Ignoring the Numbers

Just recently, United States President, Donald Trump signed an executive order, which mainly seeks to overturn his predecessor, Barrack Obama’s Clean Power Plan.

To recall, then President Obama announced the Clean Power Plan in August 2015 in response to the growing clamor to address climate change. The Plan’s primary objective is to reduce carbon pollution from power plants. The Environmental Protection Agency (EPA) subsequently issued the Carbon Pollution Standards, the first U.S. national standard on pollution.

Trump’s EO will trigger the review of the US Clean Power Plan and carbon standards for new coal plants. News reports, however, note, that it is unclear if the US will keep its commitment to made in COP 21 agreement to keep the world’s average temperature below two centigrade above pre-industrial levels.

Reports also quoted Trump as saying that his order is about “ending the theft of prosperity” as the signing of the EO will “start a new era of production and job creation,” particularly in the coal and mining sector.

Perhaps it’s not surprising that the new US President is ignoring the actions and calls of the global community to work double time to mitigate the effects of climate change. After all, he has promised to bring coal mining jobs back while dismissing climate change as “a hoax created by the Chinese” during his presidential bid.

More details are yet to be released on the full impact of this new executive order. But as early as now, environmental activists are already criticizing Trump for going backward on the progress already made by the US in fighting climate change. The U.S, once considered as the leading country in the world’s quest for a cleaner and greener world is now seemingly going backward.

I also join the many others who question Trump’s move in signing such an E.O. as Trump seemed to have ignored that cleaner forms of energy, do generate jobs. Many jobs in fact.

Weeks before Trump signed his controversial order, the US Department of Energy (DOE) released a report showing the contribution of the renewable energy (DOE) sector in jobs creation in the country.

The US, Energy and Employment Report revealed that solar power employs the most workers in the US Electric Power generation industry with wind energy is the third biggest. Solar alone provided work for 43 percent of the sector’s employees with 374,000 individuals from 2015 to 2016. In contrast, traditional fossil fuels all together just hired 22 percent of the workforce at 187, 117 for the same period. Coal’s job figures have been on the decline for the past decade the report stressed.

And renewables’ contribution to the additional employment in the power sector is not to be ignored either. The Energy Sector’s contribution to the overall job generation is significant as it accounts for some additional 300,000 jobs, which is 14 percent of the US job growth in 2016.

Plus, RE’s job growth is significant as it increased by 25 percent, creating a total of 73,000 new jobs last year.  Wind power employment alone grew by 32 percent.

The growth of the renewables has been significant in the past decade as more energy are generated from these sources the report stressed: “The electric generation mix in the United States is changing, driven by the transition of coal-fired power plants to natural gas and the increase in low-carbon sources of energy.”

The study pointed out that generation from coal sources has dropped by 53 percent from 2006 to September 2016 while solar power alone has increased by 5000 percent in the same period.

And with the stellar growth of cleaner energy, jobs are still created.

“These shifts in electric generation source are mirrored in the sector’s changing employment profile, as the share of natural gas, solar, and wind workers increases, while coal mining and other related employment is declining.”

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Solar alone provided work for 43 percent of the sector’s employees with 374,000 from 2015-2016.  Photo c/o http://www.zmescience.com

Trump stressed during the signing of the report that the main thrust of the EO was to protect American jobs. But apparently, the above numbers released by the U.S. DOE shows that adding cleaner forms of energy in the mix does not necessarily translate into the loss of jobs. Renewable power generation also requires manpower.

The US DOE study isn’t the only one that talks about job generation in the RE sector. Earlier studies have already established that increasing investments in renewables will generate employment.

Research by the University of California, Berkeley has shown that “photovoltaic technology produces more jobs per unit of electricity than any other energy source. Most of the jobs are in construction and installation of solar facilities and can’t be outsourced to other countries.”

Similarly, the report of the University of Massachusetts, “The Economic Benefits of Investing in Clean Energy in the US” stressed that a total of $150 billion of investments in clean energy would produce some 2.5 new million jobs.

