperatives namely PHILRECA, QUEZELCO and AMRECO, among others.

 Among the issues raised by the electric cooperatives were ensuring the right of way for electric projects, tax reforms, non-privatization of Agus and Pulangui complexes in Mindanao, the interconnection of SPUG areas to the main grid and the putting up of a one-stop shop and fast lane for the processing of permits and licenses for energy projects.

On the DOE-Meralco partnership in providing electricity connection to relocated informal settlers.

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When “free electricity connection” was reported in local media, I asked Joe Zaldariaga what it means — only the one-time cost of electricity connection plus meter readers are free, or also the monthly electricity bill of the informal settlers. Joe said that only the former is free. The latter, people still have to  pay their monthly electricity bill. This is low anyway because of  the  “lifeline subsidy” for consumers of only 100 kWh a month or less.

Meanwhile, I am curious why the electric  coops would oppose the privatization of hydro power plants in Mindanao? This is long overdue as EPIRA was enacted in 2001 or 15 years ago. Besides, only private players operating in a competitive environment would have enough incentives to really improve the electricity output of those hydro plants, especially when WESM in Mindanao would start operating.

TransCo and the big beneficiaries of feed in tariff

* This is my article in BusinessWorld last July 20, 2016.

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The Philippines’ expensive electricity prices in Asia — second only to Japan — was highlighted once again in a paper by The Lantau Group (TLG) during the Asia Clean Energy Forum (ACEF) 2016 at the ADB last June.

Metro Manila’s residential electricity prices were even higher than those in Amsterdam, Hong Kong, and Singapore, twice than those of Hanoi and Beijing, and about three times than those of Taipei and Kuala Lumpur (see chart).

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This will have negative consequences for the Philippines’ bid for industrialization. Many energy-intensive sectors and big foreign companies will put up their manufacturing plants in Vietnam, Thailand, Indonesia or Malaysia, where they enjoy cheaper and stable electricity there, then export these products to the Philippines at zero tariff because of the ASEAN Economic Community (AEC). So instead of attracting more manufacturing and higher-paying industrial jobs here, our neighboring countries will snap up those jobs instead.

The quick lesson from this reality is that we should find ways to further bring down the costs of electricity here. Identify those charges, costs, bureaucratic delays, taxes and royalties that contribute to our expensive electricity, and significantly shrink or abolish them.

Unfortunately, we are not moving towards that direction.

Instead we go the opposite, by creating new measures, new indirect taxes that contribute to even more expensive electricity via the feed in tariff (FiT) scheme for renewable energy (RE) companies, among others.

The FiT scheme as designed is very anomalous for three reasons, among others: (1) guaranteed price for 20 years, (2) initial price will be adjusted upwards yearly indexed to inflation, and (3) even consumers in Mindanao, who are not connected to the Visayas and Luzon grids, do not have Wholesale Electricity Spot Market (WESM), and suffer from frequent blackouts due to insufficient power supply for, pay for FiT.

Here are the adjusted FiT rates for 2016 and the corresponding FiT payments that electricity consumers must pay to RE companies via Transco. Wind 1 and 2 and Solar 1 and 2 refer to two tiers of FiT-eligible RE firms, the second tier is given lower rate in exchange for expanding the FiT-eligible new capacity addition (see Table 1).

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Last July 6, 2016, this column attempted to quantify how much the big RE companies have cornered the FiT revenues. The next day after it was published, I wrote to the National Transmission Corporation (Transco), a government corporation in charge of administering the FiT-All, and asked: (1) if my estimates of (a) P2.63 B for EDC Burgos, (b) P1.92 B for Caparispisan, (c) P0.73 B for San Lorenzo Trans Asia, etc. are correct; (2) if my estimate of P12.2 billion total FiT revenue for 2015 is correct; and (3) what are the correct numbers if those estimates are wrong.

I mentioned in my letter/e-mail that President Duterte will soon issue an EO for FoI since these are public funds collected from electricity consumers nationwide and administered by a public entity, Transco and hence, the numbers should be made public too.

