13th ICCC, Washington DC

Heartland Institute will hold the 13th International Conference on Climate Change (ICCC-13) this coming July 25, 2019, at Trump International Hotel in Washington DC, USA. Lots of interesting, brilliant speakers.

I have attended the 2nd ICCC in New York, March 2009, and the 4th ICCC in Chicago, May 2010. Those two big and very technical conferences solidified my skepticism of the “man-made” or anthropogenic climate change (CC) agenda and drama.

Nikki Comerford of Heartland asked me if Minimal Government Thinkers would like to be among the minor co-sponsors, I said Yes. I will help promote the ICCC here in the Philippines. Thank you for the invite.

Power underwhelming: Why are there power outages?

This is a special report by BusinessWorld last June 17 where I was one of the resource persons they have interviewed. Enjoy.

Power underwhelming: Why are there power outages?

By Mark T. Amoguis
Senior Researcher

IN THE PHILIPPINES, one would have to get used to brownouts, or the drop in voltage in an electrical power supply system. Whether or not it is intentional, these outages have wide-ranging effects on the economy: households would experience no electricity for a few minutes or even for hours, causing great inconvenience; businesses would incur higher costs by way of lost revenue and reduced productivity; and investors would be hesitant to do business, leading to reduced investments.

The Luzon grid has had episodes of “yellow” alerts since March due to high electricity demand outstripping supply as well as unscheduled outages of power plants. The first yellow alert, which occurred on March 5, saw peak demand for the day reaching 9,491 megawatts (MW) against the grid’s available capacity of 10,115 MW with an operating margin at just 624 MW — falling short of the required contingency reserve of 647 MW.

Thinning reserves reached a low when the National Grid Corporation of the Philippines (NGCP) declared on April 10 its first “red” alert notice as power demand in Luzon outstripped reserves following unscheduled outages.

NGCP, which is the private firm that operates, maintains, and develops the country’s transmission network, issues these alerts whenever energy reserves are inadequate. The grid operator has several levels of reserve energy that it uses to stabilize the fluctuating power demanded from the electricity grid.

One, there is a “regulating” reserve, which is the standard operating requirement to maintain a balance between available capacity and system demand. This is ideally equivalent to around four percent of peak demand.

On top of the regulating reserve, the NGCP maintains a “contingency” reserve that it allocates to immediately cover the loss in supply when the largest power generating unit online — usually at around 600 MW — fails to deliver.

Lastly, the operator also maintains a “dispatchable” reserve that is readily available to replenish lost contingency reserve.

A yellow alert notice is issued when the dispatchable reserve is fully spent and the system is already tapping into its contingency reserve. A red alert notice means both dispatchable and contingency reserves are gone.

Based on NGCP notices, there were seven yellow alerts and seven red alerts in April alone. In May, there were 13 yellow alerts and two red alerts.

This number far outstripped the number of yellow alerts in the previous years, according to consumer advocacy group CitizenWatch Philippines’ “PowerPlant Watch.”

“Comparing this to previous years, we had only seven instances of yellow alerts in 2018 and only three during the same period in 2017,” wrote Hannah Viola, convenor of CitizenWatch and energy fellow at Stratbase ADR Institute, in her column in BusinessWorld titled “A Call for Energy Transparency” published on April 9.

Bienvenido S. Oplas, Jr., columnist for BusinessWorld, economist, and president of Minimal Government Thinkers (MGT), noted in an e-mail interview the Philippines’ power capacity as being “far out from many neighbors in East Asia.”

Citing data from the Central Intelligence Agency’s World Factbook, Mr. Oplas said the Philippines, which has a population of at least 100 million, has a lower power capacity per person compared to neighboring countries such as those of Vietnam, Malaysia, and Laos at 2.1 times, 4.9 times, and 4.9 times, respectively.

LACK OF POWER PLANTS, DE-RATINGS

Industry players and analysts said this scenario could have been avoided had there been more power plants available to compensate for those undergoing unscheduled shutdowns or maintenance.

Data from the Department of Energy (DoE) showed there are 126 power plants in Luzon grid alone as of end-2018 with installed and dependable capacities of 16,133.06 MW and 14,641.76 MW, respectively.

