Monday, May 08, 2017

BWorld 128, The quest for more stable and cheaper electricity in the ASEAN

* This is my article in BusinessWorld last April 28, 2017.

High economic growth means high energy demand coming from stable supply and competitively priced energy, not unstable, intermittent, and expensive energy. This is what the Association of Southeast Asian Nations (ASEAN) economies need as their high GDP growth of 4.7% in 2016 is projected to improve to 4.8% this year and 5% in 2018 (ADB data), much faster than the projected growth of other regions and economic blocs.

One week before the ASEAN 50th Summit Meeting, the 7th Annual Meeting of the Nuclear Energy Cooperation Sub-Sector Network (NEC-SSN) hosted by the Department of Energy (DoE) was held. A pre-feasibility study showed that many ASEAN countries are in favor of using nuclear energy for commercial use. The ASEAN Center for Energy (ACE) also sees nuclear energy as a long-term power source for the member-countries.

The intensive infrastructure projects of the Duterte administration require huge amount of energy. The proposed 25-km. subway in Metro Manila by the Japan government alone would require high energy supply for the dozens of trains running simultaneously below the ground plus dozens of train stations below and above ground.

Lots of base-load power plants, those that can run 24-7 all year round except when they are on scheduled shut down for maintenance, will be needed. These baseload plants include coal, natural gas, geothermal, and nuclear. Hydro plants too but only during the rainy season.

How reliable and how costly are the different power generation plants that the Philippines and other ASEAN countries will need? This table will help provide the answer as I have not seen data for the ASEAN yet.

Power reliability is represented by plant capacity factor or actual power output relative to its installed capacity. So unstable, intermittent sources like wind and solar have low capacity factor, not good for manufacturing plants, hotels, hospitals, malls, shops, and houses that require steady electricity supply.

Power cost is represented by the levelized cost of electricity (LCOE), composed of capital expenditures (capex), fixed and regular operation and maintenance (O&M), variable O&M, and transmission investment. CCS means carbon capture and sequestration.

The cost of ancillary services for intermittent sources, the standby power plants if the wind does not blow or if it rains make solar plants temporarily inutile, does not seem to be reflected in the transmission cost though.

ASEAN countries like the Philippines will need those power plants that have (a) high reliability, high capacity factor, (b) low LCOE, and (c) low or zero need for ancillary services.

However, more ASEAN countries are entertaining more solar PV and wind onshore since they were convinced to believe that they need unstable yet expensive electricity to “save the planet.”

During the Energy Policy Development Program (EPDP) lecture last April 20 at the UP School of Economics (UPSE), Ms. Melinda L. Ocampo, president of the Philippine Electricity Market Corp. (PEMC) talked about “Electricity Trading and Pricing in the Philippine WESM.” Ms. Ocampo discussed among others, the new management system where the interval for electricity dispatch has been improved from one hour to only five minutes.

I pointed during the open forum that the imposition of the lousy scheme feed-in-tariff (FiT) or more expensive electricity for favored renewables was unleashed even to consumers in Mindanao, which is not part of WESM, and is not connected to the Luzon-Visayas grids. The FiT-Allowance that is reflected in our monthly electricity bill has risen from 4 centavos/kWh in 2015 to 12.40 centavos in 2016 and this year, we should brace for at least 26 centavos/kWh soon because the 23 centavos petition by Transco starting January 2017 has not been acted by the Energy Regulatory Commission yet.

The issue of stable and affordable energy will be tackled in the forthcoming BusinessWorld Economic Forum this May 19, 2017 at Shangri-La BGC. Session 4 “Fuelling Future Growth”of the conference will have the following speakers: John Eric T. Francia, president & CEO of Ayala Corp. (AC) Energy Holdings, Inc.; Antonio R. Moraza, president & COO of Aboitiz Power Corporation; Josephine Gotianun Yap, president of Filinvest Development Corp., and DoE Secretary Alfonso G. Cusi. Yap and Cusi are still to confirm the invite.

Local energy players will have a big role in ensuring that the Philippines should have stable and competitively priced energy supply today and tomorrow.

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