Revisiting the Role of Battery Storage in Renewable Energy Development

According to the annual report of the International Renewable Energy Agency (IRENA) entitled “Renewable Capacity Statistics 2021” more than 80 percent of all new electricity capacity added in 2020 was renewable. In contrast, total fossil fuel additions fell to 60 GW fin 2020 for the 64 GW recorded in 2019, which as the report noted stresses the continued downtrend of fossil fuel expansion.

IRENA Director-General Francesco La Camera says that “2020 marks the start of the decade of renewables” since costs continuously falling, and clean tech markets are growing. It’s an unstoppable trend but more needs to be done if the world is to achieve the Paris Agreement goals of bringing C02 emissions close to zero by 2050.”

Another IRENA report entitled “World Energy Transitions Outlook” says the world needs more technology and innovation to advance the energy transition. The world will have to increase investments in the energy transition by 30 percent to a total of $131 trillion from now to 2050

It’s a conclusion that Morroo Shino president and CEO of Marubeni Asian Power echoes. The head of the Japan-based independent power producer sees two categories that will accelerate our shift from fossil fuels to sustainable, clean power. The first category is investments in proven technologies like wind, solar, and energy storage. The second is increasing investments in rolling out new technologies that can help overcome current challenges in RE development such as solutions for baseload power.

Indeed, more investments are needed to store renewables as only geothermal energy can act as a baseload plant. Energy storage plays a crucial role in our electricity grid and will pave the way for increased renewable energy generation.

Let us keep in mind that most electricity grids virtually have no storage capabilities. In the Philippines, we have the most mature and common storage facilities, that is pumped hydropower, where two reservoirs with different elevations can store extra power. The Kalayaan pump is an example, except it was not originally intended to store renewable energy and presently provides ancillary services to the system.

Recently, San Miguel Corporation’s power arm, SMC Global Power Holdings Corp announced that it will be spending more than a billion dollars to build new battery energy storage facilities with a rated capacity of 1,000 megawatts (MW). SMC said that 31 new battery energy storage units are already underway with some storage facilities already in the advanced stages of completion.

SMC Global Power is building battery energy storage facilities to help address power quality issues. Photo c/o https://www.sanmiguel.com.ph/

The company said that the immediate goal of building the facilities is to address power quality issues as the projects will be used as a regulation reserve ancillary service by our grid operator, National Grid Corporation of the Philippines (NGCP).

Having more battery energy storage systems (BESS) bodes well for the Philippines. BESS stores energy during off-peak times while the battery supplies power during peak periods, thus providing frequency regulation and voltage control to the power system. This is over and above its use as a generation resource. Because of its nature, it can provide energy at 100% capacity factor. Think of your mobile phones – even if the charge goes down, it still delivers the same energy and capacity. Of course, eventually, you will need to recharge the battery of your phone.  This is the same what happens when batteries provide energy to the grid.

BESS is also the optimum solution to problems of storing energy from renewable sources as it can also discharge when more power is needed in central, de-central, and off-grid situations. It is exceptionally useful for our faraway provinces or off-grid areas.

Plus, battery energy storage also reduces the need for both peak generation capacity and transmission and distribution capacity upgrades. It also lowers greenhouse gas emissions.

Those are just the operational benefits of a battery energy storage system. There are also social and economic benefits to be gained. For one, the ability to shift demand to off-peak results in energy bill saving and reduces the need for dispatching expensive peaking generators during peak time. There are significant savings on fuel bills In hybrid systems where diesel generating sets operate alongside BESS and renewable energy.

And more importantly, in renewable energy, battery energy storage systems address the challenges of dealing with the intermittency of renewables. In the words of ADB senior energy specialist Atsumasa Sakai,“Mega battery energy storage systems are one technology that holds significant promise for increasing the share of renewable energy available for the grid, and for energy consumers.”

Unfortunately, we lack ancillary services in the Philippines. Data from the Department of Energy (DOE) shows that a total of 2,604 MW have been identified as required ancillary service but to date only 727 MW are deemed confirmed ancillary services.

NGCP in a recent senate hearing admitted that the grid operator could not contract firm AS reserves due to the lack of available capacity. So, SMC’s foray in BESS is beneficial in closing the gap between our grid’s needed ancillary services and available capacity in the market.

It would also be helpful if we have independent platform for ancillary services. One that’s transparent and inclusive, meaning a platform that includes all ancillary services as long as they meet safety and security requirements. NGCP had plans of having its own ancillary procurement platform but it yet has to push through.

BESS has so much to offer us both on renewable energy development and the economic and operational side. But as experts have been saying, when it comes to renewable energy development, more support is needed in the policy framework. In the case of battery energy storage, much like other developing countries, we need to adopt laws and regulations that would encourage market players to provide ancillary services, or specifically a transparent procurement platform.

All Is Not Lost

The world was on its way to massive energy transitions before the pandemic came. Governments were announcing ambitious clean energy targets and banks were shying away from funding coal projects. Big businesses, too were flexing their muscles, announcing 100 percent renewable energy targets to be met in the next few decades.

However, the COVID-19 pandemic, one of the major shocks in major history, happened. It caused disruptions in every business, mobility, and everyday life. This pandemic also caused the most severe economic recession since World War II.

As the world grapples with the effects of the COVID-19 pandemic, has all been lost when it comes to clean energy transition? Are governments less keen on keeping up with their clean energy goals and Paris Agreement targets?

Not all bets are off said Boston Consulting Group (BGC) Center for Energy Impact. COVID-19 may have changed the economic calculus of many governments but these could bode well for renewable energy development.

The consulting group studied how regions around the world are adopting evolving stimulus measures that are altering energy transition plans. The study noted that Europe’s clean energy shift is likely to move forward while some hard-hit countries in South Asia, Africa, and Latin America’s ability to promote energy transitions are severely constrained. It also said that the adoption of renewable and electrification of transport in Northeast and Southeast Asia are likely to increase.

BGC said some countries are pushing forward with their clean energy plans as they have suffered less adverse health and economic impacts from COVID-19. Many leading Asian economies such as Singapore, Malaysia, China, Japan, and South Korea are in a good position to make substantial energy infrastructure-related investments required to make the energy transitions. These countries, after all, are likely to gain the most by aggressively investing in renewable energy generation. These Asian countries have also adopted policy reforms and stimulus measures aimed at increasing industrial competitiveness.

