* This is my column in BusinessWorld last Friday, May 10, 2019.
Until last week May 3, another yellow alert has been
issued by the National Grid Corp. of the Philippines (NGCP) because of
insufficient reserves due to the following: (a) forced outage due to earthquake
of GN Power Mariveles (316 MW), (b) unplanned/forced outage of SEM Calaca U2
and Team’s Pagbilao U1 (582 MW), and (c) derated/reduced capacity of five power
plants (736 MW). Total 1,634 MW unavailable, that’s big.
These yellow alerts and occasional red alerts (which
require rotational blackouts) have been going on since around mid-March this
year — and have become an election issue for some sectors. This week we are
lucky with thick clouds daily and occasional rains, meaning power demand is
low. Mid-terms election on Monday, we pray that the thick clouds will stay.
Numbers below will further illustrate how weak and
unreliable the Philippines’ power sector is — which explains the recurring
power shortages and, in the process, higher power prices. For instance, these
three socialist economies have shockingly more power capacity per person than
supposedly capitalist Philippines: Vietnam has 2x, Laos has 5x, and N. Korea
has 6x (see table).
Official DoE data show that the Philippines’ installed
capacity was 21.42 GW in 2016, 22.73 GW in 2017, and 23.82 GW in 2018.
Nonetheless I use the CIA numbers for comparison purpose.
Four recent stories in BusinessWorld would give more
contexts to this situation and I quote portions of them.
1. Power panel passes amendments to EPIRA IRR (May 3):
“THE Joint Congressional Power Commission (JCPC) on
Thursday approved amendments to the implementing rules and regulations (IRR) of
the Electric Power Industry Reform Act Law (EPIRA) to facilitate the granting
of benefits to host communities.”
2. Invitation still open for Chinese merchant power plant
builders — Energy dep’t says (May 3):
“We asked both Japan and China to help us put up a
merchant plant and this is part of an MoU that we successfully signed in
China.”… Aside from the China-funded coal-fired power plants, the DoE has
encouraged private sector investment in… liquefied natural gas (LNG).”
3. On credit ratings upgrade and power shortage risk (May
6, opinion piece by Romeo L. Bernardo):
“Chair Devanadera’s chart shows that there are 454 Power
Supply Agreements Requiring Further Action, involving 150 power plants. How
long does an evaluation take and how many technical people has the Energy
Regulatory Commission assigned to evaluate? Answer: 90-180 days; 14 technical
personnel.
The ERC can be more faithful to market based competition
principles… by moving away from detailed cost based review of every PSA… a
simple validation of adherence to Competitive Selection Process rules to ensure
arms length competitive contracting would be a fairly quick and straightforward
alternative approach.”
4. ERC’s competitive selection rules expected in 30 days
(May 7):
“…final rules on competitive selection process (CSP), a
scheme that chooses the lowest-cost power for consumers… require the generation
companies to shoulder the cost of unscheduled plant outages…. a template for a
power supply agreement (PSA) … provision on replacement power.”
Story #1 is bordering on a risky proposal by some sectors
to amend the EPIRA law of 2001. I say ‘risky’ because once EPIRA is amended,
the probability of that law becoming worse — more state-control of power
generation and supply vs better/market competition — becomes 75-25.
Story #2 is eliciting another anti-China communist
government sentiment here. The communist bully that steals Philippines
territory at the WPS/SCS is being invited by the Duterte government to build
more dams, airports, telecoms, power plants, other sectors that are strategic
for national security.
Opinion #3 offers good and practical proposals so that
ERC should move away from a micro-managing central planner and further relax
regulations, so that we should have more new and big power plants today, not
three to five years from now.
Story #4 is good, CSP rule is long overdue and having a
template for all PSAs is important. If power supply remains tight, the cost of
replacement power will be high so ERC should further deregulate pricing by
gencos. Having more new reliable power sources at WESM will remedy this.
We should stay the course of more market players and
competition, less government regulations and over-bureaucratism of power supply
approval and pricing.
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See also:
BWorld 322, MORE transparency in China deals, May 04, 2019
BWorld 323, MORE smart cities… with sufficient water, May 07, 2019
BWorld 324, MORE price declines, less Dutertenomics, May 12, 2019
