Energy 101, Disinformation and fake stories by the watermelon movement

Fake stories and disinformation can be rampant in the energy sector because of the climate alarmism drama and renewables cronyism agenda. A recent example is one published in BWorld last Thursday, The Philippines’ Ill-Advised P1 Trillion New Coal Gamble, October 20, 2017 By Sara Jane Ahmed.

The lady seems to be ignorant of many data before writing their anti-coal drama. Some things she wrote:

  1. “High electricity prices are driven by imported fuel and subsidies; electricity surcharges…”

à Wrong. Check Meralco website for customer charges, http://www.meralco.com.ph/consumer-information/rates-archive. Here, October 2017 charges, if one consumes up to 300 kWh, he would pay a total of P2,880, one-half of which is for generation charges and the other half for 11 other charges including taxes and FIT subsidy for mostly wind-solar.

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From the generation charge, about half of which are from Malampaya natgas-using plants in Batangas; there are hydr0, geothermal, coal could be about 40% of Meralco energy mix.

  1. “Diesel dependence, much like our growing national coal dependence, is a result of subsidies…”

à Wrong, diesel has no subsidy, or maybe she refers to the current zero excise tax for diesel but under Duterte TRAIN, it will soon be slapped with P6/liter excise tax.

  1. “Coal subsidies assure the private sector guaranteed returns…”

à Wrong. Currently coal excise tax is P10/ton but under TRAIN, to rise to P20/ton. Now Dr. Ciel Habito proposes a P600/ton excise and carbon tax for coal. I criticized his proposal here, http://bworldonline.com/carbon-tax-wrong/

  1. “Meralco is currently underwriting a solar power supply deal for 85 megawatts (MW) at P2.99 per kWh.”

à True, and that’s the exception, from Solar Philippines of Leandro Leviste, son of Sen. Loren Legarda. Many solar farms here are given the cronyist FIT or guaranteed price for 20 years of P8.69 to P10+/kWh.

  1. “Philippine’s financial sector as massively exposed now to the eventual stranding proposed new coal fleet to the tune of more than 10,000 MW in overcapacity and P1.05 trillion in financial risk”.

-> See this: “Countries that have coal consumption of at least 2.1x expansion over the past two decades are also those that experienced fast GDP growth of at least 3x expansion. Prominent examples are China, India, South Korea, Indonesia, Vietnam, Malaysia, Philippines, and even Pakistan.” http://bworldonline.com/high-carbon-tax-irrational/

Finally, the lady is highly disoriented, talking about diesel and coal subsidies when there is none. Yet silent on renewables subsidies, haha. P10B in 2015, P18.5B in 2016, P24.4B this 2017, and P26B next year. The main recipients of this renewables cronyism are the wind farms of the Lopezes/EDC, Ayalas’ Caparispisan and Bangui, Phinma, Alternergy/Vince Perez, etc. http://www.bworldonline.com/content.php?section=Opinion&title=why-the-fit-all-is-a-burden-to-consumers&id=145326
The “planet saviours”, the renewable cronyism lobbyists, they want more government intervention — in arm-twisting the consumers to pay higher electricity to subsidize renewables; in coercing the grid to prioritize the intermittent, unstable, unreliable, non-dispatchable energy sources; in choking and even killing stable, reliable, dispatchable 24/7 sources like coal, gas and nuke. Watermelons — green outside, red inside.

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Alex Magno on FIT and renewables

Reposting an article today by Alex Magno in Philippine Star.

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A businessman-friend sent me a message the other day, railing about how the P18 billion raised through Feed-in Tariffs (FIT) charged electricity consumers could have been used to build a chain of recharging stations in the metropolitan area. Instead, as intended by our corrupt policies, FIT collections went to political cronies who claim they are saving the environment by investing in renewable energy.

With a chain of recharging stations in place, we could leapfrog the jeepney modernization program to use electric, not just Euro-4 compliant, vehicles. The technology is there. The recharging stations are not.

The environmental impact of clearing out the dirty diesel engines and putting in electric vehicles will be dramatic. The death toll from polluted air should drop remarkably.

FIT collects billions from consumers, keeping our power price regime high therefore depleting our manufacturing. In 2015, total FIT collections amounted to P10.22 billion. In 2016, with adjustments in the FIT rate, total collections ballooned to P18.54 billion. Estimated FIT collections for 2017 is placed at P24.44 billion.