BGC also looked back at history to determine how governments’ responses to economic recessions influence the energy sector’s trajectory.

Back in the global recession of 2007 to 2009, various governments implemented green stimulus programs justifying such moves by saying that a greater commitment to renewable energy development could jolt economic development and offer long-term competitive benefits. 

Green energy policy measures back then were not entirely brought about by climate change concerns. The Paris Agreement did not exist back then. BGC stressed that the European Union and the United States governments directed stimulus spending towards renewables to generate new installation, domestic construction, and manufacturing jobs.

Governments too can bank on renewable energy development to drive economic activities during this pandemic. A report by the International Renewable Energy Agency (IRENA) released last year showed that accelerating investments in renewable energy can help economies recover as they can spur the global gross domestic product (GDP) by almost $98 billion between 2020 and 2050. Renewable energy development can also quadruple the number of jobs over the next three decades.

BGC recognized in its report that the COVID-19 pandemic and the economic recession that comes with it are quite different from the 2007 to 2009 global recession. The collapse of the economy back then required governments to stimulate and sustain new economic activity while the present recession is forcing governments to allot more resources to combat the health crisis while minimizing the impacts of unprecedented short-term employment. Governments are more focused on keeping the economy afloat given their smaller tax revenues and higher spending, rather than jump-starting new economic activity.

In the Philippines, we can expect a much slower energy transition. Aside from the fact that the government’s lukewarm reception to renewable energy before the pandemic, the Philippines also has trouble getting back to its feet economically speaking. As I write this, we are on the fifth week of the enhanced community quarantine or ECQ part 2. The recent jobs report also showed that 4.2 million Filipinos lost their jobs while 7.9 million took pay cuts in February alone. 

According to BGC, “the worse a country is affected by the pandemic, the less likely its government and businesses are to be able to focus on materially altering its energy infrastructure.” It added that energy transitions require a stable economic and social environment to pour substantial investments in energy infrastructure. As the Philippines is badly affected by the pandemic, our country’s clean energy transition will probably be slower.

But this is not to say that the Philippines is in a hopeless situation regarding the clean energy transition. There has been good news last year, after all.

For one, the Department of Energy (DOE) implemented a moratorium on the approval of new coal contracts. It was a move that surprised many as the DOE previously rigorously defended its technology-neutral stand. 

Second, Yuchengco-led Rizal Commercial Banking Corporation surprisingly declared that it would stop funding local coal-fired power projects, following the footsteps of international banks like US third-biggest bank, Citigroup, Sumitomo Mitsui Banking Corporation of Japan, South Africa’s ABSA bank, and Mizuho Financial Group. Such a bold move deserves the country’s gratitude for pioneering this much needed change in our energy landscape.

The Philippines, however, has to make some policy adjustments to attract low-cost funding for renewable energy development. As I have been saying, requiring a higher level of fixed-price contracts is long overdue. Likewise, I have been advocating for a portfolio approach to energy planning so that the tariffs are also based on this portfolio approach.

I’m not alone in these assertions. A study by S&P Global entitled, “How is COVID-19 Impacting the Energy Transition” noted that global investment appetite for green energy remains strong but sustaining appetites requires either fixed-price auctions or long-term visibility in terms of power price agreements. As I have always argued in the last, fixed price contracts will lead to lower power rates for the man on the street.

The Philippines has so much to gain in shifting to renewables swiftly. Even before the pandemic, our government was aiming to become an upper-middle-income country status by 2022. Sustaining economic growth will require more electricity, and local electricity demand is seen to increase by an average of 6.7% annually.

Plus, we need energy security. This pandemic should teach us that it is necessary to end our reliance on imported fossil fuel to power our nation. Just imagine the devastating effect had Indonesia closed its borders and decided to stop exports of its coal. Thankfully, it didn’t happen, but by now we should be working on ensuring our local energy supply.

And experts after experts predict that it would be cheaper to build renewable energy plans than continue the use of existing coal-fired plants, which eventually would become stranded assets.

We are facing monumental challenges in the Philippines as the coronavirus continues to claim lives and cause havoc in our economy. But hopefully, we continue our quest for a faster clean energy transition as more renewables will help us in our economic recovery and ensure energy security. As they say, we need to build back better.

A Stronger Case for Distributed Energy

Apart from disaster resilience, the country will do well in welcoming more distributed energy systems because of other benefits. Photo c/o http://www.advisian.com

Time and time again, thousands of Filipinos are left in the darkness after destructive typhoons hit us.

Just a few weeks ago, Tropical Depression Auring left some residents of Surigao del Norte and Davao Oriental without electricity although the outages didn’t last that long. Auring, after all, was merely classified as a Tropical Depression and didn’t wreck as much havoc as the three typhoons that we experienced last year.

In the last quarter of 2020, Typhoon Quinta, Super Typhoon Rolly, and Typhoon Ulysses battered the country, leaving massive destruction and causing major power outages. The Bicol Region suffered a total power blackout due to these typhoons. 

According to the National Electrification Administration (NEA), the country suffered some Php500 million worth of damages to the utility system because of these three typhoons.

It’s a given that the Philippines will always suffer from catastrophic typhoons given its location. On average, the country is visited by at least 20 typhoons annually, five of which are destructive. We can’t change our location but we can invest in resiliency measures.

 For the Energy Sector, this means revisiting our energy systems, and reinvesting in distributed energy and smart grids

As I have mentioned in a previous post, many countries are already moving away from traditional central power production and are moving toward distributed energy production. The Philippines must follow suit as distributed energy will bring many benefits to Filipinos.

Disaster resilience is one benefit. Our current centralized systems require power lines spanning long distances, which proves detrimental for us when natural disasters happen. Damage to a single line can leave thousands without electricity, which is why it’s hard to restore power immediately. Power distributors, cooperatives, and the transmission company will first have to assess which lines are damaged and affected. Only then can linemen start physically restoring power. Power restoration after a calamity is risky and sometimes results in the deaths of some linemen.

Apart from disaster resilience, the country will do well in welcoming more distributed energy systems because of other benefits.

A recent study in the United States conducted by Vibrant Clean Energy found out that investing in local solar and wind energy, storage, and distributed energy technologies can save the US some $473 billion in power bills from now and year 2050. This amount of savings the research said is feasible if the US invests heavily and uses solar and wind power and distributed energy to power businesses, farms, homes, and schools.

