energy planning in philippines

It’s Time to Embrace a New Design Philosophy in the Power Distribution Sector

/ gaadsblog / 3 Comments

It’s been two months since Typhoon Odette (international name Rai) devastated large parts of Visayas and Mindanao. Sadly, many families are still living in the dark as power has not been restored in their communities.

Time and time again, natural calamities like Typhoon Odette show us how ill-designed our infrastructure is and how poorly prepared our power sector leadership is in handling power outages and restoration. 

As we saw with the disaster response in Typhoon Odette, our government was unable to respond timely mainly because we rely on a centralized power system supported by a transmission and distribution infrastructure designed over a century ago.

Resiliency has always been a challenge in the power sector. Whenever a typhoon damages the poles of the distribution system, there is no other option but for unaffected utilities to send teams to help restore the lines. The Bayanihan Spirit is laudable, but this approach faces many challenges.

For one, just think of the logistics involved in this approach. Volunteer teams need to bring their own vehicles, equipment, food supplies, etc. It’s also quite challenging for these volunteers given that affected areas are usually without food and water.

We also have to take into account that the transmission company, the National Grid Corporation of the Philippines (NGCP), also has limited men and equipment to repair damaged lines and towers. 

In the past, the National Power Corporation (NAPOCOR) could mobilize temporary generator sets or even power barges to supply emergency electricity. However, these days, it is unclear who should assume the role of providing emergency sets.

The media has reported that the Energy Regulatory Commission (ERC) cannot allow NGCP to run emergency gensets because that will counter the Electric Power Industry Reform Act’s (EPIRA) intent. As NGCP is prohibited from putting up emergency generators, it is up to the generators to provide emergency power supply, which they will have to sell to the distribution utilities (DUs) or electric cooperatives (ECs).

Sadly, this setup is far from ideal since DUs and ECs have to conduct bidding, award and sign the contract, and seek the approval of the ERC. Unless the Department of Energy (DOE) gives an exemption to the utilities, the entire process of procuring an emergency power supply will take many months.

There is something wrong with this setup. Keep in mind that consumers actually do pay for this “emergency supply” via the ancillary services charged by NGCP. This capacity charge is under the “Reserves” item in everyone’s electricity bill. By this alone, NGCP should be the one to provide this service. Since it obviously could not dispatch the generators, bringing in mobile gensets is a simple extension of that function. 

Think about it. Consumers are being short-changed since NGCP is already relieved of the responsibility of providing emergency power that consumers are paying for. The legal definition of NGCP’s function is placing consumers at a real disadvantage. Some power sector luminaries reported that Congress has to pass a resolution to allow NGCP to provide emergency power supply for an extended period. In the meantime, people are dying of hunger and disease while local government units (LGUs) deal with these bureaucratic processes and legalities.  

Infrastructure and utilities damage caused byTyphoon Odette in Cebu City last December. Photo c/o of http://www.rappler.com

We can draw several conclusions from our experience with Typhoon Odette.

First is that the current design of centralized power distribution is no longer responsive to modern times. The effects of climate change are real, which is why we are experiencing more severe weather disturbances. The centralized power distribution model has not changed in a century but the planet has changed significantly in many ways.

Second, is that LGUs have to be involved in the design and implementation of public utilities in their provinces and cities. We cannot afford to simply rely on utility companies to respond to crises as often they are helpless in times of disasters.

There are no short-term remedies to prevent prolonged suffering of Filipinos should another devastation as Typhoon Odette happens. The actions we need to take are long-term solutions.

Recently, President Rodrigo Duterte signed Republic Act 11646 promoting the use of microgrids in unserved and underserved areas. Under the law, microgrid system providers (MGSP) which are natural or juridical persons can provide integrated power generation and distribution services. These MGCPs do not need to secure a franchise from Congress since they are not considered public utility operations.

They, however, are required to seek waivers from existing distribution utilities to provide unserved and underserved areas as well as an authority to operate from the ERC.

The new law is a step in the right direction as microgrids—small grids independent of the traditional grid — have been proven effective in providing reliable power and can make our power systems more disaster resilient. But it’s not enough as we need to take more drastic actions to make our energy system more resilient to disasters.

We must empower LGUs by including them in the energy planning process. LGUs typically are excluded from planning the power distribution infrastructure, which is ironic as they are the first line of defense and responder when a disaster strikes. 

Thus, all LGUs should take to task all local power utilities to redesign their power distribution infrastructure based on a higher level of resiliency; consider possible budgetary allocation from the National Government. The LGUs should determine whether the utilities have considered the human factor in their plans. No current electricity planning tool considers the human element. The LGUs ultimately are answerable to the people. Therefore, planners must consider the human aspect, and only the LGU is competent to do this. 

Likewise, LGUs must have their power distribution franchises. They must be allowed to mobilize power assets without fear of violating the EPIRA. Consider what happened after Typhoon Odette. Many governors were searching for interim generations but their hands were tied since they are not licensed generators. Likewise, generation companies could not bring in genset as well as that would still require bidding and approval from the ERC. The lack of power after massive devastation paralyzes the local government’s disaster response.

In contrast, allowing LGU to have their franchises will give them the flexibility to design and have a private concessionaire build the microgrid. Further, the local government can mobilize its resources in emergencies without waiting for the local utilities to act. 

Plus, it should be mandated that local barangays are provided electricity locally from solar plus battery systems, or other forms of Distributed Energy Resources( DERs), especially for disaster-prone areas. I have been saying again and again that the century-old design of having a central power plant and the electricity transported through high voltage transmission lines and then brought to the household level is no longer resilient enough for today’s environment. 

Also, the NGCP has recently warned of a possible red alert, leading to  rotational power interruptions in Luzon during the summer season when several coal-fired plants experience an unplanned outage. The grid operator says it foresees higher demand than actual peak load in Luzon from April to June. The Visayas, on the other hand, could go on yellow alerts.

We often receive warnings like these from NGCP and every time we resort to bandage solutions. We need to think long-term and seriously accept the fact that centralized systems no longer work for us. We need flexibility in our energy system which DERs can provide. When we have DERs, we won’t be at the mercy of these coal plants and won’t have to endure rotating brownouts

Saying that microgrids are too costly just won’t cut it anymore. Technological advancements in renewable energy like solar and wind have brought down costs significantly. Battery technologies meant to complement the intermittency of solar and wind have also brought down storage prices. Together, these technologies can provide baseload power at prices close, if not at par, with conventional baseload power. These Distributed Energy Resources (DERs) make microgrids technically and financially viable.

Of course, aside from cost considerations, we also have to realize that microgrids make us more resilient. Because the microgrid is no longer dependent on the vulnerable NGCP lines, it can immediately have electricity back because households can draw energy from the batteries. 

