Should We Have a Moratorium on New Coal Plants?

 

According to news reports, Germany intends to shut down its first power plants that use black coal in 2020 as part of the country’s efforts to phase out all coal plants by 2038.

Earlier this year, Germany, one of the largest consumers of coal in the world, announced that it would shut down all 84 coal-fired power plants in the next two decades in the hope of meeting its international commitments in the fight against climate change. 

Coal plants account for roughly 40 percent of Germany’s electricity as the country is the last bastion of coal burners inNorth-Western Europe.

The decision to close all of Germany’s coal-fired plants was no walk in the park. The German coal exit commission consisting of industry representatives, politicians, and non-government organizations (NGOs) spent seven months of discussions and a 21-hour negotiating session deciding whether to junk coal-fired plants altogether. 

The decision to end coal plant operations was described as “a historic accomplishment,” by Ronald Pofalla, chairman of the 28-member government commission. Likewise, Hans Joachim Schellnhuber, a member of the commission and an adviser to the German chancellor, Angela Merkel stressed that “This is an important step on the road to the post-fossil age – a step that also opens up new perspectives for the affected regions through innovation-driven structural change.” 

German Chancellor Angela Merkel’s administration is reported to have allotted some 1 billion euros or $1.1 billion to fund the closing of several coal plants with a total of five gigawatts capacity by 2023. Merkel’s government intends to replace coal power with renewables by increasing the share of renewable energy from 38 percent to 65 percent in 2030.

Germany, one of the largest consumers of coal in the world is shutting down all 84 coal-fired power plants in the next two decades. Photo c/o carbon brief. org

Germany is not the only country that’s retiring coal-fired plants. The United Kingdom government has earlier committed to phasing out its coal plants by 2025.

Similarly, in the United States, coal plants are being closed as well. According to data from the U.S. Energy Information Administration and Thomas Reuters, around 10,6000 megawatts of coal-fired plants are either to be retired or converted to gas by the end of 2019. Last year, several coal plants with a total of 13,000 MW ceased operations.

The Philippines, however, is going against the global trend. Data shows that coal accounts for 52.1 percent of the country’s power generation mix in 2018, up from 49.6 in 2017. On the other hand, the contribution of renewable energy has declined from 24.7 percent in 2017 to 23.5 percent in 2018.

And the Philippines will continue to rely on coal for at least two more decades, according to BNEF’s New Energy Outlook 2019. 

Caroline Chua, BloombergNEF’s energy analyst for Southeast Asia noted that coal-fired power generation in the Philippines will steadily increase and will remain as the biggest single source of electricity until 2041. “By 2050, the Philippines will still have almost as much coal-fired generation as today,” Chua stressed.

Our country’s reliance on coal does not sit well with various sectors. There have been calls to place a moratorium or suspension on the building of new coal-fired power plants. Cagayan de Oro City 2nd district Rep. Rufus Rodriguez floated the idea during a budget deliberation so the Philippines can cut its carbon emissions. 

Congressman Rodriguez asked Energy Secretary Alfonso Cusi if he agrees to a moratorium on coal to help the Philippines meet its commitment to the United Nations by 2030. “May we know whether the Secretary agrees that we should, therefore, to comply with our Intended National[ly Determined] Contribution to the UN, we should therefore already have a moratorium on coal plants?” he asked.

The secretary, however, was quoted to have said a “moratorium on any technology is a disservice to our country.” If we can find alternative ways to provide electricity service, then it will not be a disservice.

The suggestion of Congressman Rodriguez has its merits. If we want to meet our international obligations of cutting down carbon emissions, then preventing the construction of more coal-fired plants is a great start. I am from Cagayan de Oro, and I am proud of Congressman Rodriguez’s stand. He will get my support.

But setting aside environmental concerns, there are other reasons why the Energy Department should consider placing a moratorium on coal power, particularly large central thermal coal plants.

We have to keep in mind that coal-fired power plants with large generating capacities are signed up for long-term power supply agreements (PSAs). These contracts often run up to 25 years.

