Hampering Our Growth

Southeast Asian countries are at different stages of economic development and will have higher demand for energy. In fact, according to the Global Energy & CO2 Status Report published by the International Energy Agency or IEA, Southeast Asia (SEA) accounted for eight percent of global energy growth last 2017.

An earlier report released by the same agency, the Southeast Asia Energy Outlook 2017  revealed that the region’s energy demand is likely to grow by roughly two thirds and account for a tenth of the world demand by 2040. Installed capacity is set to increase from 240 GW in 2017 to 565 GW by 2040 with coal accounting for  40 percent of the growth. This will push Southeast Asia to become a major importer of fossil fuels by 2040. The IEA predicts that the region’s annual net import bill will be over $300 billion, which is equivalent to four percent of the SEA’s total gross domestic product.

The IEA, however stressed that the region can still avoid incurring such a huge net import amount if governments implement policies that will reduce the demand for energy and increasing the use of renewables. Based on IEA’s estimates, Southeast Asia can lower the import bill by $180 billion if  the region increases Renewable Energy’s share in the mix by 20 percent.

The agency stressed that the increasing energy demand both pose as a challenge and an opportunity as governments can opt to go for affordable policy and technology options. ” The rapidly declining cost of wind and solar PV provides an opportunity to help meet growing electricity demand in a cost-effective and sustainable manner  while also helping spur local manufacturing industries.”

IEA also noted that attracting investments in RE will be crucial to meet the region’s energy requirements as Southeast Asia will need some $2.7 trillion to $2.9 trillion in investments by 2040.

For his part, International Renewable Energy Agency or IRENA director-general Adnan Z Amin noted that Southeast Asian countries should do a better job in attracting higher investments for RE development.

He stressed that despite the falling costs of RE technologies around the world, financing for RE in SEA countries remain a challenge given the lack of clear policy and regulatory frameworks for investors. He urges SEA countries’ leaders and regulators to come up with clear and reliable long-term policies to attract financing for the sector: “Basically what we’re lacking right now is a sense of government resolve and a sense of adequate, reliable policy framework that allows the private sector to come in…The market opportunity has to be created by policy and regulations.”

 

eco business

Southeast Asia can save $180 billion if more renewables are used by 2040. Photo c/o www.eco-business.com

 

Unfortunately, the observation of the IRENA president reflects the state of our policies and regulatory environment of the energy sector in the Philippines. The regulations here in the country are far from friendly to RE developers and do scare potential investors.

For one, the foreign ownership restriction in our constitution prevents investors from coming in to help us build more RE plants. As I have suggested in the past, it is time for us to consider allowing foreign investors to provide the equipment and technologies needed convert our resources into power while limiting their ownership on the natural resources. After all,  building RE power plants is an expensive undertaking and there are very few local businessmen who can afford to develop RE.

Aside from our problem in the foreign ownership, our regulators and even some of the players in the sector fail to realize the importance of renewables on the economy.  As I have been discussing thoroughly in this blog, we need to realize that the concept of least cost– where we only look at the upfront cost of building our power plants– hinders RE from becoming mainstream in the country.

We seem to forget that the risks of foreign exchange fluctuations, global fossil fuel prices and other market conditions will cost us more in the future. Our country cannot fully realize the benefits of RE unless we appreciate  the crucial role it plays in ensuring both energy security and equity. This is unfortunate for us as our country has been blessed with natural resources we can tap to help us achieve equitable economic growth.

Plus, the world is heading towards distributed generation and smart grids with the advancement of technology and yet the Philippines still rely on central generation. Unfortunately, we still lack rules on distributed generation and remain focused on distribution monopoly controlling the development of embedded generation. This hampers the development of RE.

Our government should pave the way for a more flexible design of a distribution system that can immediately supply the power demands and at the same time deliver the preferred sources of power to the customers.  Our distribution companies should have intelligent systems capable of accommodating renewable energy sources. We need to take a good look at our distribution system and make some drastic changes if we are serious in our desire to bring more renewables in our energy mix.

These are just are some of the problematic  issues that the sector needs to address and there are more.  Around the world, developments are taking place to accommodate greater use RE, and unless our country and regulators are able to address the myriad of problems hounding the energy and hampering more investments in renewable development, then the Philippines will surely be left behind by the rest of the world.

