Rising feed in tariff (FIT) due to more wind-solar power

* This is my article in BusinessWorld last January 24, 2017.

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Cheaper electricity and stable energy supply are among the important components to have fast and sustainable economic growth.

On Jan. 17, the Philippine Electricity Market Corp. (PEMC) sent a press release saying that “effective settlement spot prices (ESSPs) in the wholesale electricity spot market (WESM) plunged to P2.28/kWH for the December 2016 billing period which is the lowest since January 2011. ESSPs refer to the average prices paid by wholesale customers for energy purchased from the spot market.” That is good news as various players using fossil fuel sources like coal, natural gas, and oil, are fiercely competing with each other in generating electricity. WESM was created by EPIRA of 2001.

On the same day, the Department of Energy (DoE) posted a “Request for comments on the draft Department Circular entitled ‘Declaring the launch of WESM in Mindanao’ (on Jan. 26, 2016) and providing for transition arrangements.” Another good news because finally, there will be a formal spot market for power producers and electric cooperatives that will guide a competitive and deregulated market, benefitting the consumers.

Last Dec. 23, 2016, the Energy Regulatory Commission (ERC) posted a request for public comments until Dec. 30 regarding the petition of three wind developers — Trans-Asia Renewable Energy Corporation (TAREC), Alternergy Wind One Corporation (AWOC), and Petrowind Energy, Inc. (PWEI) — that their feed in tariff (FiT) or guaranteed price for 20 years of P7.40/kWh be raised to P7.93/kWh, citing various cost escalations. That was bad news because expensive electricity is never a virtue. I sent a letter to ERC Commissioner Salazar arguing that they say No to the petition.

And last Dec. 6, 2016, the ERC published in a newspaper a National Transmission Corp. (TransCo) petition asking for a FiT allowance (FiT-All) of 22.91 centavos/kWh starting January 2017. That’s also bad news because FiT payments by consumers keep rising fast. From an introductory price of only 4 centavos/kWh in 2015, became 12.40 centavos/kWh in 2016, and almost 23 centavos/kWh this year.

Now two factors will raise the FiT-All for 2017 beyond 23 centavos. (1) ERC will not be able to act on this by January or not even February 2017, that means there will be price underrecoveries that must be added to the original requested price. And (2) with low WESM prices the past few months — P3.19/kWh last September, P2.91/kWh last October, P2.54/kWh last November (data from Meralco), and the P2.28/kWh ESSP last December — this means that FiT-All will go up. This allowance is the difference between FiT rates (highest prices are solar of P10+/kWh this year due to price escalation, followed by wind, then biomass, cheapest is run of river hydro) and average WESM prices. Or FiT-ALL = FiT rates — WESM prices

Expensive electricity is the hallmark of renewable energy favoritism anywhere in the world.

Understand that in my previous columns, it was shown that the main beneficiaries of expensive electricity from renewables in the Philippines are not ordinary firms but huge companies: the Lopez group (EDC Burgos wind) and Ayala group (Northern Luzon UPC Caparispisan wind, and Northwind Bangui) who got P8.53/kWh FiT and combined revenues of about P4.3 billion in 2015 alone.

Let us check Germany’s renewables output. The chart below is for the last three months, Oct. 23, 2016 to Jan. 22, 2017.

Last Jan. 8, its total electricity consumption was 57.4 GW and here are the renewables output that day: solar 0.23 GW, onshore wind 1.53 GW, and offshore wind 0.39, or a total output of only 2.15 GW from these three renewables (see chart).

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A total of only 2.1 GW was generated by solar-wind sources or only 3.7% of 57.4 GW power demand. If Germany relied solely on wind-solar, that would have meant massive, large-scale, and catastrophic blackouts. Germany of course was saved by the power plants that it wants to banish someday — fossil fuel sources like coal and natural gas plus nuke power, within Germany and from energy imports from its European neighbors — and which it kept running. So we did not hear or read such massive blackouts in Europe’s biggest economy.

Aside from expensive direct cost of wind and solar in Germany due to FiT, there is additional indirect cost of higher transmission cost. From a news report, “The Energiewende is running up against its limits” last Oct. 21, 2016 (http://energypost.eu/energiewende-running-limits/)

“German transmission system operator Tennet recently announced an 80% increase in its transmission fees because of the high construction costs of new power lines to accommodate renewable energy. A study of the Düsseldorf Institute for Competition Economics found that by 2025 costs of the Energiewende could exceed €25,000 for an average four-person household.”