The problem with these long-term PSAs is that they take away the power of consumers to choose their preferred sources of energy or technologies. Essentially, big coal-fired plants that are signed-up by distribution utilities will end up burdening consumers who are stuck with the same power supply contract for as long as 25 years. This is a disservice to consumers since what we should be aiming for and working for is for the consumers to be given a choice on their preferred technology and pricing. So distribution utilities should balance their portfolio by matching type and tenor of their contracts to the needs of their consumers.

This is just the problem with our energy planning. We often fail at being consumer-centric when in fact, placing the welfare of the consumers should always be the priority. Looking after consumers mean giving them as many options as possible. Unfortunately, locking them into long-term supply contracts is akin to taking away their power to choose. We could change all that now by considering a moratorium on the construction of big central thermal coal power plants.

But the discussion should be beyond just discussing “moratorium” as we should really be thinking about alternative ways to tap the environment for energy. It is this mentality of looking for an easy way out of our energy needs that leads us to the usual suspect: coal. So yes, we should have this moratorium on new coal plants while developing other sources of energy.

References:

Murang Kuryente slams DOE refusal to impose coal moratorium

Green energy use to rise but coal to remain necessary

http://ieefa.org/u-s-coal-plant-retirements-to-top-10gw-in-2019-eia/

Cusi not cool with coal-fired power plant moratorium

https://cleantechnica.com/2019/10/04/a-uk-coal-power-station-closes-signaling-the-end-of-an-era/

https://www.theguardian.com/world/2019/jan/26/germany-agrees-to-end-reliance-on-coal-stations-by-2038

Floating nuclear power plants? Why not floating solar power plants?

Recently, our government signed-up with Rosatum Overseas, Russia’s state nuclear company to study the possibility of exploring the construction of nuclear power plants in the Philippines.

According to reports, our government is looking into the feasibility of buying into the newly launched floating nuclear power plant technology of Russia. Rosatom’s chief executive officer Alexei Likhachev was quoted to have said that Russia had already proposed building a floating nuclear power plant in the Philippines.

However, according to the palace spokesperson, the agreement on nuclear power is still uncertain.

This isn’t the first time proposals of building nuclear power plants are being brought up.

Last year, the local government unit of Sulu announced that it was studying the feasibility of putting up a modular nuclear power plant (NPP) in the province. This idea, however, was dismissed by Energy Department’s spokesperson and undersecretary Felix William as a “remote possibility”.

And he was correct in saying that there’s little chance of having a modular nuclear power plant in the country anytime soon.

During the power crisis of the 1990s we even considered tapping Russia’s nuclear submarines to help solve the power shortage. We just had a simple problem – the submarines had a frequency of 50 Hz.  We operate at 60 Hz.

Those pushing for nuclear plants fail to realize that the legislative and regulatory frameworks we have for nuclear power are already outdated as they were created some 50 years ago.

The Philippine Atomic Energy Commission or PAEC was created almost half a century ago to regulate nuclear power development and operations. PAEC also was handling the licensing of nuclear power engineers. The agency, however, was later downgraded to the Philippine National Research Institute (PNRI) during President Cory Aquino’s administration.

Before we talk about building nuclear power plants, let us ask ourselves, who would issue permits to build and operate a nuclear facility? And do we even have qualified people to build and operate them anyway?

Russia says that it is ready to assist the Philippines in exploring nuclear energy if it requests for such help. However, is it a good idea to rely solely on foreigners’ help given our lack of experts and experienced personnel to handle nuclear power?

It’s mind-boggling that a country that has so many natural resources are contemplating on building nuclear plants rather than turning to indigenous renewable energy. Have we forgotten that we are a tropical country or that we are a top producer of geothermal power?

We should instead start thinking about floating solar plants rather than floating or modular nuclear plants. Floating solar photovoltaic installations, after all, are a safer and more sensible option than nuclear ones.

floating solar2

World’s largest floating solar plant in China. Photo c/o http://www.we.forum.org

What’s great about floating solar technology is that it is highly similar to land-based PV systems except that the PV arrays, as well as most inverters, are placed on a floating platform. Thus, floating photovoltaic (FPV) installations are great for us as we have the expertise to build and operate floating solar plants given that we have been building land-based ones. The floating power plants are beneficial for our country, too given our high population density and competing uses for our land.

