Energy 101, Disinformation and fake stories by the watermelon movement

Fake stories and disinformation can be rampant in the energy sector because of the climate alarmism drama and renewables cronyism agenda. A recent example is one published in BWorld last Thursday, The Philippines’ Ill-Advised P1 Trillion New Coal Gamble, October 20, 2017 By Sara Jane Ahmed.

The lady seems to be ignorant of many data before writing their anti-coal drama. Some things she wrote:

1. “High electricity prices are driven by imported fuel and subsidies; electricity surcharges…”

à Wrong. Check Meralco website for customer charges, http://www.meralco.com.ph/consumer-information/rates-archive. Here, October 2017 charges, if one consumes up to 300 kWh, he would pay a total of P2,880, one-half of which is for generation charges and the other half for 11 other charges including taxes and FIT subsidy for mostly wind-solar. 

From the generation charge, about half of which are from Malampaya natgas-using plants in Batangas; there are hydr0, geothermal, coal could be about 40% of Meralco energy mix.

2. “Diesel dependence, much like our growing national coal dependence, is a result of subsidies…”

à Wrong, diesel has no subsidy, or maybe she refers to the current zero excise tax for diesel but under Duterte TRAIN, it will soon be slapped with P6/liter excise tax.

3. “Coal subsidies assure the private sector guaranteed returns…”

à Wrong. Currently coal excise tax is P10/ton but under TRAIN, to rise to P20/ton. Now Dr. Ciel Habito proposes a P600/ton excise and carbon tax for coal. I criticized his proposal here, http://bworldonline.com/carbon-tax-wrong/

4. “Meralco is currently underwriting a solar power supply deal for 85 megawatts (MW) at P2.99 per kWh.”

à True, and that’s the exception, from Solar Philippines of Leandro Leviste, son of Sen. Loren Legarda. Many solar farms here are given the cronyist FIT or guaranteed price for 20 years of P8.69 to P10+/kWh.

5. “Philippine’s financial sector as massively exposed now to the eventual stranding proposed new coal fleet to the tune of more than 10,000 MW in overcapacity and P1.05 trillion in financial risk”.

-> See this: “Countries that have coal consumption of at least 2.1x expansion over the past two decades are also those that experienced fast GDP growth of at least 3x expansion. Prominent examples are China, India, South Korea, Indonesia, Vietnam, Malaysia, Philippines, and even Pakistan.” http://bworldonline.com/high-carbon-tax-irrational/

Finally, the lady is highly disoriented, talking about diesel and coal subsidies when there is none. Yet silent on renewables subsidies, haha. P10B in 2015, P18.5B in 2016, P24.4B this 2017, and P26B next year. The main recipients of this renewables cronyism are the wind farms of the Lopezes/EDC, Ayalas' Caparispisan and Bangui, Phinma, Alternergy/Vince Perez, etc. http://www.bworldonline.com/content.php?section=Opinion&title=why-the-fit-all-is-a-burden-to-consumers&id=145326

The "planet saviours", the renewable cronyism lobbyists, they want more government intervention -- in arm-twisting consumers to pay higher electricity to subsidize renewables; in coercing the grid to prioritize the intermittent, unstable, unreliable, non-dispatchable energy sources; in choking and even killing stable, reliable, dispatchable 24/7 sources like coal, gas and nuke. Watermelons -- green outside, red inside.
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See also:

Energy 98, Wind-lover S. Australia has highest electricity rates in the world, August 14, 2017 

Energy 99, Germany's FDP questioning or ditching Energiewende, October 04, 2017 

Energy 100, Bjorn Lomborg on World energy mix, October 19, 2017

BWorld 120, Five myths of solar-wind energy

* This is my article in BusinessWorld on March 20, 2017

Variable renewable energy (RE) like wind and solar are far out from giving humanity sufficient, stable, and cheap electricity to sustain growth and fight poverty. For the simple reasons that they are very intermittent and expensive. Below are five of the common myths that we hear and read about wind and solar.

1. Solar, wind, biomass, and other REs will replace fossil fuels as major global energy sources in the near future.

Wrong. From the projections by the two of the world’s biggest oil and gas companies, these REs, which may also include geothermal, will produce only 8.5% of global energy demand (Exxon Mobil data) or 6% (British Petroleum data) by 2025.

2. The share of coal, gas, and nuclear will further decline as the world moves towards implementing the Paris Agreement of 2015.

Wrong. From both EM and BP projections, there is no let up in global use and demand for fossil fuel and nuclear sources in the near future. This is for the simple reason that people anywhere dislike power interruption even for one minute, much more frequent and involuntary outages lasting many hours, daily or weekly.

3. Solar and wind are cheaper than coal now, their overall costs will keep falling.

Wrong. The feed-in-tariff (FiT) rates or guaranteed price for 20 years for solar-wind keep rising, not declining. For first group of solar entrants, their FiT rates in Pesos/kWh were 9.68 in 2015, 9.91 in 2016, and 10.26 in 2017. For second group of solar entrants, their FiT rates were 8.69 in 2016 and 8.89 in 2017.

For wind power first group of entrants, their FiT rates in Pesos/kWh were 8.53 in 2015, 8.90, in 2016 and 9.19 in 2017. For second group of wind entrants, their FiT rates were 7.40 in 2016 and 7.72 in 2017. Only the sun and wind are free but the panels, switchyards, cables, wind turbines, towers, access roads, etc. are not.

Current power prices in Mindanao are only around P2.80/kwh as many new huge coal plants compete with each other along with hydro and geothermal plants. No additional charges.

4. Solar and wind have no social cost (SC) while the SC of coal is very high.

Wrong. Solar and wind are very land-intensive and, as a result, more areas for food, commercial, and forest production are diverted to accommodate more solar and wind farms. To have 1 MW of installed solar power, one will need about 1.5 hectare of land. So to have a 300 MW solar plant, one will need about 450 hectares of land; San Miguel power has a 300-MW coal plant in Mindanao sitting on only 30 hectares of land, or hectare/MW ratio of only 0.1 for coal vs. 1.5 for solar.

Since solar has a low capacity factor, only 18% of its installed capacity -- from 450 hectares of land with installed power of 300 MW -- can actually produce only around 54 MW.

Majestic solar, 66.3 MW in CEZA, Rosario, Cavite is not included here because it is a rooftop facility and hence, does not occupy extra land area.

