Thursday, November 28, 2019

BWorld 388, TAPP paper on power

* My article in BusinessWorld on November 21, 2019.


“Power is a key component of any nation’s growth. Ensuring a balanced and reliable generation portfolio and a robust and responsive transmission and distribution network should be a key priority of our public and private sectors.”

— Emmanuel de Dios,
CEO of GE Philippines and former DOE UnderSecretary

The Arangkada Philippines Project (TAPP) 2019 conference today at the Marriott Hotel Manila has a beautiful theme, “Turning on the TAP (Tourism, Agribusiness, Power).” TAPP is a major project of the Joint Foreign Chambers (JFC) in the Philippines composed of the Chamber of Commerce of the US, Canada, the EU, Australia-New Zealand, Japan, and Korea.

One of the three policy papers to be launched is “A Policy Brief on the Philippine Power Sector,” co-authored by Emmanuel “Jocot” de Dios, Lorenz de la Cruz, and yours truly. The 39 page-long paper contains a wealth of data, analysis, and recommendations addressed to both government and private stakeholders. Below is among the data presented there, I expanded the countries and years covered in the first two tables. Data sources are the BP Statistical Review of World Energy 2019, and US CIA Factbook.

The Philippines has low installed power capacity to cover increasing peak demand and unscheduled outages. Our 22 GW capacity in 2016 was just half of the capacity of Thailand, Vietnam, and Taiwan. Our electricity generation in 2018 was only half of Vietnam’s, which showed almost 10 times expansion over 1998 level (see Table 1).
  
  
Many environmental and climate activists oppose continued use of coal and even natural gas in power generation. They are misguided in imposing their desire on the rest of the Philippines population and businesses because our coal and natgas (natural gas) consumption is among the lowest in the region and if we cut those, we will be facing large-scale blackouts. Our coal use in 2018 was only half of Taiwan’s and Vietnam’s, one-fifth of South Korea’s, and one-seventh of Japan’s (see Table 2).

  
Low power capacity and low reserves lead to low electricity supply relative to demand and this results in higher electricity prices. When many other charges (transmission, distribution, system loss, universal, subsidies to renewables, etc.) and taxes are added to the generation cost, the result is the Philippines having the 3rd most expensive power in East Asia. Data sources are the International Energy Consultants (IEC), “Regional/Global Comparison of Retail Electricity Tariffs,” May 2016 and August 2018, and Department of Energy Director Mario Marasigan, Energy Outlook forum by Stratbase-ADRi, Sept. 27, 2018, Joy-Nostalg Hotel, Ortigas (see Table 3).

  
Now there are continuing moves to have more coal supply control, to oppose the construction of additional coal power plants like the proposed 1,200 MW plant in Atimonan, Quezon, and to have more power price control via lower secondary price cap in WESM.

Coal control, price control, wage control, rent control and other varieties of command and control are wrong. They distort the supply-demand dynamics towards shortages, discourage supply while encourage demand.

The Energy Regulatory Commission should fast track the approval of power supply agreements (PSAs) of more coal and conventional plants. We should have not just one but four or more 1,000+ MW new coal plants. Again, see Tables 1 and 2 on why this is necessary.

Business groups like the Federation of Philippine Industries (FPI) and Philippine Independent Power Producers Association, Inc. (PIPPA) are correct in pushing for faster PSA approval, which will encourage more gencos to build more power capacity, especially more baseload plants (running 24/7).

Less politics, less climate and energy alarmism, more energy realism and market competition. That is what we need.
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