Floating solar plants are nothing new as the first FPV system was built in 2007 in Japan. The first commercial installation involving a 175 kWp was in 2008 in California. This was then followed by a medium to large floating installations in Korea, Japan, China, Australia, and the United Kingdom, to name a few. As of December 2018, some 1.8 gigawatt-peak was the recorded cumulative installed capacity around the world. This is expected to increase rapidly as more countries add FPV installations.

It can be the solution for those hard to reach areas as ground-mounted PV are usually difficult to deploy in mountainous areas. FPV, on the other hand, can be placed on bodies of waters like lakes or dams.

So, again why are we discussing floating nuclear power plants when we can bank on floating solar power plants? We have the expertise to build FPV installations. Thus, we do not need to rely solely on the knowledge and experience of foreigners, unlike nuclear plants. We do not have to look for complicated and almost impossible to achieve solutions for our growing power needs. We simply need to be practical and turn to our indigenous renewable energy for our energy security.

References:

https://globalnation.inquirer.net/180821/from-russia-with-nuke-plant-plans

https://www.rappler.com/nation/241987-gatchalian-says-nuclear-energy-very-risky-philippines-signs-deal-russia

Where Sun Meets Water: Floating Solar Market Report

Rolling Out New Programs May Not Be Necessary

It is no secret that the Philippines is heavily dependent on coal for its energy needs.

Data from the Department of Energy show that coal’s share in our country’s energy mix was 35.4% in 2017 up from 34.6% in 2016.  On the other hand, renewable energy contracted last 2018, only contributing 31.1% of the total, down from 32.5% in 2017.

Indeed, the Philippines is declining in terms of renewable energy development.

This is why it’s heartwarming to hear President Rodrigo Duterte address this issue in the last State of the Nation Address (SONA) where he ordered to fast-track the development of renewable energy resources. His exacts words were: “We recognize the urgent need to ensure the sustainability and availability of resources and the development of alternative ones. In this regard, I trust that Secretary Cusi shall fast-track also the development of renewable energy sources, and reduce dependence on the traditional energy sources such as coal.”

Naturally, the Department of Energy (DOE) responded to such call. In a statement, Energy Secretary Alfonso Cusi said that “The DOE is encouraged by the President’s comments. Indeed, his leadership will be pivotal for the DOE to implement policies and regulations that ensure the affordability, reliability, security, and sustainability of energy in the Philippines for generations to come.” 

The secretary promised to fast-track the implementation of the key renewable energy policies, namely the Renewable Portfolio Standard and the Green Energy Option. The former mandates distribution utilities to source a percentage of their power from renewable sources. The latter, on the other hand, empowers consumers to demand that their power comes from renewable sources.

The Energy secretary also said that it is looking at implementing a Green Energy Rate that will help the country to build a renewable energy portfolio of 2,000 megawatts in 10 years. There would be a ceiling rate and a green tariff rate would be auctioned among investors and developers.

Green tariffs and Green Energy Options are nothing new.  Other countries already have these programs, although the Green Tariff in other countries seems to be quite different from the one being planned by the DOE.

For example, in the United States, utility green tariff is optional programs in regulated electricity markets that are offered by utilities and by the state public utility commissions. The program lets industrial customers and large commercial clients purchase bundled renewable energy power with a special utility tariff rate.  It allows utilities to supply large industrial and commercial clients with up to 100 percent renewable power that’s either owned by the utility or sourced from another independent power producer. I’m not sure if this is the model the DOE and National Renewable Energy Board (NREB) are looking at. 

In the United Kingdom (UK), the green tariff is also available and works quite differently.  It is offered to those who want to lessen their carbon footprint with their power consumption by allowing customers to give back the same amount of power consumed back to the national grid in the form of renewable energy. Green tariff can also work by supplying the customer with either 100 percent RE or a portion of.

Clearly, Green tariffs are in place in other countries to help their RE sector prosper as well as to provide customers with cleaner option.