5. Carbon dioxide (CO2) pollution and emission from coal power plants will further warm the planet.

Wrong. CO2 is not a pollutant or evil gas. It is a useful gas, the gas that we humans and our animals exhale, the gas that our rice, corn, flowers, trees and other plants use to produce their own food via photosynthesis. More CO2 means more plant growth, more food production, more trees regenerating naturally, which have cooling effect on land surface.

The above five myths were among the topics discussed during the World Wildlife Fund (WWF) and Institute for Climate and Sustainable Cities (ICSC) “Roundtable on Philippine Energy Security and Competitiveness” last Friday, March 17 at UPSE in Diliman, Quezon City. The main speaker was Dr. Majah Ravago of UPSE and EPDP and she presented the main EPDP paper, Filipino 2040 Energy. The five reactors included Jose “Viking” Logarta of the ICSC and Dr. Christoph Menke of Trier University of Applied Sciences in Germany. Dr. Menke discussed the GIZ paper criticizing the EPDP paper.

Governments should not create regulations that distort the energy market away from real competition. Insisting on dishonest claims like “carbon pollution” and “renewables to save the planet” only lead to more expensive and unstable energy supply, wasteful use of land and other natural resources.

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See also: 

BWorld 114, Brownouts, ancillary services and transmission charge, March 23, 2017 

BWorld 117, Energy bureaucracy, electric cooperatives and NEA, March 28, 2017 

BWorld 118, Regulate this, prohibit that: bureaucracies in transportation, March 30, 2017 

BWorld 119, Seven myths in the mining debate, April 07, 2017

BWorld 105, Top 10 energy news of 2016

* This is my article in BusinessWorld last January 6, 2017.

Here is my list of 5 international and 5 national or Philippine important energy issues last year.

INTERNATIONAL

1. Donald Trump and his energy policies.

US president-elect Donald Trump’s energy policies are summarized in his major campaign platform, “Seven actions to protect American workers” and these include:

“FIFTH, I will lift the restrictions on the production of $50 trillion dollars’ worth of job-producing American energy reserves, including shale, oil, natural gas and clean coal... SEVENTH, cancel billions in payments to UN climate change programs and use the money to fix America’s water and environmental infrastructure.”

So far some of Mr. Trump’s Cabinet Secretaries are his fellow skeptics of the anthropogenic or “man-made” climate change claim (climate change is largely cyclical and natural or “nature-made”), or simply pro-oil. These include: (a) Environmental Protection Agency (EPA) head is Scott Pruitt, former attorney general of Oklahoma; (b) DoE Secretary is former Texas Governor Rick Perry who is pro-drilling; and (c) Secretary of State is Rex Tillerson, CEO of the oil giant Exxon Mobil Corp.

2. OPEC cut on oil production.

For eight years, OPEC never cut its oil production despite declining oil prices to protect its global market share under intense pressure from huge shale oil supply from the US. In November 2016, OPEC finally blinked and decided to cut their collective oil output by 1.2 million barrels per day (mbpd) hoping for an increase in oil prices. Non-OPEC countries like Russia and Mexico made an agreement with OPEC to cut output by another 0.56 mbpd, for a total projected output cutback of about 1.8 mbpd. So far, price impact was marginal as oil prices before this OPEC decision was already touching $50 a barrel. But once US shale oil output ramps up, this marginal price increase can easily be reversed.

3. More wind-solar means more expensive electricity in selected countries in Europe.

The numbers below show that countries with expensive electricity (1-5) have zero or little nuclear power, have high wind power (except Belgium and Italy), and high solar capacity (except Spain). And cheaper electricity countries (6-10) have high nuclear power (except UK and Netherlands) and low wind (except Sweden), low solar capacity (see Table 1).

4. By 2040, 46% of global energy demand will come from Asia Pacific.

Based on a recent report by Exxon Mobil which grabbed global energy headlines, it said that it expects China, India, and the rest of Asia Pacific (including Japan, ASEAN, and Australia) will increase its global share of total energy demand from 234 quadrillion British thermal units (BTUS) in 2015 to 322 quadrillion BTUs by 2040. The percentage share of the region will rise from 41% of global demand in 2015 to 46% by 2040. In contrast, the share of EU and the US combined will shrink from 28% in 2015 to only 22% by 2040 (see Table 2). 

5. By 2040, wind, solar, biomass, other renewables will contribute only 11% of total global power generation.

Coal will remain the dominant source in power generation worldwide by 2040 but its share will decline from 44% in 2015 to 34% by 2040. The share of natural gas and nuclear power combined will increase from 38% in 2015 to 45% by 2040. The share of wind, solar, geothermal and other renewables will marginally increase from 6% in 2015 to 11% by 2040, despite all the political noise worldwide that these renewables will get “cheaper than coal” and attain “grid parity” with conventional sources like coal and natural gas.

PHILIPPINES

6. Search for an Independent Market Operator (IMO) of WESM.

In the last Congress, then Sen. Serge Osmeña, Chairman of the Senate Committee on Energy conducted a series of meetings until January 2016 about the absence of an IMO that is supposed to manage the Wholesale Electricity Spot Market (WESM). The Philippine Electricity Market Corporation (PEMC) as market operator of WESM remains weird because (a) PEMC Board is chaired by the DoE Secretary, many board members are government officials; (b) Even the supposed four independent directors plus consumer representative (5 total) are all appointed by the DoE Secretary; and (c) PEMC is regulated by the Energy Regulatory Commission (ERC), which is under the administrative control of the DoE Secretary, who chairs the PEMC that is regulated by ERC.

7. WESM Mindanao, IMEM.

Aside from issues on the new Market Management System (MMS) for WESM rules and the transition to a real IMO, the move to create a WESM in Mindanao via the Interim Mindanao Electricity Market (IMEM) is gaining ground. The Mindanao dispatch protocol will have to be spelled out in detail too.

8. Imposition of Renewable Portfolio Standards (RPS).

In June 2016, the DoE issued a draft Department Circular (DC) on RPS, a provision in the RE Act of 2008 (RA 9513) that “requires electricity suppliers to source an agreed portion of their energy supply from eligible RE resources.” This RPS will result in more expensive electricity because wind, solar, biomass, and small hydro that are not given feed in tariff (FiT) privilege of guaranteed price for 20 years can demand higher price for their energy output because distribution utilities will have zero choice but buy from them otherwise the DoE will penalize them.