References:

Southeast Asia Energy Outlook 2017: https://www.iea.org/southeastasia/

Global Energy & CO2 Status Report
The latest trends in energy and emissions in 2017:https://www.iea.org/geco/

https://www.businesstimes.com.sg/asean-business/clear-reliable-policy-direction-in-asean-needed-to-attract-renewables-investment

Honoring Commitments: A Hot Warning

The historic 2015 Paris climate agreement saw world leaders committing to limit the average global temperature rise to “well below 2°C” above pre-industrial levels to combat climate change and its effects.

However, more than two years after the signing of the accord, the International Renewable Energy Agency or IRENA notes that “current emission trends are not on track to meet that goal.” In its report, the Global Energy Transformation: A Roadmap to 2050, released last April, the agency stressed that current and planned policies of governments are far from achieving their emission reduction targets. Fossil fuels like natural gas, oil and coal would still dominate the global energy mix in the next decades.

The Energy agency stressed that the goal of keeping the world’s temperature rise below 2 degrees Celsius is technically feasible. But it is imperative to scale up renewable energy (RE) at least six times faster so that the world can start hitting the goals set out in the Paris Agreement. “Global energy system must undergo a profound transformation from one largely based on fossil fuel to one that enhances efficiency and is based on renewable energy,” the report added.

The report also emphasized that all countries can grow the proportion of RE in their overall energy use. According to IRENA’s global roadmap, the REmap, nations can source 60 percent or more of their total energy consumption from renewable energy. After all, the world would need to increase the share of renewable energy in the power sector from 25 % in 2017 to as much as 85% by 2050. “If we are to decarbonize global energy fast enough to avoid the most severe impacts of climate change, renewables must account for at least two-thirds of total energy by 2050,” IRENA Director-General Adnan Amin said.

To accomplish this feat, new approaches to the power system, planning, system and market operations, regulations and public policy must take place IRENA stressed

The Energy agency also noted that all regions of the world would benefit from the energy transformation. Areas like East Asia, Southern Africa, S. Europe and Western Europe are set to have high welfare gains from this transition through reduced greenhouse gas (GHG) emissions.

So, it’s not only the Philippines that’s having a difficult time in meeting the goals set by world leaders in the Paris agreement since there is a need to undergo a major shift to cleaner forms of energy around the world.

Unfortunately, the world’s lack of action in fighting climate change will hurt vulnerable regions like Southeast Asia.

Hans Joachim Schellnhuber, a member of the Pontifical Academy of Sciences in the Vatican and the Director of Germany’s Potsdam Institute for Climate Impact Research (PIK) last year warned that Southeast Asia might end up suffering from daily extreme temperatures if the world keeps us with high emission level where “All of the tropics will develop conditions that physiologically, humans cannot live outside anymore.”

His study, “A Region at Risk: The Human Dimensions of Climate Change in Asia and the Pacific” showed that it is possible for temperature to increase to 1.7 degrees Celsius above pre-industrial levels by 2030, up to 2.7 degrees by 2050 and even up to 4 degrees by 2070 or the temperature “where you would collapse.”

This means that the Philippines and its neighbors could “see a complete shift in living condition” where people would be forced to flee their homes. The Nobel Prize winner further added that “You would actually have to give up the Philippines altogether….Unless you put the entire population into a shopping mall, which would be a very big mall,”

This summer, the Filipinos have already endured warm temperature with the heat index reaching 46.8 8°C in Sangley Point in Cavite. Our weather bureau, PAGASA, classifies heat index temperatures from 41 to 54°C as dangerous where “heat cramps and heat exhaustion are likely” and that “heat stroke is probable with continued activity.”

 

dried land

Dried-up rice field in Cavite as heat index this summer reaches dangerous levels. Photo c/o of philstar.com

 

Can you imagine having to endure warmer temperature than the ones we have this summer? As Schellnhuber stressed, we Filipinos will be unable to live outdoors if we all fail to limit our GHG emissions.

The problems of Boaracay may not be limited to the quality of the water alone. If we do not do anything about climate change soon, sea levels will rise in the coming century by as much as 1.4 meters most likely engulfing the not only Boracay but our other lovely islands as well.

Clearly, there is a pressing need for us to do our share in limiting the average global temperature rise to the desired level as we are the ones who will suffer from the effects of climate change. Fortunately for the Philippines, it is possible to help reduce GHG emissions by relying more on cleaner forms of energy.