However, results of a study from the Energy Regulatory Commission (ERC) released in May showed that up to 72% of these power plants are at least 16 years or older, which may have contributed to the grid’s power deficiency this year.

“Older plants require more frequent maintenance and repairs and may be more prone to unscheduled outages,” Lawrence S. Fernandez, Manila Electric Co. (Meralco) vice-president and head of Utility Economics, said in an e-mail interview.

DoE Undersecretary Felix William B. Fuentebella said in a separate e-mail interview that the occurrence of unplanned and forced outages were considered in the DoE’s assessment of the 2019 summer supply and demand outlook as well as the potential impact of El Niño.

“However, the simultaneous breakdowns were not expected in spite of the preparation and availability of the interruptible load program during the red alert statuses, which resulted in manual load drops,” Mr. Fuentebella said, adding that the delays in the entry of committed power plants “contributed to the limited capacities” in the Luzon grid.

Meralco’s Mr. Fernandez said they have noticed the demand for power has been growing faster in the rest of Luzon compared to the Meralco service area.

“However, it was really the unplanned and forced power plant outages and the delayed entry of new generation capacity that caused the alerts this year,” he said. “This thinning power supply, paired with rising power demand, combine to create a less than ideal power situation.”

“I think the unforeseen factor there was the ‘old plants’ factor; just many of them went on unscheduled shutdowns,” MGT’s Mr. Oplas said.

A closer look at available data showed plants currently online include those built way back in the 1940s and 1950s — plants whose efficiency has eroded through the years.

Two of these plants are located in Luzon — the Caliraya dam-type hydroelectric power plant (HEPP) and the Botocon run-of-river type HEPP, both located in Lumban, Laguna. These plants were commissioned in the early to mid-1940s.

Adding to the forced and unforced outages, the lack of supply is also attributed to plant de-ratings, which happens when a power plant is operating at less than its maximum capability in order to prolong its life.

“The current situation of our power plants and the continuously rising demand suggest that it would be beneficial to our grid if new capacities are built so more supply and reserves are available,” said Meralco’s Mr. Fernandez.

For MGT’s Mr. Oplas, the lack of new peaking power plants being built is also a concern. These are power plants that are generally run when there is high demand or only during peak times.

The economist explained there is little to no incentive in putting up these peaking plants as they can only sell through the Wholesale Electricity Spot Market (WESM), which has installed price caps to protect consumers from excessive price spikes.

“There should be incentives for developers of peaking plants that may be idle for nine to ten months per year, then running only for a few hours per day on hot months… Even if they charge high, say five to ten times the average WESM clearing price on certain hours, it’s still cheaper compared to having massive blackouts, or the poor buying candles (and have more fires) or the middle class and rich buying more generator sets (and have more air, noise pollution),” he said.

“When demand is high during hot months, baseload and mid-merit plants cannot deliver extra,” he explained.

Joe R. Zaldarriaga, Meralco assistant vice-president and public information office head, said the government and power plant operators should look into the causes behind these power plant outages and address them accordingly.

“It would be best to explore ways of better operating, maintaining and sustaining the various power plants and keep them running efficiently. The government should also continue identifying projects of national significance, like large power plants and transmission facilities, and help fast-track their construction and operations,” he said in an e-mail.

DELAY IN POWER SUPPLY DEALS

According to DoE’s Mr. Fuentebella, common hurdles faced by proponents in pursuing new power projects include “licensing/permitting challenges” as well as access to financial packages.

For his part, MGT’s Mr. Oplas noted the “thick, wide bureaucracies” in the local and national levels when applying for a power plant project.

“[T]he whole thing would require 359 government signatures, involving 74 agencies and bureaus, covering 43 different licenses and contracts,” Mr. Oplas explained, citing a September 2018 PowerPoint presentation of Senator Sherwin T. Gatchalian, who chaired the Senate’s energy committee in the 17th Congress.

Meralco’s Mr. Zaldarriaga said for power projects, long-term planning is crucial as the construction of a power plant, which includes the permitting process takes more than five years to achieve.

Business groups have been calling for the construction of power plants to ensure ample long-term supply of electricity. However, hampering efforts is the delay in the approval of power supply agreements (PSA), which is a bilateral agreement between a generation company and a distribution utility for the purchase and supply of power.