The draft DC wanted an initial “2.15% to be applied to the total supply portfolio of the Mandated Participant in each grid.” When asked what will be the projected price implication of such policy, DoE and National Renewable Energy Board (NREB) officials answered that no study on price implications has been made yet. A weird proposal where proponents have no clear idea on the cost of implementation to energy consumers, the DC was shelved.

9. Shift in energy mix from energy source to system capability.

During the administration of DoE Secretaries Petilla and Monsada, the DoE wanted an energy mix based on energy source or technology, 30-30-30-10 for coal-natural gas-RE-oil, respectively. This is highly distortionary because many REs are either seasonal (hydro can be baseload only during the rainy season, biomass can be baseload only if feedstock is available) or intermittent like wind and solar. New DoE Secretary Cusi changed the energy mix based on system capability: 70-20-10 for base load-mid merit-peaking plants, respectively. This is a more rational mixture.

10. Endless demand for expanded, higher feed in tariff (FiT).

As more solar farms and wind farms are constructed nationwide, their developers and owners are lobbying hard for an expanded FiT 2 with guaranteed price for 20 years. Even geothermal developers also lobbied that their new plants should also be given FiT. Currently, three wind developers -- Trans-Asia Renewable Energy Corporation (TAREC), Alternergy Wind One Corporation (AWOC), and Petrowind Energy, Inc. (PWEI) are petitioning the ERC that their FiT rate be raised from P7.40/kWh to P7.93/kWh. Three wind farms were lucky or favored to get P8.53/kWh under the original FiT -- EDC Burgos (Lopez group), Northern Luzon UPC Caparispisan (Ayala group) and Northwind Power Bangui (partly Ayala).

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See also:

BWorld 102, Top 10 news of 2016, January 10, 2017

BWorld 103, How to improve the RORO system, January 11, 2017

BWorld 104, Top 10 positive news in Asian trade, January 14, 2017

Energy 79, Germany Energiewende's €520 Billion Cost By 2025

Now clearer pictures of the cost of Germany's energy transition to the renewables are coming up, the huge financial burden to energy consumers because of heavy government interventions and cronyism -- subsidies to renewables, taxation and over-bureaucratism of coal, gas and nuke.  See these reports last week.

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English translation from the original German news report:

German Energiewende To Cost €520 Billion By 2025, New Study Initiative 

Neue Soziale Marktwirtschaft, 10 October 2016

The total cost of Germany’s green energy transition (Energiewende) amounts to over €520 billion euros by 2025 in the electricity sector alone. This is the result of a report commissioned by the Düsseldorf Institute for Competition Economics (DICE) on behalf of the Initiative New Social Market Economy (INSM)....

By far the biggest cost driver with a total of €408 billion is the levy to finance renewable energy (EEG levy). The expansion of electricity and distribution networks totals €55.3 billion. The study is the first full-cost estimate which takes all the costs of the energy transition in the electricity sector into account. In addition to the direct costs of subsidising renewable energy, indirect expenditures such as the cost for the expansion of transmission and distribution networks were included in the calculations, as well as offshore liability expenses and network, capacity and replacement costs.

At the end of 2015, 150 billion euros had already been spent on the Energiewende, not including the cost for network expansion. The bulk of the costs (25.000 euros for a family of four) will have to be paid in coming years." -- Translation by The Global Warming Policy Foundation, UK

And aside from expensive, unstable electricity from renewables like wind and solar, they devour the natural beauty of the countryside. Many German environmentalists are now turning 180 deg, from support to attack.

More news reports:

Vahrenholt writes that already today Germany has the second highest electricity price (after Denmark) in Europe and that the so-called renewable energy feed-in tariff will rise from 6.35 €ct/kwh today “to an astounding 7.3 €ct/kwh in 2017“. Germany’s green energy feed-in act generates an additional cost to consumers of some 25 billion euros annually, paid by citizens via their power bill. This represents “a social transfer from bottom to top of immense dimensions“. http://notrickszone.com/.../power-expert-says-germany.../

"often wind parks are approved by politician’s who have a direct interest and business dealings in them, meaning the industry is rampant crony capitalism – the very kind that Germans are typically famous for opposing. For example Rannungen mayor Fridolin Zehner had a wind turbine built where none is supposed to be built – on his own land – thus allowing the honorable mayor to cash in on lucrative leasing fees – to the tune of 10,000 euros annually." http://notrickszone.com/.../germans-media-sobers-up-to.../

"The Institute for Competition Economics at the University of Dusseldorf has calculated the total cost of Germany’s Green Energy Transition. The result: By 2025, an estimated €520 billion euros will be spent. A family of four will pay more than 25,000 euros for the Energiewende.

Seldom was a German environment minister more ridiculed and mocked than Peter Altmaier (CDU): Three years ago, the current Chancellery Minister warned that the cost of the Energiewende could, if nothing were done, “cost the country around one trillion euros by the 2030.”

Major magazines and weekly newspapers from Wirtschaftswoche to Die Zeit immediately snapped that the environment minister must have got it wrong. “Don’t scare the living daylights out of people with horror figures,” Baden-Württemberg’s Prime Minister and Green Party star Winfried Kretschmann demanded." http://www.thegwpf.com/germanys-renewable-energy-cost.../

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See also:
Energy 76, PEMC reply to my article on AEMO, WESM, September 11, 2016 
Energy 77, South Australia's blackout last September 28, October 08, 2016 
Energy 78, AEMO on the S. Australia blackout last Sept. 28, October 13, 2016

BWorld 82, No FIT for geothermal and other renewables, please

* This is my article in BusinessWorld last September 01, 2016

Expensive electricity via government price guarantee for 20 years is wrong. Business is about risks and returns, capitalism is about corporate expansion and bankruptcy, so there is no such thing as guaranteed price nor assured profit for many years in a competitive economy. Only politics and cronyism will try to negate the nature of competition and business reward and punishment.

Last Aug. 17, 2016, it was reported here in BusinessWorld that Geothermal technologies sought to be included in FiT program.

“The National Geothermal Association of the Philippines (NGAP) is asking the government to include emerging geothermal technologies in the feed-in-tariff (FiT) program to address the cost and risks encountered by developers,” the report said.