Transco replied one week after and said the following:

  1. My estimates of (a) P2.63 B for EDC Burgos, (b) P1.92 B for Caparispisan, (c) P0.73 B for San Lorenzo Trans Asia, etc. are “roughly higher by 10% of what has been billed to Transco by these 3 companies in 2015.”
  1. My estimates of P12.2 B FiT-All for 2015 alone “are higher than the 2016 FiT-All Application levels of Transco on the basis of the following:
  1. There are RE plants in the Application that have not billed Transco in 2015. Although their generation may be in 2015, these plants have not gotten the final eligibility for FiT in 2015 (processing on going). Thus, they will bill Transco only upon completion of all necessary approvals;
  1. Transco also implements one month current-one month backlog billing consistent with the REPA (Renewable Energy Payment Agreement). Thus, there are plants that have gotten their FiT eligibility much later than their Commercial Operation Date (start date for FiT eligibility) and have not become current in terms of billing by the end of the December 2015 billing period;
  1. Transco estimate of FiT Revenue for 2014-2015 is about P10 B. it added that although the year has passed, it has yet to accrue all amounts pertaining to 2014-2015 since the concerned REs have yet to receive their final eligibility documents/are yet to bill Transco; and
  1. What has been actually billed to the FiT-All Fund for 2014-2015 energy generation is only around P8 billion.

Thank you Transco for the reply, which allows me to construct new estimates of FiT revenues per company (see Table 2).

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The 12.40 centavos/kWh FiT rate granted by ERC in February this year will soon be revised upwards because it was just a provisional order.

Forcing electricity consumers to pay more expensive electricity from new renewables is wrong. Consumer choice is compromised or killed. If people really believe that the new renewables’ costs are indeed falling and attaining grid parity with coal and natural gas, then they should support the abolition of RE law of 2008 or RA 9513. This way, RE developers can sell electricity to willing customers without any guilt or embarrassment.

Bienvenido S. Oplas, Jr. is a Fellow of SEANET and Stratbase-ADRi, and head of Minimal Government Thinkers.

* This is my article in SPARK by ADRi last July 4, 2016.

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The emergence of a first ever President of the Philippines coming from Mindanao has produced ample business opportunities to that big island and its many provinces in the south. After the elections last month for instance, Davao City in particular experienced huge boost in business and tourism.

Overcoming energy poverty or insufficient supply of power and electricity for the people should be among the priorities of the new government. For instance, our average electricity consumption of 672 kWh per capita in 2012 was lower than that of Indonesia, nearly ½ that of Vietnam, nearly ¼ that of Thailand, nearly 1/7 that of Malaysia and almost 1/12 that of Singapore.

There are no comparative data for 2015 so this paper makes its computation, shown in the last column in this table below.

Table 1. Electric power consumption (kWh per capita)

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Sources: Columns 2-5: WB, World Development Indicators,http://data.worldbank.org/indicator/EG.USE.ELEC.KH.PC;
Columns 6-7: BP, Statistical Review of World Energy, June 2016;
Column 8: IMF, World Economic Outlook, April 2016;
Column 9: computation by this paper

Estimating energy poverty in Mindanao

The combined population of regions 9 to 13 plus ARMM in the census August 2015 was 24.136 million (source: Philippine Statistics Authority (PSA)). Gross electricity generation in Mindanao in 2015 was 9,282 GWh (source: DOE)

This means that average electricity consumption in Mindanao last year was only 384.6 kWh per capita. This is less than half that of the national average of 809 kWh per capita, and this may be equivalent to that of Cambodia (207 kWh per capita in 2012).

Existing capacity in Mindanao, 2015

As of 2015, Mindanao grid has a total installed capacity of 2,414 MW. The major energy sources are hydro (44%), oil-based (33%) and coal (16%). Geothermal, biomass and solar constitute the remaining 7%.

In terms of actual power generation in 2015, the 17 generating companies (gencos) and 39 distribution utilities (DUs) in Mindanao has produced and distributed 9,282 GWh of electricity, mainly coming from hydro (39%), oil-based (33%) and coal (20%). Geothermal contributed 8% while biomass and solar contribution was negligible.

Capacity addition in Mindanao, 2016-2019

The biggest addition was Therma South Inc. (TSI) of Aboitiz Power with 300 MW. Unit 1 (150 MW) started operation in September 2015 while Unit 2 (also 150 MW) began operation in January 2016.