In fact, the country can supplement its power needs with renewables by 57 percent to 60 percent by 2040 with the right policies according to research from the International Food Policy Research Institute (IFPRI). “The Philippines’s current energy-supply mix must be diversified to minimize import dependency on fossil fuels and meet the country’s energy needs,” said Alam Hossain Mondal, a researcher at IFPRI and lead author of the study. And as I have repeatedly stated in the past, the impact of reliance on fossil fuel hits our ordinary households. The weakening of the peso and increasing coal prices will adversely affect the ordinary Filipino.

He further added that failure to add more RE in the power mix would result in greater fossil fuel dependency by an average rate of seven percent per year. As a result, CO2 emissions could reach 144 million tons by 2040 from the 43 million tons recorded in 2014.

Indeed, it is time to pay attention to how we can help the world limit the average global temperature rise. Yes, the Philippines and even its neighbors’ contribution GHG emissions may be negligible compared to advanced countries. But since the country and its neighbors are at risk if we fail to mitigate the effects of climate change, then it would be beneficial for us to help reduce our GHG emission.

It is time for us to exert our best effort to honor our commitment in the Paris Agreement. And it starts by sourcing more power from cleaner sources.

References:

https://www.irena.org/publications/2018/Apr/Global-Energy-Transition-A-Roadmap-to-2050

https://businessmirror.com.ph/ifpri-phl-could-supplement-57-60-of-its-energy-needs-with-renewables-by-2040/

http://www.interaksyon.com/expert-warns-with-no-cap-on-greenhouse-gas-emissions-going-outdoors-will-be-deadly-by-2100/

http://www.gmanetwork.com/news/scitech/weather/650902/heat-index-over-41-degrees-in-several-areas-across-phl/story/

A More Cost Effective Alternative

Even before he assumed office, US President Donald Trump vowed to bring back jobs to the coal sector. Shortly, after elections, he signed an executive order to overturn the Clean Power Plan to revive the coal industry.

However, it seems like his efforts did not stop US utilities from shutting down coal-fired plants. Last year, 27-coal-fired plants with a combined 22 gigawatts (GW) capacity were announced for closure and early this year, energy companies have said that that they will close down at least five coal plants with more than a 1000 GW total capacity.

These announcements of closure are not surprising. Coal generation in the US has declined by 28 percent from 2012 to 2015 as more energy companies realized that shifting to Renewable Energy (RE) is the most cost-effective solution in bringing down power rates. In fact, several US utility companies are set to retire their coal plants and replace them with RE ones.

For example, the Public Service Company of New Mexico (PNM), the largest energy company in New Mexico, which boasts of roughly half a million customers will start retiring coal by the year 2022. PNM, which generated approximately 56 percent of its power from coal in 2015 will begin shutting down coal plants as it plans to produce all its power from solar energy, natural gas and even wind power in a bid to improve their financials and lower rates.

PNM’s Integrated Resource plan for 2017-2023 released April last year concluded that phasing out coal completely was the best way for the firm to match the demand for power with the lowest cost in the coming years. According to PNM’s estimates, the company’s most cost-effective portfolio is to increase the use of renewables to 36 percent and 33 percent from natural gas by 2035 from 11% and 6% respectively in 2017.

Similarly, Wisconsin’s largest utility, We Energies decided to shut down its 1.2 GW Pleasant Prairie coal plant this year. The energy company with its 2.2 million customers, sourced 50.6 percent of its capacity from coal in 2015 and will replace a portion of the size with its 350 MW solar power plant by 2020.

Likewise, in Texas, Luminant, an energy firm that supplies some 18 GW of power has decided to close its 1.8 GW Monticello power plant in January as well as two other coal plants with a combined generation company of 2.3 GW and will replace the lost capacities from coal plants with wind power. So far, the firm can generate 21 GW of wind power and additional 14-27 GW solar power by the year 2030.

These are just some of the major utilities in the US that are now moving away from coal and shift to cleaner forms of energy, and there are more. After all, contrary to those opposed to RE, it is possible to go 100 percent renewables.

We do not have to look far to see such an example. Recently, the local government of Guimaras, the small island province in the Visayas announced its “Guimaras 100% Coal Free Declaration,” a ban on coal-fired plants in the province. In his speech, Guimaras Governor Samuel Gumarin said that “The people of Guimaras have embraced renewables over dirty, polluting energy. We want to show that a sustainable-development path, powered by renewable energy, is not only possible but more viable.”

guimaras

Windmills in Guimaras. The province declared a complete ban on coal power. Photo c/o http://www.evwind.es

 

Guimaras is not the only province in the country that favors RE. Last March, the Bohol local government through its Bohol Energy Development Advisory Group or BEDAG has decided to prevent the building of new coal plants in the province. In a statement, the BEDAG said: “the BEDAG and the entire Provincial Government of Bohol are fully intent on maintaining the sanctity and pristine condition of the environment.”