However, in the Philippines, rolling out new programs may not be the most urgent concern if we want our renewable energy sector to flourish. What our regulators must pay attention to are the current programs that hinder the growth of the sector. There is the Competitive Selection Process  (CSP) as it places renewable energy developers at a disadvantage and the Retail Competition and Open Access (RCOA) that fails to help local renewable energy development.

Let’s take a look at the CSP mandating energy demand must first be aggregated then later bid out by a third party. This means that the power capacity becomes large before it can be auctioned off. It is then the large quantity required by the bid that places renewable energy suppliers at a disadvantage. We have to keep in mind that most RE plants have small capacities.  Unfortunately, those with smaller capacities RE plants will be left out in the cold as a result of aggregating the power requirement before the auction.

So, will the planned Green Energy Tariff by the DOE no longer require undergoing the CSP? I am personally curious about the mechanics of this planned program intended to help develop renewable energy in the Philippines. 

Our government should indeed work harder to make renewable energy development a priority. After all, going for sustainable and green energy helps in bringing down our power rates. Renewable power will also provide us with energy security.

As I have been saying, renewable energy, unlike traditional sources of energy are not vulnerable to foreign exchange and world price fuel prices. This means consumers are spared from the consequences of ‘floating contracts’ where Filipinos pay for higher power prices when the peso falls against the dollar or when coal or oil prices in the world market spikes.

Developing renewable power bodes well for us. Traditional sources, particularly oil and coal are finite sources. What then happens when these power sources are low in supply or worse are already unavailable?

There’s also the RCOA that’s also meant to help the sector by allowing a number of customers to source their preferred service provider.  Unfortunately, only those with  750 kilowatts or higher monthly demand can be considered contestable customers, thus restricting the number of consumers that has the option of choosing their power source.

So, yes we can look at other programs to help the RE sector prosper. Unfortunately, DOE has a track record of showing its lack of appreciation on the many benefits of renewable power for the Filipino consumers. 

We have to keep in mind that sometimes new programs, entities or rules can wait. They may not even be necessary. All we have to do is to simply review current regulations and practices rather than find new ones. And if we as a nation want to heed the orders of the President to develop cleaner and sustainable sources of power, then we urgently need to review our current regulations. 

References:

https://www.epa.gov/greenpower/utility-green-tariffs

https://www.comparethemarket.com/energy/information/energy-tariffs-explained/

Coal plants’ share in 2017 energy mix expands to over 35%

Amid fears of global economic recession, let’s worry about high power rates, too

Those who regularly read the business news would know that the US-China trade war has been hogging the headlines way back in 2017.

Two years ago, the United States launched an investigation into China’s trading policies and imposed tariffs on Chinese products worth billions of dollars a year after. Beijing, naturally retaliated.

The trade war between these two countries escalated after China allowed its currency, the Yuan to depreciate for the first time in over 10 years. This move was criticized and China was called a currency manipulator by the US.

I will not delve on how the trade war will place the Philippines in an advantageous or disadvantageous position. I leave that to economists.

Now, perhaps you are wondering why am I writing about this trade war when my expertise is the energy sector?

The answer is simple. The trade war, just like other major global developments in the Philippines  hurt the Philippine peso since global issues such as the spat between the US and China affect emerging economies such as ours.

For example, the peso sank to Php51.955 from Php51.79, down by 16.5 centavos on August 6 after the US tagged China as a currency manipulator. A trader quoted by a Business Word report said that “The peso weakened significantly due to demand for safe-haven currencies after the US Treasury Department labelled China as a ‘currency manipulator,’ further heightening current tensions between the US and China.”

