Energy agenda of China’s Belt and Road Initiative

* This is my article in BusinessWorld on July 21, 2017.

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In a presentation during the Asia Pacific Pathways to Progress Foundation, Inc. (APPFI) round table discussion on China Belt and Road Initiative (BRI) last July 11 at Astoria Plaza, Ortigas, APPFI president Dr. Aileen Baviera said that BRI is China’s new international development strategy. It will link China to the larger Asian region, Europe, and Africa through connectivity of policy coordination, facilities/infrastructure, trade/markets, finance (investments, loans, grants, AIIB), and people.

The Silk Road Economic Belt will span China, Central Asia, Russia, Europe while the 21st century Maritime Silk Road will span eastern China, South China Sea, Indian Ocean, Mediterranean, North Africa, Europe) + SCS-South Pacific and China-Europe via Arctic, covering 65 countries, 3 international organizations, 4.4 billion people and $21 trillion of trade.

Why is China doing this? Aileen said there are three main reasons.

(1) Economic — put excess local production capacity and funds to profitable use, help develop Western China, and access to markets and resources.

(2) Political — shore up domestic support for Xi (amid anti-corruption drive ad slowing economy), build platform for China to take leadership in the provision of global public goods, counter the China Threat Theory.

(3) Strategic — avoid Malacca dilemma, make the South China Sea irrelevant in developing transport and trading links in the region, access to ports and airports reduces need for overseas air and naval bases, and compete with the US influence and perceived containment efforts against China.

This is incisive analysis from a local scholar. She also showed maps of the Silk Road Beltway, the Maritime Road covering the three continents of Asia, Europe and Africa, and the Pan-Asia railway network.

In many discussions on China’s BRI, often left out is China’s energy agenda that spans practically the same continents and countries. Here are just three of several reports on this aspect.

(1) From NY Times, July 1: “When China halted plans for more than 100 new coal-fired power plants this year… China’s energy companies will make up nearly half of the new coal generation expected to go online in the next decade.

These Chinese corporations are building or planning to build more than 700 new coal plants at home and around the world, some in countries that today burn little or no coal, according to tallies compiled by Urgewald.”

(2) From China Dialogue, May 5: “Global Environment Institute (GEI) figures show that between 2001 and 2016 China was involved in 240 coal power projects in BRI countries, with a total generating capacity of 251 gigawatts. The top five countries for Chinese involvement were India, Indonesia, Mongolia, Vietnam and Turkey.”

(3) From Financial Times, March 31, 2016: “China’s proposed investments in long-distance, ultra-high voltage (UHV) power transmission lines will pave the way for power exports as far as Germany… Exporting power to central Asia and beyond falls into China’s ‘one belt, one road’ ambitions to export industrial overcapacity and engineering expertise as it faces slowing growth at home.”

Europe’s problem is that they are committing sort of energy mini-suicide by relying more on intermittent wind-solar and closing down many of their reliable and big nuclear and coal power plants. So here comes China with huge domestic coal supply capacity plus additional coal plants in countries along the BRI route. It will have the capacity to augment Europe’s energy needs via those UHV transmission lines and power sources are several thousand kilometers away (see table).

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Source: BP Statistical Review of World Energy, June 2017
* Less than 0.05.

Notice the huge discrepancy between installed capacity of wind-solar and China, and the very small actual electricity output from them.

In a forum on “The Framework Code of Conduct, One Year After Arbitration” organized by Stratbase-Albert del Rosario Institute (ADRi) last July 12 at the Manila Polo Club, among the speakers were Roilo A. Golez, former National Security adviser; Antonio T. Carpio, senior associate Justice, Supreme Court of the Philippines, and Dr. Jay Batongbacal, director of UP Institute for Maritime Affairs and Law of the Sea.

Justice Carpio highlighted the energy aspect of China’s occupation of shoals and creation of artificial islands in the South China Sea or West Philippine Sea, and the huge implication for the Philippines if China will occupy areas near Malampaya, currently the source of about 3,000 MW of natural gas plants based in Batangas. Malampaya natural gas is expected to be exhausted around 2024 or less than a decade from now. We shall have massive, daily blackouts for many hours daily if no new gas is discovered or new gas facility is created.

China has a different agenda in its massive BRI project, some are useful, some are harmful to their partner countries. The Philippines should craft foreign affairs and energy policies that will secure the country’s economic needs, not China’s needs.

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

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Projected PH power deficit in early 2015

* Originally posted on September19, 2014.

Independent think tank, Stratbase Research Institute (SRI) published yesterday my paper, “Energy and Rice Deficiency: Reform Challenges for the Last Quarter of the Aquino Administration.”

1I uploaded the paper in my slideshare account, 11 pages, check it there. For this article, I will only discuss the part on power and energy.

President Aquino has officially requested for a Congressional Resolution to deal with projected power deficiency next year, especially on the hot months of March to May 2015, or just six months from now. I believe they have a reason to panic.