Not a single peso from FIT collections goes to improvement of infrastructure. All the billions shelled out by poor electricity consumers via FIT go to offsetting business risks and ensuring profits for those who set up renewable energy facilities. The cronies who benefit from this have pulled off a massive scam by wrapping their enterprise with the cloak of political correctness.

It is not too late to scuttle this scam. We have much to learn from the experience of Australia on this matter.

As demand nears supply, Australians now realize that renewable energy is not a dependable source. It cannot provide the baseload capacity an economy needs to achieve energy security. Subsidizing renewable energy merely raises electricity prices, undercutting an economy’s ability to compete.

Renewable energy is well and good if consumers are not forced to subside them. In our case, the subsidies are better used to modernize mass transport systems.

Our backward and inefficient public transport system is, after all, the biggest contributor to the degradation of air quality in the urban centers where most of our people now live.

The cult of political correctness has misled many environmental activists otherwise acting in good faith. They ended up justifying FIT subsidies and, at the behest of cronies, demonizing coal power generation. They gloss over the fact that new technologies for coal power generation have made the iconic black smokestacks a thing of the past.

Those who make profits without assuming business risks by using FIT had the gall to demand even higher rates of subsidies from consumers. Fortunately, Energy Secretary Al Cusi has a clearer grasp of things. He rejected demands to further raise FIT rates.

Bjorn Lomborg on World energy mix

I am reposting here a post by Bjørn Lomborg in his fb wall early today. Thanks for this great piece, Bjorn.
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The world is mostly run on fossil fuels (81.4%). Nuclear makes up 5% with 13.6% from renewables. Solar panels and wind turbines contribute less than 0.7%.

When you hear 13.6% renewables, you will likely think ‘wow, things are going pretty well with the change-over to renewables’. But these are not the ones you hear about. The biggest contributor is wood, used in the poor world to cook and keep warm. This leads to terrible indoor air pollution – it is actually the world’s deadliest environmental problem, killing some 4.3 million people each year. We should definitely hope the poor will have to use *less* polluting wood in the future.

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The other main contributors of renewables are biofuels (e.g. the American forests, cut down and shipped across the Atlantic to be burnt in European power plants to be called green and CO₂ neutral) and hydropower. In total, that makes up 12.1%. The last 1.5% comes mostly from geothermal energy (0.54%) and wind turbines (0.53%) along with solar heaters in China, tidal power etc. (0.29%) and solar panels (0.13%).

Contrary to the weight of news stories on how solar and wind is taking over the world, solar panels and wind turbines really make up a very small part of the global energy mix. (I started out coloring solar panels yellow, but the thin sliver at the top became invisible.)

Sources: The International Energy Agency has released their latest Renewable Energy Information 2017, http://www.oecd-ilibrary.org/…/renewables-information…. It contains 488 pages of data, with preliminary data for the rich world for 2016, but for the entire world for 2015. Unfortunately, the data is not free.

Since solar PV constitutes such a small part of the energy supply, the International Energy Agency combines it with tidal, solar CSP and solar thermal (the water heaters on rooftops for direct hot water). In 2014, the split was 34% for solar PV, 0% for tidal, 6% for CSP and 60% for thermal, so I applied the same split to the data for 2015.

All data is Total Primary Energy Supply, which is the International Energy Agency’s own main measure, also used in all their graphs for global energy balances.

Why a carbon tax is wrong

* This is my article in BusinessWorld last week.

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Coal power produced nearly 48% of Philippines’ actual electricity generation in 2016 despite having only 34.6% share in the country’s installed power capacity of 21,400 MW or 21.4 GW, Department of Energy (DoE) figures show.

Renewables (hydro, geothermal, wind, solar, biomass) produced 24.2% of total power generation in 2016 despite having 32.5% of installed power capacity. In particular, wind + solar combined contributed a small 2.3% of total power generation.

At a forum organized by the Energy Policy Development Program (EPDP) at the UP School of Economics last Oct. 5, the speaker Dr. Francisco Viray, former DoE secretary and now president and CEO of PhinMa Energy Corp., showed in his presentation a screen shot of Dr. Ciel Habito’s article, “Let’s get the carbon tax right.” Ciel was arguing among others, that the carbon tax for coal power should be raised from the current P10/ton to P600/ton and not P20/ton as contained in Senate bill No. 1592 of Sen. Angara.

I commented during the open forum that Ciel’s article in reality has a wrong title, it should have been “A carbon tax is wrong.” And here are the reasons why.