The development came after the provincial government via an SP ordinance has declared environmental impact as the most important consideration for the selection process for interested energy developers as part of the province’s energy development program. The provincial government will institutionalize its “No Coal” stand through an ordinance.

The above examples only show that it is possible to shift from coal power to cleaner energy. Unfortunately, while others are already shutting down coal-fired plants to lower energy costs, we in the Philippines are busy building them since 90 percent of the roughly 7300 MW capacity approved or already for construction by the Energy Department are coal-fired power plants. This despite calls from experts, world and business leaders to work extra hard to make the shift to greener forms of energy possible.

I wonder how long and what will it take to convince others that RE is the practical choice for all of us.

References:
https://www.forbes.com/sites/energyinnovation/2017/05/18/embracing-the-coal-closure-trend-economic-solutions-for-utilities-facing-a-crossroads/#1f05af1b1c99
http://www.iloilotoday.com/2018/02/guimaras-declares-coal-free-receives.html

http://www.boholchronicle.com.ph/2018/04/02/govt-blinks-no-to-coal-power-in-bohol/

Everyone Is Reaping The Benefits of Lower RE Prices, But What About Us?

The International Renewable Energy Agency (IRENA) says that all renewable energy technologies will be at par with fossil fuel costs by the year 2020.

In its report, Renewable Power Generation Costs in 2017, the organization noted the significant drop of prices from 2010 for both solar photovoltaic (PV) power, which dropped by 73 percent and onshore wind by 23 percent.

At present, onshore wind power average cost is at $0.06 per kilowatt-hour (kWh) while solar is to $0.10. These amounts are close to the cost of electricity generation from fossil fuels, which is somewhere between $0.05 to $0.17 per kWh.

The study predicts that solar prices will trim down by as much as 50 percent by 2020 and that in the next couple of years, both RE technologies are likely to cost $0.30 per kWh.

For the director general of IRENA, these falling costs are an indication that significant changes are about to sweep the energy sector: “These cost declines across technologies are unprecedented and representative of the degree to which renewable energy is disrupting the global energy system,” he noted.

The report also stresses that soon the RE sector will flourish even without subsidies and will continue to do so with the proper government support: “Already today, and increasingly in the future, many renewable power generation projects can undercut fossil fuel-fired electricity generation, without financial support. With the right regulatory and institutional frameworks in place, their competitiveness should only further improve.”

 

solar prices

Solar prices will trim down by half by 2020. Photo c/o http://www.wsj.com

 

Fortunately for the Philippines, we have access to plenty of sunlight. In fact, one study showed that the country could generate as much as 16.17 watts per square meter of solar power. However, our regulatory framework and support for the RE sector are weak. This means we cannot hope to lower down the costs of our renewables unlike what is happening in other countries.

We have to keep in mind that traditional sources of energy continue to dominate our energy mix and will continue to do so in the next 10 years. A BMI Report said that the share of coal is likely to increase by 10 percent over the decade, “The share of coal [is]actually increasing over our 10-year forecast period—from just under 50 percent in 2017 to over 55 percent by 2027,” BMI noted.

The Fitch-owned BMI also sees that RE will contribute around 20 percent of the total power mix in 2020 and a decrease to 16 percent in 2027.

Now, those figures are alarming since the above numbers do not reflect our government’s commitment to shifting to greater use of renewables, to as much as a third of the power mix. This is a point stressed even by BMI: “However the country has released few details on how they intend to reach its target, particularly given the dominance of coal in the project pipeline,”

So, while other countries around the world are enjoying lower costs of power because of RE, the Philippines is not only being left behind but will also have to endure the complete opposite of lower costs of energy: the higher cost of power.

As I have been saying again and again in this blog, our dependence on traditional sources of power comes at a high cost because we import our raw materials, particularly coal from other countries.

The BMI estimates that the Philippines imports around 75 percent of its coal supply from Australia and Indonesia. We pay for these imports in dollars.

Let us not forget that experts predict that the Philippine Peso will be the worst performing currency in Asia this year. The head of trading for the Asia Pacific at Oanda Corp. in Singapore, Stephen Innes even described the Philippine peso as “ the local whipping boy in the region.” Just in the middle of February, the Philippine Peso hit an 11-year low as it fell to P52.12 against the United States dollar.

