Government and Taxes: Majah Ravago

Showing posts with label Majah Ravago. Show all posts

Saturday, November 12, 2016

BWorld 90, Who should set the energy mix, government or consumers?

* This is my article in BusinessWorld last November 02, 2016.

This question seems to have a “default” answer: the government and it is time to revisit the premise of government being the central planning body that sets the Philippines’ energy mix.

The Energy Policy Development Program (EPDP) composed of mostly UP School of Economics (UPSE) faculty members as fellows and researchers produced their most recent paper, “Filipino 2040 Energy: Power Security and Competitiveness.” The 52-page long paper projects two scenarios for the Philippines until 2040, the strong/fast growth and slow/mediocre growth, and the projected energy demand and prices based on four policy options. Here are the projected cost of electricity by 2040 based on current technology and two Sensitivity Analysis (SA) that project the cost of variable renewable energy (VRE) on two scenarios. (see Table 1)

The numbers for policy #4 under the three scenarios above do not account yet for these two costs: (a) intermittency cost of VREs (possibility of frequent brownouts) and (b) grid integration cost of VREs (will require additional investment by NGCP). The EPDP paper noted these two costs:

“For example, a 16 GW wind turbine in Scotland requires a grid investment of £4 billion... In Britain, a 34% share of renewables in their generation and transmission imposes a likely cost of £6.8 billion a year, or an extra 38% increase.”

This EPDP paper was presented by lead author, Dr. Majah Ravago during the Stratbase-Albert del Rosario (ADRi) and Foundation for Economic Freedom (FEF) forum on “Affordable Electricity: a Requisite for Competitiveness” held at Oakwood in Mandaluyong City last Oct. 26.

As one of the two reactors during the event, I expressed my disagreement with some of the numbers presented, as indicated on the table.

Even under current technology, the price gap between policy #2 (the current energy mix) and policy #4 (being pushed under RA 9513 or Renewable Energy Act of 2008) by 2040 will be small.

In Germany’s experience of feed in tariff (FiT) for instance, the price and subsidies did not flatten or decrease, they only kept rising, endlessly. From €0.20 cents/kWh in 2000 to €0.42 by 2003, €0.88 by 2006, €1.31 by 2009, €3.53 by 2011, €5.28 by 2013, €6.24 by 2014, €6.35 this year and projected to further rise to €7.1 by 2017. A whooping 35.5x increase after 17 years.

I also mentioned the case of massive, state-wide blackout in South Australia last Sept. 28.

Some areas lost power for five hours, others ten while others for one week or more.

While Australia is 69% dependent on coal, especially the state of Victoria, the state of South Australia is heavily dependent on wind power. When the wind does not blow, wind turbines’ output is zero. When the wind blows too much like the big storm that day, many wind operators shut down and lock their wind turbines to prevent damage, and wind output was also zero, triggering a series of power trips that resulted in state-wide blackouts.

Below are actual electricity production and not just installed electric power capacity for selected economies in Asia Pacific in 2012.

The ADB’s Key Indicators 2016 report has yet to be released as of this writing. Note the wide disparity in energy mix in favor of coal for many of them (see Table 2). Those that are more dependent on natural gas are Thailand, Malaysia and Singapore (84.3%).

Note that all those countries that are more coal dependent than the Philippines have lower electricity prices than us except Australia because of the latter’s high grid or transmission charges, more than twice that of the Philippines.

Thus, if more coal reliance would result in cheaper, more stable, electricity supplies, why should the Philippine government -- through the Department of Energy (DoE), Energy Regulatory Commission, and even Congress -- impose regulations that will force us to have less coal power and instead, have more intermittent, unstable, expensive renewables?

So, who should set the optimal and consumers-oriented energy mix, the state or the public? The government or the consumers?

The obvious answer is the consumers; residential, commercial, agricultural, industrial consumers. They are the ones who will ultimately pay the monthly electricity bill, the ones who will suffer if brownouts become frequent.