The Joint Congressional Power Commission should consider introducing a law in the future that will abolish the RE Act of 2008 (RA 9513). Penalizing the energy consumers to further enrich the favored and crony firms in renewable energy is wrong.

Top 10 energy news of 2016

* This is my article in BusinessWorld last January 6, 2017.

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Here is my list of 5 international and 5 national or Philippine important energy issues last year.

INTERNATIONAL

  1. Donald Trump and his energy policies.

US president-elect Donald Trump’s energy policies are summarized in his major campaign platform, “Seven actions to protect American workers” and these include:

“FIFTH, I will lift the restrictions on the production of $50 trillion dollars’ worth of job-producing American energy reserves, including shale, oil, natural gas and clean coal… SEVENTH, cancel billions in payments to UN climate change programs and use the money to fix America’s water and environmental infrastructure.”

So far some of Mr. Trump’s Cabinet Secretaries are his fellow skeptics of the anthropogenic or “man-made” climate change claim (climate change is largely cyclical and natural or “nature-made”), or simply pro-oil. These include: (a) Environmental Protection Agency (EPA) head is Scott Pruitt, former attorney general of Oklahoma; (b) DoE Secretary is former Texas Governor Rick Perry who is pro-drilling; and (c) Secretary of State is Rex Tillerson, CEO of the oil giant Exxon Mobil Corp.

  1. OPEC cut on oil production.

For eight years, OPEC never cut its oil production despite declining oil prices to protect its global market share under intense pressure from huge shale oil supply from the US. In November 2016, OPEC finally blinked and decided to cut their collective oil output by 1.2 million barrels per day (mbpd) hoping for an increase in oil prices. Non-OPEC countries like Russia and Mexico made an agreement with OPEC to cut output by another 0.56 mbpd, for a total projected output cutback of about 1.8 mbpd. So far, price impact was marginal as oil prices before this OPEC decision was already touching $50 a barrel. But once US shale oil output ramps up, this marginal price increase can easily be reversed.

  1. More wind-solar means more expensive electricity in selected countries in Europe.

The numbers below show that countries with expensive electricity (1-5) have zero or little nuclear power, have high wind power (except Belgium and Italy), and high solar capacity (except Spain). And cheaper electricity countries (6-10) have high nuclear power (except UK and Netherlands) and low wind (except Sweden), low solar capacity (see Table 1).

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  1. By 2040, 46% of global energy demand will come from Asia Pacific.

Based on a recent report by Exxon Mobil which grabbed global energy headlines, it said that it expects China, India, and the rest of Asia Pacific (including Japan, ASEAN, and Australia) will increase its global share of total energy demand from 234 quadrillion British thermal units (BTUS) in 2015 to 322 quadrillion BTUs by 2040. The percentage share of the region will rise from 41% of global demand in 2015 to 46% by 2040. In contrast, the share of EU and the US combined will shrink from 28% in 2015 to only 22% by 2040 (see Table 2).

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  1. By 2040, wind, solar, biomass, other renewables will contribute only 11% of total global power generation.

Coal will remain the dominant source in power generation worldwide by 2040 but its share will decline from 44% in 2015 to 34% by 2040. The share of natural gas and nuclear power combined will increase from 38% in 2015 to 45% by 2040. The share of wind, solar, geothermal and other renewables will marginally increase from 6% in 2015 to 11% by 2040, despite all the political noise worldwide that these renewables will get “cheaper than coal” and attain “grid parity” with conventional sources like coal and natural gas.

PHILIPPINES

  1. Search for an Independent Market Operator (IMO) of WESM.

In the last Congress, then Sen. Serge Osmeña, Chairman of the Senate Committee on Energy conducted a series of meetings until January 2016 about the absence of an IMO that is supposed to manage the Wholesale Electricity Spot Market (WESM). The Philippine Electricity Market Corporation (PEMC) as market operator of WESM remains weird because (a) PEMC Board is chaired by the DoE Secretary, many board members are government officials; (b) Even the supposed four independent directors plus consumer representative (5 total) are all appointed by the DoE Secretary; and (c) PEMC is regulated by the Energy Regulatory Commission (ERC), which is under the administrative control of the DoE Secretary, who chairs the PEMC that is regulated by ERC.

