One major reason why foreign investors avoid putting up manufacturing plants here is our iffy power situation. We are notorious for red and yellow alerts in our power grids because the margin between demand and supply is exceedingly thin.
El Niño was a problem this year as it dried up our storage hydro power plants. Then, the coal power plants that provide for the base load demand are quite old and not very reliable. That’s true not just in Luzon but also in Panay and that caused serious power outages.
In Iloilo, the dollar earning BPOs had to invest in diesel standby generators to be able to operate.
On paper, Panay Island of which Iloilo City is a part, has four large coal power plants with a total capacity of 451 megawatts (MW) and the demand of Iloilo City is just 132 MW.
But because the Panay coal plants are badly maintained and constantly break down, power supply is the biggest problem of Iloilo City that hinders its tiger economy ambitions. NGCP’s completion of the lines that interconnects Panay with the Visayas and Mindanao grids offers hope but the specter of power failures remains as Negros has an abundance of unreliable solar plants using the line that require priority dispatch and crowd out other sources.
That’s the general story for the rest of the country. A succession of post-EDSA administrations failed miserably to make the power sector keep up with the economy’s demand. Total electricity generation per person in the Philippines is just 1,008 kilowatt hour (kWh), below that of upper middle-income countries (5,222 kWh) — a classification NEDA keeps saying we will attain by next year.
In the ASEAN-5, the Philippines lags behind Singapore (9,532 kWh), Malaysia (5,474 kWh), Thailand (2,653 kWh), and Indonesia (1,263 kWh). Interestingly, this correlates with each country’s GDP per capita at purchasing power parity values, with Singapore having $108,036, Malaysia having $28,384, Thailand having $17,508, Indonesia having $12,410, and the Philippines having $8,582.
Moreover, according to the Philippine Electricity Market Corp. forced outages accounted for 55 percent of total outages in 2023. In terms of duration, they observed that for every one day of combined planned and maintenance outages, there are approximately 12 days of forced outages.
Energy security is a major hindrance to our sustainable economic growth and development.
I have serious doubts our government has what it takes to keep up with growth in our electricity sales that is forecasted to double in just 13 years. I am not even sure our energy officials have the right strategies and priorities.
For instance, I was shocked to hear that some DOE officials seriously proposed putting up a second power grid running parallel to NGCP. I hope they were just joking, otherwise it would seem the energy policy makers do not understand what a natural monopoly is and why it is justified.
Funding for a parallel national grid, assuming a financial institution is crazy enough to give it, is better spent on the last mile connections to reach every Filipino’s home. According to the UNDP, the national average of electrified households is only 62 percent.
Anyway, DOE is already challenged to meet peak electricity demand as well as nationwide electricity sales which are growing by 5.19 percent and 5.49 percent, respectively, each year until 2050. Our country’s economic growth targets of six to seven percent in 2024, 6.5 to 7.5 percent in 2025, and 6.5 to eight percent from 2026 to 2028 are meaningless unless we can meet power demand growth.
The Philippine electric power industry is incapable of assuring businesses and households that the electricity supply will be sufficiently abundant, reliable and affordable.
Worse, DOE has made a big bet on Variable Renewable Energy, which by definition is already unreliable due to intermittency of solar and wind power installation and their much lower capacity factor compared to baseload coal and natural gas. The intermittency problem would have been mitigated if DOE required the solar and wind power producers to include a storage battery component. This was only recently required, pretty much as an afterthought but none of the current producers have it yet.
How well did the VRE proponents do this year in terms of getting their installations on line?
DOE reported early this year that they are expecting 2,883.22 MW of VRE projects to go on line by year end. The majority are solar, with 13 projects by June, one in July, one in August and one in October and 12 projects in December. That’s broken down to 72.16 MW for mini hydro; 75.28 MW for biomass; 1,985.78 MW of solar and 160 MW of wind. Storage battery is 590 MW.
As of last week, only seven solar plants went on line for a total of 824.3 MW. The list includes: Trust - 20.9 MW;
Pinugay - 95.8 MW (embedded); Cayangga - 94.7 MW; San Marcelino Ph 1 & 2 - 384.8 MW; Calabanga - 74.2 MW; Cagayan North - 133.5 MW and Orion - 20.4 MW.
A wind project, 160 MW was due last June but as of last week, no wind project went on line.
There are other issues that need to be resolved quickly. The power industry participants have been complaining about the snail-paced approval of their proposals by the Energy Regulatory Commission (ERC).
Perhaps, ERC’s work load has tremendously increased since the Electric Power Industry Reform Act (EPIRA) which created it was enacted in 2001. The ERC may need more commissioners and staff.
Under EPIRA, only the private sector can put up power plants. The less-than- encouraging investment climate due to the uncertain regulatory environment is a reason for the cautious attitude of privately-owned power companies. That, in turn, is why our grid reserves are so thin.
We have surely learned so many lessons from two decades of EPIRA and updating the law is necessary to make the power industry responsive to present needs. Hopefully that comes soon.
Boo Chanco’s email address is bchanco@gmail.com. Follow him on X @boochanco