Here is my list of 5 international and 5 national or
Philippine important energy issues last year.
INTERNATIONAL
1. Donald Trump and his energy policies.
US president-elect Donald Trump’s energy policies are
summarized in his major campaign platform, “Seven actions to protect American
workers” and these include:
“FIFTH, I will lift the restrictions on the production of
$50 trillion dollars’ worth of job-producing American energy reserves,
including shale, oil, natural gas and clean coal... SEVENTH, cancel billions in
payments to UN climate change programs and use the money to fix America’s water
and environmental infrastructure.”
So far some of Mr. Trump’s Cabinet Secretaries are his
fellow skeptics of the anthropogenic or “man-made” climate change claim
(climate change is largely cyclical and natural or “nature-made”), or simply
pro-oil. These include: (a) Environmental Protection Agency (EPA) head is Scott
Pruitt, former attorney general of Oklahoma; (b) DoE Secretary is former Texas
Governor Rick Perry who is pro-drilling; and (c) Secretary of State is Rex Tillerson,
CEO of the oil giant Exxon Mobil Corp.
2. OPEC cut on oil production.
For eight years, OPEC never cut its oil production
despite declining oil prices to protect its global market share under intense
pressure from huge shale oil supply from the US. In November 2016, OPEC finally
blinked and decided to cut their collective oil output by 1.2 million barrels
per day (mbpd) hoping for an increase in oil prices. Non-OPEC countries like
Russia and Mexico made an agreement with OPEC to cut output by another 0.56
mbpd, for a total projected output cutback of about 1.8 mbpd. So far, price
impact was marginal as oil prices before this OPEC decision was already
touching $50 a barrel. But once US shale oil output ramps up, this marginal
price increase can easily be reversed.
3. More wind-solar means more expensive electricity in
selected countries in Europe.
The numbers below show that countries with expensive
electricity (1-5) have zero or little nuclear power, have high wind power
(except Belgium and Italy), and high solar capacity (except Spain). And cheaper
electricity countries (6-10) have high nuclear power (except UK and
Netherlands) and low wind (except Sweden), low solar capacity (see Table 1).
4. By 2040, 46% of global energy demand will come from Asia
Pacific.
Based on a recent report by Exxon Mobil which grabbed
global energy headlines, it said that it expects China, India, and the rest of
Asia Pacific (including Japan, ASEAN, and Australia) will increase its global
share of total energy demand from 234 quadrillion British thermal units (BTUS)
in 2015 to 322 quadrillion BTUs by 2040. The percentage share of the region
will rise from 41% of global demand in 2015 to 46% by 2040. In contrast, the
share of EU and the US combined will shrink from 28% in 2015 to only 22% by
2040 (see Table 2).
5. By 2040, wind, solar, biomass, other renewables will
contribute only 11% of total global power generation.
Coal will remain the dominant source in power generation
worldwide by 2040 but its share will decline from 44% in 2015 to 34% by 2040.
The share of natural gas and nuclear power combined will increase from 38% in
2015 to 45% by 2040. The share of wind, solar, geothermal and other renewables
will marginally increase from 6% in 2015 to 11% by 2040, despite all the
political noise worldwide that these renewables will get “cheaper than coal”
and attain “grid parity” with conventional sources like coal and natural gas.
6. Search for an Independent Market Operator (IMO) of
WESM.
In the last Congress, then Sen. Serge Osmeña, Chairman of
the Senate Committee on Energy conducted a series of meetings until January
2016 about the absence of an IMO that is supposed to manage the Wholesale
Electricity Spot Market (WESM). The Philippine Electricity Market Corporation (PEMC)
as market operator of WESM remains weird because (a) PEMC Board is chaired by
the DoE Secretary, many board members are government officials; (b) Even the
supposed four independent directors plus consumer representative (5 total) are
all appointed by the DoE Secretary; and (c) PEMC is regulated by the Energy
Regulatory Commission (ERC), which is under the administrative control of the
DoE Secretary, who chairs the PEMC that is regulated by ERC.
7. WESM Mindanao, IMEM.
Aside from issues on the new Market Management System
(MMS) for WESM rules and the transition to a real IMO, the move to create a
WESM in Mindanao via the Interim Mindanao Electricity Market (IMEM) is gaining
ground. The Mindanao dispatch protocol will have to be spelled out in detail
too.
8. Imposition of Renewable Portfolio Standards (RPS).
In June 2016, the DoE issued a draft Department Circular
(DC) on RPS, a provision in the RE Act of 2008 (RA 9513) that “requires
electricity suppliers to source an agreed portion of their energy supply from
eligible RE resources.” This RPS will result in more expensive electricity
because wind, solar, biomass, and small hydro that are not given feed in tariff
(FiT) privilege of guaranteed price for 20 years can demand higher price for
their energy output because distribution utilities will have zero choice but
buy from them otherwise the DoE will penalize them.
The draft DC wanted an initial “2.15% to be applied to
the total supply portfolio of the Mandated Participant in each grid.” When
asked what will be the projected price implication of such policy, DoE and
National Renewable Energy Board (NREB) officials answered that no study on
price implications has been made yet. A weird proposal where proponents have no
clear idea on the cost of implementation to energy consumers, the DC was
shelved.
9. Shift in energy mix from energy source to system
capability.
During the administration of DoE Secretaries Petilla and
Monsada, the DoE wanted an energy mix based on energy source or technology,
30-30-30-10 for coal-natural gas-RE-oil, respectively. This is highly
distortionary because many REs are either seasonal (hydro can be baseload only
during the rainy season, biomass can be baseload only if feedstock is
available) or intermittent like wind and solar. New DoE Secretary Cusi changed
the energy mix based on system capability: 70-20-10 for base load-mid
merit-peaking plants, respectively. This is a more rational mixture.
10. Endless demand for expanded, higher feed in tariff
(FiT).
As more solar farms and wind farms are constructed
nationwide, their developers and owners are lobbying hard for an expanded FiT 2
with guaranteed price for 20 years. Even geothermal developers also lobbied
that their new plants should also be given FiT. Currently, three wind
developers -- Trans-Asia Renewable Energy Corporation (TAREC), Alternergy Wind
One Corporation (AWOC), and Petrowind Energy, Inc. (PWEI) are petitioning the
ERC that their FiT rate be raised from P7.40/kWh to P7.93/kWh. Three wind farms
were lucky or favored to get P8.53/kWh under the original FiT -- EDC Burgos
(Lopez group), Northern Luzon UPC Caparispisan (Ayala group) and Northwind
Power Bangui (partly Ayala).
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See also:
BWorld 102, Top 10 news of 2016, January 10, 2017
BWorld 103, How to improve the RORO system, January 11, 2017
BWorld 104, Top 10 positive news in Asian trade, January 14, 2017
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