  1. WESM Mindanao, IMEM.

Aside from issues on the new Market Management System (MMS) for WESM rules and the transition to a real IMO, the move to create a WESM in Mindanao via the Interim Mindanao Electricity Market (IMEM) is gaining ground. The Mindanao dispatch protocol will have to be spelled out in detail too.

  1. Imposition of Renewable Portfolio Standards (RPS).

In June 2016, the DoE issued a draft Department Circular (DC) on RPS, a provision in the RE Act of 2008 (RA 9513) that “requires electricity suppliers to source an agreed portion of their energy supply from eligible RE resources.” This RPS will result in more expensive electricity because wind, solar, biomass, and small hydro that are not given feed in tariff (FiT) privilege of guaranteed price for 20 years can demand higher price for their energy output because distribution utilities will have zero choice but buy from them otherwise the DoE will penalize them.

The draft DC wanted an initial “2.15% to be applied to the total supply portfolio of the Mandated Participant in each grid.” When asked what will be the projected price implication of such policy, DoE and National Renewable Energy Board (NREB) officials answered that no study on price implications has been made yet. A weird proposal where proponents have no clear idea on the cost of implementation to energy consumers, the DC was shelved.

  1. Shift in energy mix from energy source to system capability.

During the administration of DoE Secretaries Petilla and Monsada, the DoE wanted an energy mix based on energy source or technology, 30-30-30-10 for coal-natural gas-RE-oil, respectively. This is highly distortionary because many REs are either seasonal (hydro can be baseload only during the rainy season, biomass can be baseload only if feedstock is available) or intermittent like wind and solar. New DoE Secretary Cusi changed the energy mix based on system capability: 70-20-10 for base load-mid merit-peaking plants, respectively. This is a more rational mixture.

  1. Endless demand for expanded, higher feed in tariff (FiT).

As more solar farms and wind farms are constructed nationwide, their developers and owners are lobbying hard for an expanded FiT 2 with guaranteed price for 20 years. Even geothermal developers also lobbied that their new plants should also be given FiT. Currently, three wind developers — Trans-Asia Renewable Energy Corporation (TAREC), Alternergy Wind One Corporation (AWOC), and Petrowind Energy, Inc. (PWEI) are petitioning the ERC that their FiT rate be raised from P7.40/kWh to P7.93/kWh. Three wind farms were lucky or favored to get P8.53/kWh under the original FiT — EDC Burgos (Lopez group), Northern Luzon UPC Caparispisan (Ayala group) and Northwind Power Bangui (partly Ayala).

Europe’s rising electricity prices as more wind and solar are added into the grid

More wind and solar plants, more expensive electricity. This is shown in Europe (this graph), shown in the PH. Feed in tariff (FIT) rates will rise from 4 centavos/kWh in 2015, 12.40 centavos in 2016, to 23-25 centavos/kWh this year.

europeelectricprice

Source: http://euanmearns.com/green-mythology-and-the-high-price-of-european-electricity/

Another data from Euan Mearns. Left chart is for industrial customers, right chart for household/residential customers.

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Source: http://euanmearns.com/energy-prices-in-europe/

A friend commented that “We should treat the subsidies as state support to explore alternative energy sources.”

It is not “state support” but “consumers support”. The state, the DOE or Malacanang or Congress have no money of their own. It is ultimately the consumers who pay for more expensive electricity, including those who (a) do not support more subsidies to REs in Luzon-Visayas, and (b) consumers in Mindanao who are not even members/part of WESM because Mindanao grid is not yet connected to Luzon-Visayas grids.

Imagine if only Luzon-Visayas consumers pay for FIT here, the price would have been about 18 centavos/kWh last year and could be 28 centavos/kWh this year. Remember also that these are just “intro prices”, first 3 years of FIT implementation with 17 more years for existing RE plants and with with RE plants added to the grid plus FIT price escalation, expect 30, 50 centavos/kWh or more in the coming years, FIT alone. Eh current WESM prices are only about P2.80/kWh, why do we pay P9+, P10+/kWh for wind and solar? Fluctuating pa every minute, every second.

Look at Europe again, the charts above. They have the longest system of subsidies for renewables, perhaps for the past 20 or 30 years. RE prices coming down? No, the opposite happens, (a) prices keep rising, and (b) grid instability rising, they are talking of blackouts soon in UK, Germany, Denmark, etc. because of more wind and solar added to the grid.

Meanwhile, more news reports about RE in Europe.