Coming this year will be Saranggani (by Alsons), San Miguel Davao (by SMEC) and FDC (by Filinvest), all coal plants. Next year, GN Power will further add a huge coal power plant.

Table 2. Committed Power Projects in Mindanao, 2016-2019, as of May 2016

m2Source: DOE.

These will result in temporary power oversupply by 2017 and significantly raise the kWh per capita use in Mindanao. But such oversupply will be short-term because demand will simply adjust and rise quickly. Again, note the low per capita electricity consumption in Mindanao compared to the national average, and much lower compared to those in Vietnam, Thailand, Malaysia and other developed Asian economies.

Here are the indicative projects for Mindanao grid. Coal plants will still dominate the field. Once the Wholesale Electricity Spot Market (WESM) operates in Mindanao, it will be a dynamic market for both power producers and consumers.

Table 3. Indicative Power Projects in Mindanao, 2016-2021, as of May 2016

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With these initiatives at big power addition in Mindanao, among the policy measures that needed to be put in place are the following.

One, ensure the transmission link between the Mindanao and Visayas grids soon. This will significantly complement WESM operation in Mindanao.

Two, do not reverse many coal capacity additions with anti-coal pronouncements that might possibly come from the DENR and the Climate Change Commission (CCC). Check again table 1 above, the Philippines’ coal consumption even until 2015 is small compared to the coal capacity of our neighbors in the region.

Three, renewable energy development in Mindanao should focus on hydro power, development of new ones and rehabilitation and capacity expansion of existing ones under PSALM, and less on new renewables like wind and solar that require huge FIT allowance and more expensive electricity.

The stance of the new DENR Secretary against mining has an indirect adverse impact against coal power plants. The worst that can happen is a stop in granting DENR’s environmental clearance certificate (ECC) for new coal plants while a mild version is to further bureaucratize and delay for years the granting of ECC and various environmental permits. Both actions will adversely affect power development in the country and prolong energy poverty. This should not happen.

With six years in power of the first Mindanaoan President of the Philippines, the looming finalization of peace agreement with the MILF and even with the CPP-NPA, business expansion under the ASEAN Economic Community (AEC) and the 16-nations Regional Comprehensive Economic Partnership (RCCEP), and continued destabilization in many Muslim countries in the Middle East, many big investments and businesses will be coming to Mindanao. What appears as power oversupply by 2017 can become undersupply the next year when high demand from existing and new consumers – household, commercial and industrial – will kick in.

Bienvenido S. Oplas, Jr. is a Fellow of Stratbase-ADRi, a columnist in BusinessWorld, and President of Minimal Government Thinkers.

Wind power firms corner billions of FIT money

* This is my article in BusinessWorld last Wednesday.

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From an introductory price hike of 4.06 centavos/kWh of Feed In Tariff Allowance (FiT-All) in 2014, this subsidy scheme of guaranteed price for 20 years became 12.40 centavos/kWh in 2016. As more renewable energy power plants are added to the country, the cost of FiT-All will keep rising and it is safe to assume that this FiT-All might further rise to 20 centavos or more by 2017. And even consumers in Mindanao who are not participants of the Wholesale Electricity Spot Market (WESM) are paying for this.

Such is the abuse received by consumers nationwide via expensive electricity from subsidies to renewable energy (RE) companies. Last month, I wrote to the National Transmission Corporation (TransCo), a government corporation in charge of administering the FiT-All, and asked who among the RE developers received how much.

TransCo sent me a statement of cash flow, Receipts minus Disbursements = Fund Balance, and Fund Payable as of end-2015. I thanked them for the reply but that was not the information that I needed, so I called up the officer and asked why the list of who received how much was not sent. She said that they cannot release it to the public, implying confidentiality of the information. I wish that President Duterte will release that new Executive Order on Freedom of Information (FoI) very soon. The Department of Budget and Management (DBM) releases yearly data on how much government agencies received from taxpayers so why can’t TransCo release data on how much RE developers received from electricity consumers nationwide?