The research also revealed that investments in distributed energy and other technologies that can power 25 percent of US homes are the most efficient way of meeting the country’s climate goals while generating 2 million jobs along the way. And as I have discussed above distributed energy can also help boost the resilience of communities that are dealing with wildly variant weather patterns.

Speaking of farms renewables and distributed energy can also help our agricultural sector.

Recently the Department of Agriculture (DA) and the Department of Energy (DOE) announced that they will jointly undertake pilot renewable energy (RE) projects for the agriculture and fishery sectors in strategic areas of the country. The goal is to promote the use of clean energy in boosting food security. 

Some of the pilot RE projects will include off-grid electrification in corn, rice, and sugar cane farms and the use of solar-powered systems for aquaponics, hydroponics, crop irrigation, and poultry egg incubators and hatchers. The pilot projects will help jumpstart the Renewable Energy Program for the Agriculture and Fishery Sector (REPAFS).

The REPAFS will eventually serve as the blueprint for efficiently and effectively integrating renewables in the agriculture and fishery sector to enhance productivity and ensure sustainability and environmental protection.

The REPAFs will benefit from distributed energy and renewables. Areas that heavily rely on variable energy resources such as wind and solar are better off investing in distributed energy systems as renewable power can be deployed to help balance the grid and improve system reliability.

In this regard we are looking at off-grid solar with battery solutions to be implemented in such areas. One system we are seriously looking into will allow almost a 24-hour electrical source to power  a TV, radio, and a set of lights. And the system will cost below what it currently costs NPC to provide electricity to SPUG areas. We are also exploring collaboration with Land Bank of the Philippines (LBP) to provide the financing needed for the farmers and fishermen.

Distributed energy can also help power rates become more affordable as consumers can sell back power to the grid or receive compensation for allowing the use of their storage systems to help stabilize the grid.

Plus, distributed generation can help breakdown monopolies in power distribution. A study by the Massachusetts Institute of Technology (MIT) entitled, “Utility of the Future” noted that present electricity distribution systems create a natural monopoly as regulators tend to be clueless about the distribution utilities’ managerial inefficiencies and costs. This in turn allows DUs to justify their higher operating and convince regulators to pass the additional costs to consumers.

Distributed energy systems work differently as they bank on other advanced technologies such as advanced metering, energy management systems, and dynamic-based pricing, all of which offer more transparency on pricing.

The transmission and distribution businesses were once conceded as natural monopolies, but technological changes proved that transmission and distribution need not be dominated by a single or few players. 

The transmission and distribution businesses were once conceded as natural monopolies, but technological changes proved that transmission and distribution need not be dominated by a single or few players. Around the world, the energy sector is undergoing massive changes given the many technological advancements and the need to address climate change. It’s high time the Philippines joins other countries that are moving away from centralized distribution as Filipinos will benefit more from distributed energy.

ONE YEAR LOCKDOWN: WHAT I HAVE LEARNED

As we saunter into the second year of what may be another year of lockdowns, albeit, in varying degrees, I am compelled to share with you my friends, what I have learned this past year. What seemed to be a broad spectrum in our lives pre-COVID 19 suddenly became very narrow, concrete activities in our daily lives. In fact, for many of us, we lost a very vital aspect in our lives: livelihood. The loss of ability to provide for one’s family is so devastating that it leads one to think: can I make it through? Where can I find help…

Pope Francis in his encyclical, Fratelli Tutti, said it well when he pointed out that “the storm has exposed our vulnerability and uncovered those false and superfluous certainties around which we constructed our daily schedules, our projects, our habits, and priorities .” This hit me most especially because in my attempt to protect that ability to maintain a livelihood, a livelihood that also ensured the livelihood of many, I found there were activities I was engaged in that only led to false and useless ends.

Today, although certainly in a tighter bind than pre-COVID 19 financially, my life is, I believe, in better order. Of course, worries about the uncertainty of the future stare at my face every day. But this pandemic has taught me how to put these worries in context. One can sublimate these worries in human and supernatural terms. There are worries about the vulnerability of one’s health, especially now we are senior citizens. Again, as long as we are prudent in following health protocols and have a healthy attitude towards the inevitability of death, we should be able to sleep soundly at night. My Apple Watch tells me I sleep on the average 7-8 hours every night with 4-5 hours of deep sleep.

So what have I learned?

1. Family Matters: It is Our Basic Social Unit

As obvious as it seems, this was a fact that dawned on me a month after the lockdown started in 2020. In the beginning, everyone thought that the lockdown will be for 30 days. So, I took it for granted that my entire family — down to my grandsons — were with me when the government first announced the lockdown period last March 15, 2020.

However, as the days went into months, and now the months may turn out to be a year, I feel really blessed to have been locked down with my entire family. I found out it is not healthy to be alone. Man, psychologically and physiologically, needs to have that face-to-face contact that is currently being restricted by the pandemic.

This pandemic has taught us that it’s not our officemates who will ultimately determine our surviving this pandemic. It’s not our drinking buddies, and it’s not even our business partners.

This pandemic has made my resolve to protect the family as our primary social unit even more vital. While our constitution protects this basic concept, there are attempts these days to redefine what “family” means. For those surviving this pandemic, there is no other way to define what “family” means — a mother, father, children, and grandchildren.

2. Social Interaction with Friends and Colleagues Matters

Over this last year, I lost 15 friends to COVID-19. Except for one to whom I could send a taped message even when he was intubated, I was never able to visit or talk to the others. I am told of the solitude of those who die from the disease. I am informed of the pain they suffer alone without being able to feel the touch of a loved one or hear the consoling whisper from a spouse, child, or even just a friend.

This is why I feel it is essential to reach out to friends and colleagues. I have regular chats with friends, former classmates. We have no particular agenda, just sharing experiences and reminiscing our past. Of course, we do have regular “ZOOM” meetings with our business colleagues, but just being able to talk will surely help.

You and I, we are all suffering in the strictest sense of the word. Suffering because we cannot do what a normal human being, a social animal, a social being, was designed to do. Therefore, we should reach out to whoever we can. This will help our mental and physical health.

3. Physical and Mental Health Matters

We are lucky to live in a gated community that eventually allowed its residents to use the subdivision roads to walk, run, or simply exercise. Otherwise, we would have been relegated to a small gym and just our room. As the doctors recommend Vitamin D to get from the sun, a year without the sun would have been disastrous. While this may be an exaggeration, one gets the drift.