This is wrong. Other renewables should also not aspire for FiT system. Granting FiT for intermittent renewables like wind and solar for 20 years was already wrong because it exposed consumers to high and rising electricity prices and the grid to volatile power fluctuations within minutes, among others.

The association was correct in calling that “On the policy front, NGAP calls for expedited regulatory action and permit approvals, as well as assurance of peace and order in some of the more remote prospects.”

Let there be less government interventions and bureaucracies for businesses.

Another reason why granting FiT to geothermal and other renewables is wrong is because energy technologies keep improving and hence, their costs keep falling. So why give an assured, guaranteed high price for technologies that evolve towards falling price through time?

The numbers below on levelized cost of electricity (LCoE) will support the above statement. LCoE is not a perfect measurement of the overall cost per technology but it is a good dimension of the overall competitiveness of different power generation technologies.

Some definitions here.

a. Dispatchable energy sources are those that can easily adjust to consumer demand. Non-dispatchable technologies are those that are generally dependent on the weather.

b. Capacity factor means the ratio of actual electricity output over rated or installed capacity.

c. CC means combined cycle for natural gas plants.

d. CCS means carbon capture and storage, it is made mandatory by the US government for all new coal plants and it pushes the capex to high levels, making coal power in the US more costly (see table).

So in the US, the no. 1 geothermal electricity producer in the planet, the LCoE of geothermal is falling fast, the lowest among all energy sources at only $42.3/MWh by 2022. The Philippines is no. 2 geothermal producer in the planet, next only to the US. Technologies also follow the law of diffusion of molecules, making expensive technologies become cheaper through time.

On another note, I wrote in my column last Aug. 17, 2016, Brownouts, coal power and the electricity market, “can we expect PEMC to be more independent, more candid, in assessing the harm, actual and potential, of more REs in WESM and grid stability?... no. The DoE cannot contradict itself and say that REs are necessary and that REs are dangerous to the customers’ pockets and the stability of the national grid.”

The Philippine Electricity Market Corporation (PEMC) through Atty. Phillip C. Adviento replied last Aug. 23, 2016. They said that PEMC “acts only as the Market Operator responsible for the governance and operations of the WESM. The function of maintaining the security, reliability and integrity of the power grid is lodged with the System Operator. Against this context, it is grossly inaccurate to claim that PEMC is expected to study the impact of influx of RE resources in the grid.”

Good point, I recognize that strict distinction between a market operator (of WESM) and system operator (of the national grid). Still, PEMC has the data, it generates that data, of the intermittency per hour and even per minute, of the overall low capacity factor, of the renewables that enter the WESM.

PEMC added that it is “not a government-controlled corporation.”

However, it IS a private but government-controlled corporation. The Governance Commission for GOCCs (GCG) itself said this at the Senate Committee hearing last Jan. 26, 2016, then chaired by former Senator Serge Osmeña III.

Since the DoE Secretary sits as ex officio Chairman of the PEMC Board, the Secretary determines who among the private players can sit and cannot sit on the board, the Secretary has included government-owned energy corporations on the board even if they have minimal or zero contribution to electricity supply at WESM (NPC and PSALM), also TransCo. That makes PEMC a government-controlled corporation.

Government needs to step back from its intervention in the sector. It should reduce the number of permits that firms need to secure so that they can put up new power plants quickly. The government should also cut or abolish the system of guaranteed price for decades for favored renewables, reduce the taxes and fees imposed on energy companies, and the electricity costs paid by the customers.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a Fellow of SEANET and Stratbase-ADRi.

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See also: 

BWorld 66, Renewable portfolio standard and electricity prices, June 26, 2016 
BWorld 70, Wind power firms corner billions of FIT money, July 09, 2016
BWorld 76, Solar can never power the PH and Asia, August 06. 2016 

BWorld 79, Brownouts, coal power and the electricity market, August 21, 2016 

BWorld 80, Declining share of agriculture in GDP, September 11, 2016 

BWorld 81, Property rights are human rights, September 30, 2016

BWorld 76, Solar can never power the PH and Asia

* This is my 3rd article in the special issue, BusinessWorld Anniversary Report last July 25, 2016. Due to limited space, the table was not shown but the arguments and texts are retained.

The rapid pace of economic growth in East Asia over the past two to three decades coincided with, or was facilitated by, high energy capacity largely coming from coal power plants.

This is shown by the numbers below covering two decades. Electricity generation and solar power consumption are expressed in terawatt hours (TWh, 1 TW = 1 million MW), coal consumption is expressed in million tons oil equivalent (mtoe), and GDP size is valued at Purchasing Power Parity (PPP).

The table on the right shows the following:

1. The Philippines has a small electricity production, only 83 TWh in 2015 or just one-half (1/2) that of Vietnam and Thailand and only one-third (1/3) that of Indonesia. This is a reflection of its low installed power capacity relative to its neighbors.

2. China and Vietnam have significantly expanded their electricity production in the last two decades by nearly 500% and 1,000%, respectively. This coincided with, or significantly contributed to, their high GDP expansion of 769% and 426% respectively for the same period. China has a very high level of coal use, 1,920 mtoe in 2015 while Vietnam has a very high % expansion of coal use, 616% in just two decades.

3. Of the 12 Asian economies listed, only three — Japan, Thailand and Hong Kong — did not experience 200+% expansion or quadrupling of GDP size after two decades. They are also the three economies plus Pakistan, that did not experience high expansion in electricity generation and coal use.

4. The eight other Asian economies have benefited from higher electricity generation, higher coal use, and coincided with or facilitated higher GDP size expansion in just two decades.

5. Solar power consumption in Asia remains very small. Less than 0.05 TWh in 2015 for six of the 12 economies — Vietnam, Hong Kong, Malaysia, Philippines, Singapore and Thailand. Thus, statements that many Asian economies have (a) significantly embraced new renewables like solar, and (b) their use of coal power is declining as they shift towards more solar and wind power – are preposterous.

During the BusinessWorld Economic Forum last July 12, 2016, the subject of Philippines’ power and energy policies was mentioned several times by different speakers.

In his keynote speech, First Pacific Co. Ltd. managing director, said that “The recent heightened interest in renewables is understandable. But let me say this: for now, renewables cost more than conventional power, which means higher power prices. There’s a cost to protecting our environment — no such thing as free lunch.” He added that we are heading towards sufficient power capacity and majority of these power plants are coal.

