Sunday, July 25, 2021

BWorld 496, Energy and economic development

* My article in BusinessWorld last July 13.

After the yellow-red alerts and blackout in the Luzon grid in late May to early June caused by many big but old and ageing power plants going on extended maintenance shutdowns and derating, this month the issue has shifted back to amending the Electric Power Industry Reform Act (EPIRA) of 2001 and kill-coal narratives. See these two reports in BusinessWorld: “House bill seeks to allow gov’t to own power plants, halt hydro privatization” (July 5); and, “Climate advocate calls for ban of coal-fired plants to extend to pending projects” (July 11).

The first report is about amending the EPIRA law which mandated the government to get out of the power generation business, including the big hydro plants in Mindanao, and encourage more private power generation competition. That House Bill will amend the EPIRA for the worse, not for the better.

The second report is about the endless lobby by environmental groups to kill coal power in the Philippines, not just for new projects but even for existing ones, and push more renewables especially wind and solar.

To understand the impracticality of this lobby, see the global power generation picture from the BP Statistical Review of World Energy (SRWE) 2021 that was released last week. I chose the big power and electricity generation countries in the world plus the ASEAN-5, then I computed the percentage share of coal power and wind plus solar. 

The numbers above show the following.

1. Electricity generation. Four of the five countries with more than 1,000 TWH generation are in the world’s top six largest economies or gross domestic product (GDP) size — the USA, China, India, and Japan. Further proof that energy is development, big electricity output is big GDP output.

2. Coal generation. Many Asian countries have coal output at at least 36% of total electricity generation in 2020. These are also the countries with high average GDP growth from 2010-2019: China 7.7%, India 7.0%, Vietnam 6.5%, the Philippines 6.4%, Indonesia 5.4%, Malaysia 5.3%, Taiwan 3.6%, and South Korea 3.3%.

The Philippines’ 58.2 TWH coal generation in 2020 is actually small, only half of Vietnam and Taiwan’s, a third of Indonesia’s, nearly a fourth of South Korea and Japan’s, 1/14 of the US’, and 1/85 of China’s coal generated power. And yet many environmentalists bully the Philippines while they cannot do the same to China, India, and Russia.

3. Wind plus solar generation. European countries are leading in “decarbonization” and have high solar plus wind share to total electricity generation of at least 10%. They are also the countries with slow GDP growth. Average growth 2010-2019: Germany 1.9%, the UK 1.8%, France 1.4%, Spain 1.1%, and Italy 0.3%.

For the first half of 2021, the power generation mix in the Luzon-Visayas grids reflect a similar mix as 2020. During a media briefing last week by the Independent Electricity and Market Operator of the Philippines (IEMOP), the reported average generation mix from April-June 2021 were as follows: coal 55.7%, natural gas 23.6%, geothermal 10.5%, hydro (big and run of river) 4.1%, oil-based 2.5%, solar 1.8%, biomass 1%, wind 0.9%.

Solar, wind, biomass, and run of river hydro are given subsidies via feed-in tariff (FiT), fixed and guaranteed price for 20 years under the Renewable Energy (RE) law of 2008 (RA 9513). So, after 13 years, solar, wind, biomass can produce only 3.7% of total electricity generation.

IEMOP also reported high demand forecast accuracy of the Enhanced WESM Design and Operations (EWDO) with five-minutes interval, day before forecast for peak demand is high 99.2% in Luzon grid and 99.0% in Visayas grid.

The Philippine Electricity Market Corp. (PEMC), the governing board of the Wholesale Electricity Spot Market (WESM), is monitoring compliance by market participants to EWDO.

The good thing in the Philippines electricity market is that there is bigger role for private sector competition in power generation and retail distribution. Market operations are now in the hands of the private sector too. The only thorns are a private monopoly in transmission (granted a Congressional franchise) and the endless lobby to amend EPIRA and some power plants to remain in government hands and hence, non-competitive.

The Philippines should prioritize higher growth and more job creation for its people via cheap and stable energy, not the environmental lobby to kill fossil fuels and thus court frequent blackouts by relying on unstable, unreliable, non-dispatchable wind and solar.

Bienvenido S. Oplas, Jr. is the Director for Communication and Corporate Affairs, Alas Oplas & Co. CPAs
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See also: 
BWorld 493, 10 trends in lockdowns, COVID deaths, and vaccinations, June 26, 2021 
BWorld 494, The economic and energy legacy of PNoy Aquino, June 30, 2021 
BWorld 495, High growth under PNoy Aquino and tax cuts under Duterte, July 12, 2021.

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