Understanding External Risks to PH Energy Sector Part 2 

In my last article, I talked about the two external risks facing the local power sector, namely global prices, and foreign exchange rates. 

In this post, I will talk about the third risk: natural disasters.  

The “Philippines Country Climate Development Report” released by the World Bank stressed that the Philippines is “uniquely vulnerable” to climate change. 

World Bank Country Director for the Philippines Ndiame Diop said that “In 2022, the Philippines ranked number one among the countries most affected by extreme weather events…climate change is often called a silent crisis, but in the Philippines, it is not silent. It’s an imposing problem and a real threat,” 

Indeed, climate change is a real threat. Just recently our country suffered from the wrath of Tropical Storm Paeng, which affected millions of Filipino families. As of this writing, damage to agriculture alone stands at 4.7 billion pesos. 

Over four million Filipinos, too, experienced power interruptions due to Paeng. The Department of Energy (DOE) also said that at least three power generation plants were shut down because of the tropical storm. 

Tropical Storm Paeng affected millions of Filipinos. Photo c/o CNN Philippines/Bandera News TV

The effects of Paeng, however, on the local sector are “mild” when compared to other natural disasters or storms.  

Late last year, Typhoon Odette (international name: Rai) devastated large parts of Visayas and Mindanao. Odette left many Filipino families in the dark even months after it struck. 

The recent Philippines Country Climate Development Report noted that the Philippines typically experience around 20 tropical cyclones yearly but the country has been experiencing stronger typhoons in recent years. 

“Temperatures in the Philippines will continue to rise by the end of the 21st century. Rainfall patterns will change and intensify, and extreme weather will become more frequent. Without action, climate change will impose substantial economic and human costs, affecting the poorest households the most,” Mr. Diop said. 

What we should aim for in the local energy sector is resilience. However, this is difficult to achieve. 

Just consider what happens every time a natural disaster strike. With poles and transmission lines down, we end up sending teams to restore power. This is risky and, in most cases, has caused the death of our linemen. 

We should have learned from these natural disasters from long ago that centralized power distribution no longer works for us. It is an outdated power distribution model. We should be looking at microgrids to make our power systems a lot more resilient to disasters. 

Aside from moving away from centralized power systems, we should empower our local government units (LGUs) by letting them lead the redesign of their power distribution infrastructure. LGUs, after all, are the first responders after a disaster 

We must consider giving LGUs their own power distribution franchises. This way, they can have more flexibility in designing and getting private concessionaires to build their microgrids.  

In previous posts, I have discussed that barangays should be mandated to provide power locally from distributed energy resources (DERs) like solar and battery systems, especially for disaster-prone areas. 

Microgrids, and empowering LGUs at the barangay level go a long way in making our electrical systems more resilient. I am aware that the government through the Energy Regulatory Commission (ERC) is coming up with rules on how to implement this.  I am wary about such rules as they tend to protect the incumbent utilities thereby robbing consumers of their unfettered access to renewable energy and microgrids in general. 

It is highly unlikely that natural disasters, particularly weather disturbances, will be fewer in the next few years. They will inevitably strike us repeatedly and with more ferocity. 

Rather than rely on the Filipinos’ resilience to endure hardships, what we must do is make our power systems more resilient. We can do this by veering away from the traditional power systems and instead start building DERs and empowering communities. 

The best time to do this was years ago. The next best time is now. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We Can and Must Do Better

269 cities and municipalities were left in the dark due to Typhoon Odette’s wrath. Photo c/o OneNews.PH

Christmas season is for merrymaking with friends and family. And we Filipinos just love this festive season.

However, many times the December holidays are spent dealing with the aftermath of strong typhoons. 

We just suffered the wrath of  Typhoon Odette that left around 400 dead as of this writing and caused almost Php16.7 billion in damages. The typhoon has also brought darkness to millions as 269 cities and municipalities experienced blackouts as the typhoon damaged transmission facilities and toppled electric posts. The National Disaster and Risk Reduction Management Council (NDRMMC) said that full restoration of power in affected areas may happen in February. Thousands of families are also without water supply and are going hungry.