One, as mentioned above, coal power was responsible for nearly 48% of total electricity generation nationwide in 2016 and it is wrong to restrict its supply and/or make its price become more expensive. Kill coal or even drastic cut in coal power would mean massive, large-scale, and nationwide blackouts for several hours a day, something that consumers wouldn’t want to endure. After all, even a one minute brownout can already cause widespread disappointment.

Two, the Philippines’ overall coal consumption – in absolute amount and in per capita level – is small compared to the consumption of its neighbors in Asia (see table).

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The Philippines has only 100 kilos or 0.1 ton per head per year of coal, the smallest in the region. There is no basis to suggest restricting further coal use given the fast demand for electricity nationwide.

Three, it is wrong to advocate more expensive electricity via high carbon tax given that subsidies to renewables via feed-in-tariff (FiT), among others, are already adding upward price pressure. A higher carbon tax may be more acceptable to the consumers if the FiT scheme is discontinued and ultimately abolished. If this is not done, better to keep coal excise tax as low as possible.

The proposed P600/ton excise tax on coal power would translate to P0.24/kWh hike in power generation charge. Using Ciel’s numbers, one ton of coal can generate 2,519 kWh electricity on average. So P600/2,519 kWh = P0.24/kWh. That is equivalent to FiT-Allowance that each electricity consumer from Luzon to Mindanao must pay monthly for many years to come.

Four, it is wrong to demonize and over-regulate carbon dioxide (CO2) as a pollutant because it is not. CO2 is invisible, colorless, and odorless unlike those dark smoke coming from vehicles and chimneys of old manufacturing plants.

CO2 is the gas that humans and animals exhale, the gas that flowers, trees, rice and other crops use to produce their own food via photosynthesis. More CO2 means more plant growth, faster greening of the planet. CO2 therefore is a useful gas, not a pollutant gas that the UN, Al Gore, and other groups and individuals would portray it.

While the hike in coal excise tax from P10 to P20/ton as contained in the Senate version is somehow acceptable, there is danger that the P600/ton proposal will spring out of nowhere during the bicameral meeting of the House and Senate leaders. This should not be allowed to happen.

Continued demonization of coal and rising favoritism of variable renewables like wind-solar would mean more expensive electricity, more unstable grid, and darker streets at night. Dark streets would mean more road accidents, more robbery, more abduction and rapes, more murders as criminals benefit from anonymity provided by darkness.

Energy irrationality can kill more people today, not 40 or 100 years from now. The irrationality and insensitivity of rising government taxes should be restricted and limited.

Germany’s FDP questioning or ditching Energiewende

I like this man, head of German liberals Free Democratic Party (FDP), Christian Lindner. The man mainly responsible for the FDP resurgence in the German Bundestag elections last September 24.

“The project of the century Energiewende [transition to green energies] has failed. None of the agreed targets will be reached. Climate protection is stalled, energy prices are rising and they are burdening us as electricity consumers, just as they are the industry and middle class. And not least of all it is becoming increasingly difficult to guarantee a secure power supply during the winter months.” — Christian Lindner.

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Source: No Tricks Zone, Germany’s Green Energy Project Close To Death: “EEG Feed-In Act Has Failed …Has To Go!” (29 September 2017)

Merkel’s CDU/CSU needs an ally to retain the majority. Almost impossible to ally with 3rd place AfD, 2nd place SPD already broke up with them. Merkel definitely needs 4th place FDP and very likely 5th place Greens but the FDP and Greens are now poles apart in energy policy. The latter wants Germany’s expensive, unstable energy to become even more expensive, even more unstable because of their kill-coal, subsidize-endlessly-wind+solar policies.

Here’s a possible opposition Watermelon (green outside, red inside) coalition:  SPD + Greens + Linke. All of them have the same hatred of fossil fuels, they just differ on the degree of their hatred, and all of them are users of fossil fuels — in electricity, cars/inland mobility, planes and long distance trips.

I think Mr. Lindner is now asserting the liberal position of market competition, less government intervention. In particular, energy competition. Focus on price and power stability, a very important factor for industrial Germany producing world-class cars, robots, monster machines, etc. Energiewende is killing energy competition. Only wind + solar + biomass, hydro, others should be prioritized by govt energy central planning. The rest — coal, nuke, gas — decimate if not kill them. FDP now under Lindner is reasserting the classical liberal, freedom-oriented public policies.

FDP leadership is right and correct in moving into energy realism and competition and away from watermelon movement and energy leftism-cronyism.