And as the peso falls against the dollar, we can expect higher power rates. Last February, the biggest power distributor in the country, Meralco has announced a rate hike of P1.08 per kilowatt hour (kWh). This means that the average household consuming 200 kWh per month will need to shell out additional P216 for their monthly bill for January partly because of the depreciation of the peso against the greenback.

That’s just the problem with relying heavily on coal power plants. The Filipino people end up paying more for their power consumption for things beyond their control such as the peso depreciation or increase of costs of imported coal because these two are passed on costs to consumers. We could help alleviate the plight of the Filipino consumers if we can tap our natural resources and rely heavily on them for our energy needs instead.

It is ironic and sad that the Philippines, a country that has natural resources available for more development and use of RE, has to rely on imported coal for our energy needs. Clearly, something must be done about it to help alleviate the suffering of Filipino consumers.

References:

Renewable Power Generation Costs in 2017, IRENA

http://www.manilatimes.net/coal-top-55-ph-power-mix-2027/377594/

https://www.rappler.com/business/196059-philippine-peso-weakest-p52-us-dollar

http://www.manilatimes.net/meralco-hike-rates-p1-08-kwh-feb/378957/

https://www.bloomberg.com/news/articles/2017-12-21/philippine-peso-seen-as-asia-s-laggard-for-2018-as-deficit-grows

 

UTILITIES OF THE 21st CENTURY Introducing Competition in the Power Distribution Sector

Around the world, changes in the energy sector, particularly in the distribution segment are taking place given technological advancements as well as the world’s worry over climate change

For example, in the United States, utilities are beginning to take the threats of climate change more seriously. New York’s Reforming the Energy Vision, a plan to “rebuild, strengthen, and modernize New York’s energy system” was initiated in 2014 partly because of the devastation brought by Hurricane Sandy in 2012. This is the most comprehensive utility proceeding today with its main idea of changing the utility model so that third party service providers can come in to serve the utility’s customers by moving away from the traditional utility model and going towards a Distribution System Platform (DSP) provider

The DSP model transforms the traditional utility into something like an air traffic controller that coordinates and facilitates the deployment of distributed energy resources (DERs). This becomes the focus of the utility, which is a far cry from the traditional concept of a monopoly. The staff of the Public Service Commission (PSC) stressed that “Under the customer-oriented regulatory reform envisioned here, a wide range of distributed energy resources will be coordinated to manage load, optimize system operations, and enable clean distributed power generation.”  The primary goal of this model is to make the utility customer-centric as “Markets and tariffs will empower customers to optimize their energy usage and reduce electric bills, while stimulating innovation and new products that will further enhance customer opportunities.”

This bold move by the New York City should not surprise us since electricity experts point out that significant transformations are causing a revolution in the way electricity is produced, distributed, and marketed. They stress that technology is giving consumers more autonomy and choice. These experts argue that we “have entered an age in which the technology-powered push and the customer-driven pull have beneficially collided.

In fact, as early as 2000, the United Kingdom (UK), already started introducing competition in the power distribution business through the Independent Connection Providers (ICPs) and licensed Independent Network Operators (DNOs), thus allowing customers to use an alternative provider for some connections work known as “contestable work.” These include but are not limited to, designing, purchasing materials to form the connection, reinforcement of the connection, and even directly connecting to the network. These tasks can be done by an Independent Connections Provider (ICP).

Indeed, change in the energy sector has already arrived where the customer’s choice has become the paramount objective of industry players by making room for more competition in the power distribution trade. The services at the retail level become less integrated by letting the customers choose his/her source of power, battery storage, Heating, Ventilating and Air Conditioning (HVAC) energy efficiency systems, and other similar value services.

The innovation will come from the ability of technology to combine customer data to Smart grids, microgrids, local generation, and storage, among others. Experts assert that the primary distribution channel for services will be online and the energy retailing price will hinge on innovative digital platforms.  In their view, these are the developments and trends that are coming and they will be coming soon.

For David Cane, former CEO of NRG Energy, the confluence of green energy and computer technology, deregulation, cheaper natural gas, and political pressure, is threatening the existing utility system. His opinion is that the grid will increasingly become irrelevant as customers move towards decentralized homegrown energy. Home automation will become king. Crane further argues that “When we think of who our competitors or partners will be, it will be the Googles, Comcasts, AT&Ts who are already inside the meter.”