Regular exercises have kept my body active daily. It’s a daily mental struggle to go out and sweat. The Activity app of my Apple Watch helps, of course. The challenge is finding variety in the activities that I do. After running throughout the village, I often itch to go out of the subdivision and run the way I used to run — in faraway places like the UP oval!

While watching Netflix or Apple TV+ can tend to be addicting, with some self-control, this activity helps balance off my day. I tend to watch crime whodunit series– it makes my brain work, and documentaries to find out more about events and people worldwide.

I have grabbed a couple of books from my library of never-read books. I do not know, but I had this habit of buying books that I never ended up reading at all. This pandemic has forced the issue — what else is there to read except the books I never read?

4. Wine and Music Matters

Some wine and music at the end of the day have kept the doldrums out of our lives this past year. Whether it’s just Joy and me or with the kids, we find every reason to sit back and listen to a Diana Krall or some excellent soothing jazz album. It’s that time of day when she and I can either just throw out nonsense at each other, like daydreaming of traveling soon or seriously talking about our future.

We would sit in different parts of the house to mimic the “tapas crawl” we miss. While enjoying a bottle of Ribera del Duero, we would put on a Bebo and Cigala album to bring us back when we were strolling along the Plaza Mayor of Salamanca. Or maybe a bottle of Chablis or Pouilly-Fumé that can invoke those nostalgic memories. We talk of the times we would walk along the Seine to go to Robert e Louis, a traditional restaurant in 64 rue Vieille du Temple, in Paris.

For the music, I can stream from Qobuz, Tidal, Spotify, or Apple Music. As a platform, I can stream through Roon, Sonos, or Apple Homepods. So between those apps and speakers, my music choices are almost limitless.

I limit myself to classical music as background to my working time: Bach, Mozart, and Chopin are my favorites. I often leave the easy track and dabble with Rachmaninoff, Dvorak, and Tchaikovsky. Then try some unknown composer to test my mental ability to focus on whatever it is I am working on.

As for jazz, I start off late in the afternoon with vocal jazz, then progress into heavier bebop as the night gets late. Often I would go for Bossa Nova. Sometimes I jump into completely unknown artists suggested only by the AI of my streaming apps.

Finally, I have gone back to my guitar playing, and I have learned to play the piano again. All these help me keep a balance during these days of the pandemic. Indeed, music and wine are the two elements of life that translate into the soul’s language. As one writer puts it, “sipping wine while listening to music can be an intense experience that fills our hearts and tickles our minds.”

5. Spiritual Health Matters

From almost the first day of the lockdown, our family started to pray the Holy Rosary every evening. One of the more painful realities of this daily routine is we literally witnessed the demise of the stalwart of the family. As the pandemic days wore on, his ability to pray with us became increasingly difficult for him until we lost him last August. However, as a family, we are grateful that he was with us in prayer until he breathed his last.

This is why during this pandemic, our spiritual life is the most essential aspect of our existence. I have realized that nothing on this earth worth anything. Our branded shoes, our expensive cars, our jewelry, all our wealth, all these mean nothing in the face of this pandemic. When COVID-19 hits you, you die, and you die alone without any strapping of your wealth.

This pandemic and lockdown have allowed us to hear Mass every day. As one writer puts it, the Holy Mass is heaven here on earth. Scott Hahn, in his book “The Lamb’s Supper,” points out the passage from Vatican II that made him realize that in the Holy Mass, we are all in heaven:

“In the earthly liturgy, we share in a foretaste of that heavenly liturgy which is celebrated in the Holy City of Jerusalem toward which we journey as pilgrims, where Christ is sitting at the right hand of God, Minister of the sanctuary and of the true tabernacle. With all the warriors of the heavenly army, we sing a hymn of glory to the Lord. (no. 1090).”

We usually go to the online Mass of the Manaoag Minor Basilica. We alternate this with the noon mass of the Manila Cathedral. In the whole year of the lockdown, we only received Holy Communion once, Ash Wednesday, and just because it was in our village chapel. I was able to go to Confession twice. This is one Sacrament the Church has not allowed to be online.

It has also given me time to do daily spiritual readings and mediation. All these have made me realize that God’s command to “love other as I love you” is a challenging task to accomplish. Given the misery surrounding us, it has compelled us to walk an extra mile in being merciful and compassionate to those around us. At the same time, this mercy and this compassion are precisely the blame that soothes our aching bodies, our tired minds, and our listless souls.

One year has passed, and while the vaccines are here, the end is still uncertain. However, these five lessons I’ve been taught by the pandemic are lessons I will pass on to my 3 grandsons: Emilio, Andres, and Alfonso. In passing on these nuggets of wisdom to the young, I remember again what Pope Francis said in his Encyclical Fratelli Tutti:

“If someone tells young people to ignore their history, to reject the experiences of their elders, to look down on the past and to look forward to a future that he himself holds out, doesn’t it then become easy to draw them along so that they only do what he tells them? He needs the young to be shallow, uprooted and distrustful, so that they can trust only in his promises and act according to his plans. That is how various ideologies operate: they destroy (or deconstruct) all differences so that they can reign unopposed. To do so, however, they need young people who have no use for history, who spurn the spiritual and human riches inherited from past generations, and are ignorant of everything that came before them.”

God bless us all.

What 2020 Taught Us

Image c/o https://www.sdmmag.com/


To say that the year 2020 was tough is an understatement. But the COVID-19 pandemic along with natural disasters we experienced in the Philippines in the last quarter of the year, have taught as many valuable lessons.

For one, the community quarantine imposed by the government exposed the vulnerabilities of the energy sector. 

The report by the Institute For Energy Economics and Financial Analysis (IEFAA) showed the downside of our inflexible coal baseload plants and long-term guaranteed contracts. 

The study entitled “Philippines Power Sector Can Reach Resilience by 2021” noted that the depressed demand for power due to the lockdown forced coal plants to turn to mid-merit load factor. This in turn increased the power cost per kilowatt-hour. The pass-on provisions of our Power Sales Agreements (PSA) that allow cost recovery for the independent power producers ensured that the higher costs are shouldered by consumers.

Our penchant for large volumes of baseload capacity running on imported fuel did not bode well for us given that 80% of baseload coal plants are inflexible. This means that fuel and other variable expenses in running power plants remained flat regardless of power demand. We may have experienced a depressed demand during the Enhanced Community Quarantine but plants had to run at their minimum operating levels.