Inevitably, these numbers point to one thing: Clean energy generates jobs. Choosing cleaner forms of energy does not come at the expense of the workers. On the contrary, more employment opportunities are available as we grow the RE sector.

Industry experts are bewildered on how Trump will deliver his promise of bringing more jobs to the coal industry.  Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University, says that it is impossible to bring back coal jobs. “There isn’t a lot of investment activity because in some cases it looks more economically attractive for firms to invest in cleaner technologies.”

Additionally, the Institute for Energy Economics and Financial Analysis or IEEFA, in its 2017 U.S. Coal Outlook stressed that job losses would continue for coal industry as companies will continue to use fewer workers in the future: Promises to create more coal jobs will not be kept — indeed the industry will continue to cut payrolls.”

Plus, the IEEFA sees that natural gas will soon replace coal, which makes it almost impossible to for Trump to achieve his goal: “Trump’s false promise that he can bring back coal is really exposed as so much coal dust and mirrors by this executive order, since utilities will continue to use natural gas instead of coal.”

Sadly, the US President didn’t look at these numbers nor listened to industry experts.

References:

http://edition.cnn.com/2017/03/27/politics/trump-climate-change-executive-order/

http://www.independent.co.uk/news/world/americas/us-solar-power-employs-more-people-more-oil-coal-gas-combined-donald-trump-green-energy-fossil-fuels-a7541971.html

http://www.reuters.com/article/us-usa-trump-energy-idUSKBN16Z1L6

https://www.energy.gov/sites/prod/files/2017/01/f34/2017%20US%20Energy%20and%20Jobs%20Report_0.pdf

https://www.epa.gov/cleanpowerplan/fact-sheet-overview-clean-power-plan

http://www.independent.co.uk/news/world/americas/donald-trump-coal-mining-jobs-promise-experts-disagree-executive-order-a7656486.html

Green is Gold: How renewable energy can save us money and generate jobs”. Greenpeace

Note: UCLA Berkeley & University of Massachusetts studies are cited from the Greenpeace report.

 

 

The Key to Sustainable Energy: Energy Storage Solutions

One of the biggest criticism on renewable energy is its inability to act as a baseload plant. With the exception of geothermal energy, renewable energy sources such as wind and solar cannot provide power 24/7 and have variable outputs, thus making the task of balancing the supply and demand a tedious one.

This is why we need additional technology to store the energy sourced from renewables. Gladly, scientists discovered energy storage technologies for RE. They have been available for some time now, but with the rise of renewables, their importance is now being emphasized

There are different kinds of technologies for energy storage. The most mature and common energy storage is the pumped hydropower where two reservoirs with different elevation are used to store excess power. Water is pumped to the reservoir with a higher elevation when there is excess hydropower supply. Stored energy is drawn when needed by releasing the stored water into the reservoir with the lower height with the help of turbines.

In the Philippines, the Kalayaan Pump Storage is one such type of storage.  Originally designed for the Bataan Nuclear Power plant, the National Power Corporation in the 1990s expanded the capacity to 600 MW to precisely act as a pump storage. In its design, however, it was not contemplated to store renewable energy. This facility provides ancillary services to the system to regulate voltage and frequency.

There are also other storage technologies available, as well.

For example, thermal storage is used by solar plants where the heat from the sun is stored in molten salts, water or other liquid.  Another storage technology is the compressed air energy storage that compresses air and stored in underground caverns. The compressed air is then drawn from their storage and a combustion turbine is used to fire the air with the help of natural gas to produce power.

At Emerging Power Inc or EPI, we use the multi-hour flywheel battery storage. We are in partnership with California-based company, Amber Kinetics for our power storage needs in our solar power plant. The flywheels serve as the reservoir of significant volume of kinetic energy with the high-speed steel rotors. The fly-wheel batteries have been around for some time, but we chose Amber Kinetics’ technology since it can store and release power for hours unlike other similar technology that works only for some minutes. The pilot model is currently installed in the Subic solar farm.