Likewise, homes and small and medium enterprises (SMEs) can invest in rooftop solar to provide their own power needs and sell to neighbors and friends. Microgrids are not only resilient but can socially make a locality economically vibrant.

It’s not only the unserved and underserved areas that must have distributed energy resources as LGUs must have their power distribution franchises. The LGUs role in disaster response can never be stressed enough. And this is why these LGUs must take a more active part in energy planning and be granted their franchises as well. 

 It’s time to embrace a new design philosophy in the power distribution sector. Doing so will require massive changes but they will be worth it.

We Knew It Was Bound to Happen

/ gaadsblog / Leave a comment
Indonesia’s ban on coal export prompted importing countries including the Philippines to make and appeal. Photo c/o http://www.aljazeera.com

Last January 1, Indonesia suspended exports of coal after its state power utility announced dangerously low levels of the fuel among domestic power stations. Indonesia is the world’s largest coal exporter.

The ban on exports pushed coal prices higher in Australia and China. Indonesia’s move also prompted Asian governments like South Korea, China, and the Philippines to make an appeal to Indonesia to lift the export ban. Philippines Energy Secretary Alfonso Cusi asked the Department of Foreign Affairs (DFA) to intercede via the Association of Southeast Asian Nations (ASEAN) cooperation mechanism.

Our Energy Department’s appeal should not come as a surprise. After all, the Philippines remains heavily reliant on coal for power generation and procures most of its needs from Indonesia. Data shows that 70 percent of the Philippines coal supply for 2020 was imported. In 2021, the Philippines sourced roughly 2.4 million tonnes of coal monthly from Indonesia. 

Indonesia requires coal mining companies to fulfill their Domestic Market Obligation (DMO) where they need to sell 25 percent of their output locally before they can export. Indonesian authorities are blaming the coal supply problems on miners as they are failing to fulfill their DMOs.

On January 13, Indonesia announced that it would allow 37 vessels loaded with coal to depart, slightly easing the coal export ban. However, this doesn’t mean that the Philippines’ problem is over.  

A Citi research note released last January 5 estimated that roughly 490 out of 631 Indonesian coal miners met their DMO, representing 35 to 40 percent of Indonesia’s total coal production. If these companies fail to meet their DMOs then they won’t be allowed to export. There might not be enough supply for major coal importers like the Philippines, and coal prices are likely to surge if the ban continues. For the Philippines, this would result in power outages and higher rates.

I have been warning of this risk for many years now. At the start of the COVID-19 pandemic, I feared that Indonesia would close its ports, which means we cannot export coal. This would have put our power supply at risk. Thankfully, it didn’t happen then. But we all know that our power supply remains under threat as long as we continue our dependence on coal.

There are several ways we can mitigate this threat to our power supply. Our government should have long taken more aggressive measures in developing renewable energy resources. It should have ordered the immediate development of indigenous sources of power— wind, solar and geothermal. At this point, the government should act quickly and start by modifying power sales procurement rules. It must take draconian measures such as requiring distribution utilities to source a higher percentage of renewables.

The Energy Regulatory Commission (ERC) should mandate that all distribution utilities during the procurement stage testify that no indigenous resources within its franchise area or vicinity are available or there are no offers from any indigenous sources. Simply put, the ERC should order that utilities must negotiate or bid with renewable energy providers before purchasing from imported energy sources.

Likewise, we should take a look at how we interpret the constitutional provision on foreign ownership. Former Energy Secretary Atty. Raphael Lotilla in an Energy Forum last October stressed the importance of allowing more foreign investors to enable the Philippines to develop its renewable energy sources. He pointed out that the 40 percent cap on foreign ownership should only be applicable to finite sources as the constitution refers to “potential energy”. Solar and wind, which can be converted quickly to power should not be viewed as potential energy. These energy sources must not be subjected to the 40 percent foreign ownership rule.

Aside from Indonesia’s ban on coal exports, the Philippines is also facing the risk of higher prices of imports. Recently the International Monetary Fund (IMF) noted that emerging markets could be at risk when the US Federal Reserve increases interest rates earlier and faster than it had earlier planned. For the Philippines, this would mean elevated import costs for fuel and other raw materials. In the event, this occurs and Indonesia continues to ban coal exports, then we are doomed.

In the end, the best time to be more aggressive in developing renewable energy sources to ensure continuous supply was many years ago. Asking the Indonesian government to lift its ban on coal exports is a temporary measure as our best bet has always been to become less reliant on coal by developing and harnessing indigent power sources.

Energy Security Series Part 3: Infrastructure Issue

/ gaadsblog / 1 Comment

Recently, the United Nations’ Intergovernmental Panel on Climate Change (IPCC) released a grim global report on climate change. The report, dubbed by the United Nations as “code red for humanity” revealed that the extreme weather is now being felt around the world and average global temperature increases that could have devastating effects will likely come sooner than expected.

The report said that human-caused climate change is already affecting every region across the world. Extreme weather has become more intense and frequent. And climate change’s effects will get worse over time. The report found that humans have increased the chances of extreme compound weather events like frequency of concurrent fire weather, droughts, and flooding.

Climate change has also brought big changes in the Philippines’ climate patterns. We are seeing massive flooding in recent years.

This December, we experienced the wrath of Typhoon Odette, which left hundreds dead and billions of iin damaged infrastructure. Some three million families are affected by power outages as the typhoon toppled electrical poles, and damaged transmission lines. Of course, it would take a while before power is fully restored in affected areas as the transmission company and electric cooperatives need to wait for floods to subside and to ensure that local conditions are safe enough for linemen and engineers.

Typhoon Odette toppled power lines and damaged transmission facilities. Photo c/o Rappler

The Philippines also experienced deadly and destructive weather disturbances last 2020.

In May of last year, the country had to deal with Typhoon Ambo. It was the first typhoon to hit the Philippines in 2020 and caused Php 2 billion damage to agriculture and infrastructure. It also left around 92,000 families homeless. Power restoration in the affected areas took weeks, months even. Sadly, some electric cooperatives lost their men to power restoration efforts.

There was also Typhoon Ulysses that unleashed torrential rain and powerful winds. This typhoon destroyed thousands of homes, killed dozens of people, and left swathes of Luzon heavily flooded. It was the deadliest tropical cyclone to hit the country in 2020.

Aside from Ulysses, the Philippines was also hit by Typhoons Quinta and Rolly in the last quarter of 2020. The National Electrification Administration (NEA) said that these three typhoons caused some Php500 million worth of damage to the utility system.