The study, released in June, estimated that power consumers could be paying PHP9.679 billion more in power rates if energy sales volume decline by 10% in 2020. 

These illustrate what I have been pointing out as the downside of not having fixed-price contracts and our over-reliance on coal-fired plants. This pandemic served as a wake-up call to fix the problems of the sector for the benefit of consumers

On top of the prolonged lockdown and the ensuing community quarantines, the Filipinos unfortunately also had to deal with natural disasters in the last quarter of 2020. Typhoon Goni, referred to as Super Typhoon Rolly in the Philippines, caused heavy rainfall, landslides, and flooding in Luzon. The super typhoon, considered the strongest landfalling typhoon in the world for 2020 left massive destruction in Luzon especially in Albay, Catanduanes, Camarines Sur, and Quezon. 

Estimates showed that Super typhoon Rolly’s damage to infrastructure reached Php 11.3 billion, causing massive livelihood loss as battered areas rely heavily on the agriculture sector.

As if that wasn’t enough, less than two weeks after Rolly’s devastation, the Philippines was once again battered by Typhoon Vamco. Locally known as Ulysses, this typhoon triggered extensive flooding in many areas like Metro Manila, Rizal, Cagayan Valley and Isabella. Estimates show that its damages are around Php 20 billion, surpassing the damages caused by Typhoon Rolly.

These two typhoons are not the only ones to hit the country last quarter of the year. There were five in total in October and November, costing the Philippine economy Php90 billion in lost output. Plus, there was tropical depression Krovanh, or locally known as Vicky, which claimed lives and caused floods in some parts of CARAGA region just before Christmas.

These weather disturbances are due to the undeniable climate crisis. Our country, unfortunately, is among those most affected by natural disasters exacerbated by climate change, despite our meager contribution to the world’s carbon footprint.

Thus, it is imperative for us to also move fast in implementing effective mitigation. The wide adoption of renewable energy is one of the most effective climate change mitigation actions.

In the words of Finance Secretary Sonny Dominguez, “Severe weather events inflict human, social, and economic costs on the Filipino people. We lose billions every year in damage to crops and infrastructure. These mounting losses dampen our overall economic progress. These costs will continue to accumulate unless we move fast on mitigation measures.”

The need for a swifter shift to more renewable energy use is more emphasized than ever. We may have been survivors of many weather disturbances and natural disasters but this pandemic should fuel action for faster mitigation measures. More so since experts have pointed out that climate change contributes to pandemics. 

We may have experienced some of the worst times, but there are still great lessons and developments to be thankful for.

For one, this pandemic has also accelerated the use of digital technologies locally. 

For example, more payment options now available allow customers to settle bills more conveniently, to avoid crowding in distribution utilities and coops’ offices and there will be more seamless and contactless payment options coming soon. Other technologies soon to be available are contactless meter application and remote reading, activation, and deactivation of power supply, to name a few.

There’s also the announcement of the Department of Energy of the moratorium on approval of new coal contracts. This announcement came as a surprise since the department had been insisting on its technology-neutral stand. 

For years, the Philippines has been lagging in its commitment to shift to renewable energy development. The country may have once been a leader in RE development having passed the RE law, but later failed to advance in renewable energy development.

Following DOE’s announcement is Yuchengco-led Rizal Commercial Banking Corporation (RCBC) surprising declaration that it will stop financing new coal coal-fired power projects in the Philippines. Now RCBC joins the ranks of Citigroup, Mizuho Financial Group, and Japan’s Sumitomo Banking Corporation banks that have already made the same move.

RCBC President and Chief Executive Officer (CEO), Eugene Acevedo made it clear that the bank will shift funding to renewables and gas-fired power facilities. “I’m going to say that moving forward, all our loans for energy projects will be non-coal, it will be 100 percent non-coal.”

It’s a statement that’s highly similar to the strategy of Finance Chief, Sonny Dominguez “Our rule should be simple: projects that are not green and sustainable should not see the light of day.” 

Shying away from financing coal-projects makes financial sense as renewable energy technology prices have been falling in recent years. According to Carbon Tracker, soon it will be cheaper for Southeast Asian countries to build renewable energy plants than continue using existing coal-fired plants. Coal plants run the risk of becoming stranded assets, which eventually will drain resources.

We may have limited control over the many unfortunate events that unfolded this year. But we do have the power to act by learning from them and ensuring that we do things better. Fortunately, recent developments give hope that indeed we are using crises as opportunities to make better policies and programs that are more responsive to modern times.

As We Plan for Economic Recovery

The energy sector should also be overhauled to support government efforts to rebuild the economy. Image c/o http://www.benzinga.com

The COVID-19 pandemic resulted in a global recession. Here in the Philippines, the imposed months-long lockdown caused our economy to contract as much as 16.5 percent in the second quarter of 2020. Economists predict that the Philippine economy will likely experience an 8 percent negative growth for 2020.

Our government is banking on its flagship infrastructure program, “Build, Build, Build” to revive our battered economy. It has allocated P1.1 trillion, equivalent to 5.4 percent of our gross domestic product (GDP) to infrastructure projects in 2021.

For the power sector, this means higher demand for electricity as we as build more roads, bridges, ports, railways stations, and airports.

As we start planning for the Philippines’ economic recovery we should also overhaul our energy sector now so we can support our government’s effort to rebuild our economy. We need to address the short-term and long-term price stability so we can meet the demand for more power at cheaper prices.

The Philippine Peso has been touted as the best performing currency in Asia, strengthening 4% against the United States dollar. We can take advantage of the Peso’s strength by purchasing all imported fuel that’s oil-based or indexed to global prices while the Peso is strong. Let us remember that our fossil fuels are based on the U.S. dollar and indexed to global prices, and we have plenty of power plants that are importing coal and oil.

I have always talked about how a weak peso and increasing fuel costs hurt Filipino consumers because our Purchase Sales Agreements (PSAs) have pass-through provisions in previous posts. Consumers end up paying more for a weaker peso and more expensive imports. But a strong peso against the dollar can be used to our advantage as we can now use them to lower electricity prices for the next few years.

The government can order all power plants to buy all their fuel requirements in advance. Doing so will place a cap at fuel prices at today’s prevailing prices and foreign exchange rates. Power plants can buy years worth of their fossil fuel requirements so they can fix their prices at a rate that’s advantageous for their consumers.