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Flywheel technology by Amber Kinetics at the JSI Subic Solar farm

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Recently, the World Economic Forum named battery storage as one of the Top Ten Emerging Technologies of 2016, the advances in technologies that can help improve lives and industries significantly and help protect the environment.  This list includes technologies that have been available for some time but have reached a tipping point, or where the development in such technology is significant and advantageous to many.

Battery storage solutions after all, are on the rise, too. Zinc, aluminum and sodium batteries are being employed to service small areas. For example, Fluidic Energy, a start-up company that specializes in making batteries using air and zinc has already signed a deal with the Indonesian government to help power-up some 500 remote villages using solar power in the country. The firm will provide air batteries that can store as much as 250-megawatt hours of energy. Fluidic Energy, has earlier inked an agreement with the government of Madagascar to help 100 remote villages put up a mini-grid with the aid of their zinc-air batteries.

As we push for more use of RE, we also need to find a way to store harnessed power from renewables and its integration to grids more feasible. And fortunately, various organizations including governments are now heavily involved in research work to find more power storage solutions that will pave the way for a cheaper, greener and cleaner energy consumption.

References:

https://www.weforum.org/agenda/2016/06/next-generation-batteries

http://www.ucsusa.org/clean-energy/how-energy-storage-works#.WDKm9Pl9600

More Reasons to Shift: Health and Death Print

Recently, the Senate voted to concur the ratification of the Paris Climate deal after President Rody Duterte signed the ‘Instrument of Accession,’ signifying the Philippines’ commitment to Paris Agreement.

To recall, the Paris Agreement on Climate Change seeks to reduce carbon emission and was signed by 194 countries. Our country has pledged to cut 70% of its carbon emissions by 2030 with the help of the international community.

The Senate’s concurrence signifies that we are now legally bound to the agreement. This means it is time for us to double our efforts in reducing our carbon emissions.  One way of doing that is to add more renewable energy in our energy mix.

This shift has sound economic reasons, and more importantly, it has even more profound rationale: its impact on the health of our people.

Data from the Department of Energy reveals that we are still reliant on oil and coal for our energy needs. In 2014, we sourced our power from imported coal and oil by as much as 13.9% and 29.8%, respectively. The figures are even higher for 2015 as imported oil and coal accounted for 14.92% and oil was 32.79% of our energy mix.

Aside from the monetary consequences relying heavily on imported products, reliance on coal and oil for our energy needs has an impact on health of our countrymen, and therefore death rates. Coal, for one, has the largest carbon footprint among all energy types. One kilowatt-hour (kWh) of power produced from coal emits roughly 900 grams of carbon dioxide. And this has health consequences.

Data shows that shifting to renewable energy will pave the way for lesser carbon emissions. Just recently, a study revealed that in the United Kingdom, carbon emissions decreased by 5.8 percent in 2016 compared to previous year as the country’s use of coal dropped by 52% for the same period.

Aside from having a large carbon footprint, experts are now talking about another measure: “death print.”.  Both oil and coal have large death prints. According to James Conca, an energy expert, and geochemist, “death print is the number of people killed by one kind of energy or another per kilowatt hour (kWh) produced”.

Conca explains that coal, oil, and biomass are carbon particulates that result from burning and cause respiratory problems. Our internal organs, particularly the lungs, don’t respond well to these particulates.  Using them has the same result as inhaling cigarette smoke: black lungs.

Just how bad are the death prints of coal and oil?

Conca’s research shows that on global average, the mortality rate of coal –computed as death divided by trillion kWh of use–is 100, 000 when 50% of energy needs are sourced from coal.  It’s even worse in China, which sources 75% of electricity from coal as its mortality rate is 170,000.  The US sources 44% from coal, and its coal’s mortality rate is 10,000. Conca says that China has unfortunately ramped up the building of coal in the last decade with plants that usually do not have exhaust scrubbers thus the higher death print.

Oil has a large death print, too, as its mortality rate is 36,000 for every 8% energy it supplies.

On the other hand, solar rooftop and wind power, with each contributing roughly one percent to the global energy supply, has mortality rates of 440 and 150, respectively.