Plus, of course, there’s the COVID-19 pandemic that has restricted the movements of everyone. In the early months of the pandemic, there was a big issue about electric bills people received as many consumers received bills that were significantly higher than what they had consumed. Distribution utilities, after all, could not send their employees to read meters during the hard lockdown.

All these point to the fact that the Philippines needs to make its power infrastructure more resilient against natural disasters. We thus need to revisit our energy systems and start investing heavily in smart grids and distributed energy systems.

The global trend is to move away from the traditional central power production model and replace them with distributed energy production. As a country that is more prone to natural disasters, we should join the fray and move to decentralized power systems.

Decentralized power systems will make our infrastructure more resilient to disasters. Centralised power systems, after all, are characterized by power lines spanning long distances and are highly vulnerable to natural disasters. Damage to a single line due to natural disasters will leave thousands of homes without electricity. We only need to remember that it takes power distribution utility companies weeks even months to restore full power in areas affected by storms.

Electric cooperatives, power distributors, and the transmission company have to thoroughly assess the damage to the power line before the linemen can restore power physically. Power restoration after a calamity is a high-risk undertaking. Sadly, many have lost their lives in the physical restoration of electricity.

Centralized power systems, given their massive size, multiply the risk of disruption. A single felled tree can deprive plenty of homes of electricity. In contrast, decentralized systems create redundancies in the power system. Microgrids can easily disconnect from the main grid experiencing outages so they can run without any disruptions until the main grid is up and running again.

Centralized grid systems are also unable to differentiate end users. This means residential users are getting the same quality and amount of power as other establishments like hospitals and government centers. This means that during disasters, the system makes it challenging to provide electricity to the most crucial users or infrastructure.

Centralized grids typically can only be turned on or off, or simply put, either on one or everyone gets power. This inability to differentiate and direct power to the most crucial areas or infrastructure makes emergency and recovery efforts more difficult during calamities. Decentralizing electricity allows for the prioritization of essential infrastructure, cutting down hindrances to quick disaster recovery.

Now more than ever, we should be seeing the role of decentralized energy resources. Cities or towns that have been struck with a natural disaster can function better if essential infrastructure has continuous electricity. Hospitals that are now in full capacity, for example, have one less thing to worry about as they can continue their operations normally despite a disaster.

Aside from disaster resilience, distributed energy systems also offer more cost savings. It is also easily scalable. One study by Vibrant Clean Energy in the United States showed that investing in renewable energy, storage, and distributed energy technologies can save the US around $473 billion in electricity bills from now to 2050.

Plus, distributed energy and other related technologies offer massive employment opportunities. The study of Vibrant Clean Energy showed that distributed energy resources can provide two million jobs if 25 percent of US homes invest in DERs and related technologies.

Consumers also enjoy plenty of benefits in distributed energy systems as they can either receive compensation for allowing the use of their storage systems in stabilizing the grid or by selling back electricity to the main grid.

Distributed energy systems also help in breaking down monopolies in power distribution. As I have discussed in a separate post, power distribution is not monopolistic by nature as monopolies only become a monopoly due to regulation. Distribution energy systems offer better transparency on pricing like energy management systems, advanced metering, dynamic-based pricing, and more options for power consumers.

There are also other tools relying on renewable energy that can be used during disasters. For example, we currently have a technology that can convert any river, lake, contaminated borehole or even flood water into clean drinking water by state-of-the art desalination units running purely on solar power. The desalination units that can be connected to the grid or a combination of solar and grid generator so the units can run 24/7. At a minimum these desalination units can provide potable drinking water for 500 to 700 individuals. The units can be fitted with a 5-kilowatt hour (kWh) Solar Panel system so it can operate round the clock.

The Philippines is always dealing with natural disasters. Year after year we will be facing the same threats, which according to the United Nations are about to get worse over time. The technology we need to make our power infrastructure more resilient is now available. The Philippines only need to realize their value and make the most of what they have to offer.

Energy Security Series Part 2: Energy Poverty

/ gaadsblog / Leave a comment
Some 840 million people worldwide don’t have to electricity. Photo c/o WEF

Energy poverty can be defined in several ways. In its simplest definition, energy poverty is the lack of access to energy services.

The World Economic Forum (WEF) defines it differently. For the WEF, energy poverty is “the lack of access to sustainable modern energy services and products.”

In his encyclical letter entitled Fratelli Tutti, Pope Francis touched on energy poverty, stressing that “forms of poverty are emerging.” He calls on us to to view poverty differently since the modern world’s current criteria do not correspond to present-day realities. “For example, lack of access to electric energy was not considered a sign of poverty, nor was it a source of hardship. Poverty must always be understood and gauged in the context of the actual opportunities available in each concrete historical period.”

Data from the United Nations (UN) shows that there are some 840 million people who live without access to any electricity worldwide. 

In the Philippines, some 1.62 million households still don’t have access to power. The country’s archipelagic nature makes it challenging to provide electricity for the many remote islands and communities.

We cannot talk of energy security in the Philippines without discussing energy poverty. After all, access to electricity is necessary for economic growth.

A study by the Philippine Institute of Development Studies showed that rural households and rural-based economic agents need electricity to enhance their productivity and expand home-based economic ventures. Having access to electricity is a significant determinant of agricultural productivity. Electricity enables Filipino families to operate their livestock and poultry farms as well as store their produce efficiently. Electricity is necessary for many Filipinos to engage in micro-small businesses to help them get out of poverty.

That’s the economic side. Health-wise, the absence of electricity increases the risk of premature deaths due to household air pollution as many rely on solid fuel for cooking like fuelwood or charcoal. 

The World Health Organization (WHO) estimates that roughly four million die prematurely annually e due to household air pollution from the use of solid fuel for cooking.

As we still have seven percent of Filipino households without access to electricity, what must we do?

To connect the hardest to reach and the poorest households, we must invest in off-grid solutions such as mini-grids, solar home systems, and solar lighting. It has been working for the entire world as according to the World Bank since at least 34 million people in 2017 gained access to basic electricity services via off-grid technologies. At the local level, we have been receiving grants from other countries to develop mini-grids powered by renewables.

Off-grid technologies will not only provide access to electricity to Filipinos but will help cut down electricity costs for off-grid locations.

A study conducted by the Institute for Energy Economics and Financial Analysis (IEEFA) and Institute for Climate and Sustainable Cities (ICSC) concluded that the Philippines can save as much as Php 10 billion if off-grid islands rely on renewable sources than traditional ones.

The study stressed that mini-grids powered by generators running on imported diesel and bunk oil are not only proving to be expensive but have also resulted in blackout and power outages. It noted that Filipino taxpayers are footing a huge bill by subsidizing these expensive imported fuels.