A German friend noted that “there are contractual and legal obligations to be honored and rule of law in place. Dismantling the energy turnaround can only be a step by step process if the government wants to avoid massive amounts of litigation, much of which will be successful. this is the most problematical aspect of the turnaround: its partial irreversibility.”

Good points, and its good that the FDP will try to stop these economic and energy lunacy of glorifying expensive, intermittent, unstable energy sources in an energy-intensive industralized econ like Germany.

Also the reason why Trump is leaving the Paris agreement, to help avoid possible multi trillion $ lawsuits from crony renewables, crony Tesla and related industries and firms.

Other related recent papers from NTZ:

Germany’s Energiewende “An Economic, Social and Ecological Disaster”, Writes Top German Socialist! 19 May 2017

Leading German Economics Professor Calls Germany’s Energiewende An Energy Policy Calamity, 3 October 2017.

Electric cooperatives and system loss

* This is my article in BusinessWorld last Friday.

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Three news reports published by BusinessWorld during the past few days indicated that the energy sector in the Philippines and its several neighbors is becoming more efficient, market-oriented, and less bureaucratic. These news articles were (1) “ERC declines to intervene in 4 Meralco power deals” (Sept. 20), “DoE says no plans to extend FiT for biomass, river projects” (Sept. 26), and “Malaysia, Thailand, Laos to sign energy-trading deal” (Sept. 26).

The first article says that the Energy Regulatory Commission (ERC) is upholding its own rule to stop intervention after a deadline for petition against any power supply agreement (PSA) has been met.

The second one says that the Department of Energy (DoE) will not extend the feed in tariff (FiT) or guaranteed high price for renewables for 20 years, for undersubscribed biomass and run of river hydro power. This move will protect electricity consumers from further high electricity prices.

The third story says that electricity trading in the three countries mentioned will mean greater power stability and more price competition among power producers. This is like expanding our Wholesale Electricity Spot Market (WESM) from national to regional trading.

To add to this list of positive news, it has also been reported that power transmission and distribution in the region have become more efficient, cutting down on system losses.

Within a decade, the Philippines, for instance, has managed to chop system losses from 12.9% to 9.4% of electricity output, an efficiency gain of 3.5% (See table).

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Based on the table, economies with low system losses have high electricity consumption per capita, except Hong Kong. And vice versa, countries with high system losses of at least 9% tend to have low per capita electricity use.

And this implies that the technology and administrative processes to bring down system losses are generally correlated with the wealth and industrialization of an economy.

There are several attempts both in Congress and the ERC to significantly reduce the distribution system loss by distribution utilities (DUs).

The ERC Draft Rules intend to make high consideration if not outright favoritism of many electric cooperatives (ECs) by giving them (a) high technical loss (mainly conductor loss and no load loss) cap of 5.5-7.0%, (b) high cap on nontechnical loss (illegal connection, direct theft, meter error, billing irregularity) of 4.5%, total of 10-12.5% distribution system loss that can be passed to consumers. In contrast, (c) private DUs will be forced to have a low technical loss cap of only 2.75%, and low nontechnical loss cap of only 1.25% or total of only 4% distribution system loss by private DUs.

This is not a good plan for the following reasons.

One, it institutionalizes a double-standard. Favoring ECs and allowing them to remain wasteful and pass the additional cost of high system loss to the consumers vis-a-vis strict monitoring of private DUs and disallowing them to pass high system losses charges to their consumers.

Two, it does not pressure or discipline the ECs and force them to become more efficient in cutting their system losses. As a result, it is not possible to bring down the system loss to the levels of Thailand, Malaysia, China, Japan, Singapore if this attitude and policy is further adopted.

Three, it does not push many inefficient ECs to be corporatized, to behave like many private corporations that are forced by SEC regulations to be more transparent.

Four, it remains silent on transmission system loss of the sole grid operator, the National Grid Corp. of the Philippines (NGCP).

Government through the ERC should create rules that apply to all players — ECs in the provinces and private DUs in big urban centers — no exceptions or favoritism, and give consumers further reduction in overall electricity prices.

Forcing both provincial ECs and private DUs to have low system loss at uniform rates is consistent with enforcing the rule of law, consistent with encouraging more competition, consistent with the spirit of EPIRA law of 2001.

Cronyism in Renewable energy, gas sectors?

This is my article in BusinessWorld last September 7, 2017.

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Last week, the National Transmission Corp. (TransCo), the administrator of feed in tariff (FiT) — which guarantees high prices for 20 years for variable renewable energy (solar, wind, biomass, run of river hydro) filed a petition at the Energy Regulatory Commission (ERC). It sought for an increase in FiT-Allowance to be paid by all electricity consumers nationwide.