A PSA is typically a critical milestone for power projects as these are signed before construction of a power plant starts to reassure banks that the plant will have ready buyers for its output.

The Supreme Court (SC) ruled last month that all PSAs submitted by distribution utilities to the ERC on or after June 30, 2015, must undergo what is called a competitive selection process (CSP).

CSP requires contracts between power generation companies and distribution utilities to be subjected to price challengers, a process that is aimed at lowering electricity cost.

The decision affected seven PSA applications that were filed by Meralco that covered 3,551 MW. The contracts were signed on April 29, 2016, a day before the April 30, 2016 extended deadline set by the ERC.

The ERC promulgated CSP in November 2015 but had to restate its effectivity date to April 30, 2016 through a resolution issued in March 2016. It said the move was prompted by letter-inquiries from distribution utilities and generation companies assailing the legal implication of the CSP to existing power supply deals.

Meralco’s PSAs are with two subsidiaries of its unit Meralco Powergen Corp., which is constructing power plants under subsidiaries Atimonan One Energy, Inc., San Buenaventura Ltd. Co., and Redondo Peninsula Energy, Inc.

The Atimonan project, whose PSA was filed in 2016, consists of two ultra supercritical coal-fired power plants with a capacity of 600 MW each. It was originally expected to be completed by 2021, but has since faced several regulatory issues. The company now looks to complete the project by the fourth quarter of 2025.

Meralco also has a PSA with St. Raphael Power Generation Corp., its joint venture with Consunji-led Semirara Mining and Power Corp. Meralco is also seeking approval for PSAs with Central Luzon Premiere Power Corp., Mariveles Power Generation Corp., Panay Energy Development Corp., and Global Luzon Energy Development Corp.

The high court ruling is viewed as a mixed bag, according to the sources interviewed by BusinessWorld.

DoE’s Mr. Fuentebella said the ruling is a welcome development in the power industry.

“While ensuring transparency, competitiveness, and reasonableness of the power supply cost, it will provide an opportunity to enhance the power supply agreements between the generation companies and distribution utilities that will eventually redound to the benefits of the electricity consuming public,” Mr. Fuentebella said.

For MGT’s Mr. Oplas, it is more of a net negative as this will further delay the construction of power plants.

“It is now 2019 and [the] SC wants to backtrack CSP ruling to PSAs made four years ago? ERC and SC should focus on enforcing CSP only to new PSAs,” the economist said.

Nevertheless, Meralco has said that they will respect the SC’s decision.

“Meralco respects, honors and abides by the SC ruling on [the CSP]. Moving forward, we will conduct CSP to ensure availability of quality, stable and cost-competitive supply in the country,” Mr. Zaldarriaga said.

“Meralco PowerGen, through its subsidiaries, will also work with all the concerned parties and agencies to ensure that planned power plants progress and to have these up and running as soon as possible,” he added.

So far, there are 19 private sector-initiated power plant projects in Luzon targeted to go online between this year and 2023, data from the Energy department as of end-2018 showed. These facilities are expected to have a combined committed capacity of 4,774.8 MW.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls.

Solar para sa politika

* My column in BusinessWorld on June 18, 2019.

Among the records of the outgoing Congress is the legislation of a cronyist bill, the Solar Para sa Bayan Corp. (SPSBC) franchise. It is so unpopular that perhaps all other power developers and generation companies (gencos), both conventional and renewable energy (RE), perhaps all private distribution utilities (DUs) and electric cooperatives (ECs) in the country have opposed it.

Among the questionable, cronyist provisions of HB 8179 are the following:

One, it originally wanted a nationwide franchise in electricity distribution for unserved and underserved areas, later limited to 16 provinces plus certain cities and municipalities of Batangas and Quezon, for a total of 18 provinces. No other franchised DUs or ECs have this privilege.

Two, there is nothing significant in its power generation but it has a franchise while all other gencos including other RE developers do not have a franchise. SPSBC claims it is competitive yet it requires a Congressional franchise and a franchise by nature is a monopoly, anti-competitive.

Three, the Electric Power Industry Reform Act (EPIRA) of 2001 unbundled energy players into transmission, generation, distribution, and supply companies; SPSBC is a generation, distribution, and supply company rolled into one.