This is a short-term solution. To ensure stable prices in the years ahead, the Department of Energy (DOE) and the Energy Regulatory Commission (ERC) should require a higher level of fixed-price contracts. I’ve been advocating for fixed-priced PSAs since the pass-on provisions always burden the consumers when the peso is weak and the global fossil fuel prices increase.

Likewise, the government can also order the off-takers of the Malampaya gas to purchase either part or all of the remaining gas so the prices of power will be pegged at current prices and present forex rates. The reasons are the same as my first suggestion for buying fuel requirements in advance. After all, the Malampaya gas is also based on prevailing forex and oil prices. 

One might argue that distribution utilities may not have enough funding to import fossil fuels and or purchase the Malampaya gas. However, we have our government banks, Land Bank and Development Bank of the Philippines that can lead a consortium of local banks to help purchase fossil fuels in advance.

Pegging fossil fuels at current global prices and forex rates will directly impact households and micro, small, medium enterprises (MSMEs) as they will be paying less for electricity. This is especially beneficial now as most Filipinos have less money to spend due to the economic recession. Taking away uncertainty is always a good option – it is valuable.

And to ensure long-term stable energy prices, our government should allow competition at the power distribution level. We have the Electric Power Industry Reform Act or EPIRA but there’s little competition still. In the past we thought that the wires business is a “natural” monopoly.  Latest developments in technology is showing that it ism not.  There are even non-wire alternatives (NWA) to power distribution.

 Currently, the the thinking is that two or more franchise holders for the same area is harmful. This policy, however, results in a monopoly, which does not benefit consumers. A monopoly doesn’t give the franchise holder any incentive to constantly innovate and improve its services.  Allowing more players will push utility companies to provide better services at cheaper rates to consumers. There are ways to improve the service to consumers through competition.

A clear definition of a load profile will also benefit us all in the long-run. Currently, our current procurement rules do not result in an efficient deployment of our energy resources because the ERC focuses on individual contracts. Consumers are paying more for power because we are not deploying power cost-effectively.

Coal-fired power, which is best used for baseload power is also being used for mid-merit power, thus whatever cost advantage of coal goes away. This happens because current procurement rules do not require ECs or DUS to differentiate the different power requirements. We need to define a load profile and regulate the appropriate levels of baseload, mid-merit, and peaking. The DOE and ERC can work on the limits and ensure that these are reflected in PSAs. The ERC should reject contracts that fall outside these limits. The recent announcement of DOE that there will be a moratorium in the issuance of permits for coal-firepower plants is a step in the right direction.

Reviving our economy requires the cooperation of all. For the power sector, this means ensuring sustainable and affordable electricity. More so since according to the Philippine Energy Plan 2018 to 2040 draft, local electricity demand is set to increase by an average of 6.7% annually. We can only meet this demand while making power rates cheaper by fixing the ills of our sector now.

Energy Transformation is What We Need

Sydney is powered by 100% renewable energy. Photo c/o https://www.energymatters.com

There’s been some good news on the renewable energy sector in recent months.

For one,  the City of Sydney, the biggest city in Australia, recently announced that is now powered by 100% renewable energy. This means that all public operations such as sports facilities, street lights, buildings, and the historic town hall in the city that’s home to 250,000 residents are running on clean energy starting July 1. The feat was made possible by a power purchase agreement (PPA) valued at $60 million, saving the city roughly half a million dollars annually over the next 10 years.

 Plus, there’s the United Kingdom (UK), which was able to generate almost half of its power needs from renewables in the first quarter of the year. The UK government data showed that renewable power made up 47% of the country’s electricity in the first three months of the year, breaking the previous set quarterly record of 39% in 2019. The substantial increase in the total renewable output of the UK was primarily driven by growth in power generated by wind farms and solar panels.

And RE sector’s record in the UK is likely to be broken in the coming years with the government’s plan for “a massive expansion of renewables as part of the UK’s green economic recovery” says Rebecca Williams, policy manager of RenwableUK, a non-profit renewable energy trade association.

Meanwhile, in the Philippines, the National Renewable Energy Board (NREB), recently reported that the renewable energy share in the power supply mix keeps on “dwindling.”

In 2015, renewable’s contribution to the supply generation mix was around 25%. RE’s share was even lower for 2016, 2017, and 2018 at 24.21%, 24.57%, and 23.38%, respectively. According to NREB Chairman Monalisa Dimalanta, renewable power’s share in 2019 was even lower at 21%.

In contrast, coal dominated the power mix, recording its highest share in 2018 at 52.05%.

As for the total installed capacity, the Philippines still is far from its target. Dimalanta notes that in 2019, RE capacity was only 5,000 megawatts (MW), more than 10,000 MW short of the 15,304 MW target by 2030.

But perhaps renewables contribution to the Philippines ’ power mix would be better in the following years. Hopefully, the government and the energy planners so engrossed in the faulty appreciation of the least cost method in power planning will finally appreciate what renewable power has to offer.

The COVID-19 has, after all, exposed the vulnerability of our energy sector. For a while, I was worried that Indonesia, the Philippines’ largest source of coal, would close its borders, thus putting our energy source at risk. Even the Energy Secretary has acknowledged that the coronavirus pandemic highlighted the need to ensure energy security by developing our indigenous resources.

Thankfully, the Indonesian government did not close its borders and stop the export of coal. But this pandemic should teach us valuable lessons, pushing us closer to clean energy transition. There’s a strong case for doing so given that experts have been saying that now is the best time to ramp up renewable energy development both locally and around the world.

For example, a policy paper, titled “Can COVID-19 spark an energy transition in the Philippines?” noted that this pandemic has provided an opportunity for the Philippines to pursue the development of more RE source more aggressively given that the lower coal generation due to the drop in power demand. 

The paper penned by Ateneo de Manila University economics department Associate Professor Majah-Leah Ravago and The University of Hawaii, Manoa economics department Professor Emeritus James Roumasset noted that “the rather dramatic fall in coal-fired generation may afford an opportunity for the Philippines to meet their renewable targets without resorting to costly subsidies.” 

The study noted that power demand dropped by 30% nationwide with coal generation decreasing from 56 to 48 %. On the other hand, generated energy from renewables remained the same with biomass and solar power generation rising slightly during our enhanced community quarantine.