Last month, the Department of Energy (DoE) posted on its Web site the “List of Renewable Energy (RE) Plants with Certificate of Endorsement (CoE) to Energy Regulatory Commission (ERC) for Feed-in Tariff (FiT) Eligibility” as of June 20, 2016. My first question as to which RE companies received FiT has been answered. There are some RE developers who did not receive FiT.

By virtue of their enormity (MW capacity) compared to other RE developers, these companies are the potential main beneficiaries of expensive electricity policy provided by the RE Act of 2008 (RA 9513):

  1. Burgos Wind Power Project (Phases 1 and 2) by EDC/Lopez group, 150 MW at P8.53/kWh
  1. Caparispisan Wind Power Project by North Luzon RE Corp./Ayala group, 81 MW at P8.53/kWh
  1. San Lorenzo Wind Power Project by Trans-Asia RE Corp./PHINMA group, 54 MW at P7.40/kWh
  1. Pililla Wind Power Project by Alternergy Wind One Corp./Vince Perez, 54 MW at P7.40/kWh
  1. Nabas Wind Power Project by PetroWind Energy, Inc., 36 MW at P7.40/kWh
  1. Bangui Bay Wind Power Project Phase 3 by Northwind Power Development Corp./partly Ayala, 19 MW at P8.53/kWh
  1. Cavite EcoZone Solar Power Project by Majestics Energy Corp., 41.3 MW at P9.68/kWh.

I only need to find out the answer to my second question: how much did other RE companies receive each? I went to the Energy Regulatory Commission (ERC) Web site and saw ERC Case No. 2015-216RC, the TransCo petition for FiT-All for 2016. The important factors and ingredients were there, so I began making my own estimates.

The FiT rates and installed capacity in MW for all RE developers already given by the DOE, I used the following factors and assumptions to construct a table of estimates.

a. Capacity factor — derived using TransCo filings with ERC which are per technology basis.

b. Generation (MWh) — derived from the capacity factor.

c. FiT Revenue — FiT rate multiplied by the generation.

d. FiT Cost Recovery Revenue (FCRR) — the amount that the RE firm got from WESM or the distribution utility (DU). This is derived using the average WESM rate per TransCo application to ERC. This amount may not be that accurate since the time of dispatch will not result to the average price.

e. FiT Differential (the basis of FiT-All) = FiT Revenue minus FCRR. For some power sources like wind plants, the calculated FiT Differential here may be under estimated since wind usually blows during off-peak hours period, and WESM prices are then below the average rate (see table).

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Now these are just estimates and there could be some corrections or mistakes in the last four columns on the right, even in the capacity factor. The capacity factor is not constant or flat the whole year, some months and days are more windy than others, and some months and days are more cloudy than others and hence, affect the output of solar PV.

I wish to be corrected by TransCo if those numbers are wrong, perhaps they should release the correct numbers. Is it true that the Lopez and Ayala groups cornered nearly P5 billion from FiT in 2015 alone? The other companies like Trans-Asia/PHINMA, Alternergy, Hedcor/Aboitiz, they also enjoyed perks by several hundred millions of pesos each because of the unjust system of high, guaranteed price system under FiT.

On a related note, it is good that Mindanao does not have any of those expensive and pampered solar and wind plants that are primarily responsible for more expensive electricity in the country. Mindanao has more hydro, big hydro with no FiT and run of river hydro with small FiT of P5.90/kWh. Recently, Mindanao added more coal plants, which is the right thing to do. Stable, dispatchable, non-intermittent and cheaper coal power, that is what Mindanao and the rest of the country should have if we are to sustain fast growth. The move by the new DENR Secretary for anti-mining policy will adversely affect coal mining and coal power development in the country. This policy move should be checked and discontinued.

Bienvenido S. Oplas, Jr. is a Fellow of SEANET and Stratbase-ADRi, and head of Minimal Government Thinkers.

Comments to DOE draft Department Circular on RPS

The DOE asked for public comments to its proposed draft Department Circular after the public consultation last June 16.