Surprisingly, the Department of Energy (DoE) and the Energy Regulatory Commission (ERC) did not raise strong opposition to the franchise bill. Perhaps the reason is that the mother of the majority owner of SPSBC is the Chairperson of the Senate Committee on Finance, which handles the budgetary appropriation of government agencies.

Four, a new insertion in the bicameral report — not in the original HB 8179 and seemingly just came out of thin air — expanded the definition of an “underserved area.” The Chairman of the Senate Committee on Energy, Senator Sherwin Gatchalian, gave an Objection Speech (June 3, 2019) to HB 8179 as amended by the Senate and argued that the bicameral report should not be ratified. His objection was based mainly on the said insertion, where underserved areas now include “where electricity services have been interrupted at least twelve (12) times in the twelve (12) months preceding the date of the determination that such area is underserved.”

Sen. Gatchalian cited two reasons why this insertion is wrong: (a) “There is no basis for the frequency of interruptions indicated in the bicameral report. Currently, the standard for the frequency of interruptions is determined by the ERC and is updated regularly… To legislate a regulatory parameter would tie the hands of the regulator…”, and (b) “there is no definition of the word ‘interruptions’ in the bicameral report… frequency interruptions are not only a function of the performance of the DU but also of power plant performance, availability of power supply, kind of power plant, and even calamities… to legislate a low and unfounded bar for an area to be considered underserved would be a disservice not only to the community but would be unfair to the franchised DU.”

The SPSBC franchise bill appealed to the gullible public because it somehow presented itself as a solar power company — and solar is cool; it helps “save the planet” while giving “cheap, reliable” power to the public.

Far out.

Even among the richest economies in the world which have wide solar farms — Germany, Italy, and Australia. among them — the contribution of solar to total electricity generation remains low. And many of our neighbors in East Asia like Hong Kong, Singapore, Indonesia, Malaysia, Vietnam, and Taiwan have zero or very small solar contribution to their power generation (see table).

The SPSBC franchise bill is a political project that favors a single newbie corporation. President Duterte should veto it. If he signs it into law, it will set a new precedent and pave the way for many other cronyist bills to be filed in the next three years. This will further weaken the EPIRA law and weaken the rule of law in the country.

Smart energy: Use more conventional sources

* This is my article in BusinessWorld on June 07, 2019.

Some good news in the world energy sector here. One, world oil prices keep falling, WTI is now only $51+ per barrel vs $62 a month ago and $75 in early October 2018. Two, the US cemented its role as the world’s largest oil producer, its output now 12.4 million barrels per day (mbpd) vs. 8.8 mbpd at the end of the Obama administration. Three, the oil-price decline is despite joint OPEC + Russia oil production cut to force higher prices. China is perhaps the world’s biggest oil consumer but it remains a mid-tier oil producer (see table 1).

President Trump and the US are winning the battle to keep world oil prices low. Saudi, the rest of OPEC and Russia are losers to force high oil prices. Russia and President Putin hate low oil-gas prices, these being their main bread and butter.

At the Jeju Forum for Peace and Prosperity 2019 conference in South Korea last May 29-31, I attended a panel discussion on “US-Korea energy cooperation.” The speakers were Melissa Simpson of the US State Department, Geoff Moody of the American Fuel and Petrochemical Manufacturers (AFPM), Prof. Shim Shangmin of the Korea National Diplomatic Academy, and Prof. Jung Yonghun of Ajou University.

Ms. Simpson explained the US government’s policy of more oil-gas production and more exports to allies like South Korea and Japan. Mr. Moody showed charts that: (a) US crude exports keep rising, (b) in 2018 the US’ top 3 export destinations for hydro-carbon gas-liquids are Japan, Mexico and South Korea, and (c) for crude oil export destinations, the top 3 are Canada, South Korea and China.

Prof. Shim explained that the South Korea government energy policy now is to shift away from nuclear and coal power and move towards renewables wind-solar. He is not very optimistic about power reliability and lower prices though. Prof. Jung emphasized the need for more US-Korea cooperation given the rising energy needs of his country.

The Friedrich Naumann Foundation for Freedom (FNF) sponsored a panel on “Smart cities” and one of its three speakers, Prof. Hwang Jie-Eun of the University of Seoul, partly mentioned the role of cheaper energy in SME tech start-ups in the Sewoon Campus project.