Chart 1. Power Supply-Demand in Luzon, 2014-2020, as of June 2014

2Source: Department of Energy (DOE).

I highlighted in my paper that when analyzing the above graph.

  1. Available or existing capacity (blue curve) does not mean that all power plants will not experience sudden or unscheduled shutdowns. A number of those facilities just conk out anytime, especially among the  older ones. Thus, actual power production on certain period is lower than what the blue line in  the  chart suggests.
  1. The same applies for committed power projects (gray curve). In addition, many of these committed are wind and biomass, where actual power generation is very often lower than their rated or promised capacity.

The National Grid Corporation of the Philippines (NGCP) issues alert levels in cases of power deficiency.  “Red alert” means the contingency reserve is near zero, if not negative. “Yellow alert” means the total power  reserves is less than the capacity of the largest plant online, which for the Luzon grid is 647 megawatts (MW).

Chart 2. Zoom in to  2014 and 2015 Only
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NGCP has issued “Yellow Alert” last April 8, May 9, 14, 20 and 26, 2014. It also issued  “Red Alert” (RA) on the following days this year.

  1. RA May 16:  Two unscheduled shutdowns, one unit of Sual coal plant (647 MW) + one unit of Pagbilao coal plant (367 MW).
  1. RA June 17:  Malampaya Gas Restriction, Manual load dropped 105 MW.
  1. RA June 25: Three unscheduled outages:  Sual 1 (647 MW) + Calaca 1 (300 MW) + Masinloc 2 (315 MW). Plus derated capability of GN power (Mariveles) 1&2.

4. RA September 9: Two unscheduled shutdown on September 8: GNPower Unit 2 (300 MW) + Ilijan Block A (600 MW). And two scheduled maintenance shutdowns: Sual Unit 2 (647 MW) + Kalayaan Unit 1 (177 MW)

These are huge power plants that conked  out unscheduled: Sual (15 year old), Pagbilao (18 yo), Masinloc (19 yo) and Calaca (30 yo). Metro  Manila and provinces in the Luzon grid are dependent on power facilities listed below.
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Check again Chart 1 above, committed power projects. Wind for late 2014 to 2015 is 253.5 MW (Northwind 18, Burgos 87, Caparispisan 81, Pillila 67.5). That looks substantial but wind power is highly unstable and  unreliable in delivering power.

Take the case of Germany, possibly the “wind and solar power giant” in the world today based on  their installed capacity. In the chart below, gray is conventional power (coal, nuclear, gas), yellow is solar, dark blue is wind, light blue is hydro, and green  is biomass. Red is actual German consumption.

The story is no different for the  US and UK.
5Sources:
Left: No Tricks Zone, Germany’s Habitually AWOL Green Energy…Installed Wind/Solar Often Delivers Less Than 1% Of Rated Capacity!

Right: WUWT, Renewable Energy in perspective: Solar and Wind power, August 30, 2014

The threat of rotating brownouts next year in Metro Manila and other provinces in Luzon is real. It is not imaginary. But it will not be as bad as the one we experienced in 1990-91 where the whole of Metro Manila would have about 3-5 hours brownout daily on some months. I think it will just be a few hours and not cover the entire metropolis. Something like this: brownout in Malabon 7-8am, in Navotas 8-9am, in northern Quezon City 9-10am, and so on.

To have stable electricity, supply must be generally equal to demand. If supply is limited due to technical problems with some big power plants, parts of electricity demand  should be “killed” via rotating brownouts.

Some policy proposals that I put in the paper:

  1. Get more peak-load plants like those mobile diesel power barges. In Luzon, there is only one existing, Therma Mobile (TMO) of Aboitiz Power. It is an old power barge actually, bought from Duracom Power and was idle for about five years until it  was rehabilitated and re-commissioned  in  November 2013 just to prevent rotating brownouts in Metro Manila and other Luzon provinces during the Christmas holiday season.
  1. Reduce power demand on peak hours of those hot months by asking the heavy users like big industrial zones, mining firms and cement plants, to have their own power generator sets. The Interruptible Load Program (ILP) seems  to be working, more big companies should volunteer to join the ILP.  But they should be compensated somehow, in the latter  months as these companies would have larger power cost on those periods that they were using their gen sets.
  1. The public, households and commercial offices can help reduce power demand by using more energy-efficient lights and appliances.

    4. Government agencies  should reduce the bureaucracies and permits they require in building and commissioning new power plants. DOE Sec. Petilla once said that in some projects, some 100 signatures are required to have one big power plant be put up and keep running.

  1. Over the medium term, government should  reduce the taxes and royalties in power as these impositions  significantly contribute to high electricity prices. And the public blame the power companies or the distribution utilities (DUs) and even call for “Junk EPIRA, back to government monopoly in power.”