Private firms worried over power situation

MANILA, Philippines - Private industries are worried that brownouts could hit the country again within two to three years unless additional investments in power generation aside from those already committed or ongoing in Mindanao and a plan to retire old oil-fired and polluting power plants in Luzon is postponed to enable supply to meet the projected demand for electricity.

The tight power supply situation along with the high cost of power and the need for further reforms in the power industry to ensure competitive pricing both for industries and household consumers, were among the concerns expressed by industry leaders in a Power and Energy Forum sponsored by the FPI at Club Filipino in Greenhills Wednesday afternoon.

FPI secretary general Rufino Margate Jr. said an assessment of the Philippines’ energy market and policy situation done by the University of the Philippines’ National Engineering Center showed that in a scenario where the country’s economy would grow moderately only by five percent annually in the next 20 years, an additional 600 megawatts of power generating capacity has to be committed by the end of this year and a plan to retire the ancient oil-fired Malaya in Rizal and Limay before 2015 has to be postponed to ensure stable and reliable electricity supply in Luzon grid alone.

Last week, Energy Secretary Rene Almendras said the government is also concerned over the tight electricity supply situation in Mindanao especially because reserve energy margins remained below the targeted 21 percent, which could plunge the island into daily brownouts again if a power plant or unit breaks down.

In 2010, a dry spell brought by El Nino caused water levels to go critical in Mindanao’s hydro plants, causing a rotating daily brownout that stunted a three-fold increase in its economy in the last three years of the Arroyo administration.

Even with plans by Conal Holdings, Inc., owned by the Alcantara-led Alsons, Inc., to put up two 200-megawatt coal-fired power plants in Sarangani and Zamboanga, and a P25-billion plan by Aboitiz Power, owned by the Aboitiz family which divested its maritime cargo business to go into the energy industry, to construct a power plant in Davao, power demand in Mindanao is expected to exceed supply by 2014.

Almendras said the Department of Energy is considering the transfer of oil-fired power barges and the re-commissioning of a 35-megawatt thermal plant in Iligan to offset a very tight electricity supply situation in Mindanao as power supply margins last summer had breached the required 21 percent despite the full generation performance of its hydro-electric power plants.

In Luzon, demand is projected to rise by 3.7 percent or an additional demand of 200 to 300 megawatts in the next five years, according to the UP study completed last May.

The UP study expressed concern that aside from raising the risk of power outages, the tight supply situation could trigger further increases in power rates in Luzon as industries compete for direct supply from power producers under liberalized grid sale rules unless 1,200 megawatts of extra capacity is added. Luzon provides much of the country’s gross domestic production.

“The electricity market of Luzon Grid is expected to continue to grow at 3% annually. This translates to 200 to 300 MW of demand every year at least in the next five years. The bilateral contracting of DUs and WESM did not produce the expected additional capacity to meet the growing demand. Currently the operating reserve of the grid is already compromised,” the UP study pointed out.

Even with the planned commissioning of a new 600 megawatt coal-fired power plant in Mariveles, Bataan by 2013, there could be a need to postpone the retirement of the expensive Malaya and Limay oil-fired power plants despite their rising unreliability due to old age, the UP study pointed out.

“Luzon grid requires 1,200 MW of base-load power plants by 2015 to achieve both reliability and least-cost power supply. With the 600 MW Mariveles coal-fired power plant under construction which is reported to be commissioned by 2013, additional 600 MW base-load capacity must be firmly committed in 2011,” the UP-NEC assessment stated.

The administration of President Aquino’s III’s medium-term economic growth program targets an annual increase of seven to eight percent in the country’s gross national product (GNP) as its antidote to extreme poverty suffered by at least four million Filipinos.

Local economists have already bewailed the current high electricity costs in the Philippines as the major contributor to the rapid decline in the country’s competitiveness in the world market, with neighbors like Vietnam, Malaysia and Thailand offering rates as low as 5-7 cents per kilowatthour against the Philippines’ 23 cents.