PEMC reply to my article on WESM, AEMO

The Philippine Electricity Market Corp. (PEMC) replied to my article in BWorld, Brownouts, coal power and electricity market, August 17, 2016, below.

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Dear Editor: We are writing in reference to a column written by Mr. Bienvenido Oplas published on 17 August 2016 entitled, “Brownouts, coal power and the electricity market”.

We note the persistent claims made in your column that Philippine Electricity Market Corporation (PEMC) is exactly replicating the Department of Energy’s (DOE) efforts to push for more renewable energy (RE) resources into the system. It was also averred in your column that “since PEMC continues to be a government controlled

corporation, can we expect PEMC to be more independent, more candid, in assessing the harm, actual and potential of more REs in the WESM and grid stability?”

In addressing these claims, you used the example of the Australian Energy Market Operator (AEMO) in its initiative to conduct reliability studies. It must be pointed out that the AEMO is not merely a market operator but also a power systems operator that provides critical planning, forecasting, and power systems information. Thus, it can conduct studies on the impact of withdrawal of coal-fired generation capacity cognizant of its responsibility in maintaining the reliability of the Australian power

grid. In contrast to the Australian structure, PEMC acts only as the Market Operator responsible for the governance and operations of the WESM. The function of maintaining the security, reliability and integrity of the power grid is lodged with the System Operator. Against this context, it is grossly inaccurate to claim that PEMC is expected to study the impact of influx of RE resources in the grid.

With regard to the claim that PEMC is pushing for more RE resources in the WESM as a result of its study on “merit order effect” (MOE), this is a non-sequitur. The study published in our electricity journal focused on the impact of FIT incentives based on

the actual generation of FIT-qualified resources in the WESM as a result of priority dispatch accorded by Republic Act No. 9513 otherwise known as the RE Act of 2008. The MOE of the possible lowering of energy prices in the electricity bourse is no form of endorsement of RE resources on PEMC’s part. In the study, the impact of MOE on the market affects only those distribution utilities and directly-connected customers that purchased from the market and does not necessarily translate to the direct lowering of retail rates for end-users because of the FIT. The initiative of PEMC in conducting studies and analyses affecting market outcomes is without partiality to any resource.

Lastly, we wish to point out that PEMC remains a private corporation and not a government-controlled corporation. We recognize the DOE’s role in the policy oversight of the WESM operations as envisioned pursuant to relevant laws and

regulations.

We understand and appreciate your pursuit of balanced reporting and as such, we deemed it necessary to address the assertions made in your column.

In the interest of unbiased journalism, we request that you allow us to air our side by publishing this letter in your paper, as is and sans comment.

Respectfully yours,

Atty. Phillip C. Adviento,

Manager, Training and Communications

 

The Philippine Electricity Market Corporation (PEMC) is a non-stock, non-profit corporation which was incorporated in November 2003 upon the initiative of the Department of Energy (DOE) with representatives from the various sectors of the electric power industry to be the governance arm of the Wholesale Electricity Spot Market (WESM). The WESM began Commercial Operations in Luzon in June 2006 and in the Visa yas in December 2010. In June 2013, PEMC launched and integrated the Retail Competition and Open Access (RCOA) into the WESM. The WESM is a centralized venue for buyers and sellers to trade electricity as a commodity where its prices are based on actual use (demand) and availability (supply). The WESM was created by Republic Act 9136, the Electric Power Industry Reform Act (EPIRA) of 2001. This provided for the establishment of an electricity market that reflects the actual cost of electricity and lowers its price through more efficient production through competition.

Brownouts, coal power and the electricity market

* This is my article in BusinessWorld last August 17, 2016.

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Brownouts, actual and potential, have returned to some areas of Metro Manila and surrounding provinces in the Luzon grid over the past two weeks. This is unfortunate because electricity demand has somehow declined because of the colder, rainy season and more power plants have been added to the grid.

This rare event was caused by heavy stress in the Luzon grid as a result of the unscheduled outage of several coal-fired, hydroelectric, oil, and geothermal power plants in the grid, many of them are already ageing. Among these coal plants were (a) 382 M-W Pagbilao’s unit 2 (U2), (b) 122 M-W South Luzon Thermal’s U1, (c) 140 M-W Southwest Luzon’s U2, and (d) 60 M-W Limay Cogen Block 5.