The authors of the study “Electricity-Sector Opportunities in the Philippines: The Case for Wind- and Solar-Powered Small Island Grids” have called for prudent reforms where electric cooperatives and distribution utilities (DUs) will be required to procure cheaper sources to reduce costs.

Similarly, a European Union-funded program, the Access to Sustainable Energy Program (EU-ASEP) also concluded that the National Power Corporation (NPC) can also save roughly Php 2.25 million or Php 4.50 per kilowatt-hour if the agency combines renewable energy with traditional power for off-grid islands’ mini-grids.

Indeed, renewables are also the way to go in giving access to electricity to all Filipinos. 

IEEFA’s recommendation in its study echoes mine as I have been vocal in requiring distribution utilities to testify that there are no available indigenous resources in their franchise area during the procurement stage. We must change regulations as our goal is to provide electricity not regardless of the cost but to provide electricity that’s affordable. 

The DOE has already come up with rules and guidelines on renewable portfolio standards (RPS) for off-grid areas in 2018, which was supposed to be implemented this year. The department, however, has suspended first-year compliance to resolve a variety of issues.

Even if the RPS for off-grid areas is being implemented it’s not enough. I have been advocating for higher levels of renewables in the RPS. 

Our goal is not simply to provide electricity to all but as WEF said to ensure that there is access to modern energy services and products. The dominance of diesel-fired mini-grids should be a thing of the past. 

Advances in technology have driven prices of renewable energy technologies down and it’s time that we benefit from new technologies that make electricity more accessible and affordable. Modern times require us to change regulations as our goal is not only to make electricity accessible to all but to provide affordable electricity to all.

Energy Security Series, Part 1: High Power Rates

/ gaadsblog / 1 Comment

The Internal Energy Agency (IEA) defines Energy Security as “the uninterrupted availability of energy sources at an affordable price.” Energy security, the agency says, has many aspects. There’s short-term energy security, which the agency defines as “the ability of the energy system to react promptly to sudden changes in the supply-demand balance. There’s also the long-term energy security, primarily concerned about timely investments to supply energy for both economic development and environmental needs

There’s no better time than now to talk about energy security in the Philippines, especially as we are experiencing a lack of power supply, resulting in rotating brownouts and energy price spikes. 

And energy security in the Philippines is what I would like to discuss in this post and succeeding ones.

Personally, the term “energy security” is difficult to define. “Secure” from what? Does the concept pertain to physical threats to power supply or exposure to global prices? What sector are we referring to– transport or electricity? Does energy security pertain to the ability of power utilities to weather economic uncertainties?

Long before the COVID-19 pandemic, the Philippines was already exposed to various risks.

For one, more than 80 percent of our coal is sourced from Indonesia. And at the start of the pandemic, I was worried that our supply from our neighbor could be affected by border closures and hampered supply chain and logistics.

There’s also the big percentage of tariffs on energy regardless of whether they are electricity or fuel that are affected by global supply and prices. These risks are shouldered by consumers.

Let me start tackling energy security in the Philippines by discussing high power rates.

It’s no secret that the Philippines has one of the highest power prices not only in Southeast Asia but also around the world. A report by the Institute for Energy Economics and Financial Analysis (IEEFA) noted that our power rates are higher by Php10 per kilowatt-hour (kWh) when compared to global standards.

The report entitled “Prospects Improve for Energy Transition in the Philippines” said that our reliance on imported fossil fuel, uncompetitive market structures, and high financing costs are causing the high power rates in the country. The pass-through costs have inflated power prices in the country.

Let me expound on this as I have long been saying that the high power rates in the country can be attributed to our cost recovery mechanism in our tariff setting, our dependence on imported coal, and our energy planners’ penchant for the least-cost method.

Let’s start with the least-cost approach, which has failed to live up to its name. If anything it has driven power rates up.

The least-cost approach compares various technologies and prioritizes the “cheapest” power source to produce. It only looks at the upfront and standalone costs and fails to factor in other considerations such as risks of supply shortage, global price fluctuations, and foreign exchange.

The least-cost method favors traditional power plants as the upfront costs of building them are cheaper than developing renewable sources. However, relying on traditional sources such as coal comes with big risks. For one, they are purchased in dollars, and as we all know, foreign exchange fluctuates. Plus, there’s the risk to its supply. Had Indonesia closed down its borders due to the pandemic, then where would we source coal?

The problem with the least coach approach is exacerbated by our Power Sales Agreements (PSAs), which typically last for 25 years. Our PSAs have pass-through provisions, meaning the foreign exchange and higher fuel prices are passed on to consumers to allow power producers to recover costs. This means that for the next 25 years or as long as the PSAs are valid, the consumers are exposed to volatilities of foreign exchange global price risks. It’s what I have been calling the ‘floating contract.’

I have then argued for a fixed contract, which is possible for renewable energy sources. The consumers pay the same prices for as long as the PSA is valid. It minimizes the exposure and likelihood of consumers paying when the peso is weak or when global fuel and coal prices are up.

Some generation companies have started to offer fixed-price contracts. I am not privy on how these companies hedge the coal price and forex risks, but I can imagine that these companies play on portfolio management, tenor of power sales agreements and over-the-counter hedging instruments to allow them to offer fixed price contracts albeit for a shorter period. This augurs well for consumers in the long-run as they will be paying the same rate for a fixed period rather than shoulder the costs of a weaker peso or higher global prices.

However, let us go back to our energy planners’ penchant for the least-cost method has gotten consumers into trouble. Just take this pandemic as an example.

Another study by the IEEFA entitled “Philippines Power Sector Can Reach Resilience by 2021″ revealed the weaknesses of the Philippine Energy sector. It noted that the country’s dependence on large scale fossil plants with guaranteed contracts have resulted in grid inflexibility and price instability

Coal plants are inherently inflexible. And so as the pandemic depressed the power demand, fossil fuel plants turned to their mid-merit load factors, which are more costly to run, increasing the cost per kilowatt-hour. This is allowed as the PSAs have cost recovery mechanisms of coal plants that in the words of IEEFA are “designed to ensure IPPs can recover their capital costs and repay their loans on a timely basis. This means that neither the financial sector nor the power sector is liable for the risk they take, as these are passed on to end-users who are ill-equipped to manage such risk.”

Sadly, 80 percent of our caseload coal plants are inflexible.

Again, our reliance on coal, penchant for the faulty appreciation of the least-cost method, and our pass-on provisions are causing consumers to pay more than what they should. All these have caused price instability. Our regulations allowing pass-on costs to consumers are a disservice to the Filipinos. I am happy to note, however, that there are now concrete plans to put up new gas-fired generation plants. Adding gas-fired power plants will allow the entry of more intermittent renewable energy projects. This, partly addresses some of the issues causing high power rates.