Here in the Philippines, three recent reports in BusinessWorld are worth noting:

1. “Luzon grid goes on six-hour yellow alert Tuesday” (June 5).

2. “Congress ratifies Solar Para sa Bayan bill” (June 5).

3. “Legislators urged to reduce Philippines’ dependence on coal-fired power plants” (June 6).

Report #1 shows that until today, we still lack sufficient power, stable and reliable power that can run 24/7 and not dependent on weather. Report #2 shows further energy cronyism via legislation while trying to expand intermittent and unstable solar power. Report #3 shows how some lobbyists spread fake news, that the Philippines has big coal power already and we need to cut or discontinue more coal power plants. Far out, see table 2.

The “smart energy” policy for the Philippines and other developing countries is to keep using conventionals — oil, gas and coal, even nuclear. With continuing rise in US oil-gas-coal production and exports, the prices of these three conventionals will further stabilize at low, competitive levels.

Energy and elections: The Philippines and Australia

* My column in BusinessWorld last May 22, 2019.

Sydney – The Philippines held its mid-terms elections last May 13, and “man-made” climate change, “more renewables” were marginal if not non-issues altogether for many of the national and local candidates. The energy issue was whether there would be any blackout because of the series of yellow and red alerts (insufficient power supply and reserves) many weeks before Election Day.

On May 18, Australia also held its federal elections, and for the Labor Party, among their big issues were climate alarmism, reducing carbon emission by 45% by 2030, and closing the Adani mine, with various surveys showing they would win. The Liberal Party campaigned for energy realism, and cheaper and stable electricity for a stronger economy. They won and PM Scott Morrison is reelected.

PM Morrison once brandished a lump of coal in parliament, saying, “This is coal – don’t be afraid!” True. There is nothing scary about coal but there is something to thank for it – because among the world’s biggest and industrialized economies are heavy coal users. The Philippines, having more coal plants recently and demonized by many anti-coal activists and climate alarmists, is actually a “midget” or small-time coal player in the world, even in Asia (see table).

Two recent reports in BusinessWorld show that the problem of power inadequacy continues and I quote portion of the reports:

1. ERC reviewing norms for allowable levels of power plant outages (May 13):

“’Those that exceeded the outage allowance under the contract should not be charged on consumers, but on the generating company that failed to deliver.’ At present, the obligation to provide replacement power depends on the provisions of the PSA between a distribution utility and a generation company.”

2. DoE may limit power contracts to 70% of plant capacity (May 16):

“’We have to encourage the plants to be well-maintained…. a 70% cap of their contracting with distribution utilities so that they can have more power available for replacement power, for power available for ancillary services and more power available in the spot market,’ said Energy Undersecretary Felix William B. Fuentebella”

Both reports 1 and 2 would tend to restrict leeway for existing gencos and power plants when the bigger issue is how to have more power capacity, more gigawatts of new, stable electricity to be added into the system, something like 1.5 GW a year or more. When there is more power available, some DUs may contract just half of their needs and get the other half from the wholesale electricity spot market (WESM), even without new DOE or ERC regulation.

Meanwhile, I am here in Sydney to attend two big events, the ALS Friedman Liberty Conference by the Australia Taxpayers Alliance, and the biennial World Taxpayers Association (WTA) conference, May 23 to 26, 2019. Energy security and more power competition is among the topics to be discussed in some panels.

Power shortage as election issue

* This is my column in BusinessWorld on May 10, 2019.

Until last week May 3, another yellow alert has been issued by the National Grid Corp. of the Philippines (NGCP) because of insufficient reserves due to the following: (a) forced outage due to earthquake of GN Power Mariveles (316 MW), (b) unplanned/forced outage of SEM Calaca U2 and Team’s Pagbilao U1 (582 MW), and (c) derated/reduced capacity of five power plants (736 MW). Total 1,634 MW unavailable, that’s big.

These yellow alerts and occasional red alerts (which require rotational blackouts) have been going on since around mid-March this year — and have become an election issue for some sectors. This week we are lucky with thick clouds daily and occasional rains, meaning power demand is low. Mid-terms election on Monday, we pray that the thick clouds will stay.

