Saturday, February 13, 2021

BWorld 474, No to indefinite electricity subsidies

* My column in BusinessWorld, February 9, 2021.

The issues of no disconnection for months, and electricity subsidy for the “lifeline” consumers extended for another 30 years until 2051, have elicited varied reactions from many legislators, energy players and the public. Here are recent reports on this subject plus related stories published in BusinessWorld.

1. “Due process not followed in FiT adjustment, NGO claims” (Feb. 1).

2. “NREB confirms higher quota for contracted RE power” (Feb. 5).

3. “Palace approves two more months of no disconnection for poor power consumers” (Feb. 5).

4. “Decarbonizing for a better working world” (Feb. 1 and Feb. 8).

5. “Regulator notifies 81 utilities of potential violations in second half of 2020” (Feb. 8).

Report number 1 is about Laban Konsyumer, Inc. (LKI) pressuring the Energy Regulatory Commission (ERC) not to give a high feed-in tariff (FiT) allowance especially for solar and wind projects. In 2014, FiT for solar and wind were only P9.68/kWh and P8.53/kWh, respectively. In 2021, these will be increased to P11.28/kWh and P9.90/kWh, respectively.

Lots of favoritism is given to solar and wind, with high guaranteed prices for 20 years via FiT even if overall power generation rates are falling. In 2020 for instance, the customer effective spot settlement price (ESSP) at the Wholesale Electricity Spot Market (WESM) was only P2.45/kWh, the load-weighted average price (LWAP) only P2.41/kWh. And solar-wind will get P11.28/kWh and P9.90/kWh. Lousy cronyism.

Report number 2 is about the National Renewable Energy Board (NREB) recommending the Energy Department to increase the minimum level of electricity contracted from renewable energy (RE) developers from the current 1% to 2.5%.

This will be burdensome for distribution utilities (DUs) which they will pass on to consumers. RE, especially solar-wind, is not cheap, it is expensive because it is unstable and intermittent, needs huge batteries, needs ancillary services from big diesel gensets as back-up power, which automatically raises the cost.

NREB now speaks as a big lobbyist for big solar-wind developers. Any public consultations done on how much additional cost consumers will endure and absorb? None as I know of. There are existing market-based schemes that promote RE, like the green energy option program (GEOP) under RA 9513 (RE law of 2008), and retail competition and open access (RCOA) under RA 9136 (EPIRA law of 2001). So why would NREB and big solar-wind developers impose higher punishment for the consumers? Get lost, guys.

Despite sweetheart schemes for RE like FiT, fiscal and non-fiscal incentives, priority dispatch to the grid under the RE law of 2008, solar, wind, and biomass still contribute very little. In 2019, latest national data from the Department of Energy (DoE), these three intermittents combined contributed only 3.2% to total power generation. In 2020, data from the Independent Electricity Market Operator of the Philippines (IEMOP) show that these three intermittents contributed only 4% of total power generation in the Luzon-Visayas grids (see Table 1).

Report number 3 is about extending the “no-disconnection” policy for lifeline consumers (those using 100 kWh/month or less) by two more months, and bills in Congress and Senate that extend the lifeline rates and subsidies until 2051, next 30 years.

These are energy socialism policies. No disconnection even if lifeline consumers do not pay their electricity bills for more than one year is the government removing household responsibility and passing this as private sector responsibility. It will adversely affect everyone in the power sector — DUs and electric cooperatives (ECs), generation companies (gencos), the transmission company, the banks that lend to these companies, etc.

I saw the statement issued by the Philippine Rural Electric Cooperatives Association, Inc. (Philreca) on Feb. 4. They are correct in saying that “If electricity consumers default on their utility bills payments, then, the DUs will eventually default as well to its power suppliers.”

Congress and NGO lobbyists that push for “no disconnection for lifeline consumers” forget or ignore that the private firms are themselves suffering from the pandemic too. Legislators and politicians pushing this are trying to look good with other people’s money.

Report/opinion number 4 is extending climate alarmism and RE cronyism agenda. If we look at our rich neighbors in the ASEAN like Singapore and Malaysia, they hardly care about having more intermittent energy in their electricity grid. The share of solar-wind in their total electricity generation in 2019 was less than 0.5% (see Table 2).

Report number 5 seems serious but there are no details given. These could be related to accumulated bills that run to tens of thousands because there were no monthly billing and collections from March to May or June.

The proposed electricity subsidy to lifeline customers until 2051 is wrong. A rich household with rooftop solar and which uses little electricity from the grid — below 100 kWh/month — is not a “lifeline” customer and hence, does not need a subsidy. A rich household in an expensive condo that uses all energy-efficient appliances and lights and consumes below 100 kWh/month is not a “lifeline” customer and hence, does not need a subsidy. And even poor households are already given monthly cash allowances by the government, have free healthcare, free education, so they hardly deserve additional electricity subsidy.

Endless subsidy policies promote mendicant and state-dependency thinking. They corrupt people’s values that individual and household responsibility can be erased because the government can always coerce and enforce corporate responsibility as a substitute. Not good.

See also:
BWorld 471, The US and world economy these past four years, January 24, 2021 
BWorld 472, Subsidies and energy policies under Biden, February 02, 2021 
BWorld 473, Growth, vaccine, ‘Cha-cha,’ and DND drama in UP, February 03, 2021.

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