(1) “The cost of the botched renewable heat incentive (RHI) scheme to the Northern Ireland taxpayer will be £490m.” http://www.bbc.com/news/uk-northern-ireland-38414486

(2) “The way the Renewable Heat Incentive (RHI) scheme was set up in Northern Ireland meant the subsidies offered were greater than the cost of the fuel.[The scheme was run by offering £1.40 for every £1 spent on heating.]” http://www.thegwpf.com/renewable-energy-scandal-rocks-britain/

Many “more RE to save the planet” advocates say that REs like wind and solar are attaining “grid parity” and getting cheaper, more competitive. If this is true, subsidies can be cut or removed but when subsidies are cut, those REs shrink. No subsidies, cheaper electricity for consumers mean these REs will die. Case of UK.

(3) “The U.K.’s renewable and low-carbon energy sector shrank by 8.7 percent last year, partly because of cuts to subsidies. The sector, from wind farms to electric vehicles, turned over 42.2 billion pounds ($52.5 billion) in 2015, provisional figures by the Office for National Statistics showed on Friday. That’s lower than the 46.2 billion pound recorded in 2014.”

https://www.bloomberg.com/news/articles/2016-12-16/u-k-clean-energy-sector-shrinks-after-government-subsidy-cuts

Energy rationing, like food rationing, toilet paper rationing in socialist economies. May soon happen in industrial and former imperial power UK. And the “planet saviours” will jump with joy?

(4) “The British Infrastructure Group, led by former Conservative minister Grant Shapps, warned lights could go out across the country next winter because there is not enough spare capacity in the system to cope with higher demand. There is just 0.1 per cent spare electricity in the current system, a dangerously small amount of headroom in case of emergencies over the winter months, the report warned.”

http://www.telegraph.co.uk/news/2016/12/19/electricity-bills-set-rise-30-year-power-rationed-amid-shortage/

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Trump transition team questions for US DOE

This is not directly related to energy issues in Asia but US climate and energy policies can reverberate strongly in Asia and other continents/countries. Hence, I am reposting this article by Willis Eschenbach, The DOE vs. Ugly Reality last December 10, 2016, about the 74 questions sent by Mr. Trump’s transition team to the current DOE leadership.

I think those question are frank and highly sensible. But there are many news reports attacking the letter and questions, saying they infringe on DOE scientists’ independence, etc., and they cite only a few of those 74 questions. Good work there, Willis, thank you
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usdoe1Questions for DOE

This memo, as you might expect, is replete with acronyms. “DOE” is the Department of Energy. Here are the memo questions and my comments.

  1. Can you provide a list of all boards, councils, commissions, working groups, and FACAs [Federal Advisory Committees] currently active at the Department? For each, can you please provide members, meeting schedules, and authority (statutory or otherwise) under which they were created?

If I were at DOE, this first question would indeed set MY hair on fire. The easiest way to get rid of something is to show that it was not properly established … boom, it’s gone. As a businessman myself, this question shows me that the incoming people know their business, and that the first order of business is to jettison the useless lumber.

  1. Can you provide a complete list of ARPA-E’s projects?

Critical information for an incoming team.

3 Can you provide a list of the Loan Program Office’s outstanding loans, including the parties responsible for paying the loan back, term of the loan, and objective of the loan?

4 Can you provide a list of applications for loans the LPO has received and the status of those applications?

5 Can you provide a full accounting of DOE liabilities associated with any loan or loan guarantee programs?

6 The Department recently announced the issuance of $4.5 billion in loan guarantees for electric vehicles (and perhaps associated infrastructure). Can you provide a status on this effort?

Oh, man, they are going for the jugular. Loan Program Office? If there is any place that the flies would gather, it’s around the honey … it’s good to see that they are looking at loan guarantees for electric vehicles, a $4.5 billion dollar boondoggle that the government should NOT be in. I call that program the “Elon Musk Retirement Fund”.

Folks, for $4.5 billion dollars, we could provide clean water to almost half a million villages around the world … or we could put it into Elon Musk’s bank account or the account of some other electric vehicle manufacturer. I know which one I’d vote for … and I am equally sure which one the poor of the world would prefer.

7 What is the goal of the grid modernization effort? Is there some terminal point to this effort? Is its genesis statutory or something else?