In the United States, Practice Greenhealth points out that a typical 200-bed hospital that uses coal-powered energy is responsible for $107,000 a year in direct healthcare costs associated with asthma attacks, chronic bronchitis, and other health problems. The organization is the leading membership and networking organization in the US for organizations in the healthcare community that have made a commitment to sustainable, and environmentally preferable practices.

Clearly, these numbers point that adding more renewable energy to the mix will both save the environment, as well as lives.

Again, as I have been saying in the past, I do not have problems with coal plants per se. In fact, I have built some of them during my days with the NAPOCOR. But I also believe in responding to the needs of our time. And studies suggest that the world needs more clean energy if we are to save the world for the succeeding generations.

References:

http://edition.cnn.com/2017/01/18/world/2016-hottest-year/

https://www.forbes.com/sites/jamesconca/2012/06/10/energys-deathprint-a-price-always-paid/#16e2ea1b709b\

https://qz.com/925294/carbon-emissions-in-the-uk-have-fallen-to-a-120-year-low/

http://www.rappler.com/nation/162865-duterte-signs-paris-agreement-climate-change

http://www.rappler.com/nation/162865-duterte-signs-paris-agreement-climate-change

https://practicegreenhealth.org/topics/leaner-energy

The Next King

Last year was another spectacular year for solar energy as a total of 73 gigawatts (GW) came online, breaking the record posted in 2015 of 56 GW installed capacity.

China and the United States contributed the most to the high growth of solar power last year as both almost doubled their installed solar power from 2015. China added 34.2 GW from 15 GW in 2015 and the U.S. with 13 GW from 7.3 GW. Other countries also added more power sourced from the sun such as India with 4.2 GW and UK, France and Germany with each adding at least one GW.

Naturally, more employment was generated from solar PV as it provided some 2.8 million full-time equivalent jobs. This figure accounts for one-third of the all the jobs for renewable energy (RE) sector worldwide. In the U.S., solar PV added around 73,000 jobs last year, twice the jobs generated by the coal industry in the country.

Aside from the growth in installed capacity, solar prices dropped significantly, too. The World Economic Forum notes that the price of solar power is currently lower than coal in some 30 countries. Indeed, there has been a continuous decrease in prices of solar power in the last few years as costs have dropped by 62% since 2009 according to the Bloomberg New Energy Finance (BNEF). And many predict that this trend is likely to continue.

Sohail Hasnie, Principal Energy Specialist for Central and West Asia Department of the Asian Development Bank, for one, foresees that global average price of coal would increase to $65- $100 per megawatt hour (MWh) for 2017 from its $60 per MWh. On the other hand, solar prices, he notes are now at $60-70 MWh, and likely to go lower in the next few months as solar energy in some countries were sold at low levels early this year.  Hasnie cites the case of India’s Madhya Pradesh state where solar power was sold was roughly $45 per MWh for 750 MW generated last February.  He believes that prices could drop below $25 per MWh this year in some auctions abroad.

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India’s 750 MW solar plant. Photo c/o http://www.hindustantimes.com

Battery storage costs are crucial to the expected price drop in solar PV, Hasnie stresses. He notes that lithium-ion battery prices dropped by 22% last year given the increase of manufacturers and awareness on the technology as the use of battery storage increased to roughly 750 MW globally. Hasnie anticipates that battery prices will likely drop by $75 per kilowatt (KWh) by 2020 from $350 per KWh in 2016.

Hasnie isn’t the only one to make such forecasts. The BNEF sees that solar energy is likely to be the lowest cost option in less than a decade.  The head of solar analysis for BNEF, Jenny Chase predicts that one MW ground-mounted solar system will be around 73 cents per watt by 2025, a 36% drop compared to its current price of $1.14. The BNEF also anticipates battery costs to decrease to roughly $200 per kWh by 2020.

Similarly, the International Energy Agency also predicts that solar generation cost will decrease by 25% in the next five years, and a drop by 65% by 2025 according to the International Renewable Energy Agency.

It looks like solar power would soon dethrone coal as the cheapest source of energy. And if these predictions come true, then we might see solar energy take over coal as the king of the energy mix.