According to S&P Global Ratings director Andrew Wood early August,  the Philippine Peso has been weakening as the trade and currency war of the two giant economies makes currencies vulnerable to downward pressure. “The Philippines and India have relatively strong external profiles, stronger than Indonesia, but they have proven to be relatively vulnerable when we do have these global contagion effects in the currency markets in the past. So the peso and Indian rupee could also be somewhat vulnerable to downward pressure,” Wood said

But the row between China and the US is not the only thing that’s affecting the performance of the Philippine Peso against the dollar.

peso dollar

Some forecasts say that the peso could be on the softer side and go as low as Php 53.50 against the dollar. Photo c/o Business world

For example, worries over a pending global economic recession last August 15 weakened the peso where trading day ended from 52.498 to a dollar from a 52.28 close a day before. “The peso depreciated as a potential U.S. recession pushed investors towards risk aversion,” a BPI Research market report said. It added  that a possible US economic slowdown and reports that Germany posted zero economic growth in the second quarter also caused the Pesos’ depreciation.

Some forecasts say that the peso could be on the softer side and go as low as Php 53.50 against the dollar or even slight below the P54 level if worries over a global economic recession worsen. For example, Mizuho Bank head of economics and strategy Vishnu Varathan as quoted by ABS-CBS news said that “For most of the next half, we’re looking at the peso on the softer side,” he said.

So, what does a weak peso mean for Filipino consumers?

As I have been pointing out, fluctuations to the peso dollar exchange will hurt the Filipino consumers.

I have discussed this at length in many posts. But let me reiterate that our energy planners love for a “floating” power sales agreements (PSAs) and reliance on traditional power sources can cause high energy rates. This is all thanks to the pass-on costs provision in our PSAs where consumers shoulder the cost of the falling peso against the dollar. Unfortunately, our reliance on coal, which we mostly export and pay for in US dollars means that we will pay higher electricity rates when the peso falls against the dollar. It also does not help that our independent power producers also have the majority of their billings in dollar denomination.

Yes, one can argue that the peso may also strengthen despite the forecasts of analysts. But it could also go the other way around.  Unfortunately, there’s no way of exactly predicting what will happen to the local currency. And there lies the problem with the floating PSAs. It leaves consumers in a vulnerable position.

So, again, we must revisit having fixed price contracts work for us as we watch how the Philippine peso fares against the US dollars amid the chaos in the global economy. Let us see the good in letting the consumers pay the  same amount for their electric bill for a specified period regardless of the performance of our local currency. This will ease the burden of consumers who pay more for energy when the peso is weak.

And while we’re at it, helping develop our renewable energy sector will also ease the burden of the Filipinos. Doing so will reduce the need to import traditional power sources that trade in US dollars.

Let the economists and analysts debate on what the government should do in light of the on-going trade wars and possible global economic slowdown. In the meantime, our energy planners should take a closer look at how these global issues will affect power rates and how we can ease the burden of consumers  by turning to renewable energy which can peg electricity rates at a fixed prices and eliminate the need to import raw materials for energy production.

I believe the world will be going towards energy independence as a goal for every household and community.  The reliance on big thermal plants and high voltage transmission networks will wane in the coming years.  Increasingly, electricity consumers will want to have more control of how and when they consume power in their homes.

This development of taking “power in their own hands” will mean that electricity consumers will be able to delink forex and global price risks.  And maybe with more independence, other supply and demand markets, other than WESM, may spring up independently.

Let me discuss these possibilities in my next blog.

References:

https://news.abs-cbn.com/business/08/19/19/peso-seen-in-p5150-p5350-vs-1-range-on-global-recession-worries

Peso sinks further on yuan move

Peso to trade sideways

https://www.philstar.com/business/2019/08/07/1941135/philippines-vulnerable-us-china-trade-tension-currency-war

https://www.pna.gov.ph/articles/1077961

The New Age of Grids

The Philippines finally appreciates the value of smart grids.

For starters, the upcoming 200-hectare New Clark City (NCC) located in Clark’s special economic zone will boast of having the first completely smart power grid in the Philippines.  The NCC, after all, is designed to be the country’s first smart, sustainable and disaster-resilient city.

NCC’s owner, the Bases Conversion and Development Authority (BCDA) already inked a deal with the Meralco-Marubeni Consortium to be the city’s power distributor. This, after the consortium, won the bidding with their proposed tariff bid of Php 0.6188 per kilowatt-hour (kWh). The tariff rate is lower than the Php1.25 kWh tariff ceiling set by the BCDA for power distribution.  It is also cheaper than the Php1.24 kWh rate of Mactan Electric, the lowest distribution supply metering tariff under the traditional distribution system.