Numbers below will further illustrate how weak and unreliable the Philippines’ power sector is — which explains the recurring power shortages and, in the process, higher power prices. For instance, these three socialist economies have shockingly more power capacity per person than supposedly capitalist Philippines: Vietnam has 2x, Laos has 5x, and N. Korea has 6x (see table).

Official DoE data show that the Philippines’ installed capacity was 21.42 GW in 2016, 22.73 GW in 2017, and 23.82 GW in 2018. Nonetheless I use the CIA numbers for comparison purpose.

Four recent stories in BusinessWorld would give more contexts to this situation and I quote portions of them.

1. Power panel passes amendments to EPIRA IRR (May 3):

“THE Joint Congressional Power Commission (JCPC) on Thursday approved amendments to the implementing rules and regulations (IRR) of the Electric Power Industry Reform Act Law (EPIRA) to facilitate the granting of benefits to host communities.”

2. Invitation still open for Chinese merchant power plant builders — Energy dep’t says (May 3):

“We asked both Japan and China to help us put up a merchant plant and this is part of an MoU that we successfully signed in China.”… Aside from the China-funded coal-fired power plants, the DoE has encouraged private sector investment in… liquefied natural gas (LNG).”

3. On credit ratings upgrade and power shortage risk (May 6, opinion piece by Romeo L. Bernardo):

“Chair Devanadera’s chart shows that there are 454 Power Supply Agreements Requiring Further Action, involving 150 power plants. How long does an evaluation take and how many technical people has the Energy Regulatory Commission assigned to evaluate? Answer: 90-180 days; 14 technical personnel.

The ERC can be more faithful to market based competition principles… by moving away from detailed cost based review of every PSA… a simple validation of adherence to Competitive Selection Process rules to ensure arms length competitive contracting would be a fairly quick and straightforward alternative approach.”

4. ERC’s competitive selection rules expected in 30 days (May 7):

“…final rules on competitive selection process (CSP), a scheme that chooses the lowest-cost power for consumers… require the generation companies to shoulder the cost of unscheduled plant outages…. a template for a power supply agreement (PSA) … provision on replacement power.”

Story #1 is bordering on a risky proposal by some sectors to amend the EPIRA law of 2001. I say ‘risky’ because once EPIRA is amended, the probability of that law becoming worse — more state-control of power generation and supply vs better/market competition — becomes 75-25.

Story #2 is eliciting another anti-China communist government sentiment here. The communist bully that steals Philippines territory at the WPS/SCS is being invited by the Duterte government to build more dams, airports, telecoms, power plants, other sectors that are strategic for national security.

Opinion #3 offers good and practical proposals so that ERC should move away from a micro-managing central planner and further relax regulations, so that we should have more new and big power plants today, not three to five years from now.

Story #4 is good, CSP rule is long overdue and having a template for all PSAs is important. If power supply remains tight, the cost of replacement power will be high so ERC should further deregulate pricing by gencos. Having more new reliable power sources at WESM will remedy this.

We should stay the course of more market players and competition, less government regulations and over-bureaucratism of power supply approval and pricing.

Good news, MORE power plants coming

* This is my article in BusinessWorld last April 29, 2019.

After several power plants that experienced unplanned or forced shutdown went back online, a strong earthquake hit Central Luzon on April 22 and four power plants with combined dependable capacity of 932 MW were isolated, with the Luzon grid going back to yellow and red alerts last week.

A huge problem in the Philippines power sector is that many big power plants are old, above 20 years old, and require frequent or prolonged maintenance shutdowns or experience frequent unscheduled shutdowns (see table 1).

There were also four new plants (below 5 years old) that suffered unplanned outage: Pagbilao U3 by Team (420 MW), Limay U2 by San Miguel (150 MW), SLGPC U2 by DMCI (150 MW), and SLTEC U1 by Ayala (135 MW). And two new plants that experienced derating: Pagbilao U3 by Team (420 to 315 MW) and SLGPC U2 by DMCI (150 to 100 MW).

Now the good news: Six big coal power plants and one gas plant are expected to start commercial operation this year and next year (see table 2).