Developing countries such as the Philippines should be sensitive to these developments.  Given our penchant on “quick fixes,” we might miss the boat (again) on this one. Our regulators should realize that the “least cost” in today’s environment takes on a different meaning. As I pointed out in my previous blogs, traditional power planning uses the least cost generation methodology where planners only look at stand-alone costs. The least cost generation method, however, does not compute for the risks involved.

For example, we never thought of Indonesia’s changing rules about exporting coal.  A few years back, Indonesia suddenly decided that it will not allow the export of certain grades of coal.  This led to a much higher cost for coal-fired power plant operators in the Philippines.  One company started to bleed because its ERC-approved formula did not take into consideration the fundamental change in the base prices.

To look at a price without considering risks behind the price can lead us to a completely wrong decision.

The global energy and political leaders should now realize that pushing for solar and other renewable energy sources is not just being good citizens of the planet, but also makes economic sense.

References:

https://www.bloomberg.com/news/articles/2017-01-03/for-cheapest-power-on-earth-look-skyward-as-coal-falls-to-solar

https://blogs.adb.org/blog/5-predictions-clean-energy-2017

State of Solar 2016: Globally and in Australia. Climate Council

https://www.climatecouncil.org.au/uploads/4127a8c364c1f9fa8ab096b04cd93f78.pdf

 

 

 

 

Double 100

The previous year closed with good news on the renewable energy development front.

For starters, the world’s billionaires have announced in December their $1 billion clean energy technology fund known as the Breakthrough Energy Ventures.

To recall, the world’s richest came together in 2015 to form the Breakthrough Coalition with the intention of helping the world find a solution to the worsening problem of climate change. Bill Gates, Jeff Bezos of Amazon, Facebook’s Mark Zuckerberg, and Alibaba’s Jack Ma are just some of the members of this organization.

A year after the formation of the coalition, these prominent businessmen put their money where their mouth are and pooled the one billion fund to finance research on clean energy. In an interview, Gates was quoted as saying “We need affordable and reliable energy that doesn’t emit greenhouse gas to power the future and to get it, we need a different model for investing in good ideas and moving them from the lab to the market.”

Aside from the venture fund, another good news greeted those who are hoping for a greener future. Before the year ended, internet giant firm, Google announced that its global operations, which includes data centers and offices would be 100% powered by renewable sources beginning 2017.

This is no easy feat given Google’s size. Having their offices which houses some 60,000 employees running on renewable energy is truly impressive.

Google, being the biggest corporation buyer of RE has done well in keeping its commitment to using clean energy as it announced in 2012. To date, it has a commitment to procure 2.6 gigawatts of wind and solar energy. For Google, choosing renewable sources to fuel their operation is a solid business strategy. According to its EU energy lead, Marc Oman. “We are convinced this is good for business, this is not about greenwashing. This is about locking in prices for us in the long term. Increasingly, renewable energy is the lowest cost option.”

Now there’s more reason to believe a cleaner environment, and achieving the goal of limiting global warming to 2 degrees are within reach. It is encouraging that prices of solar and wind are at the same price or even lower than coal energy in more than 30 countries as reported by the World Economic Forum.

Both energy types, in fact, are making headlines. Solar power in the US reached a record-breaking year with 9.5 gw of photovoltaic capacity added to the US grid in 2016. This makes it the top fuel source of the country for the entire year, a first in US history based on the estimates of US Energy Administration. The Solar Energy Industry Association noted that the US added 125 solar panels per minute last year, twice the pace in 2015.

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Dutch Trains running on 100% RE. Photo c/o Groenetrain

And even wind energy is making waves.  In Netherlands, all electric trains are now powered by wind energy as of January this year. According to the Dutch national railway company, NS some 600,000 passengers daily are being transported using wind energy. Ton Boon, the NS spokesman stressed that the increase in the number of wind farms in Netherlands allowed them to achieve their goal of powering all electric trains via wind energy one year ahead of the firm’s target date.