The smart city will have state-of-the-art facilities on par with other smart cities around the world.  The smart grid in the NCC is seen to have better reliability standards and will allow customers to access real-time information from the distribution utility. Distribution lines will be underground adding to the aesthetics of an environmental-friendly city.

Plus, just recently, the National Electrification Administration (NEA) has announced that it has piloted a smart grid technology aimed at improving the reliability of a Batangas electric cooperative’s distribution system with the help of the Japan International Cooperation Agency. The technology to be used in this pilot is the Distribution Automation System that is expected to improve the distribution system reliability as well as lessen the duration of a power outage. These are all thanks to automation.

NEA says the smart grid technology will hopefully do wonders for the operational efficiency, particularly the reliability of the cooperatives’ system reliability.

Indeed, smart grids are now making their way to the Philippines. And why not when there are so many advantages in investing in modernizing our power distribution system?

For one, smart girds, unlike the traditional grids allows for two-way communication of electricity data thus providing real-time data collection on the power demand and supply during the transmission and distribution.  This means that the electrical grid can respond quickly to changes in the power demand, thanks to the grid’s controls, automation, computation, and equipment. The said cannot be said of the traditional grid that has a one-way interaction during generation and consumption.

smart-grid-Borg-2

Smart grids empowers consumers by providing real-time data on power demand and supply. Photo c/o telecomdrive.com

 

Smart grids also empower consumers by providing them with information on when the power demand is at its lowest or highest. This information allows them to schedule high energy-consuming activities such as ironing or running the washing machine when electricity costs are lowest. Plus, smart grid coverage lets consumers purchase their electricity straight from retail suppliers.

Another benefit of smart grids is its ability to integrate renewable energy into the system.

In the case of the NCC, the BCDA plans to integrate embedded generation that has renewable energy as its primary power source. The city can also source its power from rooftop solar PVs, waste-to-energy and natural gas, among others.

Clearly,  modernizing our power system with the help of smart grids is a great way to move forward. But, of course, regulations must also be updated as we shift to the smart grid.

Currently, the Philippines has no rules concerning smart grids. The Department of Energy has said that a roadmap for smart grids in the country is underway and will be released by the third quarter of this year in the form of a department circular.

Hopefully, this roadmap will be able to address issues regarding the use of smart grids such as smart meter, real-time dynamic pricing, and grid cybersecurity, to name a few. May it will pave the way for the proliferation of smart grids so that Filipino consumers can take advantage of such technological advancements.

Finally, let me say that the advent of smart grids will lead to the integration of ICT and power systems. This will lead further to the development of data centers nationwide, increase in the number of internet exchange servers, and eventually bring down the cost of both power and telecommunication services. The distribution grids that can adapt to these developments will be those that have the 21st technologies at their disposal. This will indeed help spur the development of the country. As I said, however, only competition in the distribution sector can speed this up.

Overtaking Coal

For the first time, renewable energy has generated more electricity than coal in the United States. 

According to the Energy Information Administration (EIA), renewable power has overtaken coal generation last April by 16 percent. And renewables are expected to dominate the US power mix on May with EIA predicting that clean power will eclipse coal power by an additional 1.4 percent. 

Renewables dominating the energy mix of the United States is not a stroke of luck. In fact, clean power will consistently catch up with coal in the US in the near future says the Institute for Energy Economics and Financial Analysis (IEEFA): “Coal’s proponents may dismiss these monthly and quarterly ups and downs in generation share as unimportant, but we believe they are indicative of the fundamental disruption happening across the electric generation sector.”  

The IEEFA also foresees that renewable energy will generate more power consistently this year all the way to 2020 for the US. After all, coal’s share of the overall energy generation has been declining in the past few years from 45 percent in 2010 to 28 percent in 2018. By 2020, coal power is only expected to contribute just 24 percent of the needed power demand for the country.

