The increase in feed in tariff-allowance (FIT-All) has
been approved by the Energy Regulatory Commission (ERC) recently. As a result,
Meralco and all other distribution utilities nationwide will be collecting
12.40 centavos per kWh of electricity consumption starting this month. The
amount is higher than higher than 4.06 centavos/kWh that was collected in 2015.
Even consumers from Mindanao -- an island not connected
to the Visayas and Luzon grids -- will pay this FIT. If Mindanao consumers are
spared of this additional charge, the FIT-All will be much larger in Luzon and
the Visayas, which host an increasing number of wind and solar farms. Another
FIT hike will be expected next year.
Unlike the previous electricity price hikes that met a
big public backlash, such as the price hikes of P4+/kWh in November-December
2013 which should go back to old rates after two or three months, FIT
additional collections are not short term but long term and can last 20 to 30
years or more.
The Philippines has the highest electricity prices in the
ASEAN and has the second-highest in Asia, next to Japan. This is not good
especially if we are serious in attracting more investments that can give more
jobs to more Filipinos (see graph).
There are many factors why this is so, among which are
the various taxes, fees, and royalties imposed by the Philippine government on
energy sources (like the natural gas royalty from Malampaya gas field in
Palawan) and on companies themselves.
In the coming general elections next month, all
presidential candidates support more renewables. Sen. Grace Poe even proposed
that power distributors should be “compelled” to use renewable energy. Davao
Mayor Rodrigo Duterte is explicit in supporting more coal power plants, and
administration candidate Mar Roxas supports the use cleaner fossil fuel like
natural gas, along with renewables.
Among Senatoriables, it is weird that former DoE
Secretary Jericho Petilla would even blame some provisions of the EPIRA law of
2001 for the high cost of electricity in the country, saying that the law
prevents the government from putting up new power plants that can help rival
private generation companies.
Government-owned National Power Corporation (NPC) used to
be the sole power plant owner and operator nationwide. Instead of bringing down
the cost of electricity while raising power capacity, NPC has largely succeeded
in piling up huge amount of debts, mountains of debts hundreds of billions of
pesos, that it could not pay and hence, were ultimately passed on to taxpayers.
Renewable sources such as solar, wind, geothermal, and
hydroelectric have the following characteristics that are dissimilar to
conventional sources like coal and natural gas. Among these are: (1) zero or
near-zero variable operations and maintenance (O&M) cost, but (2) low
capacity factor or actual electricity production relative to its rated
capacity, except geothermal, (3) high levelized cost of electricity (LCOE) and,
(4) generally higher electricity prices if subsidies are not given.
LCOE is a good summary measure of the overall
competitiveness of different power generation technologies representing the per
kWh cost of building and operating a power plant over an assumed financial life
and duty cycle.
Here is the LCOE in the US four years from today. The
capacity factor is generally higher compared to those in developing countries
like the Philippines (see table).
When the Renewable Energy (RE) Act of 2008 (RA 9513) was
created, a lot of subsidies were put in the law that effectively pampered
developers of renewables like solar, wind, and biomass. Among these are the:
(1) feed in tariff-allowance (FIT-All), (2) priority and mandatory dispatch
into the grid, (3) renewable portfolio standards (RPS) or the minimum share of
renewables in power generation, and (4) various fiscal incentives.
The list of those various subsidies and incentives, FIT
rates in Germany and the Philippines, are also discussed in my earlier article,
“Feed in tariff means more expensive electricity” published by the Albert del
Rosario Institute (ADRi) blog, Spark.
A FIT that increases every year -- which has already
taken place in Germany, UK and other European economies, and now in the
Philippines -- means rising electricity prices even if generation,
transmission, distribution, supply, and various other fees and tax rates remain
the same.
So far, it seems that not a single candidate for a
national position has openly criticized this setup of ever-rising electricity
prices in the country. On the contrary, some candidates even justify expensive
electricity so that we can help “save the planet.”
Expensive electricity means more dark streets at night as
LGUs, villages, and households save on their monthly electricity bills. When
many streets and roads are dark at night, there are more road accidents, more
destruction of public and private properties, more crimes, more rapes,
injuries, and deaths.
Worse, when some households’ electricity connection is
temporarily cut off due to non-payment, people have to use candles for a few
hours or days, and candles are among the major causes of fires. These social
costs are often avoided or not recognized by the campaigners of expensive,
unstable renewables.
Expensive electricity also means less businesses and jobs
that can potentially be created here. Energy-intensive companies and
manufacturing plants will try to avoid investing in the Philippines -- where
electricity prices are expensive -- since they will put up their factories and
big offices in ASEAN countries with lower energy costs, then export to the
Philippines at zero tariff. They only rent smaller offices here to facilitate
business transactions.
As a developing and emerging economy, we should have
cheaper electricity, bigger power capacity and reserves to ensure 24/7
availability of power, even in periods of huge spikes in electricity demand or
damaged power facilities due to strong storms or earthquakes.
Bienvenido S. Oplas, Jr. is the head of Minimal
Government Thinkers, a Fellow of SEANET and Albert del Rosario Institute. minimalgovernment@gmail.com
-------------
See also:
BWorld 43, More on WESM, PEMC and DOE, February 14, 2016
BWorld 47, Renewable energy and the illusion of merit order effect, March 06, 2016
BWorld 51, WESM as market-oriented, PEMC as bureaucracy-oriented, March 25, 2016
BWorld 47, Renewable energy and the illusion of merit order effect, March 06, 2016
BWorld 51, WESM as market-oriented, PEMC as bureaucracy-oriented, March 25, 2016
BWorld 53, Population and growth projections, April 09, 2016
BWorld 54, Rice farming, trading, smuggling and electioneering, April 15, 2016
No comments:
Post a Comment