Given all these developments, it, therefore, no longer inconceivable to think of two, or even more distribution utilities in one geographical area in the Philippines. These utilities need not perform the same functions.  As distribution services have been unbundled, e.g., metering as separate business units, distribution utilities can compete on which among them can connect the fastest and cheapest to the distribution grid.

It is no longer impossible to have two, or even more distribution utilities in one geographical area in the Philippines

The utilities can also compete on how much each supports home automation or distributed generation like rooftop solars. As pointed out recently by Google’s Chief Technology Advocate, Michael T. Jones, companies like Google can develop the service where “all electronic devices (to) talk about their power needs to an aggregator, and you can have a power auction for each one.”

Technology is now available to connect reading and billing of meters to bills payment through the mobile phone.  All these services have developed because of technology.

Even in constructing power grids in the distribution sector, one can have overhead wires, or underground ones, depending on the requirements or needs of the customers. Smart transformers connected to a Supervisory control and data acquisition (SCADA) platforms can fine tune the needs of customers.

Unfortunately, unless competition is introduced in the Philippines distribution sector, it will take a long time for the Filipino consumers to enjoy the benefits of the 21st Century.  The distribution sector has long been in the abyss of lethargy induced by a monopolistic structure, running counter to the cornerstone of Energy Power Industry Reform Act (EPIRA), which was crafted to introduce competition within the power sector. In particular, a guiding principle of the Distribution Sector is that it is a business affected with public interest. This objective of competition and guided by the principle of public interest required the unbundling of business activities as provided in Rule 10 of the Implementing Rules and Regulation (IRR) of the EPIRA.

It has traditionally been thought that because of the nature of the distribution business, this sector, and the Transmission Business, are natural monopolies. This was probably true in the past, but technologies have developed over the past few years thus making this view no longer true. As argued above, technological change has brought in innovation, creativity, and access to the masses. It has also brought down costs – the mobile business is a clear example. It is not, therefore, a theoretical argument that technology will bring down cost. That is a fact.

We cannot reach the goal of empowering the Filipino power consumer unless change comes in now. Distribution utilities’ vision should always be proactive and aligned with the varying needs and load profile of a dynamic consumer.  This may be reflected in the flexible design of a distribution system that instantaneously addresses the power demands and delivers the preferred sources of power to the customers. A sophisticated consumer-centric designed system encourages the proper management of electricity usage, which translates into savings on prices and resources.

To illustrate this point, let us take the case of a distribution utility and how it handles system loss. Currently, the task of managing systems loss at almost 20% seems like an insurmountable challenge. However, the introduction of smart meters and automated billing and payment systems can bring this down to a more manageable level at about 14% thus bringing down rates for the consumers, which translates into savings of about PHP 0.15/kWh. And this is just the initial and rough calculation.

The above is just an example how a much better equipped, and better-financed utility can bring down costs of the electricity consumer. In the medium term, replacement of aging wooden poles and overworked transformers will further push down systems loss and thus power rates. Finally, because of a strong balance sheet and excellent knowledge of the power market, the cost of generation can also be brought down.

Plus, competition is always beneficial for consumers because more players in the market will always result in cheaper goods and services.  Hence, consumers should be able to choose between service providers like distribution companies so that distribution companies can no longer just “pass on” any cost that they think they are traditionally entitled. While the Energy Regulatory Commission (ERC) will approve the rates, ultimately it will be the consumer who will choose.

Opening up our distribution system for more competition will also pave the way for more use of cleaner forms of energy. It would be ideal to have distribution companies who will have intelligent systems to accommodate renewable energy sources. Such a move will then give the consumers a choice to go for greener forms of power and help us in our goal of saving our environment. After all, making our power grids responsive to climate change will be another area of transformation and competition.  With typhoons becoming an even more frequent phenomenon in the country and elsewhere in the world, change has to come in designing, building and managing power distribution networks.

Making drastic changes in the way we distribute our energy locally is a win-win solution for all of us. We give consumers autonomy and more choices, we lower our electricity bills, and we help save our environment by paving the way for more RE use.

Indeed, significant changes are needed. And we need them soon.