DoF Secretary Carlos Dominguez III partly mentioned the importance of a realistic energy mix that will not burden the consumers with high electricity prices.

In the panel on Disruption, Solar Philippines’ President Leandro Leviste argued that “solar is now cheaper than coal.” He added that batteries to stabilize solar output that currently costs an additional P2.50 per kWh to solar power can significantly drop by one-half by 2020. Still, he argued, that solar + battery prices, solar can replace all gas, oil, and diesel in the Philippines.

In the panel on Infrastructure Capacity, Eric Francia, President & CEO of Ayala Corporation Energy Holdings, Inc. showed one slide where the Philippines’ power capacity 2014 was only 15.6 GW vs. Vietnam’s 40+ GW.

Finally, in the same panel on Capacity, Erramon Aboitiz, President & CEO of Aboitiz Equity Ventures, Inc. (AEVI) said that the Electric Power Industry Reform Act of 2001 (EPIRA, RA 9136) is working. It stopped the financial drain of government with heavy NPC monopoly losses and debts, attracted investments from the private sector and competition has driven down power rates. He rightfully argued that in deciding the energy mix, affordability to consumers and stability of power supply should be a priority for the government. The open access and retail competition provision give customers the power of choice.

There are several ways that expensive solar energy will burden the consumers in the coming years. One, the high feed in tariff (FiT) of P8.69/kWh in 2015, that becomes P9.69/kWh in 2016, that will become roughly P10.70 by 2017, and further rise in 2018 and beyond as indexation to inflation rate and other factors are inserted. Two, this ever-rising solar price is assured for 20 years for each FiT-eligible solar company. Three, even consumers in Mindanao who are not connected to the Visayas-Luzon grids and not part of WESM energy trading are forced to pay this expensive FiT. Four, the priority or mandatory dispatch into the grid even if cheaper sources like coal that can be sold at marginal price of only P1 to P1.50/kWh during off-peak demand hours and days are available. And five, the impending renewable portfolio standard (RPS) will force, coerce and arm-twist many or all the distribution utilities (DUs) in the country to buy a minimum percentage from expensive renewables, the additional cost will be passed on to the consumers.

The government should step out of energy rationing and cronyism. Consumers should be given the freedom to choose, to buy from cheaper energy and avoid expensive electricity. Current legislation via the RE law of 2008 (RA 9513) that institutionalizes energy cronyism should be amended or abolished. This is one policy measure that President Duterte and DoE Secretary Cusi can consider in the next six years.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a SEANET Fellow. 

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See also:
BWorld 66, Renewable portfolio standard and electricity prices, June 26, 2016
BWorld 70, Wind power firms corner billions of FIT money, July 09, 2016 
BWorld 73, Transco and the big beneficiaries of feed in tariff, July 27, 2016
BWorld 74, Pres. Duterte's anti-corruption programs and Transparency Intl., July 30, 2016 
BWorld 75, How to profit from urban congestion, July 30, 2016

BWorld 73, Transco and the big beneficiaries of feed in tariff

* This is my article in BusinessWorld last July 20, 2016.

The Philippines’ expensive electricity prices in Asia -- second only to Japan -- was highlighted once again in a paper by The Lantau Group (TLG) during the Asia Clean Energy Forum (ACEF) 2016 at the ADB last June.

Metro Manila’s residential electricity prices were even higher than those in Amsterdam, Hong Kong, and Singapore, twice than those of Hanoi and Beijing, and about three times than those of Taipei and Kuala Lumpur (see chart).

This will have negative consequences for the Philippines’ bid for industrialization. Many energy-intensive sectors and big foreign companies will put up their manufacturing plants in Vietnam, Thailand, Indonesia or Malaysia, where they enjoy cheaper and stable electricity there, then export these products to the Philippines at zero tariff because of the ASEAN Economic Community (AEC). So instead of attracting more manufacturing and higher-paying industrial jobs here, our neighboring countries will snap up those jobs instead.

The quick lesson from this reality is that we should find ways to further bring down the costs of electricity here. Identify those charges, costs, bureaucratic delays, taxes and royalties that contribute to our expensive electricity, and significantly shrink or abolish them.

Unfortunately, we are not moving towards that direction.

Instead we go the opposite, by creating new measures, new indirect taxes that contribute to even more expensive electricity via the feed in tariff (FiT) scheme for renewable energy (RE) companies, among others.

The FiT scheme as designed is very anomalous for three reasons, among others: (1) guaranteed price for 20 years, (2) initial price will be adjusted upwards yearly indexed to inflation, and (3) even consumers in Mindanao, who are not connected to the Visayas and Luzon grids, do not have Wholesale Electricity Spot Market (WESM), and suffer from frequent blackouts due to insufficient power supply for, pay for FiT.

Here are the adjusted FiT rates for 2016 and the corresponding FiT payments that electricity consumers must pay to RE companies via Transco. Wind 1 and 2 and Solar 1 and 2 refer to two tiers of FiT-eligible RE firms, the second tier is given lower rate in exchange for expanding the FiT-eligible new capacity addition (see Table 1).

Last July 6, 2016, this column attempted to quantify how much the big RE companies have cornered the FiT revenues. The next day after it was published, I wrote to the National Transmission Corporation (Transco), a government corporation in charge of administering the FiT-All, and asked: (1) if my estimates of (a) P2.63 B for EDC Burgos, (b) P1.92 B for Caparispisan, (c) P0.73 B for San Lorenzo Trans Asia, etc. are correct; (2) if my estimate of P12.2 billion total FiT revenue for 2015 is correct; and (3) what are the correct numbers if those estimates are wrong.

I mentioned in my letter/e-mail that President Duterte will soon issue an EO for FoI since these are public funds collected from electricity consumers nationwide and administered by a public entity, Transco and hence, the numbers should be made public too.

Transco replied one week after and said the following:

1. My estimates of (a) P2.63 B for EDC Burgos, (b) P1.92 B for Caparispisan, (c) P0.73 B for San Lorenzo Trans Asia, etc. are “roughly higher by 10% of what has been billed to Transco by these 3 companies in 2015.”