Now is the best time, too to invest more in renewable energy projects says the International Renewable Energy Agency (IRENA) in its report “The Post-COVID Recovery.” It noted that the renewable energy sector has proven to be more resilient than other parts of the energy sector given the high shares of renewables continue to operate effectively. “Renewables have proven to be the most resilient energy sources throughout the current crisis. This evidence should allow governments to take immediate investment decisions and policy responses to overcome the crisis,” said Francesco La Camera, Director-General of IRENA.

The IRENA report added that accelerating the energy transition will bring substantial socio-economic benefits, specifically job creation. Aligning immediate stimulus action for the next three years, particularly from 2021 to 2023 and scaling up public and private energy spending to USD 4.5 trillion annually would boost the world economy by an additional 1.3 percent. 

This level of investment would also create 19 million more energy transition-related employment by 2030. Jobs in renewables power would grow to almost 30 million in 2030 from about 12 million in 2017. The study stressed that every one million dollars invested in renewables can provide three times more jobs than in fossil fuels.

I, along with other experts, have been arguing that the COVID-19 pandemic and the economic recession should not deter us from pursuing our clean energy transition goals. Like the experts quoted above, there’s an opportunity and a greater need for us to accelerate our shift to renewable energy.

A fast clean energy transition would reap enormous benefits for all and help in the global economic recovery. It also means ensuring energy security in the Philippines. And in the words of the IRENA President, “Now is the time to invest in a better future. Government policies and investment choices can create the necessary momentum to enact systemic change and deliver the energy transformation away from fossil fuels.”

Will the Power Sector Survive a Recession?

The COVID-19 pandemic is more than just a health crisis. It is also an economic one given that the lockdowns and restrictions have resulted in the loss of jobs and livelihood of people.

In the Philippines, the long enhanced community quarantine (ECQ) paralyzed the economy and caused a sharp economic contraction for the second quarter at 16.5%. According to Acting Secretary of the National Economic Development Authority (NEDA), Karl Kendrick Chua, 8.8 million jobs were lost between January until April “because of the very strict quarantine.” The country’s average unemployment rate in 2020 to date is at 11%, 6% up from the normal 5%.

Unfortunately, it is the masses, the rank-and-file employees, and the micro, small, and medium enterprises (MSMEs) that are particularly affected by the economic recession. A survey from Publicus Asia revealed that 78% of survey respondents said at least a member of their family who earns Php9,500 to Php 19,040,00 per month and 65% of those earning between Php19,040 to Php 38,080 have lost their jobs due to the ECQ.

In terms of businesses, only 22.1% is on full operation according to the Department of Trade and Industry (DTI). Around26% are closed and 52% are only partially operating. Professor Eric Soriano, a World Bank Consultant, in a webinar with the Philippine Chamber of Commerce and Industry (PCCI) said that it is the MSMEs that have been the hardest hit. The MSMEs contribute 40% of the GDP and employ 70% of the workforce.

The magnitude of the job losses and business closures means that many poor and low-income families are having a hard time making ends meet, and have barely enough to eat. With no source of income, how will they afford to pay their utility bills?

In the United States, the report from the National Rural Electric Cooperative Association (NRECA) showed that U.S. electric cooperatives could take a financial hit of approximately $10 billion through 2022. “As GDP growth falls below pre-COVID-19 projections, electric co-op electricity sales are projected to decline,” NRECA noted.

The group said that high rates of utility bill delinquency along with service disconnection moratoria in some states and the surge in unemployment is making it difficult for electric coops to continue providing services. “Lost revenue can severely constrain the ability of certain electric co-ops to meet the needs of their community,” the NRECA said in a letter addressed to lawmakers.

Local utility companies are facing the same challenges. Many utility companies for months now are experiencing a significant drop in their collection rates and surviving with considerably less cashflow. Eventually, these companies will have no option but to discontinue their services for those who cannot pay. So, how will utilities survive?

Perhaps we should look at our government’s response to address the impacts of high unemployment rates and business closure.

The International Labor Organization (ILO), in its policy paper entitled “COVID-19 and the world of work: Impact and policy responses” stressed that epidemics and economic crisis tend to have disproportionate impact on some segments of the population, exacerbating the worsening wealth inequality.

ILO said government policy responses should have two immediate goals: Health protection measures and economic support on both the demand and supply side.

The organization noted that stimulating the economy and labor demand through economic and employment policies to stabilize economic activity, through active fiscal policies and particularly social protection measures is necessary. Governments must protect employment and incomes for enterprises and workers negatively impacted by the indirect effects

Yes, one might argue that we have the Bayanihan To Heal as One Act One signed into law last March that provided cash aid to displaced workers. Plus, we have the newly signed Bayanihan Act II with a Php 140 billion allotment to help revive the economy and fight COVID-19.

However, are those enough? Some experts agree that the Bayanihan Act is too small and too late. 

University of the Philippines (UP) economics professor and former NEDA chief Solita Monsod pointed out that the first Bayanihan law is only equivalent to 1.93 percent of the gross domestic product (GDP) a measly amount when compared to other countries that are allocating funds equal to 5 to 21 percent of the GDP. She stressed that “But my God, Bayanihan 2 if you add it all together, is only 0.7 percent of GDP.” 

The UP economist said that the government fears that the debt figure will balloon and the credit ratings will suffer is a misguided fiscal conservatism. “We spent 1.3 percent (of GDP) in the first half and got nowhere. You think we’ll get somewhere by spending only 0.7 percent?” she added.

JC Punongbayan, a teaching fellow at the UP School of Economics echoed the thoughts of Monsod. “Good though its intentions are, Bayanihan 2 is too small. It’s not nearly enough to shore up our embattled economy.”

He pointed out that only Php 6 billion are being allotted for the Department of Social Welfare and Development’s various aid programs including emergency subsidies for poor households but only households in granular lockdowns will receive cash aid.

Punongbayan said that that economic managers are banking on the multiplier effects wherein a peso spent on business loans for companies can generate Php8 to 10 in economic activity, which is why the government thinks it does not need to shell out much more to revive the economy. However, he noted that there is no government study to back up this claim.

Both economists agree that the bill does little to help already struggling Filipino families. And in the words of Monsod, “The people, especially the poor, are always the last priority. The first priority, I tell you, seems to be the credit rating of the country,” she added.