References:

Institute for Local Self-Reliance, https://ilsr.org/u-s-power-grids-days-numbered/

https://www.utilitydive.com/news/are-recent-disasters-enough-to-spur-utilities-to-take-climate-change-seriou/517373/

https://www.utilitydive.com/news/rev-in-2016-the-year-that-could-transform-utility-business-models-in-new-y/412410/

Schwieter, N, and Flaherty T., “A Strategist’s Guide to Power Industry Transformation,” https://www.strategy-business.com/article/00355?gko=9fa18

 

 

Running Out of Time

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2017 was the second hottest year on record. Photo c/o http://www.tbo.com

We can no longer ignore the effects of climate change. We are often reminded by environmentalist and experts alike that our planet is already suffering due to our neglect of the environment

At the first week of this year, we were greeted with the news from the Copernicus Climate Change Service that another record was broken in 2017 is it was the second hottest year only next to 2016.  

The agency noted that 2017 was “cooler than the warmest year on record, 2016, and warmer than the previous second warmest year, 2015,” since temperatures of last year averaged 14.7 degrees Celsius at the at the Earth’s surface.

 In an interview with Reuters,  head of Copernicus Jean-Noel Thepaut stressed that scientific consensus point to man-made emission as the cause of the global warming trend: “ “It’s striking that 16 of the 17 warmest years have all been this century.”

Those who have been following news about climate change are no longer surprised by this piece of information from Copernicus.

 Late last year, the World Meteorological Organization (WMO) said that the earth’s temperature for 2017 was likely to be one of the hottest on record based on the first nine months of the year, just slightly cooler than in 2016 when El Nino made the temperature rise to record-breaking levels.

Petteri Taalas, secretary general of the WMO back then emphasized that “The past three years have all been in the top three years in terms of temperature records. This is part of a long-term warming trend. We have witnessed extraordinary weather, including temperatures topping 50C in Asia, record-breaking hurricanes in rapid succession in the Caribbean and Atlantic reaching as far as Ireland, devastating monsoon flooding affecting many millions of people and a relentless drought in East Africa.

Aside from the earth’s temperature, there is another indicator showing how neglectful we have been on our planet

According to the United Nation’s weather flagship annual report, The Greenhouse Gas Bulletin, the increase of the concentration of carbon dioxide in the atmosphere in 2017 was at record speed, hitting a level that has not been reached for more than three million years.

The global average concentration of CO2 hit 403.3 parts per million (ppm) in 2016, up by 3.3 ppm in 2015 “because of a combination of human activities and a strong El Niño event.”

 UN’s report emphasized that it was around three to five million years ago when the Earth last experienced the same CO2 concentration rates.

 And just like the world’s temperature, the global average concentration of CO2 in 2017 is likely lower than the 2016 levels, but will still break records.

 Indeed, our planet is suffering from our lack of care for it. And experts agree that the world has to speed up the countermeasures needed to mitigate the risks of global warming. The head of UN Environment Erik Solheim said it best: “The numbers don’t lie. We are still emitting far too much and this needs to be reversed.”

 We are indeed breaking records. The wrong ones at that. It is time to swiftly act if we are serious in our fight against climate change.

 We should be alarmed by the numbers being presented to us. Unfortunately, our own records show that we are far from taking action in helping the global fight against climate change.

Data from the DOE shows that coal still accounted for almost half of our energy needs in 2016.  We are still in our business- as usual scenario, as there will be more coal power plants in the next decade. Roughly 90 percent of 7,300 MW of the planned power projects are coal as noted by the BMI Research of the Fitch Group.

 It is time to act now and take drastic measures to mitigate the effects of climate change. We may not be one of the world’s top polluter, but we need to remember that developing countries especially those who are prone to disasters such as the Philippines are the ones who suffer most because of everyone’s neglect of the environment.  

 Senator Loren Legarda raised strong points in her speech delivered during the United Nations Climate Change Conference (COP23) last year where she urged nations to implement the needed but painful measures to help the environment. “We have all heard the saying that what is ‘difficult is done at once’ but that ‘the impossible takes a little longer.’ But we are running out of time. We have to do both the difficult and the impossible at once.”

 Yes, we need to do the almost impossible task of paving the way for the renewable energy sector to flourish for the survival of the planet. May our local energy government officials heed the words of the good senator as the Philippines– a country that’s rich in natural resources– has been slow in increasing the share of renewables in its power mix.

 We need a stronger political will and resolve to ensure that we achieve our goal of shifting to cleaner forms of energy to help save our environment. After all, we are running out of time.