The Senate Committee on Energy held a public hearing about the Luzon grid last Friday, April 26. IEMOP presentation showed that electricity spot prices at WESM have been declining: P5,176/MWH in 2014 to P3,830 in 2015, P2,947 in 2016, P3,349 in 2017, P3,618 in 2018. That’s another good news.

And so private distribution utilities (DUs) and electric cooperatives would purchase their peak hours electricity demand from WESM and not from peaking power plants. There is also price control a.k.a. primary and secondary price caps at WESM.

One result is that no one would invest in peaking power plants. And when those unscheduled outages by old plants come, plus earthquake shaking big plants, WESM cannot produce extra power, nada.

The market-oriented reforms for efficiency (MORE) needed are to (1) encourage investment in new peaking plants aside from more baseload and mid-merit plants, and (2) revise upwards if not abolish price control and price cap at WESM. Let a peaking plant that has zero revenue for 10-11 months straight, yet has fixed operating costs, makes money on a few days in April-May, hot months with high prices. People will be willing to pay high prices for a few days in exchange for zero yellow-red alerts and they can do business regularly without fear of blackouts. This reform will also make the DUs rethink their contracting strategies to possibly include peaking power, for a more stable and reliable power supply.

Blackouts are messy, ugly and costly. The costs are several times higher than increased prices at WESM for few days and hours.

MORE power supply needed: Attention ERC

* This is my column in BusinessWorld on April 15, 2019.

After the water shortage in many areas in Metro Manila last March, next is power shortage and brownouts in many areas of Luzon including Metro Manila this month.

Yellow alerts (insufficient and thin reserves) were issued early this month due to high electricity demand and unplanned, unscheduled outages of several power plants (boiler tube leak, piping leak, boiler slagging, other causes). Red alert (insufficient supply) was issued last Friday, April 12, and many areas in Luzon including Metro Manila experienced a 1-3-hours rotating power interruption. Below are the affected power plants, their commissioned/operation years and affected days.

Note that of the 11 power plants mentioned above, seven are above 19 years old, especially the huge Sual, Pagbilao, Masinloc and Calaca coal plants, and Malaya oil plant.

Many of our big power plants are old, especially the geothermal, oil and hydro plants: 74% of these plants in the Luzon grid are 15 years or older. Which makes them more prone to UFOs.

The Market-oriented reforms for efficiency (MORE) needed are to have more new power plants, especially the conventionals. We should depoliticize the approval process of many power supply agreements or PSAs (about 5,000 MW) that are languishing at the Energy Regulatory Commission (ERC).

Last April 2, I participated in a roundtable discussion on “Challenges to the Philippines power sector” organized by the Arangkada Philippines Project (TAPP). Among the debate points was whether the Philippines has enough or insufficient generation capacity both in the short- and medium-term.

The series of yellow and red alerts early this month seems to suggest that there is indeed insufficient supply of stable power.

Attention, the following agencies and groups: (1) ERC, please hasten the approval process of new power plants’ PSAs. (2) Various agencies, please control your bureaucratism and hasten the permitting process of new power plants, DOE can use the new EVOSS law for this. And (3) environmentalist NGOs and anti-fossil fuel groups, you are barking at the wrong tree. Frequent brownouts will force the people to use the really non-clean power sources — candles for the poor and gensets for the rich and middle class. More candles means more fires while more gensets mean more air and noise pollution.

Stories of “collusion” among big power companies are comparable to the “Trump-Russia collusion” hoax and dishonesty.

MORE stable electricity and competition

* This is my article in BusinessWorld last April 3, 2019.

In a September 2017 paper, “Implementing the 10-point Socio-Economic Agenda,” the Arangkada Philippines Project (TAPP) made 22 recommendations for the power sector, among which are: (1) Support and approve the massive energy investments, (2) Increase the system reserve requirement to 25% of peak demand vs the current 17%, and (3) Formulate an energy road map (generation portfolio mix) with power supply quality, reliability and affordability as key objectives.

These are good recommendations to expand and ensure more stable power supply, more competition among more players, more consumer choices, and cheaper energy prices. Which are the main advocacies of the Market-Oriented Reforms for Efficiency (MORE) series in this column.