2. My estimates of P12.2 B FiT-All for 2015 alone “are higher than the 2016 FiT-All Application levels of Transco on the basis of the following:

a. There are RE plants in the Application that have not billed Transco in 2015. Although their generation may be in 2015, these plants have not gotten the final eligibility for FiT in 2015 (processing on going). Thus, they will bill Transco only upon completion of all necessary approvals;

b. Transco also implements one month current-one month backlog billing consistent with the REPA (Renewable Energy Payment Agreement). Thus, there are plants that have gotten their FiT eligibility much later than their Commercial Operation Date (start date for FiT eligibility) and have not become current in terms of billing by the end of the December 2015 billing period;

c. Transco estimate of FiT Revenue for 2014-2015 is about P10 B. it added that although the year has passed, it has yet to accrue all amounts pertaining to 2014-2015 since the concerned REs have yet to receive their final eligibility documents/are yet to bill Transco; and

d. What has been actually billed to the FiT-All Fund for 2014-2015 energy generation is only around P8 billion.

Thank you Transco for the reply, which allows me to construct new estimates of FiT revenues per company (see Table 2).

The 12.40 centavos/kWh FiT rate granted by ERC in February this year will soon be revised upwards because it was just a provisional order.

Forcing electricity consumers to pay more expensive electricity from new renewables is wrong. Consumer choice is compromised or killed. If people really believe that the new renewables’ costs are indeed falling and attaining grid parity with coal and natural gas, then they should support the abolition of RE law of 2008 or RA 9513. This way, RE developers can sell electricity to willing customers without any guilt or embarrassment.

Bienvenido S. Oplas, Jr. is a Fellow of SEANET and Stratbase-ADRi, and head of Minimal Government Thinkers.

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See also:

BWorld 69, Foreign direct investments and Pres. Duterte, July 08, 2016 

BWorld 70, Wind power firms corner billions of FIT money, July 09, 2016 

BWorld 71, Free trade and higher income, July 11, 2016 

BWorld 72, Economic integration and disruption, July 25, 2016

Energy 74, Mindanao business opportunities via coal plants

* This is my article in SPARK by ADRi last July 4, 2016.

The emergence of a first ever President of the Philippines coming from Mindanao has produced ample business opportunities to that big island and its many provinces in the south. After the elections last month for instance, Davao City in particular experienced huge boost in business and tourism.

Overcoming energy poverty or insufficient supply of power and electricity for the people should be among the priorities of the new government. For instance, our average electricity consumption of 672 kWh per capita in 2012 was lower than that of Indonesia, nearly ½ that of Vietnam, nearly ¼ that of Thailand, nearly 1/7 that of Malaysia and almost 1/12 that of Singapore.

There are no comparative data for 2015 so this paper makes its computation, shown in the last column in this table below.

Table 1. Electric power consumption (kWh per capita)

Sources: Columns 2-5: WB, World Development Indicators, http://data.worldbank.org/indicator/EG.USE.ELEC.KH.PC; 

Columns 6-7: BP, Statistical Review of World Energy, June 2016; 

Column 8: IMF, World Economic Outlook, April 2016; 

Column 9: computation by this paper

Estimating energy poverty in Mindanao

The combined population of regions 9 to 13 plus ARMM in the census August 2015 was 24.136 million (source: Philippine Statistics Authority (PSA)). Gross electricity generation in Mindanao in 2015 was 9,282 GWh (source: DOE)

This means that average electricity consumption in Mindanao last year was only 384.6 kWh per capita. This is less than half that of the national average of 809 kWh per capita, and this may be equivalent to that of Cambodia (207 kWh per capita in 2012).

Existing capacity in Mindanao, 2015

As of 2015, Mindanao grid has a total installed capacity of 2,414 MW. The major energy sources are hydro (44%), oil-based (33%) and coal (16%). Geothermal, biomass and solar constitute the remaining 7%.

In terms of actual power generation in 2015, the 17 generating companies (gencos) and 39 distribution utilities (DUs) in Mindanao has produced and distributed 9,282 GWh of electricity, mainly coming from hydro (39%), oil-based (33%) and coal (20%). Geothermal contributed 8% while biomass and solar contribution was negligible.

Capacity addition in Mindanao, 2016-2019

The biggest addition was Therma South Inc. (TSI) of Aboitiz Power with 300 MW. Unit 1 (150 MW) started operation in September 2015 while Unit 2 (also 150 MW) began operation in January 2016.

Coming this year will be Saranggani (by Alsons), San Miguel Davao (by SMEC) and FDC (by Filinvest), all coal plants. Next year, GN Power will further add a huge coal power plant.

Table 2. Committed Power Projects in Mindanao, 2016-2019, as of May 2016

Source: DOE.

These will result in temporary power oversupply by 2017 and significantly raise the kWh per capita use in Mindanao. But such oversupply will be short-term because demand will simply adjust and rise quickly. Again, note the low per capita electricity consumption in Mindanao compared to the national average, and much lower compared to those in Vietnam, Thailand, Malaysia and other developed Asian economies.

Here are the indicative projects for Mindanao grid. Coal plants will still dominate the field. Once the Wholesale Electricity Spot Market (WESM) operates in Mindanao, it will be a dynamic market for both power producers and consumers.

Table 3. Indicative Power Projects in Mindanao, 2016-2021, as of May 2016

With these initiatives at big power addition in Mindanao, among the policy measures that needed to be put in place are the following.

One, ensure the transmission link between the Mindanao and Visayas grids soon. This will significantly complement WESM operation in Mindanao.

Two, do not reverse many coal capacity additions with anti-coal pronouncements that might possibly come from the DENR and the Climate Change Commission (CCC). Check again table 1 above, the Philippines’ coal consumption even until 2015 is small compared to the coal capacity of our neighbors in the region.

Three, renewable energy development in Mindanao should focus on hydro power, development of new ones and rehabilitation and capacity expansion of existing ones under PSALM, and less on new renewables like wind and solar that require huge FIT allowance and more expensive electricity.

The stance of the new DENR Secretary against mining has an indirect adverse impact against coal power plants. The worst that can happen is a stop in granting DENR’s environmental clearance certificate (ECC) for new coal plants while a mild version is to further bureaucratize and delay for years the granting of ECC and various environmental permits. Both actions will adversely affect power development in the country and prolong energy poverty. This should not happen.