Aside from batting for more fixed-price contracts, we should also push the government to order the immediate development of indigenous sources along with making changes to procurement rules. The Energy Regulatory Commission (ERC) does not differentiate imported energy from indigenous ones. 

The commission should require distribution utilities during procurement to testify that either there are zero offers from indigenous power producers or there are no available indigenous resources in their franchise area.

When we talk about energy security, particularly energy prices then we should look at how favoring the least-cost approach has led us into more trouble. IEEFA in its report said it best “Power sector planners assumed that a large system lock-in such as coal would lead to the least-cost system. Unfortunately, this lock-in for countries that import coal has led to inflexibility, price instability, and high prices.”

Wanted: Fast and Reliable Internet Connection

/ gaadsblog / Leave a comment

The Enhanced Community Quarantine or ECQ forced us all to stay indoors. As with the many Filipinos, I stayed inside and worked at home. But work from home means having a slow and unreliable internet connection.

According to Speedtest Global Index, as of February 2020, the Philippines’ mobile, download speed average is 16.66 while upload speed is 6.47 Megabits per second (Mbps). On the other hand, fixed broadband average download speed is31.48 Mbps and upload of 31.42 Mbps.

An internet speed test I did, however, show that my home internet’s download speed was at 1.59 Mbps while upload speed is 11.17 Mbps. I am subscribed and am paying for a plan that’s supposedly up to “100 Mbps”, considered my fast internet that can handle multiple activities online.

Yes, one can argue that with everyone at home there’s heavy usage of the internet. But really, my internet service provider (ISP) seems to be robbing me with my 1.59 and 11. 17 Mbps. My ISP says my subscription is up to 100 Mbps but really, my download speed is just 1.5 percent of what I’m subscribed to. The service I received is even way below than the Philippines’ average. This kind of service is just really absurd.

Clearly, and as everyone knows, we need better internet speed and reliable connection, requiring more investments in IT infrastructure. This isn’t because I simply want to stream in Ultra High Definition for my Netflix, Hulu or Apple TV. We need to invest in our IT infrastructure because our modern world depends on reliable interconnectivity.

In the Energy Sector, high speed and dependable internet is a prerequisite for modernizing the grid.

The Internet of Things or IoT is a game-changer and the internet is the backbone of IoT. Technological advancement has given birth to distributed energy systems, which foregoes the traditional distribution energy of centralized generation and transmission with really long high-powered lines delivering power. Rather, we now have a combined generator and distributor in small and even remote communities.

IoT is needed to empower consumers. There are more choices for everyone if we can leverage on what technology has to offer, allowing even a homemaker to be a generator and distributor at the same time. Imagine a homeowner with solar power or even wind turbines generating excess capacity that can be sold to neighbors.

Speaking of distributed energy, thanks to the internet, grid managers will have visibility over grid functions and performance remotely. Distributions lines and substations are equipped with sensors that can provide real-time data on power consumption helping grid managers make decisions remotely. Even when away from their substations, grid managers can decide real-time on network configuration, load switching, and voltage control, among others.

The Internet allows for virtual troubleshooting, too. We can expect fewer linemen risking their lives trying to fix broken power connections and consumers waiting for days or weeks to get their power back that after a devastating natural disaster.

As for consumers, they now have more information in their hands. With smart devices and meters, they can now know their power consumption and adjust their consumption patterns accordingly. Smart technologies allow them to choose and eventually limit the use power-hungry appliances. Likewise, they can strategize their consumption if they are likely to go over the budget with their power consumption. This is because IoT’s low-powered sensors and internet-connected devices allow for the collection and transmission of data to users quickly.

The case of Chattanooga City in Tennessee illustrates how crucial fast internet is in the modernization of grids and improvement of the community’s economy. In 2008, Chattanooga City rolled out a fiber-optic network that could provide speeds of up to 1000 Mbps. This despite the huge capital needed to install and maintain fiber networks which required new underground wiring and linking to individual homes.

Chatt gridsmart

Chattanooga City is reaping huge benefits from investments in fiber optics and smart grids. Photo c/o http://www.smartgrids.com

Chattanooga’s project was started as the small city wanted to build a “smart” power grid that’s capable of rerouting or switching electricity easily to prevent outages.

The city government opted to operate a city-owned agency, the Electric Power Board (EPB) that would run its own network offering higher-speed service than any private sector players can provide. Naturally, large businesses incapable of providing better service tried to prevent the entry of a new player that would change the competitive landscape. The city government faced lawsuits from US telecom giant, Comcast and local cable operators who tried to block the entry of EPB. But by September 2009, the internet service was already in operation.

A $111 million stimulus grant given to the city by the US Department of Energy saw the completion of the project. EPB managed to roll out its smart grid rapidly. The organization intended to complete the smart grid deployment in 10 years, but only needed three years. “Deploying a network for telecommunications is not fundamentally different from deploying a network for power,” Benoit Felten, a broadband expert with Diffraction Analysis said. “Chattanooga is the prime example of that, and it’s absolutely worked.”

These days, the EPB offers electric, cable, internet and telephone service to the majority of the Hamilton County in Tennessee and eight nearby counties in East Tennessee and Georgia. It manages 3560 miles of transmission line and serves around 178,000 residential and business customers.

Reports say that Chattanooga City is reaping huge benefits from EPB’s investments in fiber optics and smart grids. EPB is credited for being the most influential in Chattanooga’s astonishing economic transformation

The city’s smart grids have helped reduce power outages and incidents in half. This translates to 285 million customer minutes, which means EPB’ customers get to save around $50 million yearly in spoiled food, lower productivity, and other negative impacts.

Chattanooga City’s example shows that there are many benefits to be enjoyed if one invests in a smart grid. The best way to start modernizing the grid is to address the lack of high speed and reliable internet. This is why we need to have better internet services in the country. We need to invest in our internet infrastructure not because we need to stream our entertainment content in Ultra High Definition. But rather because, the Energy Sector needs reliable internet to provide more choices and better services to Filipinos.

Is Weather Too Hot? Soon the World Will Be Unlivable

/ gaadsblog / 2 Comments

 

The summer season in the Philippines means enduring sweltering weather for two to three months. According to the state weather bureau, Philippine Atmospheric, Geophysical and Astronomical Services Administration or PAGASA, the month of May saw the country’s heat index reach its highest values for the year.

The heat index in May (or at least for the first half of May) reached what Health officials refer to as dangerous levels, a range between 41℃ to 54 ℃.  The dangerous level can cause heat cramps, and heat exhaustion and might result in a heat stroke. Unfortunately, the dangerous heat index was recorded in May all over the Philippines, the highest so far for the month was 51℃ to 53℃ in places like Dagupan City in Pangasinan, Butuan City in Agusan Del Norte, and Sangley Point, Cavite.