Asking the right questions about vague programs …

8 Who “owns” the Mission Innovation and Clean Energy Ministerial efforts within the Department?
Continue reading

The PEMC-NGCP Electricity Summit 2016, low ESSPs last October, high FIT-All next year

The annual Electricity Summit jointly organized by the Philippine Electricity Market Corporation (PEMC) and the National Grid Corporation of the Philippines (NGCP) will be held next week in Davao City, the home of President Duterte. PEMC is the market operator, the Wholesale Electricity Spot Market (WESM) while NGCP is the system operator.

I attended theElectricity Summit 2015 held at the Crowne Plaza in Ortigas. Compared to most conferences that I attend, it was an odd or weird one. The organizers and speakers are the energy regulators (DOE, ERC), market operator and system operator, and the audience are the regulated market players. So during the open forum, I think the audience were  hesitant to ask critical questions and comments to the guys who regulate them and operate the system for them. I think I stood 2 or 3 times to ask questions because the huge conference hall has a generally friendly atmosphere to the organizers.

The program this year is a bit different mainly because (1) EPDP is involved, an independent institute, (2) there are speakers from the WB and ADB, and (3) the President is a keynote speaker. Last year, among the key speakers were from (1) the ASEAN Power Grid, (2) the International Energy Agency (IEA), and (3) Mr. MacDonald, the Australian consultant who justified the PEMC structure of many government representatives in the board and still call it an “independent” agency. Provisional program of Summit 2016 as of November 17.

el-summit

I have heard the presentations by Majah, Laarni and Geoffrey at the recent PH Economic Society (PES) conference last November 8. The WB and ADB guys will likely be talking about “more renewables please to save the planet” and indirectly say “we offer pretty climate and energy loans to save the planet.” 🙂

What will be new there will be the proposed electricity market and transmission connection for Mindanao. Will the session also tackle the privatization of huge hydro power plants in Mindanao, the Agus-Pulangi plants, others? I doubt it. These plants are still under another government corporation, the Power Sector Assets and Liabilities Management Corp. (PSALM).

Registration is P15,000 per head, not cheap. People from Metro Manila, Visayas must also fly to Davao and get a hotel room for a night or two.

Meanwhile, PEMC sent me their latest press release with a good news: the Effective Settlement Spot Prices (ESSPs) in WESM further fell from PhP2.86/kWH in September to PhP2.48/kWH in October 2016 billing period. Good news, indeed. ESSPs are average prices paid by wholesale customers for energy purchased from WESM. Meralco has been getting more of their power supply from WESM over the past two or three months, something like 15-20% of their power supply. Mura eh, good decision.

Supply – demand dynamics. Higher supply, more competition among gencos, lower prices. Limited supply while demand remains high, higher prices.

This is the power generation mix for October 2016 in the Luzon-Visayas grids, PEMC data. Will the planet saviours who keep insisting on “more wind-solar please to save the planet” be happy with frequent, long hours of blackouts daily, more candles and noisy gensets 365 days a year? Solar + wind can only supply 2.3% of the total electricity need in Luzon-Visayas grids including Metro Manila.

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Meanwhile, PEMC will not report that there is a bad news to low ESSPs — that the FIT-All (feed in tariff allowance) will naturally rise big time next year.

FIT-All = (Total FIT collections by the renewables firms) – (collections from WESM)

So, since the collections from WESM are low because of low ESSPs while the total FIT collections will be high as more solar-wind are added to the grid with their expensive guaranteed price (for 20 years, mind you), FIT-All will naturally rise. From 4 centavos/kWh in 2015 to 12.40 centavos/kWh this year, to about 20 centavos/kWh in 2017?

If we combine these: (a) FIT under-recoveries in 2015 because of the low FIT-All of 4 centavos + (b) FIT under-recoveries in 2016 because of low ESSPs and insufficient 12.40 centavos + (c) more expensive solar-wind power added to the grid, the resulting FIT-All by 2017 will be high.

The FIT administrator is another government firm that owns the country’s grid system and assets, the National Transmission Corporation (Transco). I do not know yet how much Transco has petitioned the ERC for the FIT-All next year.

Again, my bottomline: government interventions in setting the energy mix, in setting fixed and guaranteed pricing for the variable renewables (solar, wind, biomass, run-of-river or small hydro), in granting mandatory dispatch for these renewables, are all wrong. They can lead to more expensive electricity, more unstable supply and “brownouts-friendly” electricity

Climate action and Asian energy realities

* This is my article in BusinessWorld last Friday.

