Coal power and economic development

* This is my article in BusinessWorld on July 12, 2017.

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Cheaper and stable energy means cheaper production costs for the industrial, agricultural, and services sectors of the economy. Cheaper energy also results in increased convenience for consumers too as many activities now are impossible without stable electricity supply.

In the modern history of Asian economies’ rapid growth, the use of coal power is an important contributor for their economic expansion.

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These numbers show three important things:

(1) Countries that have high and fast coal consumption are also those that experienced faster economic expansion (at least three times expansion of GDP size). Most especially China, India, South Korea, Indonesia, Vietnam, Malaysia, and Philippines.

(2) Countries with declining coal use are also those with slow economic expansion (below three times expansion of GDP size). Most notable are the US, Russia, Germany, and UK.

(3) Philippines’ coal use is actually small compared to its neighbors; its 2016 use is just nearly 1/2 of Malaysia and Vietnam’s consumption, just 1/3 of Taiwan’s and almost 1/5 of Indonesia’s. South Korea, Japan, India, and China’s consumption are many times bigger than the Philippines’.

Recently, groups have suddenly scored seven coal power plants that entered into power supply agreements (PSA) with Meralco last year. These coal projects are (1) Atimonan One Energy (A1E) 1,200 MW, (2) Global Luzon (GLEDC) 600 MW, (3) Central Luzon Premiere (CLPPC) 528 MW, (4) Mariveles Power (MPGC) 528 MW, (5) St. Raphael Power (SRPGC) 400 MW, (6) Redondo Peninsula (RPE) 225 MW, and (7) Panay Energy (PEDC) 70 MW.

This covers a total of 3,550 MW of stable and affordable energy that can lead to cheaper and reliable electricity supply for more than 20 million people in Metro Manila, Bulacan, Rizal, Cavite, Laguna, and parts of Batangas and Quezon provinces.

These groups — Center for Energy, Ecology, and Development (CEED), Philippine Movement for Climate Justice (PMCJ), Sanlakas, Freedom from Debt Coalition (FDC), Koalisyong Pabahay ng Pilipinas (KPP), Power for People (P4P) member organizations, others — argue that coal plants are detrimental for the people’s health and livelihood as well as bad for the environment.

They are wrong.

What is bad for the people’s health and livelihood are more candles and noisy gensets running on diesel when there are frequent brownouts coming from intermittent, unreliable renewables like solar and wind. Candles are among the major causes of fires in houses and communities.

What is bad for people’s health and security are dark streets at night that contribute to more road accidents, more street robberies, abduction and rapes, murders and other crimes. Many LGUs reduce costs of street lighting when electricity prices are high (ever-rising feed-in-tariff or FiT for renewables, more expensive oil peaking plants are used during peak hours, etc.). Expensive and unstable electricity can kill people today, not 100 years from now.

Seeking to disenfranchise some 3,550 MW of stable and cheaper energy supply from seven coal plants is suspicious. There are no big hydro, geothermal, and biomass plants coming in. Wind and solar are limited by their intermittent nature, have low capacity factors, high capital expenditures, and often are located far away from the main grid. The only beneficiaries of disenfranchising big capacity coal plants then would be the owners of new natural gas plants.

Are natural gas cheaper than coal power? From the recent experience of Mindanao where many big coal plants were commissioned almost simultaneously, the answer seems to be No. The generation price in Mindanao has gone down to below P3/kWh, on certain days even below P2.50/kWh. Which means coal power has big leeway for lower price if competition becomes tighter. This cannot be said of natural gas plants here.

Consumer groups and NGOs should bat for cheaper, stable electricity. If they fight for something else like intermittent and expensive renewables, or more expensive gas plants, then they abdicate their role as representatives of consumer interests. Pathetic.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a Fellow of SEANET, both are members of Economic Freedom Network (EFN) Asia.

Cheap oil, natural gas and coal prices

Last Saturday, a $35 a barrel oil at West Texas Intermediate (WTI) was breached. Airlines and shipping lines’ fares should go down, more tourism. More farm mechanization, more cows and carabaos will be spared of heavy farm work.

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http://oil-price.net/

Some oil products other than WTI and Brent are actually cheaper than these. Like Western Canada, Iraq heavy, etc.