Locally, we have seen more companies employing renewables to power their operations. Major malls such as SM, Robinsons and Gaisano have installed solar rooftop systems to power up their operations. Just this January, Gaisano Capital has unveiled its 1.03 MW system that can supply 50 percent of its daytime operations of its mall in La Paz city in Iloilo, making it the largest solar rooftop system in Iloilo.

Similarly, the University of the Philippines recently announced that its partner has already completed the installation of three solar roof top with a combined capacity of 240 kWp in the Diliman campus.

No doubt 2016 was a good year for renewable energy development, and it seems that 2017 will likely even be better.

References:

https://qz.com/871907/2016-was-the-year-solar-panels-finally-became-cheaper-than-fossil-fuels-just-wait-for-2017/

http://www.reuters.com/article/us-bill-gates-fund-energy-idUSKBN1412QP

https://blog.google/topics/environment/100-percent-renewable-energy/

https://www.weforum.org/agenda/2016/12/google-green-renewable-energy-in-2017/

https://www.theguardian.com/world/2017/jan/10/dutch-trains-100-percent-wind-powered-ns

https://www.theguardian.com/environment/2016/dec/06/google-powered-100-renewable-energy-2017

http://www.rappler.com/move-ph/160377-iloilo-malls-switch-solar-energy

http://powerphilippines.com/2017/02/09/pnoc-renewables-completes-solar-rooftop-installations-diliman/

 

Job Generation in Renewables

Going green, in this case, going for more renewable energy sources to dominate our energy mix has its rewards. Coal, as we have been discussing, is harmful to our environment, as well as health. Sourcing energy from renewables would lead to savings from medical expenses.

Aside from the environment and health-related benefits, there is one advantage of going renewables, an outcome that can help the lives of impoverished families And this is the focus of GreenPeace Philippines report, “Green is Gold: How Renewable Energy can save us money and generate jobs.” Renewable energy development generates employment. The report cited the example of Europe where the renewable energy sector employs some 650,000 individuals. The RE sector in Germany alone has roughly 370,000 jobs. Data from the German Renewable Energies Agencies stressed that there are more employment available in solar energy than nuclear and coal energy combined. Likewise, in Spain, its RE industry has already provided close to 89,000 direct jobs.

In its report, GreenPeace stressed that solar power could generate the highest number of employment. Research by the University of California, Berkeley pointed out that “photovoltaic technology produces more jobs per unit of electricity than any other energy source. Most of the jobs are in construction and installation of solar facilities and can’t be outsourced to other countries.” A good example would be the solar power business in Japan, where some 9,800 jobs were generated after completing the installation of a total of 360 MWp (megawatt peak) of PV power.

And it’s not just solar power that can provide employment. The study also showed that other RE sources could provide a great number of employment, too.  For example, a typical wind farm generating 250 MW can generate 1079 direct jobs–jobs in the manufacturing, construction, maintenance and operation of power plants– during the installation phase alone. Naturally, indirect jobs are created as well.

On the other hand, job generation figures of geothermal power are impressive, too.  A Philippine company that generates some 1,189 MW of geothermal power has directly hired more than 2,500 individuals.

At Emerging Power Inc. or EPI, we also employ locals in our various power plants including indigenous people. Our Mindoro power plant has employed some Mangyans while there are hundreds of Aetas working with us in the Subic solar plant. So far, we have roughly 400 individuals working with us, and this figure is likely to increase over time as we build more renewable energy projects.

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Workers at EPI’s solar plant in Subic.

Aside from giving them employment, EPI also provides them with the opportunity to go back to school through our CSR programs.  For example, our Alternative Learning Program sponsors individuals to go back to school regardless of their age. In fact, one of our recent high school graduates is a 47-year old Mangyan, who unfortunately had to quit school in the past due to poverty.

Clearly, growing our RE sector will help address the country’s unemployment problems especially when renewables provide more employment than coal-fired plants. A study by the University of Massachusetts, The Economic Benefits of Investing in Clean Energy in the US, noted that about 2.5 million new jobs are to be created when investments on clean energy reach a total of $150 billion. Concluding their report, the researchers added that “clean-energy investments generate roughly three times more jobs than an equivalent amount of money spent on carbon-based fuels.”