It was worse for San Jose City in Occidental Mindoro on April 20 as it recorded a heat index of 58℃. The Health Department says there is an extreme danger if the heat index is more than 54 ℃ because heat stroke is imminent. 

In mid-May, a tropical storm with an international name, Vongfong. After two days of torrential rains and strong winds in Northern Philippines, the warm summer heat in the Philippines returned a few days after, which is likely to last until mid-June. The current heat index we are experiencing shouldn’t be surprising since scientists have already predicted that 2020 will be the hottest year on record.

Fortunately for us, we only have to endure such sweltering heat for two to three months. But there’s a strong likelihood that the majority of the world will suffer from extreme heat by 2070 as new research revealed.

According to the study “Future of the human climate niche,” some three billion people will live in “nearly unlivable” conditions by 2070 if global warming remains unchecked. Authors say that much of the world’s population will live in climate conditions that are “warmer than conditions deemed suitable for human life to flourish.” I probably won’t be around by then but my grandchildren will be still on this earth by that time, so this warning is still alarming for me.

The study warns that the average annual temperatures will be above the climate “niche” in which humans have lived for 6,000 years. “We show that in a business-as-usual climate change scenario, the geographical position of this temperature niche is projected to shift more over the coming 50 years than it has moved (in the past 6,000 years),” the study noted.

If the world continues with its business-as-usual and refuses to take climate mitigation measures, a substantial part of the world will be experiencing average annual temperatures warmer than practically anywhere today by 2070. This means the future generations could be enduring warmer weather than what we are experiencing now here in the Philippines. 

 

ecoworld

By 2070, the world will suffer from unlivable weather conditions if global warning remains unchecked. Photo c/o eco world

“Large areas of the planet would heat to barely survivable levels and they wouldn’t cool down again,” says the study co-author Marten Scheffer of Wageningen University in the Netherlands.”Not only would this have devastating direct effects, it leaves societies less able to cope with future crises like new pandemics. The only thing that can stop this happening is a rapid cut in carbon emissions.”

Again, this isn’t the only warning about the effect of climate change. we have heard. A few years ago, Nobel Prize winner and Director of Germany’s Potsdam Institute for Climate Impact Research (PIK) already warned us that Southeast Asia would likely suffer from extreme temperatures if nothing is done to lessen our high carbon emission levels. 

Schellnhuber’s paper entitled “A Region at Risk: The Human Dimensions of Climate Change in Asia and the Pacific,” said that temperatures would keep increasing where we could “see a complete shift in living conditions,” and that “All of the tropics will develop conditions that physiologically, humans cannot live outside anymore.”

Experts have been warning us all that lessening our carbon footprint is the only way we can avoid extreme temperatures around the world in the future. These studies also point out that a shift to renewable energy is one of the effective climate change mitigation measures we should adopt. 

Unfortunately, with the world already falling into recession, the renewable energy sector is likely to see a lean period, probably temporarily ending the sector’s rapid growth in recent years. Renewable power projects are exposed to various risks due to the economic crisis brought by the COVID-19 pandemic just like other sectors. One of these risks could be less access to financing.

Fossil fuels are likely to become more attractive in the cover-19 recovery period as coal prices have been falling even before COVID-19 forced locked downs. Plus, oil prices hit at an all-time low. Economies could be wary of the high upfront costs of renewable energy projects and potentially renege on long-term sustainable development plans.

But governments, particularly ours, shouldn’t be too quick to abandon or shelve clean energy transition plans for a variety of reasons. For one, analysts say that the low oil prices will be short-lived. According to an editorial entitled “Coronavirus: The Caribbean is the First Domino to Fall, but There is Hope” “It is expected that at current lows, many high-cost producers will shut down operations and some may go out of business. In a post-COVID world, with increasing global demand and a reduced number of suppliers, there will be upward pressure on oil prices.”

Plus, energy transition plans were well already underway before the pandemic causing the technology costs for renewables to fall in recent years.  Wind power and solar photovoltaic have become the cheapest source of energy in many markets, debunking the myth that renewable energy is the more expensive choice.

A report by the International Renewable Energy Agency also showed that accelerating investments in renewable energy could spur the global gross domestic product (GDP) by almost $98 trillion between now and 2050. IRENA projects that RE would provide returns of $3 to $8 for every dollar invested in renewables. The report entitled “Global Renewable Outlook” stressed that high investments renewable power could also quadruple the number of jobs in the sector over the next 30 years.

And in the short-term, decentralized energy systems will help small communities economically as IRENA Director-General, Francesco La Camera stressed recently. “Decentralized technologies also allow for greater involvement by citizens and communities in energy decisions, with transformative social implications. Importantly, they offer a proven approach for remote health care in energy-poor communities and add a key element to the crisis response toolkit.”

These are some of the reasons to debunk the belief that fossil fuel could be the better choice in the short-term. But if these counter-arguments illustrating that renewable energy isn’t the “expensive” option, then let us go back to the fact that we need to address climate change.

According to scientists, climate change is a potent risk multiplier or can contribute to pandemics. Plus, rising temperatures allow for the quick spread of certain infectious diseases like dengue and malaria. As research shows, failure to address rising carbon emissions will make the world an unlivable place as humans cannot survive the high temperature by 2070 unless they stay in an air-conditioned place, day-in and day- out.

A Bloomberg New Energy Finance (BNEF) report released before coronavirus was declared a pandemic said that 77 percent of investments from 2019 to 2050 will be in renewables. This prediction of BNEF remains achievable if we don’t let the pandemic and its economic effects derail us from putting more money in clean energy. Short-term plans to revive any economy post-COVID-19 must remain aligned with our long-term objectives on sustainable development and climate change. The COVID-19 pandemic should encourage us to build back better.

Finally, I would like to repeat my previous point that moving forward we need to move away from our dependence on imported fossil fuel.  The COVID-19 crisis has raised a specter that Indonesia may decide to shut down its ports and close down all ingress and exit points of the country.  If that happens – and thank God it has not happened – this will not augur well for the Philippines We rely on 90% of our coal from Indonesia.

We will have not only a pandemic but a total power meltdown.

Burning Fossil Fuels Equals Big Losses

/ gaadsblog / Leave a comment

Recent research by Greenpeace Southeast Asia and the Centre for Research on Energy and Clean Air (CREA) found that the global cost of air pollution from fossil fuels is roughly $8 billion per day or 3.3% of the world’s global domestic product (GDP). Burning fossil fuels also causes 12,000 premature deaths daily.

