Cheaper electricity and stable energy supply are among
the important components to have fast and sustainable economic growth.
On Jan. 17, the Philippine Electricity Market Corp. (PEMC)
sent a press release saying that “effective settlement spot prices (ESSPs) in
the wholesale electricity spot market (WESM) plunged to P2.28/kWH for the
December 2016 billing period which is the lowest since January 2011. ESSPs
refer to the average prices paid by wholesale customers for energy purchased
from the spot market.” That is good news as various players using fossil fuel
sources like coal, natural gas, and oil, are fiercely competing with each other
in generating electricity. WESM was created by EPIRA of 2001.
On the same day, the Department of Energy (DoE) posted a
“Request for comments on the draft Department Circular entitled ‘Declaring the
launch of WESM in Mindanao’ (on Jan. 26, 2016) and providing for transition
arrangements.” Another good news because finally, there will be a formal spot
market for power producers and electric cooperatives that will guide a
competitive and deregulated market, benefitting the consumers.
Last Dec. 23, 2016, the Energy Regulatory Commission
(ERC) posted a request for public comments until Dec. 30 regarding the petition
of three wind developers -- Trans-Asia Renewable Energy Corporation (TAREC),
Alternergy Wind One Corporation (AWOC), and Petrowind Energy, Inc. (PWEI) --
that their feed in tariff (FiT) or guaranteed price for 20 years of P7.40/kWh
be raised to P7.93/kWh, citing various cost escalations. That was bad news
because expensive electricity is never a virtue. I sent a letter to ERC
Commissioner Salazar arguing that they say No to the petition.
And last Dec. 6, 2016, the ERC published in a newspaper a
National Transmission Corp. (TransCo) petition asking for a FiT allowance
(FiT-All) of 22.91 centavos/kWh starting January 2017. That’s also bad news
because FiT payments by consumers keep rising fast. From an introductory price
of only 4 centavos/kWh in 2015, became 12.40 centavos/kWh in 2016, and almost
23 centavos/kWh this year.
Now two factors will raise the FiT-All for 2017 beyond 23
centavos. (1) ERC will not be able to act on this by January or not even
February 2017, that means there will be price underrecoveries that must be
added to the original requested price. And (2) with low WESM prices the past
few months -- P3.19/kWh last September, P2.91/kWh last October, P2.54/kWh last
November (data from Meralco), and the P2.28/kWh ESSP last December -- this
means that FiT-All will go up. This allowance is the difference between FiT
rates (highest prices are solar of P10+/kWh this year due to price escalation,
followed by wind, then biomass, cheapest is run of river hydro) and average
WESM prices. Or FiT-ALL = FiT rates -- WESM prices
Expensive electricity is the hallmark of renewable energy
favoritism anywhere in the world.
Understand that in my previous columns, it was shown that
the main beneficiaries of expensive electricity from renewables in the
Philippines are not ordinary firms but huge companies: the Lopez group (EDC
Burgos wind) and Ayala group (Northern Luzon UPC Caparispisan wind, and
Northwind Bangui) who got P8.53/kWh FiT and combined revenues of about P4.3
billion in 2015 alone.
Let us check Germany’s renewables output. The chart below
is for the last three months, Oct. 23, 2016 to Jan. 22, 2017.
Last Jan. 8, its total electricity consumption was 57.4
GW and here are the renewables output that day: solar 0.23 GW, onshore wind
1.53 GW, and offshore wind 0.39, or a total output of only 2.15 GW from these
three renewables (see chart).
A total of only 2.1 GW was generated by solar-wind
sources or only 3.7% of 57.4 GW power demand. If Germany relied solely on
wind-solar, that would have meant massive, large-scale, and catastrophic
blackouts. Germany of course was saved by the power plants that it wants to
banish someday -- fossil fuel sources like coal and natural gas plus nuke
power, within Germany and from energy imports from its European neighbors --
and which it kept running. So we did not hear or read such massive blackouts in
Europe’s biggest economy.
Aside from expensive direct cost of wind and solar in
Germany due to FiT, there is additional indirect cost of higher transmission
cost. From a news report, “The Energiewende is running up against its limits”
last Oct. 21, 2016 (http://energypost.eu/energiewende-running-limits/)
“German transmission system operator Tennet recently
announced an 80% increase in its transmission fees because of the high
construction costs of new power lines to accommodate renewable energy. A study
of the Düsseldorf Institute for Competition Economics found that by 2025 costs
of the Energiewende could exceed €25,000 for an average four-person household.”
The Joint Congressional Power Commission should consider
introducing a law in the future that will abolish the RE Act of 2008 (RA 9513).
Penalizing the energy consumers to further enrich the favored and crony firms
in renewable energy is wrong.
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See also:
BWorld 104, Top 10 positive news in Asian trade, January 14, 2017
BWorld 106, Top 10 projections for Asian economies, January 23, 2017
BWorld 106, Top 10 projections for Asian economies, January 23, 2017
BWorld 107, Top 10 myths for oil tax hike, January 28, 2017
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