Saturday, February 27, 2016

Energy 58, Sen. Loren Legarda and renewables

Yesterday, I attended a forum on "Making Renewable Energy a Vehicle for Sustained Inclusive Growth” held at the International Finance Corporation (IFC, part of the WB Group), Bonifacio Global City, Taguig. The event was organized by the UPLB-CEMAFI. My friend Ozone who is a UPLB Economics alumni tagged me along.

They keynote speaker was Sen. Loren Legarda, a known environmentalist. She gave a litany of the threats of man-made climate change, the evils of coal power and the hosanna of renewables.

During the open forum, I was the first to comment. I mentioned the following:

1. Demonizing coal power and glamorizing wind, solar, other new renewables to replace coal is unrealistic. At the Meralco generation charge latest data, from wind-solar is zero, about 5% from WESM, the balance of around 95 % is from nat gas, coal, diesel power plants. At the DOE data as of the1st half 2015 in Luzon grid, about 51% of actual electricity production is from coal, only 1% from wind-solar-biomass, the rest are from nat gas, big hydro, geothermal.

2. So if we follow your advice of glamorizing wind-solar, there will be massive brownouts in the country. This building housing the IFC, WB offices will be running on noisy gensets running on diesel; there will be more road accidents at night, more crimes at night, as there will be little or no street lights; more fires as more people will use candles. So the social cost of displacing coal with intermittent renewables is very high.

3. Subsidies given to wind, solar, will make our "2nd most expensive electricity in Asia" become even more expensive because of feed in tariff (FIT) and renewable portfolio standards (RPS).

4. Climate change is natural and cyclical, warming-cooling-warming-cooling for the past 4.6 billion years.

She replied that she's not advocating the total banning of coal, only to reduce its share in the country's energy mix while raising the share of wind-solar-other renewables. She asked again my institute, I said Minimal Government Thinkers, an independent, non-govt think tank. She also asked where I got the data on climate change as cyclical, I said there are plenty of paleo-climate data available online free, one can choose whether the past 1,000 years, past 100,000 years, past 10 M years, 4.6 B years. They all show warming-cooling cycle.

She defended her position of course. I did not make follow up comments or questions because (a) she's the lady of the hour, she's the keynote speaker, and (b) it was not my intention to "win" a debate, only to speak my position in a public forum so others can hear the contrary views.

The Moderator was Atty. Jose Layug Jr., former DOE Undersecretary and now a Senior Partner, Puno Law Office.

The 1st panel discussion was on "Renewable energy project development: current state" and the speakers were (from left in the photo below):

1. Mr. Gaspar Escobar Jr., Chief, Renewable Energy Management Bureau (REMB) Technical Secretariat, DOE;
2. Mr. Peter Nepomuceno, Chairman and President, RASLAG, a solar company in Pampanga;
3. Mr. Rene Ronquillo, President and COO, HEDCOR, a hydro company with many hydro plants nationwide;
4. Dr. Bernardo Tadeo, President and CEO, Full Advantage, a biomass company.

The three gentlemen from the private sector shared their experiences in dealing with the various government bureaucracies like the National Commission on Indigenous People (NCIP), Department of Agrarian Reform (DAR), Department of Environment and Natural Resources (DENR), local government units (LGUs), etc. Simply put, it is costly, time-consuming and complicated to deal with them.

I briefly commented during the open forum that while the private players may be shy to recognize it, but such kind of bureaucratism by different agencies is somehow a legalized extortion. No one moves, no one starts a business, unless they get the signatures and permits of those regulators and agency officials. Hence, they must deal with the long paper work including the idiosyncracies of some or many of these officials.

The afternoon and 2nd panel discussion was about "Finance and Investments" in the RE sector. The speakers were (from left to right, photo below):

1. Atty. Deborah Layugan, Head, Market Operations Service, Energy Regulatory Commission (ERC);
2. Mr. Rustico Noli Cruz, AVP, Field Department, Development Bank of the Philippines (DBP);
3. Ms. Jo Ann Eala, VP and Head, Sustainable Energy Finance, Bank of the Philippine Islands (BPI);
4. Mr. Joseph Lledo, VP for Corporate Banking Group, BDO Unibank, Inc.;
5. Ms.Donna Gonzales, Senior Investment Officer, IFC; and
6. Mr. Yongbin Chen, Director, EQUIS. It owns many solar projects in Asia including the 132 MW solar plant in my hometown, Cadiz City, Negros Occidental. 

