July 6, 2023
https://www.bworldonline.com/opinion/2023/07/06/532516/energy-realism-g7-brics-and-other-big-asian-economies/
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I compared the economic and energy performance over the past 25 years — 1997 to 2022 — of four groups of countries: the G7 industrialized countries, the competing economic bloc BRICS (Brazil, Russia, India, China, South Africa), other big Asians (OBAs) like South Korea and Saudi Arabia, and the ASEAN-6.
The three indicators of comparison are: GDP size in Purchasing Power Parity (PPP) values, primary energy consumption (PEC), and power or electricity generation. The results are interesting.
One, 25 years ago the G7 countries, led by the US, were larger than BRICS in all three indicators. Today it is the reverse, BRICS, led by China, have overtaken the G7.
Two, all G7 countries except the US and Canada experienced significant declines in PEC, they seem to have embraced slow deindustrialization in hard pursuit of decarbonization and “net zero.” Their PEC has contracted 11% over 25 years vs. 123% growth in BRICS, 156% in OBAs, and 215% in ASEAN-6. And the power generation of G7 has increased only 6% after 25 years vs. 229% in BRICS, 265% in OBAs, and 372% in the ASEAN-6.
Three, within the ASEAN-6, Vietnam has overtaken the Philippines in all three indicators. Their PEC was only one half of the Philippines’ 25 years ago, now it is twice that of the Philippines (See the table).
The Philippines really needs to expand and modernize power generation, transmission, and distribution systems. We should keep the pace of the BRICS, OBAs, and ASEAN, not the G7. Our power generation is less than half of Vietnam’s — even if all conglomerates and corporations in the power sector will double their output in the next five to 10 years, it will greatly help but will not be enough given the high growth momentum and targets for the Philippine economy.
Yesterday I attended the Pandesal Forum on the subject “Achieving Philippine Energy Security through Strategic Policy Reforms” and the lone speaker was Secretary Raphael “Popo” Lotilla. The event was hosted by Wilson Lee Flores.
Among the points discussed by Secretary Lotilla were the following:
(a) President Ferdinand Marcos, Jr. is very serious about energy issues, they keep him awake at night;
(b) nuclear power in the Philippines is on the table, the President already mentioned it as early as in his first State of the Nation Address last year;
(c) high electricity prices in the Philippines compared to neighbors in Asia is partly because our neighbors subsidize their electricity, directly or indirectly, like Vietnam which asked their government to subsidize $2 billion last year, and Indonesia which, as a big coal producer and exporter, has cheap domestic coal;
(d) renewable energy’s share to total power generation will keep rising, 50% by 2040, with natural gas power as backup;
(e) the National Grid Corp. of the Philippines (NGCP) audit is proceeding, Congress is asked by the Energy department to review the NGCP franchise, it is the only corporation in the Philippines granted by Congress to pay only a 3% franchise tax in lieu of all other taxes;
(f) there is stranded energy, excess energy supply in some islands that cannot be shared or exported to other islands due to NGCP transmission congestion;
(g) there are reforms in electric cooperatives sought by local governments via corporatization or bringing in private corporations, or being registered with Philippine Cooperative Authority.
On high electricity prices, the Energy Regulatory Commission (ERC) has been adjusting rates down — the ERC-approved rate is lower than what was applied for in the power supply agreement between distribution utilities and generation companies.
While this is understandable as the ERC is trying to help mitigate high consumer prices, plus there is a policy where neither party can withdraw from the approved rate, there is problem in this modification of contract because this already went through competitive bidding.
One option is to decouple the generating plant from the energy supply contract. It becomes the supplier’s problem to source energy from one or more generators. It will also address the problem of capacity utilization or forcing plants to load follow at inefficient levels. With no plant linkage, there is no cost basis to evaluate, only the integrity of the bidding process. So, fuel costs become the supplier’s problem and safeguards can include financial penalties covered by L/Cs that can be drawn in case of default.
Meanwhile, there is a piece of good news — the energization of a remote health center in Barangay Laiban, Tanay, Rizal which serves over 3,000 individuals, done by Meralco under its community electrification program that covers low-income households. Good job, guys.
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See also:
BWorld 616, Financing sustained growth: NAIA privatization, July 02, 2023
BWorld 617, Energy realism: Raising consumption and economic growth, July 04, 2023
BWorld 618, Year 1 of Marcos Jr.: Budget deficit and unemployment, July 08, 2023.
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