It is not possible to have sustained fast growth if there is no reliable, stable, 24/7 electricity in major economic centers if not nationwide. And the Philippines remains among the laggards in East Asia in terms of total electricity generation and kWh per capita. Then there is the persistent promotion plus subsidies to variable renewables solar and wind starting with the RE law of 2008 (RA 9513) but after 9 years, their combined output remains very small (see table).

The good news is that the Energy Virtual One Stop Shop (EVOSS) law has been signed as RA 11234 on March 8. This will hasten approval and permitting system in power construction and development.

In a paper, “When There’s Too Much Sun and Wind” (WSJ, March 10, 2019), Rupert Darwall (author of “Green Tyranny: Exposing the Totalitarian Roots of the Climate Industrial Complex”) argued:

“(T)he most destructive consequence of wind and solar power result(s) from periods of oversupply… Coal and gas plants have to be kept on standby and ramped up to cover the shortfall resulting from still air and darkness. That forces them to operate less efficiently and pushes their costs up. During periods of low demand, wind and solar can produce too much electricity, creating gluts and driving wholesale prices negative, meaning grid operators have to pay consumers to burn unwanted energy.”

While the Philippines is still far from having wind + solar oversupply, strong legislative and executive lobbying point to that direction.

The interest of electricity consumers — more stable electricity at cheaper/competitive price, no additional taxes and subsidies like the feed in tariff (FIT) allowance — should prevail over government, as well as the RE lobby and environmental NGO interests that oppose fossil fuel power plants which can provide stable, cheaper power.

MORE electricity supply in East Asia

* This is my column in BusinessWorld last March 22, 2019.

Continuing the Market-Oriented Reforms for Efficiency (MORE) series in this column, we tackle the importance of more electricity production in the development of Asia-Pacific economies.

On Tuesday, March 19, I attended the joint press conference of the Department of Energy (DoE), the National Power Corporation (Napocor), National Transmission Corporation (Transco), National Grid Corporation of the Philippines (NGCP), and Manila Electric Co. (Meralco) in formally announcing the Philippines hosting of two big international energy events.

First, the Association of the Electricity Supply Industry of East Asia and Western Pacific (AESIEAP) in September 2019 in Shangrila Mactan, Cebu; second, the Conference of Electric Power Supply Industry (CEPSI) at the Philippine International Convention Center (PICC) in November 2020.

During the open forum, I commented that the Philippines holding these two big energy events that are technology-neutral on energy sources is important, to contrast with the renewable energy (RE) favoritism of the Asian Development Bank’s Asia Clean Energy Forum (ACEF). The latter is an annual event glamorizing the role of wind-solar and other renewables while implicitly demonizing the role of fossil fuels in energy development in Asia. Their delegates, speakers, and sponsors fly from all over the world on fossil fuel then directly or indirectly lambast fossil fuel and talk of a “decarbonized world” via RE favoritism and cronyism.

Having a technology-neutral energy policy is important for fast economic growth and expansion of Asian economies. For instance, despite the decades-long lobby to glamorize and subsidize wind-solar and other renewables, fossil fuels provided 74% of total electricity generation in Asia-Pacific in 2017, with many countries being more than 80% fossil fuels-dependent — India, Australia, Indonesia, Malaysia, Thailand, Taiwan, etc. (see table 1).

Other AESIEAP members with low electricity generation are Cambodia, Laos, Macau, Nepal, Papua New Guinea, and Sri Lanka. Hong Kong is also a member; its reported domestic electricity production is small because mainland China supplies the rest.

High power generation coincides or correlates with high economic expansion. The numbers are shown below spanning 30 years from 1987 to 2017. High correlation is shown in some countries like S. Korea, Indonesia, Malaysia, India, Taiwan, Thailand, and Bangladesh (see table 2).

As shown in table 1, the Philippines still has small power generation despite its huge population of 108 million (two times that of S. Korea, four times that of Australia). We need more investments in the sector — in generation, transmission, distribution, and supply.

Energy efficiency as “substitute” for more power generation is not enough. If one will drive at night in many provinces, one will notice that national and provincial roads are dark and conducive to accidents, except in some city centers.

In many instances, government taxes, permits and bureaucracies, plus occasional price control (like the Wholesale Electricity Spot Market price cap), are among the hindrances to more energy development. Government should learn to step back on these.