 References:

 https://www.rappler.com/science-nature/environment/188779-legarda-speech-cop23-bonn-germany

 https://www.theguardian.com/environment/2017/nov/06/2017-set-to-be-one-of-top-three-hottest-years-on-record

 https://www.theguardian.com/environment/2017/oct/30/global-atmospheric-co2-levels-hit-record-high

 https://www.reuters.com/article/us-climatechange-temperatures/2017-was-second-hottest-year-on-record-after-sizzling-2016-report-idUSKBN1ET1JF

Suspense Is Only Good For Movies

I’ve written so many posts about how our local policies have been far from friendly to renewable energy (RE) developers like myself. But these days, it seems that the regulatory environment has even gone worse.

There is uncertainty in the sector given that our Energy Regulatory Commission (ERC) is caught in a messy situation after the Ombudsman suspended the four ERC commissioners last December.

Just this week, the Court of Appeals has issued a 60-day Temporary Restraining Order (TRO) on the suspension.  But then again, as the order suggests, it is just temporary stay order. What happens after 60 days? Also, will the resolutions approved by the suspended commissioners during the 60-day TRO period be deemed legal?

But the complication does not end with the suspension order and the TRO. There is a bill filed in the Lower House seeking the abolition of the ERC. It was sponsored by no less than the Speaker of the House, Pantaleon Alvarez.

The House Bill 5020 not only seeks to abolish the commission but is also pushing for the creation of a new quasi-judicial regulatory body, the Board of Energy as ERC’s replacement.  The new board will be an attached unit of the Department of Energy (DOE)  and will be composed of a Chairperson and two members appointed by the President upon the recommendation of the Energy Secretary.

All these developments are worrying since the ERC while being far from being an ideal regulator even before the chaos brought by the suspension, at least provided some comfort to the sector that somehow issues will eventually get resolved. So, is it essential to abolish the commission and replace it with a new one? A new entity might not be the answer to problems already hounding the ERC, especially if it is attached to the Department of Energy (DOE). It is not implausible to think that the DOE can come up with policies which, contrary to its opinion, may not be good for consumers in the long-run. So, it is essential that ERC, or its equivalent, must remain independent of the Executive Branch.

The bigger issue here is REGULATORY CAPTURE. And here, I am not even implying covert attempt to control the ERC. Because the deregulation and privatization were not ideally done, there are pockets of monopolies and monopsonies that make it difficult for the ERC to make sound decisions that benefit the Filipino consumers. Because of all these, the ERC is sometimes constrained to follow “jurisprudence” and those with vested interests will not question the commission’s decisions. Creativity and innovation in rule-making for the benefit of the Filipino consumer are gone.

For example, as I have explained previously, the commission had the incorrect appreciation and application of the Capital Asset Pricing Model in the tariff setting for cost recovery in power contracts. From the very beginning I have always questioned the use of the CAPM – a classic situation of the emperor not having clothes. The CAPM is NOT appropriate for the Philippines. We do not have a well-developed equity market. Our economy is controlled by a few families, thus obliterating the classic economic model of “perfect competition.”

Since all the cases in the past have been decided on this economic model, how can the ERC reverse itself without putting in jeopardy its previous decisions? Can you imagine the amount of money that may have to be REFUNDED to the consumers if someone can prove in court that the CAPM was wrongly used in the past,? Billions!

Unfortunately, the suspense on the fate of the ERC will not only affect RE developers but everyone in the sector, and ultimately, the Filipinos. At this point,  power sector players are probably holding their breaths, waiting for the next scene in the ERC saga. In the meantime, local power producers will be having a hard time obtaining loans and getting their power sales agreements (PSAs) approved, which might result in massive rotating blackouts as new capacities are stalled.

Newly minted ERC chairperson Agnes Devanadera has warned that the suspension would paralyze the power sector, could result in massive blackouts as the commission cannot act on P1.59 billion worth of PSAs.

Similarly,  BDO Capital & Investment Corp. president Eduardo Francisco stressed that lending to the industry might be affected by the Ombudsman’s order. Banks are likely to postpone approval of loans given the absence of off-take contracts. “We can give conditional approval, but usually conditions to lend are based on the ERC approved contracts. There will be an impact on lending,” he was quoted by The Philippine Star.

We do like suspense, but only if we are watching films or TV series.The uncertainty on ERC’s operations has no place in the real world. Hopefully, the mess in the ERC gets resolved quickly.

Let us keep in mind that the current administration is pushing for sustainable economic development, including the building of more public infrastructure in the next couple of years.  Our goal of putting up more bridges, airports, and roads cannot be achieved if we have an almost paralyzed or inefficiently functioning regulator in the Energy sector.