Again, I am not against coal power plants per se. In fact, I had helped built some them when I was with NAPOCOR. But times are different, and we need to make some changes to address the needs of our country and the earth.

We have to remember that we are a country that benefits from abundant natural resources. For one, we are the second largest producer of geothermal energy in the world. Plus, the Philippines has a long and hot summer, as well.  According to the National Renewable Energy Labor NREL, the Philippines has the potential of generating an average of 161.7 watts per sq. m., being one of the sunniest countries on the planet.

No doubt that we are set to gain more economically if we harness our resources properly. Building more power plants from renewables could help lower our unemployment rate which stands at 19.7% as of July this year.  RE doesn’t only help save the planet; it also helps improve the lives of so many through the creation of jobs.

References:

“Green is Gold: How renewable energy can save us money and generate jobs”. Greenpeace

Note: Data including geothermal, wind employment & NREL figures, cited UCLA Berkeley, University of Massachusetts & German Renewable Energies studies and definition of direct employment are included in the Greenpeace report.

Labor Force Survey. PSA. https://psa.gov.ph/statistics/survey/labor-force

The Pros and Cons of a MinPoCor

Recently, there are initiatives to push for the refiling of house bills, which seeks for the creation of Mindanao Power Corporation or MinPoCor, according to a Businessworld report. The new entity will be a government owned and controlled agency (GOCC) that will manage the Agus and Pulangi hydropower plants.
The report cited the interim head of the Mindanao Power Monitoring Committee (MPMC), Glenn Jay Reston saying that the MinPoCor “will help maintain affordable electricity rates in Mindanao and assure that the revenues earned will also be reinvested in the island.”
The House of Representatives of the last Congress passed a consolidated bill on the establishment of the MinPocor. However, the said bill failed to pass the scrutiny in Senate. Under the bill filed in the lower house, MinPoCor will operate as a stand-alone GOCC and will raise funds to operate and maintain the remaining power assets of the government in the region.
Now that the discussion on the MinPoCor has been revived, let us ask the following questions: Is it beneficial to create such a GOCC? What are the pros and cons of having the Mindanao power corporation?
On the one hand, having MinPoCor will address the power crisis in the island. It will be an entity that will focus on the needs of Mindanao’s energy sector. After all, the appalling power situation in the region is a result of the long neglect of the national government through poorly crafted government policies.
To stress this point, a report from the Asian Correspondent said that in 2009, the Philippine Chamber of Commerce and Industry already stressed that the island was in need of additional 100 Megawatts to keep up with the economic activities in the region. Plus, business and industry leaders were already asking the national government to address the need for additional capacity as estimates show that Mindanao will likely suffer from power shortages by 2011 if no new capacity were to be installed.
However, the previous administration failed to heed the calls for the additional base load capacity. It was no surprise then that a full blown power crisis interrupted in 2012, with the island suffering from at least 8-hour rotating black outs.
Given the above slow response of the national government to focus on the power situation in Mindanao, it might be in the best interest of Mindanawons to have an entity that concentrates on the power situation in the region.
However, there is also a downside to the creation of MinPoCor.
Being a GOCC, it is still a government entity and will suffer the same problems of a government monopoly, as well as bureaucratic issues.
The possible lack of funding for MinPoCor could create bigger problems as it could delay the much-needed repairs and rehabilitation of the hydro complexes in the region.
The essence of EPIRA is to privatize the government-owned energy assets. The government, after all, has limited funds for the maintenance and operation of assets. This said, it is probably better for the private sector with deeper pockets to take the commercial, operational and constructions risks of operating and maintaining the power plants. Otherwise, the government will need to borrow additional funds and pay for the interest of borrowing money.
There are various ways of going about the privatization of the hydro plants. In my opinion, the Power Sector Assets and Liabilities Management or PSALM could enter into a 25-year power supply agreements before bidding out the hydro plants. This is to ensure that low prices are kept low despite the privatization for the benefit of NAPOCOR’s existing clients including distribution utilities and industries directly sourcing their power from the said plants. Of course, this will be much more complicated given the implementation of the Competitive Selection Process or CSP but still can be done if the government acts on it.