With six years in power of the first Mindanaoan President of the Philippines, the looming finalization of peace agreement with the MILF and even with the CPP-NPA, business expansion under the ASEAN Economic Community (AEC) and the 16-nations Regional Comprehensive Economic Partnership (RCCEP), and continued destabilization in many Muslim countries in the Middle East, many big investments and businesses will be coming to Mindanao. What appears as power oversupply by 2017 can become undersupply the next year when high demand from existing and new consumers – household, commercial and industrial – will kick in.

Bienvenido S. Oplas, Jr. is a Fellow of Stratbase-ADRi, a columnist in BusinessWorld, and President of Minimal Government Thinkers.

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See also:

Energy 71, Roberto Verzola's rebuttal to my BWorld article on renewables, June 10, 2016 

Energy 72, FIT-eligible solar plants in the Philippines, June 22, 2016 

Energy 73, Comments to DOE draft Department Circular on RPS, June 27, 2016

BWorld 70, Wind power firms corner billions of FIT money

* This is my article in BusinessWorld last Wednesday.

From an introductory price hike of 4.06 centavos/kWh of Feed In Tariff Allowance (FiT-All) in 2014, this subsidy scheme of guaranteed price for 20 years became 12.40 centavos/kWh in 2016. As more renewable energy power plants are added to the country, the cost of FiT-All will keep rising and it is safe to assume that this FiT-All might further rise to 20 centavos or more by 2017. And even consumers in Mindanao who are not participants of the Wholesale Electricity Spot Market (WESM) are paying for this.

Such is the abuse received by consumers nationwide via expensive electricity from subsidies to renewable energy (RE) companies. Last month, I wrote to the National Transmission Corporation (TransCo), a government corporation in charge of administering the FiT-All, and asked who among the RE developers received how much.

TransCo sent me a statement of cash flow, Receipts minus Disbursements = Fund Balance, and Fund Payable as of end-2015. I thanked them for the reply but that was not the information that I needed, so I called up the officer and asked why the list of who received how much was not sent. She said that they cannot release it to the public, implying confidentiality of the information. I wish that President Duterte will release that new Executive Order on Freedom of Information (FoI) very soon. The Department of Budget and Management (DBM) releases yearly data on how much government agencies received from taxpayers so why can’t TransCo release data on how much RE developers received from electricity consumers nationwide?

Last month, the Department of Energy (DoE) posted on its Web site the “List of Renewable Energy (RE) Plants with Certificate of Endorsement (CoE) to Energy Regulatory Commission (ERC) for Feed-in Tariff (FiT) Eligibility” as of June 20, 2016. My first question as to which RE companies received FiT has been answered. There are some RE developers who did not receive FiT.

By virtue of their enormity (MW capacity) compared to other RE developers, these companies are the potential main beneficiaries of expensive electricity policy provided by the RE Act of 2008 (RA 9513):

1. Burgos Wind Power Project (Phases 1 and 2) by EDC/Lopez group, 150 MW at P8.53/kWh

2. Caparispisan Wind Power Project by North Luzon RE Corp./Ayala group, 81 MW at P8.53/kWh

3. San Lorenzo Wind Power Project by Trans-Asia RE Corp./PHINMA group, 54 MW at P7.40/kWh

4. Pililla Wind Power Project by Alternergy Wind One Corp./Vince Perez, 54 MW at P7.40/kWh

5. Nabas Wind Power Project by PetroWind Energy, Inc., 36 MW at P7.40/kWh

6. Bangui Bay Wind Power Project Phase 3 by Northwind Power Development Corp./partly Ayala, 19 MW at P8.53/kWh

7. Cavite EcoZone Solar Power Project by Majestics Energy Corp., 41.3 MW at P9.68/kWh.

I only need to find out the answer to my second question: how much did other RE companies receive each? I went to the Energy Regulatory Commission (ERC) Web site and saw ERC Case No. 2015-216RC, the TransCo petition for FiT-All for 2016. The important factors and ingredients were there, so I began making my own estimates.

The FiT rates and installed capacity in MW for all RE developers already given by the DOE, I used the following factors and assumptions to construct a table of estimates.

a. Capacity factor -- derived using TransCo filings with ERC which are per technology basis.

b. Generation (MWh) -- derived from the capacity factor.

c. FiT Revenue -- FiT rate multiplied by the generation.

d. FiT Cost Recovery Revenue (FCRR) -- the amount that the RE firm got from WESM or the distribution utility (DU). This is derived using the average WESM rate per TransCo application to ERC. This amount may not be that accurate since the time of dispatch will not result to the average price.

e. FiT Differential (the basis of FiT-All) = FiT Revenue minus FCRR. For some power sources like wind plants, the calculated FiT Differential here may be under estimated since wind usually blows during off-peak hours period, and WESM prices are then below the average rate (see table).

Now these are just estimates and there could be some corrections or mistakes in the last four columns on the right, even in the capacity factor. The capacity factor is not constant or flat the whole year, some months and days are more windy than others, and some months and days are more cloudy than others and hence, affect the output of solar PV.

I wish to be corrected by TransCo if those numbers are wrong, perhaps they should release the correct numbers. Is it true that the Lopez and Ayala groups cornered nearly P5 billion from FiT in 2015 alone? The other companies like Trans-Asia/PHINMA, Alternergy, Hedcor/Aboitiz, they also enjoyed perks by several hundred millions of pesos each because of the unjust system of high, guaranteed price system under FiT.

On a related note, it is good that Mindanao does not have any of those expensive and pampered solar and wind plants that are primarily responsible for more expensive electricity in the country. Mindanao has more hydro, big hydro with no FiT and run of river hydro with small FiT of P5.90/kWh. Recently, Mindanao added more coal plants, which is the right thing to do. Stable, dispatchable, non-intermittent and cheaper coal power, that is what Mindanao and the rest of the country should have if we are to sustain fast growth. The move by the new DENR Secretary for anti-mining policy will adversely affect coal mining and coal power development in the country. This policy move should be checked and discontinued.

Bienvenido S. Oplas, Jr. is a Fellow of SEANET and Stratbase-ADRi, and head of Minimal Government Thinkers.

