The power gap

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By Neil Honeyman

An Independent View

Wednesday, August 13, 2014


THE National Grid Corporation of the Philippines (NGCP) produces a daily “Power Situation Outlook.” For example, NGCP’s outlook for 24 July 2014 was:

Luzon
Available Capacity (7,751 MW)
System Peak (6,983 MW)
Gross Reserve (768 MW)

Visayas
Available Capacity (1,404 MW)
System Peak (1,461 MW)
Gross Reserve (-57 MW)

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Mindanao
Available Capacity (1,347 MW)
System Peak (1,376 MW)
Gross Reserve (-28 MW)

MW = Megawatts

Our electricity requirements are therefore monitored closely by NGCP. We can see that the supply/demand situation in Visayas and Mindanao is disadvantageous to the consumer. This accounts for the rotating brownouts that we experience.

Mindanao, in particular, has had substantial blackouts lasting several hours a day. Mindanao depends substantially on hydro-electric power, which, of course, varies substantially depending on whether it is the rainy or dry season.

The data shown above indicates that a stronger national grid whereby electricity is distributed properly throughout the archipelago would ensure that the available capacity comfortably exceeds the system peak.

The above data shows that for the nation as a whole the available capacity is 10,502 MW whereas the system peak is 9,820 MW. If we had a fully developed national grid, there would be no brownouts associated with lack of generating capacity.

Energy Secretary Carlos Jericho Petilla anticipates problems for next year. His projections indicate a supply shortage of 200 MW by May 2015. We need to examine this. The forecasted demand cannot be made with certainty. The demand for May 2015 depends significantly on whether we have an excruciatingly hot summer or merely a hot one. We expect the Energy Secretary to be cautious and, as he has appropriately done, to give early warning of problems that may lie ahead. We assume that the predicted supply is around 10,500 MW and the forecasted demand to be approximately 10,700MW.

Accordingly, the Energy department has submitted a request to the President to declare a power crisis. He is empowered to do this as a result of the Electric Power Supply Industry Reform Act (EPIRA). This Act states that if the President believes there is an imminent shortage of electricity supply, Congress may authorize, through a joint resolution, additional generating capacity under such terms and conditions as it may approve.

The European Chamber of Commerce of the Philippines (ECCP) has done similar calculations as the Department of Energy and has predicted a 400-MW power supply shortage in Luzon for next year.

We are concerned. Mindanao has had a chronic supply shortage yet not much effective action is taken. Yet when an electricity shortage in Luzon is predicted then there are moves to declare a power crisis. Does this mean that Luzon is considered to be more important than Mindanao? If so, this could become an election issue in 2016. Those who want to gain national support (Senators, President, Vice President) should take care not to suggest that one part of the country should receive preferential treatment over another.

In principle, the private sector likes to invest in utilities such as electricity supply due to the certainty of demand. Reasonable profits are therefore ensured. Many private sector projects in manufacturing, for example, are fraught with uncertainty due to the unpredictability of public demand for the potential product.

Why is the private sector, which according to EPIRA has primary responsibility for providing new electricity generation capacity, seemingly dragging its feet?

The first is red tape. According to ECCP vice president for external affairs Henry Schumacher, it takes a minimum of three years “and in the Philippines with all the 162 environmental and other clearances, more than five years to get a good sized power plant ready for hookup to the grid.” Do we really need all this red tape? In Negros Occidental, San Carlos Bioenergy Inc. (SCBI) for a long time malodorously failed to meet the requirements of its Environmental Compliance Certificate yet nothing was done until PNoy was due to come to San Carlos to open San Carlos Solar Energy Inc. Does it really require a Presidential visit to cause San Carlos to have fragrant air?

Red tape engenders corruption which reduces foreign investment. Anecdotally, those who wish to invest in power plants need to pay grease money to facilitate the issuance of necessary permissions to build a power plant. Further corruption is alleged to be involved to ensure the signing of supply contracts with electricity co-operatives which needs the permission of the Energy Regulatory Commission (ERC).

The Investment Ombudsman Team (IOT) which I mentioned on Monday needs to work hard to unearth the problems which may cause unnecessary electricity shortages. Economic growth depends on many factors. One of the most important is the availability of reasonably priced electricity.

‘Her mother lived the latter years of her life in the horrible suspicion that electricity was dripping invisibly all over the house’ – James Thurber (1894-1961), My Life and Hard Times (1933)

Published in the Sun.Star Bacolod newspaper on August 13, 2014.

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