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Source: http://www.doe.gov.ph/news-events/events/announcements/2995-draft-department-circular-providing-rules-and-guidelines-governing-the-establishment-of-the-renewable-portfolio-standard-rps

Below is my letter to the NREB Secretariat and Dir., also Assistant Secretary Mario  Marasigan.
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To: techsec.nreb@gmail.com

June 21, 2016

Dear ASec Mario,

My column today in BusinessWorld is about the RPS and the public consultation last week,

http://www.bworldonline.com/content.php?section=Opinion&title=renewable-portfolio-standard-and-electricity-price-uncertainty&id=129284

Please consider that as my position  paper on the subject. Take note in particular Table 2.

PH total electricity generation in 2015 = 82.6 TWh. Of which from wind = 0.6 TWh, from solar = 0.1 TWh. So small despite FIT + priority dispatch + fiscal subsidies.

In contrast: Vietnam electricity generation in 2015 = 164.6 TWh (2x that of PH’s). Of which from wind + solar = 0.2 TWh only.

Indonesia’s = 234 TWh (nearly 3x that of PH’s), of which from wind + solar = less than 0.1 TWh.

Malaysia’s = 147.4 TWh (nearly 2x that of PH’s), of which from wind + solar = 0.1 TWh only.

Our neighbors have huge existing power capacity, something that we should aspire for many years from now, and they are not gung-ho on new renewables like wind and solar. The numbers on price implication to electricity consumers should be prioritized.

My article’s conclusion,

“The DoE should either implement the minimum 1% of AMI in RPS, or further delay RPS implementation until the price implications are studied and the consumers are not further burdened with higher prices and unstable electricity supply.”

Thank you.

Nonoy Oplas
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Meanwhile, see this table (original table is annual data from 1990-2015, I cropped it)

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Source: http://www.doe.gov.ph/doe_files/pdf/02_Energy_Statistics/power_statistics_2015_summary.pdf

New RE’s share in total installed capacity rose from 0.9% (153/17,325 MW) in 2013 to 4.3% (813/18,765 MW) in 2015.

But new RE’s actual contribution to electricity generation nationwide was only 0.4% (279/75,266 GWh) in 2013 and 1.5% (1,254/82,413 GWh) in 2015. Low capacity factor of new REs (about 20% average for solar, wind and biomass) is the  main reason for this. Old REs like geothermal and hydro have higher capacity factor, about 75%.

Again, new REs give us more expensive electricity and less stable, less reliable energy source. That is why government-imposed subsidies to new REs from the  pockets of electricity consumers nationwide should have short timetable, not 20 years, not even 10 years. After all, the proponents, advocates and campaigners of new REs often argue that their energy sources have “already attained grid parity” with coal and nat gas.

If that is true, then the more that subsidies, fiscal incentives, mandatory dispatch and related provisions (like this soon RPS or  mandatory use of renewables by __% of distribution utilities’ (DUs) total electricity supply to their clients and customers.) should end soon.

Renewable portfolio standard and electricity prices

* This is my article in BusinessWorld last June 21, 2016.

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The key to cheaper prices and/or good services is more competition among more players, more voluntary exchange, and not more price coercion by regulators. If buyers do not like the price of seller A, they can opt out and go to sellers B, C, and so on. Seller A is then pressured to lower his price to compete with other sellers.

The key to expensive prices and/or lousy services is more government regulation and curtailing voluntary exchange. Buyers are forced to buy from expensive sellers and opting out is not allowed. This happens in government-created monopolies like tricycle routes, electric cooperatives, or government-favored sectors like producers of new renewables like solar and wind power.

The Department of Energy (DoE) along with the United States Agency for International Development (USAID) conducted a public consultation last June 16 at Shangri-La at the Fort, Bonifacio Global City about the proposed or draft Department Circular (DC) on the Renewable Portfolio Standard (RPS). The activity was hurriedly organized and was not posted on the DoE’s Web site.

But I heard about it from a friend and then I wrote to DoE’s Mario Marasigan and asked if I could attend it and he said yes. Thank you Sir Mario.

Here is a quick backgrounder of the subject.