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See also: 

BWorld 43, More on WESM, PEMC and DOE, February 14, 2016
BWorld 47, Renewable energy and the illusion of merit order effect, March 06, 2016
BWorld 51, WESM as market-oriented, PEMC as bureaucracy-oriented, March 25, 2016 

BWorld 55, FIT-All, renewables and elections 2016, April 23, 2016 

BWorld 58, INDCs and PH energy realities, May 14, 2016 

BWorld 63, Can renewables only power the PH and Asian markets? June 10, 2016

BWorld 66, Renewable portfolio standard and electricity prices, June 26, 2016

BWorld 68, Criminal justice and Duterte, July 07, 2016 

BWorld 69, Foreign direct investments and Pres. Duterte, July 08, 2016

BWorld 66, Renewable portfolio standard and electricity prices

* This is my article in BusinessWorld last June 21, 2016.

The key to cheaper prices and/or good services is more competition among more players, more voluntary exchange, and not more price coercion by regulators. If buyers do not like the price of seller A, they can opt out and go to sellers B, C, and so on. Seller A is then pressured to lower his price to compete with other sellers.

The key to expensive prices and/or lousy services is more government regulation and curtailing voluntary exchange. Buyers are forced to buy from expensive sellers and opting out is not allowed. This happens in government-created monopolies like tricycle routes, electric cooperatives, or government-favored sectors like producers of new renewables like solar and wind power.

The Department of Energy (DoE) along with the United States Agency for International Development (USAID) conducted a public consultation last June 16 at Shangri-La at the Fort, Bonifacio Global City about the proposed or draft Department Circular (DC) on the Renewable Portfolio Standard (RPS). The activity was hurriedly organized and was not posted on the DoE’s Web site.

But I heard about it from a friend and then I wrote to DoE’s Mario Marasigan and asked if I could attend it and he said yes. Thank you Sir Mario.

Here is a quick backgrounder of the subject.

1. Under the Renewable Energy (RE) Act of 2008 (RA 9513), RPS is defined as a “policy that requires electricity suppliers to source an agreed portion of their energy supply from eligible RE resources.”

2. Under the Implementing Rules and Regulations (IRR), Section 4, RPS, “...Annual minimum incremental percentage of electricity sold by each RPS-mandated electricity industry participant which is required to be sourced from eligible RE Resources and which shall, in no case, be less than one percent (1%) of its annual energy demand over the next ten (10) years.”

3. Under the draft DC discussed by the DoE last June 16, Section 8. “The minimum annual increment in the RPS level shall be initially set at 2.15% to be applied to the actual total supply portfolio of the Mandated Participant in each grid for the previous year.”

4. Under the Annex table, RPS Calculation, also prepared by the DoE that day, the cumulative RE capacity that will be needed from 2016 to 2030 is a glaring 30,862 MW (30.86 GW) or an average of 2.06 GW/year increase for RE alone (see Table 1).

During the open forum, I asked about many consumers’ concern about expensive electricity. What would be the implication in pricing of the proposed RPS, if they impose a 1.5% annual marginal increment (AMI)? How about at 1.75% or at 2.15% (their proposed rate)? And if they target 30% renewables in the energy mix by 2030, or 32% or 35% (their proposed target), what would be the impact on electricity prices?

The feed in tariff (FIT) without RPS was already four centavos per kilowatt-hour (kWh) last year, 12 centavos per kWh this year, so with FIT + RPS next year, will it become 20 centavos? 25 centavos?

DoE officials answered that no study on price implications has been worked out yet and that it can come out later as the current focus is the mechanisms on how RPS will be implemented, including penalties for violators or non-implementers of RPS.

So it is a weird circular because both the DoE and the National Renewable Energy Board (NREB), the multi-stakeholder body that recommends policy options for the DoE, are pushing for a policy where they admittedly do not have a clear idea on the cost of implementation to energy consumers.

One thing that can be favorable for RPS though is that distribution utilities (DUs) will have more options from among renewable technologies -- biomass, waste to energy, geothermal, run of river hydro, impounded hydro, wind, solar, ocean, hybrid systems, others -- and choose those that are least cost.

The above RPS and RE targets by 2030 are not practical and not viable because the Philippines is still way below many of its neighbors in power generation and we need to grow fast to sustain the economic momentum of recent years and create more businesses, more jobs to more people.

People who push for higher renewables in the national energy mix want to push out coal power as much or as soon as possible. This is a day-dream and illusionary goal because of the big role that coal power contributes to many industrialized and emerging Asian economies. From 2000 to 2015, Indonesia, Malaysia and Vietnam ramped up their coal power capacity from 375% to 609%. The Philippines’ 11.4 gigawatt (GW) coal capacity in 2015 was only one-half that of Vietnam’s 22 GW, only one-third that of Taiwan’s and nearly one-eighth of South Korea’s.

For Table 2, definition of the following terms:

a. 1 terawatt (TW) = 1,000 gigawatt (GW) = 1,000,000 megawatt (MW)

b. MTOE = Million tons of oil equivalent

c. 1 MTOE = produces about 4.4 terawatt-hour (TWh) of electricity in a modern power station.

The share of wind and solar in total electricity production in the Philippines is small, only about 0.8% of the total in 2015, despite their installed power share of around 2.5%-3% of total installed capacity. The explanation for this is the low capacity factor of these new renewables.

Some people insist that there is already “grid parity” by the new renewables with coal and natural gas, that “solar is cheaper than coal” now. If this is true, then why are they asking for another round of energy coercion through high RPS, on top of existing coercions on FIT (guaranteed price for 20 years) + priority dispatch to the grid + fiscal incentives?

A developing country like the Philippines should be given more leeway in building up cheaper and stable energy sources.

Energy poverty and expensive electricity result in lack of jobs because energy-intensive industries and companies would avoid the Philippines and go to energy-stable and competitively-priced economies like Malaysia, Indonesia, Vietnam and Thailand.

The DoE should either implement the minimum 1% of AMI in RPS, or further delay RPS implementation until the price implications are studied and the consumers are not further burdened with higher prices and unstable electricity supply.

Bienvenido S. Oplas, Jr. is a Fellow of SEANET and Stratbase-ADRi, and heads a free market think tank, Minimal Government Thinkers.

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See also: 

BWorld 51, WESM as market-oriented, PEMC as bureaucracy-oriented, March 25, 2016 

BWorld 55, FIT-All, renewables and elections 2016, April 23, 2016 

BWorld 58, INDCs and PH energy realities, May 14, 2016 

BWorld 63, Can renewables only power the PH and Asian markets? June 10, 2016 

BWorld 64, The WTO and trade agreements, June 17, 2016 BWorld 65, PH exports growth from 1960-2014, June 22, 2016