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Source: http://www.bloomberg.com/news/articles/2015-12-14/never-mind-35-the-world-s-cheapest-oil-is-already-close-to-20

The anti-fossil fuel planet saviours

Many of the tens of thousands of planet saviours and climate hangers who went to the UNFCCC COP 21 meeting in Paris who hate fossil fuel may be shivering with this development. They want the world to cut petroleum use while they do their frequent jet-setting global meetings and junkets on airplanes that fly and cars that run on petroleum.

They will dislike that there will be more trucks, more buses, more cars, more planes, more ships that move more people and goods across cities, islands, countries and continents, as oil prices keep falling.

The animal rights activists should welcome this development too. Millions of cows, carabaos, horses, other big animals will be spared of heavy and punishing farm work as it is cheaper and faster to use more tractors and machines than those animals.

OPEC now a price taker, not price dictator

The old, tested greed by OPEC member-governments have been shattered by heavy competition from shale gas/oil drillers and producers in the US, Canada, etc. Before, whenever oil prices fall down, OPEC would quickly cut their output from 30 M barrels per day (bpd) to around 29 M bpd. Now they cannot and will not do that. They are forced to keep producing at 30-31 M bpd, accept low prices and lower revenues, just to keep their market share.

The rest of us, oil consumers around the world, benefit from this global competition among oil and gas producers. In the Philippines, the minor Peso/$ depreciation contributed to small price rollback. Besides, the $35 per barrel is for 1 or 2 months delivery, meaning by January or February 2016, not December 2015.

Peak Oil theory is discredited

Peak oil, along with peak food and Malthusian hypothesis, climate alarmism, discredited. The short- and medium-term scenario is that world oil prices will hover between $40-$60, still low compared to 2012-2013 levels of nearly $100. And lower than the past decade’s prices.

We are in a period of cheaper energy, cheaper food, longer lifespan, healthier people. The problem of many economies now is more fat/obese people than thin and undernourished people. When people die at 50 or 60 yrs old, some would say, “he/she died young”. In 1900, when a person dies at 40 or 50 yrs old, that’s “long” already because life expectancy was only around 33 years.

So few decades from now, if a person dies at 70-80 yrs old, other people will say, “he/she died young.” Why, because average life expectancy then will be at around 100, 110 yrs old.

Regulated fares and the LTFRB

But why despite oil and fuel prices going down, public vehicles in the Philippines do not automatically bring down their fares?  When fuel prices go up, PUV operators and drivers ask for a fare hike again.

The Land Transport Franchising Regulatory Board (LTFRB) of the DOTC is a jerk government agency. MARINA (regulator for shipping companies and operators) and CAB (regulator for airlines) allow fare deregulation. So airlines’ fares can go up or down depending on the travel season. The LTFRB officials, past and present, are among the hard-core central planning bureaucrats. No fares can go up or down unless they give permits, unless they affix their signatures.

Not only world oil prices, natural gas prices are also falling, chart over the last 7 1/2 years. More energy at cheaper price, more prosperity.

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http://www.infomine.com/investment/metal-prices/natural-gas/all/

And world coal prices too. Since the Paris climate agreement is non-binding, no penalties for countries that do not obey their promised emission cuts, then more developing countries like India, China, Indonesia, Philippines, Brazil, etc. will be using this energy source to further empower their economy. Rich countries too like Japan and the US. Prices chart over the last 14 years.

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http://www.infomine.com/investment/metal-prices/coal/all/

Global capitalist competition will spring us more surprises, for the better. There are lots of shale gas/oil rigs that have been temporarily closed because of low prices. But there are lots more shale oil and gas deposits around. More global prosperity is the game.

Deflation

Yes, cheap energy prices can contribute to deflation or declining overall prices of commodities and services. But it will be a good type of deflation. More output per unit of input. In this case, more oil, more natural gas, per rig.

There is a distinction between good and bad deflation. The good is productivity-driven (cheap oil, cheaper mobile phones and flat tv, cheaper food and shoes, etc.). The bad deflation is due to poor economic outlook in the future (people seldom spend even if they have the money).

There is little role for governments in this type of deflation, and they should not intervene more, like imposing higher petroleum taxes. The WB and IMF have been lobbying for this tax hike for sometime now. They believe that petroleum being a “public bad” should be taxed more. Nehh? Those WB, IMF, UN, other multilaterals’ officials and bureaucrats love to jet-set and travel a lot, on petroleum-powered planes and SUVs, meaning it is useful for them, then declare petroleum as a “public bad”?