The study entitled, Toxic Air: The Price of Fossil Fuels is the first global assessment of the economic burden of health impacts from fossil fuel air pollution. The research showed that burning fossil fuels also resulted in an estimated 4.5 million premature deaths every year globally as toxic pollutants are causing an increase in chronic and acute diseases. This costs the world some $2.9 trillion annually as a result of non-communicable diseases and respiratory made more likely by elevated pollution levels.

Particulate Matter (the small liquid droplets and particles in the atmosphere that comes from fossil fuels) air pollution increases work absences with an estimated cost of 1.8 billion days of work absences yearly worldwide.

Plus, the research also showed that air pollution from fossil fuels is affecting children from low-income families severely. There are at a minimum of 40,000 kids who die before reaching the age of five due to exposure to particulate matter air pollution.

In the Philippines, the study noted that air pollution due to burning fossil fuels, particularly, coal, gas, and oil is causing an estimated 27,000 premature deaths yearly, which is equivalent to roughly $6 billion in economic losses annually or as high as 1.9 percent of our country’s GDP.

The study concludes that decarbonizing globally can provide rapid gains for everyone. The authors stressed that many of the solutions to address climate change are the same ones needed to eliminate air pollution. This means that replacing fossil fuels with renewable energy is crucial in limiting global warming to 1.5 c above pre-industrial level while at the same time help in the reduction of the emission of air pollutants. “A phase-out of existing coal, oil and gas infrastructure brings major health benefits due to the associated reduction in air pollution,” the study read.

The numbers presented by this recent research is alarming. Yet it isn’t the first warning the world has received about the dangers of using fossil fuels heavily for our needs.

deadly coal

Research shows that burning fossil fuels also resulted in an estimated 4.5 million premature deaths every year globally. Photo c/o theecologist.org

The recent Greenpeace study also somewhat echoes the findings of energy expert and geochemist James Conca who measured death prints or the “number of people killed by one kind of energy or another per kilowatt-hour (kWh) produced”.

Conca’s research showed that globally, the mortality rate of coal is 100,000 for every 50 percent of electricity demand sourced from coal. Oil also has a large death print with its mortality rate of 36,000 for every 8% energy sourced from oil.

In contrast, solar rooftop and wind power, and mortality rates of 440 and 150, respectively. Each power source only contributes one percent respectively to the global energy at the time of the study.

Plus, the environmental benefits of shifting to renewable energy has long been well documented. For example, a study in the United Kingdom in 2017 showed that the carbon emission of the UK decreased by 5.8 percent in 2016 as the use of coal dropped by 52 percent.

Unfortunately, our government and energy planners don’t see the risks of using traditional sources of power continuously. Coal remains the dominant power source in the Philippines, accounting for 52 percent of the total energy supply in 2018. And unlike other countries that are closing down coal power plants, the Philippines will see a massive expansion of coal plants up until the next decade. Fitch Solution’s forecast released August last year showed that coal will continue to dominate our power mix and contribute to 59 percent of the energy mix by 2028.

There was a time when I have built coal plants myself to address the growing needs for more energy but we can no longer ignore the undesired effects of relying heavily on fossil fuels. And over the last few years, I have been advocating for the shift to renewables for a long time for a variety of reasons. It is possible to plan for a renewables only future for the country.  Of course, we know that even if we go completely renewable it will not contribute much in terms of “volume” to the global need to bring down CO2 . However, as we say, a small candle lighted in the dark will go a long way in contributing to this global effort.

More importantly, as I have been saying renewable power is our best bet in getting ourselves affordable and stable power. Of course, the benefits to health and our environment are also more reasons to push for a major transition to cleaner energy as many countries are now doing. We also need to look at what climate change has been doing to our father patterns -we are one of the more disaster-prone countries in the world.

Maybe providing affordable and stable energy are not sufficient reasons for our planners and government to work double-time to fast track renewable energy development in our country. Perhaps the thought of premature deaths among Filipinos and especially among our young children less than five years of age can help convince that the time to make that big shift to cleaner power is now.

References:

https://news.abs-cbn.com/spotlight/10/14/19/ph-climate-measures-lack-urgency-despite-vulnerable-status-experts-say

 https://newsinfo.inquirer.net/1228083/dirty-air-kills-27k-in-ph-yearly-says-study#ixzz6FFbqt1dz 

PH could attract $20-B renewable energy investment

Smart Grids and Distributed Energy for Disaster Resilience

/ gaadsblog / Leave a comment

Typhoon Ursula hit during Christmas time and left several provinces devastated. Its impact includes damaged power supply structures, leaving many many Filipinos without electricity for weeks.

In Aklan, power yet has to be restored three weeks after Ursula made its landfall. According to the Aklan Electric Cooperative or Akelco, the firm is targeting normalization of power supply in some parts of the province by January 25, almost a month since Ursula’s arrival.

Unfortunately, despite round-the-clock efforts to restore electricity, only 60 percent of 381 villages’ power supply has been restored. Power restoration is a massive undertaking in the province given Ursula’s destruction. There were 1144 electric posts either damaged or destroyed. “Several of our primary and backbone lines were destroyed or damaged, that is why full restoration is taking time,” an Akelco engineer was quoted in a news report.

Naturally, being without electricity is hurting the businesses in the province. According to the Philippine Chamber of Commerce and Industry (PCCI) the micro, small and medium enterprises are the ones suffering most from the lack of electricity in the areas as generator sets needed to power their businesses cost a lot of money to operate.

ursula

Electric posts felled by Typhoon Ursula in Capiz. Photo c/o inquirer.net

Similarly, electric cooperatives in other parts of Visayas are also begging consumers for patience as restoration of power takes time. An executive from Samar II Electric Cooperative is appealing to consumers for more patience and understanding. The cooperative is being criticized for its inability of the cooperative to bring back electricity. The linesmen have been at the receiving end of harsh comments, too, prompting the executive to explain that the cooperative has to also look out for the safety of linemen as well.

“These are stories that sometimes never made it in the news. We don’t want to make grandstanding, what we want is for people to know how our linemen risk their lives just to get the power back to your respective houses and properties.” 

Unfortunately, we are a country that is and will be repeatedly hit by extreme weather events. The Philippines will always experience the wrath of natural disasters. This means that Filipinos will have to endure the effects of natural calamities like being without power. If we can recall, it took almost six months for power to be restored after Super Typhoon Yolanda devastated the Visayas region in 2013. It was reported that six linemen died in the restoration process.

For the power sector, this means investing in infrastructures such as distributed generation and smart grids. 

The traditional model of power supply and distribution is proving to be detrimental and even deadly for us Filipinos. Let us keep in mind that central power production means that energy has to be carried via power lines spanning long distances. This means any damage to a single line leaves thousands of homes without power.