FiT-All is one of roughly 12 different charges and taxes in our monthly electricity bill and the one with the fastest increases in recent years: four centavos/kWh in 2015, 12.40 centavos in 2016, 18 centavos this 2017, and 29.32 centavos next year. It is a clear example of renewables’ cronyism that penalizes electricity consumers and rewards renewable energy (RE) developers supposedly to help “save the planet.”

Also last week, I attended the Energy Policy Development Program (EPDP) lecture at UP School of Economics, entitled: “Natural gas: Addressing the energy trilemma and powering our energy needs.” The lecture was delivered by Mr. Giles Puno, President and COO of FirstGen, a big Lopez-owned power company. Mr. Puno covered many topics but I will only focus on the lecture’s three aspects.

One, the lecture mentioned that the cost of wind-solar keeps decreasing so efforts to decarbonize the economy is improving, away from coal power which cannot remain cheap in the long-term.

During the open forum, I said that this is not exactly correct because while it is true that the technology cost of wind-solar is declining, the FiT rates given to wind-solar keeps rising actually. FiT rates for wind batch 1 (2015 entrants) were P8.53/kWh in 2015, this went up to P8.90 in 2016, and P9.19 in 2017. Wind batch 2 (2016 entrants) were P7.40/kWh in 2016 and P7.71 in 2017.

Solar batch 1 (2015 entrants) FiT rates were P9.68/kWh in 2015, P9.91 in 2016, and P10.26 in 2017. Solar batch 2 (2016 entrants) FiT rates were P8.69/kWh in 2016 and P8.89 in 2017.

FiT revenues collected by all RE firms given FiT privilege were P10.22B in 2015, a figure that rose to P18.54B in 2016, and P24.44B in 2017.

Two, to address the energy trilemma (energy security, energy equity/affordability, environmental stability), the lecture questioned the 3,500 MW worth of coal supply in the Meralco power supply agreements (PSA). These PSAs were anathema to environmental stability and energy equity since power rate hikes will be expected since coal prices are expected to rise over the long-term. That government should instead prioritize natural gas development.

I mentioned in the open forum that I saw the World Energy Council (WEC) World Energy Trilemma Index 2016 and out of the 125 countries covered, the Philippines was #1 in environmental sustainability, thanks to our big geothermal and hydro, plus recently added variable REs. But Philippines was #92 in energy equity because of our expensive electricity, 3rd highest in Asia next to Japan and Hong Kong.

So it is wrong to demonize coal (nearly 35% of installed capacity but 48% of actual electricity production in 2016) that contributed to declining prices in generation charge in recent years. For instance, the load-weighted average price (LWAP) at the Wholesale Electricity Spot Market (WESM) was declining from about P5.40/kWh in 2012 to only P2.80 in 2016.

Consider also the fact that Philippines’ coal use is small compared to what our neighbors in the region consume. Vietnam consumes twice the amount of what we use, Taiwan three times, Indonesia five times, South Korea and Japan six times — for 2016 alone (see graph).

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Power companies like FirstGen should focus on ensuring that electricity consumers have cheap and stable electricity available 24/7 without any brownouts, even for a minute. Instead of demonizing and suggesting the stopping of more coal power to come on stream.

Third, Mr. Puno and FirsGen want “government support crucial for LNG development and (1) Holistic and defined energy mix to direct planning and investments, (2) Incentivize LNG through fiscal and non-fiscal policies, (3) Secure LNG Off-take, similar to how Malampaya was underpinned.”

The first two items I consider as cronyist or seeking a crony status from the government. Setting the energy mix should be done by the consumers, not government. The previous Petilla/Monsada plan of 30-30-30-10 energy mix for coal-natural gas-renewable energy-oil respectively is wrong and has no sensible basis. It is good that new DoE Secretary Cusi has dumped it in favor of 70-30-10 energy mix for baseload-mid merit-peaking plants, respectively.

Government taxes should apply to all technology — coal, natgas, hydro, geothermal, etc. — no special privileges of tax breaks and other non-fiscal sweeteners. To ask for tax and non-tax privileges for LNG is asking for crony privileges.

We need less government regulations in setting the energy mix, less government favoritism for expensive wind-solar resulting in more expensive electricity. Government should focus on having energy laws and taxes that apply to all technology and players without any entity enjoying special privileges.