The energy policy of the Duterte administration could not be clearer: maintaining a reliable power supply and ensuring the broadest access to electricity.
Achieving the broadest access to electricity is pretty clear-cut. We have a large agency, the National Electrification Administration, tasked with building the lines that will deliver electricity to the most distant settlements. Right now, the outstanding problem is how to power up island communities separated from the main grid in the most economical manner.
Maintaining adequate supply has always been a more complicated goal.
There are endless debates going on over our power mix, whether coal plants or alternative energy sources should be built. Some misguided measure were passed to insulate alternative energy producers from the harshness of the market – such as the badly devised “feed-in tariffs” that raise electricity costs for consumers to protect private profit.
There will be no early solution to the debate over energy mix. Renewables may be nice, but they are expensive and unreliable for the basic supply needs of the economy.
Historically, high power costs squeezed out our manufacturing sector. It is not globalization that killed our manufacturing and extinguished jobs. High power costs made our manufacturing uncompetitive.
While our electricity-hungry industries died off like dinosaurs, our economic expansion was led by the less energy-dependent services sector. The “new economy” of talent-intensive services-led economic growth is nice, but it is industries that create quality jobs.
During the period of costly electricity, when our manufacturing withered, unemployment rose. Our skilled labor migrated. We were in danger of becoming an economy of masseurs and manicurists.
We cannot wait for the debate on our power-mix to be resolved one way or the other. Our economy is being programmed to grow at 7 percent. We aspire for investments-led growth, which is the only way for our economy to be truly inclusive. We need ample and cheap energy supplies now. We do not want a repeat of the Cory Aquino years, when economic growth was sabotaged by power lack.
EO 30
President Duterte recently issued Executive Order 30. The order seeks to fast-track the process of permitting and approvals to speed up investments in power generation in the country.
Rotating brownouts and the vulnerability of our wholesale electricity spot market to manipulation because of thin reserves continue to this day. When a number of baseload plants conk out, government is forced to crank up the aged Malaya plant. This is a notoriously inefficient plant that generates power at the highest cost. If we had ample generating capacity, this tired plant ought to be retired. It is a museum piece.
Strangely, we have more than enough investments waiting in the pipeline. In Luzon we have GN Power Diningin, Limay Premier Power, SMC Consolidated Power, Mariveles Power Generation, Redondo Peninsula Energy, Atimonan One Energy, St. Raphael Power Generation, Global Luzon Energy and Central Luzon Premier Power. In energy-short Mindanao, there is GN Power Kauswagan, Minergy Power and San Miguel Consolidated Power.
Some of them have been in the pipeline for years. The process of permitting and approvals, however, grind exceedingly slow. The main bottleneck, is appears, is the Energy Regulatory Commission (ERC). The agency is noteworthy for the seemingly endless warfare among the commissioners.
There seems to be no fixed formula for the approvals process. Each application for a power supply agreement (PSA) seems to be decided upon entirely on whim. There is a crying need to make the streamline the process and make approvals more efficient.
Protected by a fixed term, the commissioners seem to operate in a world of their own, impervious to the urgency of building capacity and bringing down power costs. Longer processing time invariably translates into higher power costs, given all the nuances of financing pending projects.
During one congressional hearing on the stalled PSAs, legislators pressed the ERC to act more quickly on the pending PSA applications. The commissioners promised to act on the applications in three months. But these applications have been pending for years.
It is not only the investors who are impatient. Recently, the local government and people’s organizations of Atimonan, Quezon marched to the House and picketed the offices of the ERC demanding speedy action on the applications. They understand the tremendous economic benefits the locality will derive from investments in a power facility.
Independent groups such as Citizen Watch, Bantay Kuryente, the Federation of Philippine Industries and the Philippine Chamber of Commerce and Industry have all issued statements urging the energy regulators to act promptly on the pending PSA applications. The ERC, it seems, need to be bludgeoned to do their work.
The installation of new power generators is part of the infra modernization program of the current administration. It is, in fact, a key element in that program. If economic growth hits the ceiling of available capacity, our economic progress will screech to a halt. Investment, wary of unreliable power supplies, will flee.
EO 30 is intended precisely to avert that possible power shortage. It signals to our energy officials the urgency of getting the new capacity in place before rapid economic growth outstrips power supply. This order must now be enforced with firmness.
Only a handful of leftist groups are bent on delaying the construction of new generation capacity, invoking environmental protection. More and more, it is becoming increasingly clear they are acting on behalf of a lobby group invested in renewable.
If these groups were a little more clear-headed and a bit more patriotic, they should be demanding the repeal of the anti-consumer “feed-in tariffs.”