I am no economist but I do know that joblessness during the pandemic brings economic hardships to low-income families and that it is the government’s job to provide aid to them. Economists have been giving their opinions on the meager amount allotted to help Filipinos and revive the economy, which the government must pay attention to.

From a utility standpoint, loss of jobs and business closures definitely have a negative impact not only on the collection of utilities since the consumers’ ability to pay for basic utilities will also erode over time. When the population no longer can pay basic utilities, how can these utilities survive? 

The answer to the above question is beyond the power sector of which I belong to. This is exactly why I included the economists’ thoughts on our government’s response to the health and economic crisis. But let me point out that utility companies are suffering too when consumers do not have enough in their pockets to pay for their basic needs. NRECA CEO, Jim Matheson said it best “The economic health of electric co-ops is directly tied to the wellbeing of their local communities.”

Thus, we need to find a way to help the Filipinos struggling to pay for food and other basic needs. And as Matheson stressed, “As the economic impact of this pandemic spreads, electric co-ops will be increasingly challenged as they work to keep the lights on for hospitals, grocery stores, and millions of new home offices.” In the end, power companies, which are essential in economic development and nation building might also be left with nothing.

References:

https://rappler.com/voices/thought-leaders/analysis-bayanihan-2-here-yet-too-small-late

https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/nreca-says-us-electric-co-ops-may-take-10b-financial-hit-from-covid-19-58152700

NCR COVID-19 Survey 3: ECQ job loss affects 69% of households surveyed

Ditching the Notion of Least Cost

In a previous post, I have raised the possibility of Indonesia, our biggest source of coal, closing its ports because of the COVID-19 pandemic. Fortunately, this didn’t happen as we would have major problems given that we source 90 percent of our coal from Indonesia.

But this doesn’t mean that we should refrain from overhauling our energy sector. After all, this pandemic has exposed vulnerabilities in our energy sector especially since we are a fossil-reliant power country.

A study by the Institute For Energy Economics and Financial Analysis (IEFAA) discussed how the COVID-19 pandemic has revealed the weaknesses of the power sector. 

The report entitled “Philippines Power Sector Can Reach Resilience by 2021” stressed that our energy market, which relies heavily on fossil fuels because our energy planners prefer the least cost method, has not delivered on its promise of being the cheapest cost of energy. On the contrary, our reliance on large scale fossil fuel plants with guaranteed contracts have resulted in grid inflexibility, and price instability.

The researchers noted that the sector for so long has focused almost exclusively on mobilizing capital for large volumes of baseload capacity that runs on imported fuel. Unfortunately, coal plants are inherently inflexible, and in the Philippines 80% of baseload coal plants are inflexible.

The lockdown, the IEFAA said, has exposed the downside of the guaranteed contracts with coal plants.

According to the authors, with the depressed demand for power, coal plants are turning to their mid-merit load factors, which have a higher per kilowatt-hour rate. This is all thanks to our power sales agreements (PSAs) that ensure capital recovery for coal plants. 

The study pointed out that our PSAs have provision for capacity payments, which is the payment to ensure that the coal investor can recover their capital “it is 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.”

And with the depressed demand for power, coal plants are turning to their mid-merit load factors, which in turn increases the cost per kilowatt-hour. Thus, Filipino consumers have to pay more for every kilowatt-hour, thanks to the pass-on cost provisions of the PSAs.

By just how much will consumers have to shoulder for these capacity payments? According to the study, if there is a 10% decline in energy sales volume for 2020 and if power comes from fossil plant with the usual PSA with the capacity payments clause, then end-users will have to fork out PHP9.679 billion (USD 193.573 million) in 2020. Now, that’s a lot.

All this could have been avoided if we had fixed-term contracts where our consumers will pay the same price regardless of the power demand. As I have been saying in the past, these pass-on provisions burden the consumers. I have been proposing for fixed-price contracts to protect consumers. This is the same recommendation of IEEFA of making fixed cost procurement.

Looking at our PSAs will help us understand what we are doing wrong in the energy sector. Having fixed-price long terms contracts will reduce our power rates regardless of technology. And as I have pointed out in previous blog posts, our PSAs are similar to asking Juan deal Cruz to shoulder the risks through the pass on costs, because our energy planners have a faulty appreciation of the least cost. But in reality and as IEEFA has stressed, big-scale fossil fuel plants have not delivered the least cost system but rather caused price instability.

Our least-cost approach has been faulty as we only base our decisions on the cheapest energy to generate by comparing technologies and choosing which sources are ‘cheaper’ than others. We exacerbate the problem by regulating the costs that can be passed on to Juan deal Cruz according to the returns we feel are owed to the investors rather than what consumers deserve.

The IEEFA study emphasized that the COVID-19 pandemic has highlighted the need for the market to turn to more flexible dispatch strategies especially because of the dramatic drop in demand during the lockdown months. It is recommending for the Department of Energy to start pushing for grid flexibility, modular system, a moratorium on new inflexible power, and for the Energy Regulatory Commission (ERC) to remove pass-through cost provisions and carve out curtailments for inflexible plants.

I would add further to these recommendations. As the government orders the immediate development of indigenous sources, our procurement rules should also change as the present rules for evaluating PSAs do not differentiate indigenous and imported energy. Thus, ERC should require distribution utilities to testify during procurement that there are no indigenous resources in the franchise area or that there are no offers from indigenous power producers.

It makes a lot of sense to recommend grid flexibility, modular dispatch, and grid upgrades via the inclusion of more renewable energy. This is nothing new. Renewable energy, after all, offers flexibility to a power system as they are capable of rapid start-up and dispatching adjustable capacity.

Plus, the prices of renewable technologies have been falling in the last few years. IEEFA noted that “The deflationary price trajectory of renewable electricity generation and storage triumphs over the cost of generating and moving electricity from a large fossil-fueled power plant.”  We can also have a fixed price for power sourced from indigenous materials. 

The IEEFA said it best when it noted that “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.” And as we rebuild our economy, let us build better by addressing the ills in the energy sector. We can start by ditching the notion of least cost where we forget about the risks and only look at the upfront cost.

It bodes well for us to make a swifter transition to renewables. Unfortunately, the COVID-19 pandemic has paralyzed most economic activities. By now we should be working double hard to revive our economy. We can start by addressing the high power rates in our country by replacing traditional sources of power with renewable energy to support businesses as they recover. The construction of renewable power plants will also provide more jobs for Filipinos, too.

Wanted: Fast and Reliable Internet Connection

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.