Energy issues from the US elections, Energy The Freeman Cebu forum

Cebu City – Central Visayas is the third-largest or richest region in the Philippines after Metro Manila. In 2023, its regional domestic product was P1.58 trillion, following CALABARZON’s P3.44 trillion and Central Luzon’s P2.65 trillion. Metro Manila had P7.57 trillion out of a total Philippines GDP of P24.32 trillion.

Cebu City is the heart and commercial and financial center of Central Visayas. I’m here to attend The Freeman’s “Powering Cebu” energy forum held at Waterfront Hotel & Casino in Cebu City. The Freeman is a leading regional newspaper and is part of the The STAR group.

This piece will cover four energy topics, so let’s go straight to the numbers.

US elections and energy implications

In December 2016, the last month of the Obama administration’s second term, the US was producing 8.8 million barrels per day (mbpd). When Trump took office, this quickly jumped to 9.8 mbpd in 2017, 11.7 mbpd in 2018, 12.9 mbpd in 2019, peaked at 13.1 mbpd in February 2020, then dropped to 11.0 mbpd in December 2020 due to worldwide lockdowns in March of that year.

Under Biden, production increased marginally to 12.0 mbpd in 2022 and recovered to 13.3 mbpd in 2023. As of October 2024, it reached 13.5 mbpd.

Trump’s “drill baby drill” policy significantly expanded US domestic oil and gas production, while the Biden administration started with a “save the planet” policy, initially curtailing US oil and gas production until they changed course in 2023.

As of this writing, Trump is leading Harris in the Nov. 5 elections. If Trump wins a second term, then the “drill baby drill” policy will resume, and US oil production could reach 16 mbpd by 2029, stabilizing world oil prices at lower levels. A Harris presidency, however, would mean a marginal increase, if not a flatlining, of US oil and gas production, and oil prices will likely resume their increase.

ERC chairperson Dimalanta reinstated

Energy Regulatory Commission chair Monalisa Dimalanta was suspended by Ombudsman Samuel Martires last Sept. 5 for six months but was reinstated on Oct. 31, less than two months later.

While Ombudsman Martires said the reason for lifting the suspension was that “the reason for the preventive suspension has ceased,” I think another reason is the pushback from many business and professional organizations that expressed concerns, if not indirect criticism, regarding his suspension order.

Among the groups that issued public statements expressing direct or indirect support for Dimalanta were the Philippine Chamber of Commerce and Industry, Philippine Exporters Confederation, Employers Confederation of the Philippines, Management Association of the Philippines, Makati Business Club, Philippine Independent Power Producers Association Inc. and Retail Electricity Suppliers Association of the Philippines.

IEMOP power update

The Independent Electricity Market Operator of the Philippines (IEMOP) held a media briefing last Tuesday. Among the important numbers are the following:

The electricity generation price for October 2024 was P4.39/kWh, higher than September’s P3.88/kWh but lower than August’s P5.94/kWh, and also lower than October 2023’s P6.60/kWh. The reason for this is lower supply in October due to some unscheduled plant shutdowns.

In terms of power generation mix, coal remains the largest single source of electricity in the Philippines. The average share of total power generation for August-September-October 2024 was as follows: coal 60.4 percent, natural gas 14 percent, hydro 11.2 percent, geothermal 8.2 percent, solar 3.0 percent and wind plus biomass 1.7 percent.

As of October 2024, solar plus wind generation capacity was 9.8 percent of the total, but their actual power generation was only 4.1 percent of the total. In contrast, coal generation capacity is 42.4 percent of the total, but actual generation is 60.3 percent. We should remember this large discrepancy in power reliability and stability before we discuss “energy transition” away from coal and other fossil fuels.

The Freeman Cebu energy forum

This was an important forum organized by The Freeman because the Visayas grid continues to experience thin reserves, with approximately half of Visayas power consumption going to Cebu province and its wealthier cities alone.

Miguel Belmonte, the president and CEO of the PhilStar Media Group, which includes The Freeman, gave the welcome message. The keynote speakers were Department of Energy Assistant Secretary Mario Marasigan and Cebu Gov. Gwendolyn Garcia.

Other speakers and panelists included Raul Lucero, president and COO of Visayan Electric Co. Inc.; Fermin Alvarez, country manager of Acciona Energia; Niel Martin Modina, assistant vice president for Visayas System of National Grid Corp. of the Philippines; Rolando Paulino Jr., chief engineer and projects officer of Aboitiz Power Thermal Business Group; Jay Yuvallos, president of Cebu Chamber of Commerce and Industry; Alfredo Reyes, president of Hotels, Resorts and Restaurant Association of Cebu; Fred Languido, Editor of The Freeman; and Lorafe Lozano, chair of the Department of Industrial Engineering at the University of San Carlos. The forum was hosted by Andrea Matheu.

The Visayas grid has the lowest reserves and margin (supply minus demand) of all regions. According to IEMOP data from October 2024, the Luzon grid has a margin of 4,064 MW, Mindanao has 1,354 MW and Visayas has only 507 MW.

Low reserves and supply margins mean a heightened risk of power interruption, if not blackouts.

“Low reserves and supply margin means courting power interruption if not blackout. Visayas grid always has the highest price. In October 2024, Luzon price was P3.89/kwh, Mindanao was P5.20/kwh, Visayas P5.93/kwh. Higher electricity prices force some households and businesses to reduce consumption, helping avoid blackouts but detrimental to business and job creation.

Efforts by some generation companies to expand power supply in the Visayas should be prioritized. Aboitiz Power has expansion plans for its Therma Visayas Inc. in Toledo, Cebu, and Meralco Power Gen Corp. has plans for its Panay Energy Development Corp.