* This is my article in
BusinessWorld last August 11, 2017.
The Philippines has acquired a growth momentum that
started a few years ago in the past administration and we are now looked upon
as among the fastest growing economies in the world. Sustaining fast GDP growth
will require stable and cheaper energy because almost all economic activities
now require energy and electricity.
The World Energy Council (WEC), a UN-accredited global
energy body composed of 3,000+ organizations from 90+ countries (governments,
private and state corporations, academe, NGOs, other energy stakeholders)
produces the annual World Energy Trilemma Index.
The Trilemma index is based on a range of data sets that
capture both energy performance and their context, indicating energy
sustainability of countries. The index is composed of three factors: energy
security, energy equity, and environmental sustainability, defined as follows:
Energy security — effective management of primary energy
supply from domestic and external sources, reliability of energy
infrastructure, and ability of energy providers to meet current and future
demand.
Energy equity — accessibility and affordability of energy
supply across the population.
Environmental stability — achievement of supply and
demand-side energy efficiencies and development of energy supply from renewable
and other low-carbon sources.
There are 125 countries covered and ranked. Top five
countries overall in the 2016 report are Denmark, Switzerland, Sweden,
Netherlands, and Germany. Here are the rankings of selected Asian countries.
Some Asian economies not included in the study are Indonesia, Taiwan, and Vietnam
(see table).
Based on these numbers, here are the implications for the
Philippines in energy policy:
1. Environmental sustainability: We are already world’s
number one in this category. We have high reliance on renewables like hydro and
geothermal plus newly added renewables like run of river hydro, biomass, solar
and wind. There is no need to “further decarbonize” as suggested by the CCC,
DENR and other greenies, suggesting that we close or discontinue having more
coal power plants.
2. Energy equity: We are very low here, ranking 92nd
because of our expensive electricity, 3rd highest in Asia next to Japan and
Hong Kong. However, there has been a steady decrease in generation cost of
electricity in the country. The Load Weighted Average Price (LWAP) at the
Wholesale Electricity Spot Market (WESM) has decreased from an average
P5.37/kWh in 2012 to P4.65 in 2014 and further down to P2.81 in 2016. This is
the result of more big coal plants, more players, more competition. But there
are other factors that can neutralize these as discussed further below.
3. Energy security: We are midway, ranking 61 out of 125
countries in this category. We need to add more big conventional plants to take
over many aging plants, and to put in place an LNG facility in Batangas to
import gas in case no substantial gas reserves are discovered when Malampaya
gas runs out sometime around 2024.
There are at least four dangers in Philippine energy
policies resulting in prices either rising or flatlining.
One is feed-in-tariff (FiT) or guaranteed high prices for
20 years for variables renewables especially wind-solar. FiT has been rising
steadily and slam-dunking all electricity consumers from Aparri to Tawi-tawi:
four centavos/kWh in 2015, 12.40 centavos in 2016, 18 centavos middle of this
year, and going up to 26 centavos (Transco petition at the Energy Regulatory
Commission [ERC]) later this year.
Two is transmission charge. NGCP must add more ancillary
services to stabilize power supply from intermittent wind-solar, and build more
transmission facilities in far-flung areas where these wind-solar plants are
constructed. Consequently, transmission fees will slowly and steadily rise.
Three is system losses. High losses in provinces — areas
which are run by monopoly electric cooperatives (ECs) — are ultimately passed
on to the consumers. Current ERC and legislative proposals plan to allow these
ECs to retain their high system losses while pressuring private distribution
utilities (DUs), which on average have low system losses, to further bring this
down.
Four is the impending renewable portfolio standards
(RPS). This will require all ECs, DUs, and retail electricity suppliers (RES)
to get a mandatory, minimum percentage of their electricity sales to come from
expensive wind-solar and other variable renewables. If these renewables are
cheap and getting cheaper as claimed by their developers and lobbyists, there
is no need for RPS. But because they are expensive, RPS is made mandatory and
coercively imposed.
Nature has given the Philippines energy advantage.
Volcanoes have given us plenty of geothermal resources and potentials. Our big
mountains have given us more waterfalls and big river systems.
Government policies favor expensive electricity via FiT,
RPS, priority dispatch of renewables at WESM, accommodating more renewables in
the grid. These policies must be reversed soon. Only then will we have higher
scores in energy equity and energy security and finally, economic security.
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See also:
BWorld 145, Energy agenda of China’s Belt and Road Initiative, August 11, 2017
BWorld 146, Mining and industrialization in Duterte SONA 2017, August 12, 2017
BWorld 147, Sugar tax and health alarmism, August 15, 2017