Policy option #2 of EPDP should be pursued by the government. The DoE and Congress should step back and respect the consumers’ right to cheaper and stable electricity.

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Friday, April 01, 2016

Energy 61, EPDP lecture on PH power projections by 2040

Yesterday afternoon, I attended the Energy Policy and Development Program (EPDP) lecture at the UP School of Economics (UPSE). The 5 co-authors were all there. The powerpoint version of this 34-pages paper was presented by Dr. Majah Ravago. Lecture room was full, audience from different groups, energy companies, NGOs.

http://garnet.zoom.ph/~upeconor/wp-content/uploads/2016/03/DP2016-01-Filipino-2040-Energy_Power-Security-and-Competitiveness.pdf

Sadly, there was no one from the WWF because during the open forum, I referred to them as "dishonest people" (audience laughed) for claiming that the capacity factor of renewables is 53%. From WESM data, capacity factor of solar in the PH is around 18% only, wind about 14%, biomass about 12%, so where did the WWF get their 53% figure, from the cold air of the Arctic or Antarctica?

(next 2 photos below from EPDP fb page)

The EPDP team however used the WWF data in projecting PH power capacity by 2040. I hope they will discard that WWF paper as a source and make another PH power projection.

Among the slides shown was this chart, that the generation charge in Meralco area is the biggest component of our monthly electricity bill. I pointed out during the open forum that one reason for this is that the cost of generation for natural gas power plants is distorted upwards by government royalty or energy tax, the Malampaya royalty. It is about P1 to P1.50/kWh, the royalty alone, that government collects from the Malampaya consortium (composed of Shell, PNOC, another company) that developed the nat gas field offshore of Palawan, which the consortium passes to the 2 power companies that own and run the 3 nat gas power plants in Batangas, and these companies ultimately pass it to us electricity consumers in the form of higher generation cost.

So this type of energy pricing by the gencos in the PH, that P4.48/kWh from nat gas includes the Malampaya royalty or energy tax (about $1 B a year, makes the government richer, greedier). If there was no royalty, then the consortium and the 3 power plants in Batangas that use the Malampaya nat gas can sell at around P3 to P3.50/kWh including their profit already.

I did not comment anymore on carbon tax as inspired by the UN FCCC global energy racket. There were many hands raised that afternoon from an active audience.

So this is the result of using that lousy and dishonest WWF data on capacity factor of renewables. The projected installed capacity by 2040 under the 30% minimum share of renewables is 48 GW. If the more realistic cap factor of around 16% for renewables is used, then the required installed capacity by 2040 should be 50+ GW.

Nonetheless, this table and projection shows a very important point -- that if we use the 30% mandatory renewables share by 2040, we will require some 48 GW of installed power cap (in 2014 it was 16+ GW) and the average generation cost will be P6+/kWh.

Whereas if we discard that 30% mandatory renewables, we will need only 40.5 GW of installed capacity to serve some 130 M Filipinos by 2040. And the cost of generation that consumers will pay will be lower, only about P4.7/kWh.

I like the points made by Alan Ortiz of San Miguel Energy Corp. (SMEC), the biggest genco in the country, followed by Aboitiz Power, First Gen and so on. Especially on the cost of building renewable power plants: about $5M per MW for solar, $4M/MW for wind and hydro, $2M/MW for coal. And solar requires 2 hectares of land to produce 1 MW of power. Me thinks that if actual electricity production is considered and not the installed capacity, it will require about 5-6 hectares of land to produce 1 MW because solar's average capacity factor is only around 18%. That is, a 100 MW solar farm can actually produce only around 18 MW on average.

After the lecture. All UPSE faculty members and EPDP Fellows, except the left most :-) From left: Ruping Alonzo, Raul Fabella, Ernesto Pernia, Majah Ravago, Rolly Danao. Sir Ruping (also my ninong, wedding godfather) and Raul were my former teachers at the school.

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