In extreme weather disturbances like typhoons, dozens of power lines are compromised simultaneously. The transmission company and distributors then work double-time to determine which lines are affected and which broken ones should be fixed first. Only then can the crews and linemen start the physical side or power restoration.

This is where smart grids and distributed energy come in. Since power is produced in many places, only a handful will be affected if the facilities of a power producer are badly damaged. Even then, those being supplied by the affected power producer may not even experience a power loss. Thanks to the smart grid, electricity can be sourced from another generation node so those affected by the compromised line or power generator can be supplied by another generator.

This is the advantage of moving away from the traditional way of power transmission and generation. Distributed energy along with smart grids can make an area extremely resilient from the wrath of natural calamities.

The traditional model of central production, transmission and generation are slowly being replaced by distributed energy and smart grids. And rightly so, as explained by Josiah Nelson, Chairman, and CEO at Trolysis, a renewable energy company producing on-site, on-demand hydrogen power from aluminum and water.

“Not many people realize this, but in the majority of the country, if there’s a compromised line or a power outage, the power company has no way of knowing until customers pick up the phone and tell the utility that they’ve lost power. This is a horribly backwards way of detecting outages and is a perfect example of the decades-old technology our grid is built on.”

Aside from smart grids and distributed energy, our government should also consider underground conduits that can carry power and even telecommunication cables. Naturally, underground conduits are more unlikely to be damaged during typhoons.

We cannot change our geographical location, nor can we prevent typhoons or other natural disasters from happening. Neither can we change the fact that power restoration with our existing facilities is a dangerous task. What we can do is increase the country’s resilience against natural disasters. This means shifting away from decades-old technology and making way for new ones. Doing so requires acknowledgment of our need for such, proper regulation and more investments.

(Again) It All Boils Down to Appreciating Portfolio Theory in Energy Planning

/ gaadsblog / Leave a comment

A new study by the Institute for Energy Economics and Financial Analysis (IEEFA) foresees a record decline in coal-fired power in 2019.

The study entitled “Global Coal Power Set for Record Fall in 2019,” says that the decline of thermal power coal is likely in major markets such as the United States, China, European Union, and Japan. The slowdown in the US is a record one as coal-fire use in electricity generation is likely to fall by 13 percent. Coal power decline in the EU posted a staggering 23 percent year-on-year in the calendar year to September 2019. 

It also notes that Southeast Asia is unable to absorb the dramatic decline of coal in these markets. “At just 4.6% of the world’s total coal-fired power generation in 2019, the Southeast Asian region is not big enough to compensate for the dramatic cuts in thermal coal use in the U.S, the European Union and South Korea, and the ongoing slow decline in Japan,” explained Tim Buckley, co-author of the report and director of energy finance studies at IEEFA.

The report also stresses that around the world, investments are moving away from coal due to fear of rising stranded asset risks. It also doesn’t help the coal sector that renewables are seeing double-digit deflation annually says the report. Buckley says it is clear that we will see a steady decline in thermal coal in the coming year. “The transition away from coal is happening faster than forecasters can keep up with.”

In the Philippines, it seems like there is no slowdown in coal power use. On the contrary, coal dominates and continues to dominate the country’s energy mix. A Greenpeace recent report says that coal remains our primary energy source with a 52.05 percent contribution. On the other hand, renewable energy sources share was less than half of coal at 22.27 percent as of December 2018.

The Greenpeace study also says that in terms of proposed committed projects, coal remains the king with 80 percent shareholding in total installed capacity. The environmental group says that coal power’s share in the power mix will increase to three-fourth if all these proposed projects were to be approved. 

“We are already in a state or era of dirty energy because the majority of our power plants come from coal and there are a lot of proposed coal power plants,” Khevin Yu, Greenpeace Philippine campaigner noted.

Greenpeace also analyzed the commitments and energy portfolio of five power companies. These five firms’ portfolio when combined accounts for more than 50 percent of the present existing and proposed power projects in the country. The report pointed out that the proposed power projects of four out of five firms still have coal as their preferred energy source.

In terms of their priority, companies are focused on coal energy development. “This shows that these companies will lead us to a path that our energy system will become coal-dependent,” Yu said.

Greenpeace has recommended placing a moratorium on coal plants the soonest possible time so clean energy can flourish. The suggestion isn’t new as the Energy Secretary had already been asked in congress if he favors such move. To which the secretary replied that a moratorium would be a disservice to the Filipino people.

coal jan

Coal power is likely to contribute 75% in PH energy mix says Greenpeace. Photo c/o Optimusenergy.com.au

Stepping the brakes on the construction of coal-fired plants, and ultimately, the dominance of coal in our power mix is not a disservice to the Filipino people. On the contrary, building more coal-plants places Filipinos at a disadvantage as I have discussed before. We have to remember that coal plants are locked into long-term Power Sales Agreements or PSAs, which can run up to 25 years. This means that consumers’ choices are taken away from them in the long run, when in fact, what we should be working on allowing consumers to choose their preferred sources of power.

We can trace coal’s dominance in our energy mix to our energy planners’ skewed concept of the least cost. Again, our energy planners are using the ‘least cost method’ in terms of building costs without looking at the risks, namely fluctuation in foreign exchange rates and world prices of coal.

Perhaps our energy planners should be given a crash course on portfolio theory, developed by Harry Markowitz, a Nobel Prize winner. His theory posits that risks can be minimized at any level of expected return if the investor mixes assets in a portfolio, combining high and low or zero- risk assets. Putting this theory into energy planning, this means that we should diversify our energy sources portfolio.

Greenpeace says at the rate we are going, we are likely to end up with a 75 percent coal share in our power mix. This runs counter to what financial experts advise investors of diversifying one’s portfolio. Having three-fourths of our power come from coal means we are making our consumers more vulnerable to unpredictable global coal prices and fluctuation in foreign exchanges.

Yes, we can push for a moratorium on building coal plants. But unless our energy planners understand portfolio theory for energy planning, then we can expect them to always push for coal as they look at the least cost. We all should be very scared now if Greenpeace’s prediction that coal will contribute 75 percent and brace ourselves for possibly higher power rates in the future if this forecast comes true.

Of course, we need to reduce coal in power use significantly as we aim to meet our commitment of 70 percent emission reductions below business-as-usual-levels. We, along with other nations need to help save the environment. But another compelling reason to move away from coal is to provide consumers with more choices and reduce the risk of having them pay for more expensive electricity in the future. May our energy planners realize that their misplaced appreciation of the least cost method is costing Filipino consumers more.

References:

IEEFA update: Global coal power set for record fall in 2019

https://www.philstar.com/headlines/2019/11/22/1970979/greenpeace-companies-coal-expansion-will-block-philippines-transition-low-carbon-future