  1. Under the Renewable Energy (RE) Act of 2008 (RA 9513), RPS is defined as a “policy that requires electricity suppliers to source an agreed portion of their energy supply from eligible RE resources.”
  1. Under the Implementing Rules and Regulations (IRR), Section 4, RPS, “…Annual minimum incremental percentage of electricity sold by each RPS-mandated electricity industry participant which is required to be sourced from eligible RE Resources and which shall, in no case, be less than one percent (1%) of its annual energy demand over the next ten (10) years.”
  1. Under the draft DC discussed by the DoE last June 16, Section 8. “The minimum annual increment in the RPS level shall be initially set at 2.15% to be applied to the actual total supply portfolio of the Mandated Participant in each grid for the previous year.”
  1. Under the Annex table, RPS Calculation, also prepared by the DoE that day, the cumulative RE capacity that will be needed from 2016 to 2030 is a glaring 30,862 MW (30.86 GW) or an average of 2.06 GW/year increase for RE alone (see Table 1).

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During the open forum, I asked about many consumers’ concern about expensive electricity. What would be the implication in pricing of the proposed RPS, if they impose a 1.5% annual marginal increment (AMI)? How about at 1.75% or at 2.15% (their proposed rate)? And if they target 30% renewables in the energy mix by 2030, or 32% or 35% (their proposed target), what would be the impact on electricity prices?

The feed in tariff (FIT) without RPS was already four centavos per kilowatt-hour (kWh) last year, 12 centavos per kWh this year, so with FIT + RPS next year, will it become 20 centavos? 25 centavos?

DoE officials answered that no study on price implications has been worked out yet and that it can come out later as the current focus is the mechanisms on how RPS will be implemented, including penalties for violators or non-implementers of RPS.

So it is a weird circular because both the DoE and the National Renewable Energy Board (NREB), the multi-stakeholder body that recommends policy options for the DoE, are pushing for a policy where they admittedly do not have a clear idea on the cost of implementation to energy consumers.

One thing that can be favorable for RPS though is that distribution utilities (DUs) will have more options from among renewable technologies — biomass, waste to energy, geothermal, run of river hydro, impounded hydro, wind, solar, ocean, hybrid systems, others — and choose those that are least cost.

The above RPS and RE targets by 2030 are not practical and not viable because the Philippines is still way below many of its neighbors in power generation and we need to grow fast to sustain the economic momentum of recent years and create more businesses, more jobs to more people.

People who push for higher renewables in the national energy mix want to push out coal power as much or as soon as possible. This is a day-dream and illusionary goal because of the big role that coal power contributes to many industrialized and emerging Asian economies. From 2000 to 2015, Indonesia, Malaysia and Vietnam ramped up their coal power capacity from 375% to 609%. The Philippines’ 11.4 gigawatt (GW) coal capacity in 2015 was only one-half that of Vietnam’s 22 GW, only one-third that of Taiwan’s and nearly one-eighth of South Korea’s.

For Table 2, definition of the following terms:

  1. 1 terawatt (TW) = 1,000 gigawatt (GW) = 1,000,000 megawatt (MW)
  1. MTOE = Million tons of oil equivalent
  1. 1 MTOE = produces about 4.4 terawatt-hour (TWh) of electricity in a modern power station.

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The share of wind and solar in total electricity production in the Philippines is small, only about 0.8% of the total in 2015, despite their installed power share of around 2.5%-3% of total installed capacity. The explanation for this is the low capacity factor of these new renewables.

Some people insist that there is already “grid parity” by the new renewables with coal and natural gas, that “solar is cheaper than coal” now. If this is true, then why are they asking for another round of energy coercion through high RPS, on top of existing coercions on FIT (guaranteed price for 20 years) + priority dispatch to the grid + fiscal incentives?

A developing country like the Philippines should be given more leeway in building up cheaper and stable energy sources.

Energy poverty and expensive electricity result in lack of jobs because energy-intensive industries and companies would avoid the Philippines and go to energy-stable and competitively-priced economies like Malaysia, Indonesia, Vietnam and Thailand.

The DoE should either implement the minimum 1% of AMI in RPS, or further delay RPS implementation until the price implications are studied and the consumers are not further burdened with higher prices and unstable electricity supply.

Bienvenido S. Oplas, Jr. is a Fellow of SEANET and Stratbase-ADRi, and heads a free market think tank, Minimal Government Thinkers.