Disruptive

There are many reasons why old-style electric cooperatives, the transmission company and mainstream power generators dislike the “minigrid” concept introduced by Solar Para sa Bayan. The concept is totally disruptive.

The “minigrid” concept involves a small area where solar power can be supplied directly to consumers. With technologically advanced batteries solar power may be stored and distributed to consumers 24 hours a day, 365 days in the year.

This concept cuts off commissions to the local electricity cooperative and the transmission company. As the “minigrids” proliferate, they could grab significant market share from the large generation plants that were built using billions in investment. The financing costs for those large plants add to the generation costs eventually passed on to consumers.

Not too long ago, solar power was too expensive to even consider on a significant scale. Without the advanced battery storage technology we have now, solar power was unreliable. We had power when the sun was up, insufficient power on a cloudy day and no power at nighttime.

The rapid march of technology erodes old business models with impunity. Of course there will be panic among those who have sunk their money in old business models.

With the great strides taken by information technology and artificial intelligence, the acronym VUCA has quickly gained currency in the business community. The acronym stands for volatility, uncertainty, complexity and ambiguity.

For instance, some European countries are now considering banning all vehicles powered by hydrocarbons. Some major cities will have only electric cars on their streets in a few short years while we still debate the future of the jeepney and wonder when we might have a truly functional international airport.

In one of the corporate boards I sit in, we are considering convening a strategic planning workshop to assess the effects of new financial technologies (Fintech) on our basic business model. We need to adopt new strategies to cope with the disruptive effects of the new technologies on our brick-and-mortar business. Unless we adjust promptly, the new technologies could spell an existential threat.

I could imagine the dread that envelopes the corporate boards in the power industry. This sector requires heavy capitalization, a highly centralized transmission system and a wholesale market for daily trades in power supply. It is a large and centralized army in the old Prussian mold now threatened by small guerilla units spawning “minigrids” all over like mushrooms on a moist field.

The dread probably doubled when Energy Secretary Alfonso Cusi declared his support for granting Solar Para sa Bayan a franchise.

From the standpoint of the country’s top energy manager, the “minigrid” concept opens an alternative route for achieving 100% electrification in the country. It could bring affordable power to remote communities stranded from the main transmission grid. For this reason, he calls the “minigrid” a “positive disruptive development.”

What he has yet to realize is that “minigrids” could become a full-scale insurrection.

Some of our rural electric cooperatives are most vulnerable. They are undercapitalized and badly managed. They do not fully cover their franchise areas when it is not profitable for them to do so. They operate with large systems losses that inflate the cost of power for their consumers. In a word, they are vulnerable to new technologies that will contest their market.

Cusi does not seem disposed to protect the dinosaurs. He is quoted as saying: “We cannot let Filipinos wait forever. There are efficient cooperatives and there are inefficient cooperatives. Are we going to allow Filipinos to suffer because of inefficient cooperatives? I don’t think that is right.”

He is correct. The reason our economy is so screwed up is because we spent decades protecting businesses that have ceased to be competitive. We tried stopping the winds of change to protect oligarchs. We resisted new technologies because they threatened old businesses.

The only way we can liberate our economy is to make all markets contestable. An inefficient electric cooperative, for instance, is an invitation to contestation by alternative energy providers. This is the reason why a nationwide franchise for Solar Para sa Bayan is such a game-changer. Instead of protecting little electric fiefdoms that serve their customers badly, we now have a fully contestable electricity market.

From scratch, Solar Para sa Bayan is now serving 12 towns in varied such provinces as Mindoro, Palawan, Masbate, Cagayan and Aurora.

When the last typhoon struck, Dingalan town in Aurora remained continuously powered even as cell phone services went down. The town is served by a solar-powered “minigrid” that continued delivering electricity through the storm and its aftermath.

In Calayan, Cagayan, Solar Para sa Bayan installed a “minigrid” that allowed the town to be fully powered around the clock even as power in the rest of the province was cut off because of damaged transmission lines. This is the first time the town enjoyed uninterrupted power supply.

In Claveria, Masbate, the municipality’s 45,000 people now receive round-the-clock power for the first time ever. This will have revolutionary effects on the town’s productivity.

In the areas ravaged by Typhoon Ompong, Solar Para sa Bayan quickly put up “minigrids” in many areas where local electric cooperatives took too long to bring up their system. They might have lost their customers forever.

Uninterrupted power brings many good things. Vegetables could be saved from spoilage by refrigeration relying on consistent power supply.

Mao Zedong would have fully understood what Solar Para sa Bayan is up to. It is surrounding the cities from the countryside.