Malaysia and Singapore at night and nat gas power

I was in Kuala Lumpur, Malaysia, last Sunday-Tuesday, for the IPRI 2015 launching + other visits arranged by IDEAS and SEANET. It was my second visit in KL this year, I was there last April for another SEANET event.

My 5+pm return MAS flight to Manila (arrival should have been 9:20pm) on Tuesday was cancelled, should be due to additional APEC security measures in Manila. I needed to go back home, so IDEAS got a new ticket for me, KL-SG-Mla via SG Air. Left KL Tuesday at 9:45pm, left SG at 12:20am, Manila by 4:30am.

So, I was able to see KL and suburbs at night from the air as I took the window seat. Again, like what I saw in Thailand last month when I arrived Bangkok at midnight (see Thailand’s bright nights and nat gas power), Malaysia has a wide, huge area of well-lighted roads, houses and buildings.

This photo I got from the web, not from my camera. It shows KL center and suburbs. The dark areas are the many urban forest in KL.

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The bright and well-lighted areas go beyond KL and suburbs. Stretched to other urban centers further down, to Johor and other cities bordering with Singapore.

Below, Singapore at night; again, this photo I got from the web, not from my camera. It simply captures the well-lighted city-state, from the shorelines to other sides.

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OLYMPUS DIGITAL CAMERA

I am glad that like Thailand, Malaysia and Singapore do not believe in mandatory switch to unreliable, intermittent wind and solar power made “cheaper” only because of various subsidies. They rely on the old, dependable coal and  natural gas, for their electricity needs.

In 2012, these countries and economies were dependent on the following energy sources:

Thailand: 20% coal + 70.3% nat gas + 1.5% oil = 91.8% fossil fuel.
Malaysia: 41.5% coal + 46.6% nat gas + 4.5% oil = 92.6% fossil fuel.
Singapore: 84.3% nat gas + 13% oil = 95.3% fossil fuel.

Indonesia: 48.7% coal + 23.2% nat gas + 16.7% oil = 88.6% fossil fuel.
Vietnam: 17.9% coal + 35.8% nat gas + 2.7% oil = 56.4% fossil fuel.
Philippines: 38.8% coal + 26.9% nat gas + 5.8% oil = 71.5% fossil fuel.

Hong Kong: 70.3% coal + 27.3% nat gas + 2.1% oil = 99.7% fossil fuel.
S. Korea: 44.8% coal + 20.9% nat gas + 4.0% oil = 69.7% fossil fuel.
China: 75.8% coal + 1.8% nat gas and oil = 77.6% fossil fuel.

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Source: ADB, Key Indicators for Asia and the Pacific 2015, Table 6.1

So when people say they dislike or hate fossil fuels yet also dislike or hate frequent brownouts and expensive electricity, they proudly and openly exhibit their hypocrisy and double talk.

In one fb thread of a friend, he commented that during the APEC meetings, US President Obama posed climate change (CC) as a challenge that government and business leaders must take action.

I commented that the main reason why we have electricity in M.Manila for the APEC and similar events, the reason why many people can do fb and attack “man-made” CC, is because of those power plants that run on fossil fuels.  Frequent brownouts and candles are NOT nice to “save the planet.” Watch more fires because of more candles. Watch more crimes and road accidents because of dark streets.

There are many people who advocate or support the “anti-fossil fuel movement.” We can assume that they have no car or motorcycle, that they do not take a jeepney or taxi or bus, does not ride an airplane — ALL of these run on fossil fuel.

The anti-fossil fuel movement is notorious for hypocrisy and double talk. The Paris meeting in less than two weeks will have thousands of petroleum-bashing planet saviours who reach Paris via fossil fuel-fed planes and cars.

CC is natural, it is nature-made, not man-made. It is cyclical, warming-cooling-warming-cooling, endless cycle, not “unprecedented”. CC is true, it happened in the past even if humans did not even ride a bicycle or invented shoes. It is happening now, and it will happen in the future.

As I told my friend in the past, climate alarmis, ss(“it is man-made, period!”) will never be interested in dialogues or even debates. The big ones and leaders are interested only in climate money, something like $100B a year, or $500B a year, or $5 trillion a year, take your pick. The non-big ones are interested only in spreading alarmism.

The Pope, ahh, when he came to Manila, his plane was using water, or it was being towed by hundreds of witches on flying brooms or carpets.