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Planet Earth is estimated by geologists and other scientists to be 4.6 billion years old. In that period, the world has experienced a series of warming-cooling-warming-cooling cycles. So global warming and climate change (CC) have been there as natural (i.e., nature-made) and cyclical events. See dozens of paleo-climate data and charts that date back to thousands, millions and billions of years ago here: https://wattsupwiththat.com/paleoclimate/.

Yet for decades now, we have been bombarded by the United Nations and other institutions and individuals who deny nature-made climate change and climate cycle, deny that global cooling can take place after a global warming phase. Owing to such denials, anthropogenic or “man-made” climate change can only be fought via man-made and UN-directed solutions like large-scale and endless subsidies to intermittent renewable sources.

Such is the dominant global belief and being formalized during the annual UN Framework Convention on Climate Change (UNFCCC), like the Conference of Parties (COP) 22 meeting in Marrakech, Morocco from Nov. 7 to 18 this year.

The goal of the 160+ intended nationally determined contributions (INDCs) is to “hold the average global temperature rise below 2 ºC and 1.5 ºC above pre-industrial levels.” (source: UNFCCC, “Aggregate effect of the intended nationally determined contributions: an update Synthesis report by the secretariat,” May 2016)

It is another confused document from the UN.

For instance in Figure 14, p.64, the “Key climate hazards identified in the adaptation component of the communicated intended nationally determined contributions” are the following, in order of “hazards.”

Top 5: Floods, Droughts, Higher temperatures, Sea level rise, Storms.

Next 5: Decreased precipitation, Changes in precipitation timing, Vector/water-borne diseases, Increased precipitation intensity, Desertification/land degradation.

In short, the climate “hazards” for the planet according to the UN are more floods, less floods, and no flood; more rains, less rains and no rain; more storms, less storms and no storm. So regardless of the weather and climate, we should send more money to the UN and various government climate bureaucracies, give them more power, more global climate travels and meetings. And they will demonize fossil fuels like coal and oil to “save the planet.”

Such scenarios and proposals are very detached from the realities and needs of many countries, developed and developing alike.

Here are the data from the Asian Development Bank (ADB) released only two weeks ago (see table).

o4big_111716

Almost all of the big and developed economies in the region have high reliance on coal and/or natural gas, among the most prominent fossil fuels in the planet. The Philippines in particular has low national electricity production compared to many of its neighbors in north and south east Asia, only 75 billion kWh in 2013. The country also has a very low per capita electricity production of only 690 kWh/person.

Over the past two weeks, I have attended several conferences and meetings and the subject of “expensive electricity” and “insufficient supply of power” would crop up naturally even if the events are not specifically focused on energy.

These events include the DTI’s pre-summit consultation on FTAs and manufacturing industries last Nov. 3, pre-summit consultation on innovation and competitive industries last Nov. 4. One participant said that while garments are labor-intensive, textiles are energy-intensive and they can feel the pinch of high electricity prices.

Meanwhile, during the Philippine Economic Society (PES) annual conference at Novotel Cubao last Nov. 8, the two sessions on energy economics and competition policy have also touched on these subjects including competition in power generation companies and monopolies in power transmission and distribution.

In the Agribusiness commercial legal and institutional reform (AgCLIR) roundtable at Makati Shangri-La last Nov. 11, many agri-business enterprises in the country brought up the matter of high electricity costs.

Last but not the least, during the Asian Legal Business (ALB) — Thomson Reuters’s Competition Forum at Dusit Thani in Makati City last Nov. 15, one of the speakers, Dr. Raul Fabella of UPSE mentioned pricing under monopoly and duopoly or oligopoly, like in power distribution and generation.

The over-riding concern for the Philippines and other developing economies in Asia and the rest of the planet is how to hasten and sustain economic growth so that job creation and poverty alleviation can also be sustained. Having cheap and stable electricity is a major part in realizing this goal.

Forcing expensive and unstable energy sources to “fight climate change” as pushed by the UN and participating governments is contradictory to the above goal. After all, climate change from warming to cooling in natural cycles did happen in the past and continues to happen today.

Governments therefore, should be more realistic and not alarmist in pursuing that over-riding goal. Less ecological central planning, less energy rationing, less climate bureaucratism would be consistent with poverty alleviation.

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers and a Fellow of SEANET and Stratbase-ADRI.