Additionally, Pete Ilagan, President of the National Association of Electricity Consumers for Reforms Inc has suggested privatization through “cooperativization” where cooperatives will own the assets. According to Ilagan, this will ensure that consumers welfare prevails over the interest of big businesses.
We also have to consider that the creation of a new entity always comes with challenges. For one, the efficiency of a GOCC is questionable. GOCCs work under a framework of a democratic government where there is a separation of powers. A democratic government is, almost by definition, designed to be inefficient – there are strict rules on checks and balances. So, if one desires to have an “efficient” company, going through the GOCC way may not be the answer.
However, one can separate the ownership of an asset like the Mindanao power plants and the management of these plants. As government way of running things is based on a democratic framework– it does not have the discipline of profitability and efficiency that private capital will require. So, therefore, there is a way to compromise: the government can keep the ownership of the assets, but the management, including future investments, can be done by the private sector.
Before opening the management to the private sector, the government can enter into long-term power contracts with all existing customers. The government can, for example, fix the current power rate and maybe index to CPI for the next 25 years. This will ensure two things: the government asset will not compete with private generators and second, low power rates from these hydropower plants are assured for the next 25 years.
The private sector entity that comes in will then face the challenge of improving the efficiency of the assets by rehabilitating them and improving operations and maintenance to have an upside on their investment.
So, this is the challenge of a MinPoCor: have the discipline that the private sector (and consumers) require but operate within a framework of a democratic government. Otherwise, there will be no change in the cost structure nor ability to maintain these plants. It is essential to form a management team for the MinPoCor that is not only knowledgeable and transparent but also can approximate or surpass private sector management efficiency. Otherwise, the reforms needed to push the national government to pay attention to the power problems of Mindanao will remain unsolved due to the problems within the organization.
This is not to say the GOCCs cannot be run efficiently. I have seen some GOCCs and government agencies that are at par with the standards set even for private sector companies. These GOCCs are often those that have had the luck of having someone with a vision of running the GOCC effectively. However, these are few and far in between. As a whole and in the long run, the need to adhere to the principle of separation of powers will wear down on efficient management set in place by different administrations.
So, are the hydro complexes better off in the hands of a GOCC? While some may say the jury is still out, others disagree outright.
According to UP economist, Gerardo Sicat, there are several studies showing the success of privatizing hydropower plants:
“There is growing evidence that the privatization of the hydroelectric power plants in the whole country is working well. With the government being relieved from the task of operating the generating plants, gains in efficiency and in service delivery improvements have become noticeable among the privatized plants.”
So, just how beneficial is the creation of the Mindanao Power Corporation? It’s also advantageous to have an entity that is dedicated to the needs of the island. But on the other hand, the possible lack of funding and management problems may exacerbate the woes of Mindanao’s power sector further. There is a way out – the government can keep the assets and maybe even transfer these assets to MinPoCor.
In summary, one need not privatize the ownership of an asset – it is the management of these assets that may need private sector discipline. Further, to ensure a fair level of power rates, the government can enter into long-term power sales contracts with all current consumers of Mindanao. If the management of these assets is privatized, the private investors should have the incentive to invest in the rehabilitation of the power plants so that its efficiency is enhanced thus giving the investors the upside that they are looking for.
In the end, everyone wins: the Mindanao consumers are happy because their low rates are assured for the next 25 year and the government and the local governments should be happy because the assets are not privatized. The MinPoCor proponents can even lobby to have these assets transferred to MinPoCor. Plus, the private sector is happy because a chance to invest in the power sector is open to them.

References:

http://www.econ.upd.edu.ph/perse/?p=913

http://www.bworldonline.com/content.php?section=Economy&title=mindanao-power-corp.-backers-push-for-law-ahead-of-agus-pulangi-privatization&id=135866

http://www.philstar.com/nation/2015/05/27/1459319/bill-creating-mindanao-power-corp.-passes-house-joint-committee

Energy Book by Myrna Velasco

http://opinion.inquirer.net/83960/better-way-to-privatization