Among the hydro plants were (a) 50 M-W Angat Main U4 and (b) 180 M-W Kalayaan U1. Then 83 M-W from Makban Geothermal and 280 M-W from Malaya Thermal U1. Almost 1,300 MW of power went on unscheduled or unplanned outage, plus power plants on scheduled or planned maintenance shutdown.

The newly-commissioned wind and solar plants in Luzon cannot and will not be able to fill up the power deficit. If the wind DoEs not blow, wind power is zero; if it is night time or day time but very cloudy, then solar power output is zero or very low.

This situation again highlights the need to continue building new coal and natural gas plants. The proposal and lobbying by certain sectors and environmentalist groups to discontinue building new coal plants and build only intermittent renewable energy (RE) plants like solar and wind is not wise. The Philippines’ fossil fuel consumption remains among the lowest in Asia’s emerging and developed economies plus Australia.

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(Correction:  the last 2 columns are for oil, unit in million tonnes, not mtoe)

Last Aug. 11, 2016, the Australian Energy Market Operator (AEMO) released its 2016 Electricity Statement of Opportunities (ESoO) report and it highlighted the growing importance of network and non-network developments to secure future electricity generation. Notable in its report is this warning,

“AEMO has modelled the impact of withdrawing a further 1,360 MW of coal-fired generation capacity to meet the COP 21 commitment under AEMO’s neutral scenario, with results suggesting potential reliability breaches occurring in South Australia from 2019-2020, and New South Wales and Victoria from 2025 onwards.”

“Reliability breaches” is a technical term for power outages or blackouts. And AEMO projects that it will take place in three to four years from now. Replacing coal power with additional RE capacity will not compensate for the loss of coal capacity.

AEMO was candid enough to categorically warn about the dangers of cutting coal power and pushing more renewables into the system. This candor is good because it will prepare both power suppliers and consumers of what’s going to happen few years on the road.

One explanation for such candor by AEMO is its independence from the government as the latter pushes for more REs.

In contrast, the Philippine Electricity Market Corporation (PEMC), AEMO’s counterpart here as electricity market operator, is government-dependent. It is headed and chaired by the DoE (Department of Energy) secretary and many board members are from the government, like the National Power Corp. (NPC), National Transmission Corp. (TransCo), and the Power Sector Assets and Liabilities Management Corp. (PSALM).

Since the DoE is the main implementer of RE Act of 2008 (RA 9513), DoE is naturally pushing for more intermittent REs into the system and that is what PEMC is exactly doing. The latter for instance produced a study in November 2015 saying that REs that are priority dispatch at the Wholesale Electricity Spot Market (WESM) have created the “merit order effect” (MOE) in reducing the market clearing price (MCP) at WESM.

MOE can also be realized via more and cheaper conventional plants like coal rather than expensive and intermittent REs. With conventional plants, there is no need for additional ancillary costs.

So, since PEMC continues to be a government controlled corporation, can we expect PEMC to be more independent, more candid, in assessing the harm, actual and potential, of more REs in WESM and grid stability?

The most logical answer is no. The DoE cannot contradict itself, say that REs are necessary and say at the same time that REs are dangerous to the customers’ pockets and the stability of the national grid.

So the important implication here is that the independent market operator (IMO) as clearly stated in the EPIRA (Electric Power Industry Reform Act) some 15 years ago and now represented by PEMC, should be independent from government like AEMO. The DoE secretary and all other government energy agencies, including those in the “advisory” capacities, should get out of IMO or PEMC board.

Having less government intervention in the energy sector in general and the electricity market operation in particular is pro-consumer. Just give the consumers more choices, no or little coercion and they will choose the least costly, the more stable and reliable energy source.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a Fellow of SEANET and Stratbase-ADRi. minimalgovernment@gmail.com

Mr. Oplas has written about the PEMC, renewable energy, and related issues in his previous columns. To read his pieces entitled “State dependence of Philippine electricity market” and “Renewable energy, expensive electricity, and the merit order effect,” please visit these linkshttp://goo.gl/r0XaLt, http://goo.gl/Hf6DRg, respectively.

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

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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.