The US is not the first country to achieve such a feat. Other countries have already managed to generate more power from renewables in the past.  One of the notable examples is Iceland, which produced 97 percent of the country’s household power requirements from wind in 2015. Its neighbor, Denmark also sourced 42 percent of its power from wind turbines in the same year. Similarly, Germany at one point was able to generate 78 percent of the day’s power demands from renewables.

image

Germany was able to generate 78 percent of the day’s power demands from renewables at one point. Photo c/o Time.com

The decline of coal power in the US is in sync with the developments in the global energy trends. According to the International Renewable Energy Agency (IRENA), a third of the world’s installed electricity generation capacity in 2018 was from renewables. This is because 2/3 of the added power capacity last year came from renewable power.

Renewable power’s greater share in many countries’ energy mix only shows that renewables are the key to sustainable future notes IRENA Director-General Adnan Z. Amin. “The strong growth in 2018 continues the remarkable trend of the last five years, which reflects an ongoing shift towards renewable power as the driver of global energy transformation.”

The shift to renewable power is much needed since experts have warned us that we only have a few years left to mitigate the effects of climate change. The United Nations in its report Intergovernmental Panel on Climate Change last year stressed that the world only has 12 years to keep global warming to a maximum of 1.5 °C. Otherwise, we will all suffer the risks of droughts, droughts, extreme heat, and poverty. 

Plus, recently, we were greeted with the news that the Earth’s carbon dioxide level is at an 800,000-year high. Our world has breached 415 part per million sometime this May, a level that has not been seen in millions of years according to data from the Scripps Institution of Oceanography at the University of California-San Diego.

Taking drastic actions to limit global warming then is imperative for all of us. This means we should be cutting carbon dioxide emissions swiftly by reducing our fossil fuel consumption, the primary producer of greenhouse gasses. Going to renewable power is one of the best ways to decarbonize countries, after all.

Sadly, and as I have been pointing out, the Philippines is nowhere near the accomplishments of other countries when it comes to shifting to greener and cleaner energy.  Clearly, some of the major developers and major international banks have told me that they are no longer allowed to develop and/or finance coal power projects.

According to IRENA, the Philippines, from 2009 to 2018 only increased the share of renewable energy in the total power mix from 4732 to 6482 megawatts(MW) or roughly 37 percent. This growth is significantly less when compared to some of our Southeast Asian neighbors. For example, Vietnam has managed to grow its renewable power capacity from 7323 MW to 18523 MW or almost 153 percent in the same period. Likewise, Thailand has added roughly 152 percent of renewables into its generating capacity from 4130 MW to 10411 MW as well.

Some argue, that the Philippines only has a small contribution to the world’s carbon footprint. This is probably true, but it does not change the fact that the use of coal and fuel for power generation remains as the biggest contributor to greenhouse gas emissions in the country. However, this is not the only point.  A more important perspective here is the fact that the presence of coal has the tendency of INCREASING power cost.  As I have always argued the volatility of coal prices and the exchange rates contribute greatly to higher power costs.

The Philippine Climate Change Assessment Working Group 3 Report released last year notes that 41.8 percent of GHG emissions of the country comes from coal and fuel used for power generation and continues to grow by 3.7 percent annually. So, yes, there is a need for the Philippines to take drastic steps in decarbonizing our nation. This is feasible only if renewable power dominates our energy mix. And the sooner we act the better for us Filipinos as our country remains one of the most vulnerable countries to climate change. 

Many countries are working harder to do share their share for the environment by turning to renewable power. Soon, nations will have more cleaner energy to use as they walk away from coal. The Philippines is nowhere near such a state. Yet, one can remain hopeful that we can soon see our country is also taking the fight against climate change by like other nations by allowing renewable energy to flourish and surpass coal power in the country.