Financing of RE projects is not my field, not my interest either. But during the open forum, I commented the following:

1. RE developers, their banks and financing institutions, should play down or not be proud of their power plants getting FIT. FIT allowance collected from all electricity consumers nationwide including those in Mindanao was P0.04+ (4 centavos) per kWh last year, and as mentioned by Atty. Layug, can rise to P0.17 to P0.21/kWh this year as more renewables are fed into the grid.

2. In Germany, when FIT was introduced in 2001 or earlier, the amount was 2% of the average monthly residential electricity bill. By 2014, FIT comprised around 22% of the average monthly electricity bill of residents, it just kept rising.

3. So whether we are talking of FIT in UK or Germany or the Philippines, FIT means expensive electricity and many people dislike or hate expensive electricity. So RE developers and their financiers should aspire for more innovation so that they can attain grid parity and survive even without FIT because RPS and "must dispatch" policy is already a big favor for them.

Being the only skeptic of the "hosannas of renewables" in a conference room is not exactly easy, but I think many people in the audience, even among the speakers, recognize the limits and dangers of expensive electricity from intermittent and unstable RE sources.

People want power stability, dispatchable upon demand and at the same time is affordable. If a power plant is designed for 200 MW, it should be capable of producing 200 MW running 24/7. With intermittent power, things are unstable, unpredictable, non-dispatchable, costs are high.

Many people and environmentalists pound on the "negative effects" of coal. Now consider these numbers:

In 2014, coal consumption of the following countries: US 434 million tons oil equivalent (mtoe); Germany 77.4 mtoe; Japan 126.5; S. Korea 84.8; Taiwan 40.9; Thailand 18.4; Philippines only 11.7 mtoe. Are the health, environment situation in the US, Germany, Japan, S. Korea, etc. worse than in the PH because they have much much bigger coal consumption than us? No.

In the Philippines, the biggest coal plants are in Batangas, Quezon, (western) Pangasinan and Zambales. I don't think that the health and environment situation there is much worse than those in Tarlac or Bulacan, M.Manila or Laguna.

Other people say that real effects of coal is global, not provincial or national. Yes, the global effect of coal is worldwide... prosperity. Energy is development. That is why even supposedly "green" countries like the US, Germany and Japan have high use and consumption of coal until now. If we are forced, arm-twisted to rely only on wind-solar-biomass-ROR hydro, we will be very dark at night and economically poorer than N. Korea or Zimbabwe.

See also:


Anonymous said...

My first experience with "retail" solar power was after typhoon Yolanda in the form of a portable solar power kit bought from Cdr King to provide us with light during the very dark nights. The power kit is "plug and play" consisting of two 3 watts LED 12V DC bulbs and a USB terminal that could charge a cellphone. The 12AH built-in battery is being charged during day time by a 20 watts solar panel. That was more than two years ago and now and the said solar power kit (now with a new battery) is still providing us with light during brownouts. The cost of the said power kit is less than Php 4,900.00 and yes, it is made in China!

The two 3 watts LED bulbs was used for 10 hours every night, so 6 watts x 10 hrs = 60 watt-hour / 1000 = 0.06 kilowatt-hr x 10pesos = 0.60 centavos. Therefore, our local electric company was losing sixty centavos every night because am not using their electricity (or they have no electricity).

What is my point? The solar power kit is just providing me with sixty centavos worth of electricity every night but I prepaid Php 4,900.00 for it. Imagine if 1 million persons bought it. That would be 4.9 billion pesos business, just for a portable solar power kit. I think, "retail" solar power business is a new business opportunity that China and Leandro Legarda Leviste sees first. Therefore, like you, the good senator is not interested in winning the debate; because she has other business interests to think about.

Bienvenido Oplas Jr said...

Thanks for the comment. Yes, I have heard of a similar instance but different figures, saying that the cost of solar set up is huge compared to the actual electricity it can produce. And they say that the panel can work for 25 years, how can they guarantee that? A number of big solar companies in the US and Spain, Germany, have already gone bankrupt, like Solyndra. How much more with the smaller companies.