Jarius Bondoc on FIT for renewables

I am reposting the article of Jarius Bondoc in his column in Philippine Startoday. My comments and discussions after his paper.

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Enough is enough. Developers of renewable energy (RE) must stop making us electricity users subsidize their insolvent solar and wind farms. They’re already wheedling P8 billion a year from us. That windfall, called feed-in tariff (FIT) in our monthly bill, enables their clean energy to compete with cheap but dirty coal. Yet precisely because the FIT is free money for them, they feel no compulsion to improve their output and bring down costs. And now they have the gall to ask for even higher subsidies starting next month.

RE inflicts a double whammy on our monthly electricity bill. The FIT subsidy of 12.4 centavos per kilowatt-hour per se swells the bill by two percent. Worse, RE further inflates the cost of generating electricity to almost 50 percent. That’s because the mix of power sources that go into the generation grid is such that 30 percent must come from the inefficient but favored RE plants.

Why is RE inefficient? That’s for the developers to explain. For decades they’ve been enjoying state subsidies worldwide to improve. Yet solar farms are only 23-percent capable of converting and storing sunlight to power. It even costs more electricity to produce one solar panel than the energy it will produce when laid out under the sun. That production process even uses acids and oxides that emit greenhouse gases and create waste, National Geographic reports. Statistics for wind are worse. The mills even directly kill flocks of birds and bats that fly into the rotors, as well as add to noise pollution. As it is now, RE worsens climate change.

To justify their subsidies, RE developers must point to a bogeyman: coal. Hiding their own bad effects on health and environment, they demonize coal as a killer fuel. They want the Philippines to switch to more RE and lessen coal from the present 39 percent of the generation mix. In truth, however, coal has become cleaner than it was three decades ago. Pollution is basically the result of wasteful processes. But coal plants have tremendously improved efficiencies, and this reduced waste and pollution. That is why Europe, where environment laws are strictest, has coal making up 25 percent of the generation mix.

Cases long have been made against subsidies to certain industries. Congress, controlled in the ‘60s-’70s by sugar barons, allocated billions of pesos a year to subsidize the plantations and central mills. Supposedly it was to enable the hacienderos to compete with foreigners, upgrade their facilities, and uplift their farm workers. The result is well documented. The sacada seasonal workers became poorer than ever, the plantation and mill technologies remained backward, while the hacienderos used the subsidies to buy Rolls Royces and Aston Martins.

That is what’s happening today. FIT subsidies of P8 billion a year are now blocked off for the next two to three decades for the new RE oligarchs. Some of them are relatives of the very politicos who imposed the FIT subsidies. Living off us electricity consumers, they will not improve their technologies or raise salaries of their workers or bring down their costs to below that of their hated coal. Why should they, when that would mean erasing the excuse for their FIT subsidies. Meantime, Filipinos remain poor because electricity cost – the highest in Asia – discourages employment-generating investments and ultimate economic development.  We electricity consumers should not let those RE oligarchs buy up all the luxury condos and executive jets at our expense.
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Many good points by Jarius. May I add the following:

1. Feed in tariff (FIT) Allowance for renewables, especially wind and solar, is not P8 B a year, much larger than that. It’s about P11 B in 2015, P20 B this year, and P23 B in 2017.

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Source: Transco petition for FIT-All for 2016, ERC CASE NO. 2015-216 RC, p. 10.

2. On solar inefficiency, its capacity factor can range from only 18% (in PH, WESM data) to 23-25% in developed countries like the US.

fit2

3. On solar panels “production process even uses acids and oxides that emit greenhouse gases and create waste”, more than that, solar farms require zero trees within and near the vicinity. On average, it takes 2 hectares of land to produce 1 MW of installed capacity.

Consider this solar farm in Calatagan, Batangas: 63 MW capacity on 160 hectares of land. Zero tree allowed. The main hindrance to solar power generation is shade — from clouds and tall trees nearby.

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So while many environmentalists say, “Plant trees to save the planet”, the solar environmentalists say “Zero tree to save the planet.”

4. On “electricity cost – the highest in Asia”, more of 2nd highest after Japan. For the ASEAN, here’s one data.

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Source: M. Ravago, R. Fabella, R. Alonzo, R. Danao, and D. Mapa, “FILIPINO 2040 ENERGY: POWER SECURITY AND COMPETITIVENESS”, EPDP paper, October 2016, p.2.

Nonetheless, it is a good paper. Congrats, Jarius.