References:

https://qz.com/1610977/solar-wind-plus-other-renewables-beat-coal-for-first-time-in-us/

https://cleantechnica.com/2016/02/04/how-11-countries-are-leading-the-shift-to-renewable-energy/

https://news.abs-cbn.com/news/11/20/18/greenhouse-gas-emission-in-ph-rising-report

IRENA RENEWABLE CAPACITY STATISTICS 2019

Press Release: Summary for Policymakers of IPCC Special Report on Global Warming of 1.5ºC approved by governments

http://www.ipcc.ch/pdf/session48/pr_181008_P48_spm_en.pdf

https://edition.cnn.com/2019/04/29/business/renewable-energy-coal-solar/index.html

https://www.forbes.com/sites/johnparnell/2019/04/03/one-third-of-worlds-power-plant-capacity-is-now-renewable/#5801d1043064

https://www.usatoday.com/story/news/world/2019/05/13/climate-change-co-2-levels-hit-415-parts-per-million-human-first/1186417001/

What Lack of Competition Means

A recent World Bank report says that more competition in the power, transportation, telecommunication can boost economic growth in the Philippines.

According to the study, “Fostering Competition in the Philippines: The Challenge of Restrictive Regulation,” the above-mentioned sectors are crucial in improving job generation and services in the country. Unfortunately, there is limited competition in these sectors.  

When compared to other countries, the Philippines’ economy is more concentrated due to the higher proportion of oligopoly, duopoly, and oligopoly in the market, the report added.  The author of the report and World Bank senior economist, Graciela Miralles Murciego stressed that such market structures have hampered productivity growth in the sectors: “The entry of politically connected companies limited productivity.”

The study also emphasized that restrictive regulations and restrictions such as complex regulatory procedures and barriers to trade and investments including foreign equity investments have constrained the growth of the economy. This in turns led to the high prices of services. It also cited that the limitations on foreign direct investment have stunted the development of infrastructure in the energy sector.

The World Bank is not alone in pointing out that more competition is needed in the energy sector. For example, the Massachusetts Institute of Technology released a paper, Utility of the Future by Massachusetts Institute of Technology, which concluded that “the structure of the electricity industry should be carefully re-evaluated to minimize conflict. It is critical to establish a level playing field for the competitive provision of electricity services by traditional generators, network providers, and distributed energy resources.” The report may not be talking about the Philippines directly, but it nevertheless echoes the sentiments of the World Bank.

The MIT study added that there is a need to review electricity markets especially since new technologies can be integrated into the power system. “Wholesale market design should be improved to better integrate distributed resources, reward greater flexibility, and create a level playing field for all technologies.”

I have been vocal about the needed reforms by the power sector so Filipinos can enjoy lower electricity rates. Our rules are skewed to favor the few. 

Take for example the lack of competition in service areas. Currently, another power player is barred from offering its services in an area that is already being served by a distributor. This, in turn, creates a monopoly. And as our economic professor will tell us, monopolistic practices will always put consumers at a disadvantage.

It also does not help that we are not allowing more foreign investments in the power sector. As the World Bank Report stressed, limitations on foreign direct investments have curtailed the growth of energy infrastructure. This is especially true for renewable energy development. 

We have to remember that renewable sources need to be explored (as in the case of geothermal) and plants have to be constructed. These undertakings require new technologies and equipment. Foreign investors can provide these two while we limit the foreign investors’ ownership on the natural resources if they are allowed to do so. This is the best way forward if we are serious in shifting to greater use of cleaner and sustainable energy sources.

Unfortunately, our 1987 constitution limits foreign participation in many industries including power. These provisions, however, are already outdated and needs to be revised. Former National Economic Development Authority chief, Cielito Habito emphasized this need aptly when he said, “The hope is we will be willing to amend economic provisions of the constitution because that is what really is holding us back. It is outdated. Many of the restrictions in foreign advertising, mass media, education, are really out of date. Given the technology in recent years, those rationales don’t apply anymore to the information age.”

Time and time again we are reminded by various experts on the many virtues of competition in various areas including the power sector. But these reminders seem to fall on deaf ears. The Philippines still has one of the highest power rates in Asia, and we all have to thank our regulators and policymakers for that.

References:

https://www.philstar.com/business/2019/03/05/1898614/greater-competition-power-telco-transport-boosts-growth-world-bank#UcJx07M8WylEry0k.99

http://www.bworldonline.com/constitutional-amendments-needed-boost-fdi/