Typhoon Odette is once again showing us that we have a disaster in the recovery efforts for electricity because of bureaucratic legal inanities. The governors were looking for interim generators. None of the generating companies could bring in gensets because that would have required bidding and then an approval from the Energy Regulatory Commission (ERC). The local government units (LGUs) themselves couldn’t bring in gensets for the grid because they are not licensed generators. 

The most logical entity to provide interim generators would have been the grid operator, National Grid Corporation of the Philippines (NGCP). For one, it has the financial muscle and is mandated to provide ancillary services. Unfortunately the ERC interprets that providing power as a backup ancillary is not within NGCP’s mandate. I disagree. However, it was suggested that Congress exempts NGCP from this supposed prohibition. Unfortunately, again Congress is in recess. So the President has to call for a special session. 

In the meantime people are dying. 

We should indeed look at how we respond to calamities. Take the case of Bohol. Governor Arthur Yap is decrying the bureaucracy in disaster response as paperwork is delaying Bohol’s plan to use power barges to put an end to the crippling absence of power. In an interview, the governor said he has sought exemptions required by three power distribution firms and NGCP to tap into other power sources.

The lack of electricity he said is paralyzing Bohol’s disaster response and communication especially since many towns still do not have capabilities. Governor Yap said he has been following up with the ERC for the exemptions but was told national agencies are still completing paperwork for the approval. These agencies want to ensure that approved rates are not breached with the additional expenses of tapping into new supply sources.

It’s time to review these regulations as they are obtuse.  It’s disheartening to hear local executives lamenting the slow response of the national government as it needs to comply with absurd laws. People are homeless, without food, almost dying due to dire conditions, and yet we insist on following irrational laws.

It’s not the first time we’ve been hit by strong typhoons. Many Filipinos often spend their December dealing with losses brought by weather disturbances.

In the last five years, Filipinos have had to deal with strong typhoons during December. We only have to recall Super Typhoon Nina in 2016, considered as the strongest Christmas Day tropical cyclone world wide dating to1960.  It made its landfall on Christmas day, hitting Catanduanes hardest. Typhoon Nina with International name Typhoon Nock-Ten, displaced some 380,000 individuals and cut power to five entire provinces.

Then there’s Tropical Storm Unman in 2018, the second deadliest weather disaster for that year. This storm hit the Bicol region the hardest and displaced at least 17,000 individuals in the region .

Scientists agree that the world’s weather is becoming more tumultuous with weather disasters taking home livelihoods, homes and lives. Sadly, the Philippines is considered as one of the world’s natural “hot spots” due to its topographical location. Thus, our country suffers more natural hazards than most nations. Filipinos have to endure droughts, landslides, volcanic eruptions, typhoons and floods more than any other country— even during the Christmas season.

There’s nothing much we can do about our location. But what we can work on is to build our resilience to natural disasters. 

Aside from fixing the bureaucratic issues and regulations, we should also work on building resilience to help mitigate the impact of natural disasters. 

As I have been discussing in previous posts, it’s time for us to make big investments in distributed energy resources (DERs). Recently, President Duterte signed Executive Order 156, for a “consistent and reliable electricity service” ordering the Department of Energy (DOE) to identify unviable, unserved, underserved and poorly served areas within the franchise areas of distribution utilities. 

The EO also orders the Energy Regulatory Commission (ERC) to  “promulgate rules in computing rates that allow full cost recovery for the facilities built by microgrids, [distributed energy resources], and other alternative electric service providers.”

It’s a step in the right direction since many nations are moving towards distributed energy production, recognizing that traditional central power production has its limits and disadvantages.

Centralized power systems characterized by power lines traversing long distances are disastrous during a natural calamity. Damage to a single line can leave hundreds if not thousands of families without power.  Restoration of electricity takes time as the transmission company, distribution companies and electric cooperative have to assess which power lines were affected and damaged, an undertaking that takes time given the size of their service areas. Power restoration after a natural disaster also costs lives.

To increase disaster resilience, we must push for barangay-level microgrid systems, all renewable energy-based. This is already feasible these days given the decreasing costs of technologies both in the Information and Communication Technology (ICT) and power sectors.  The merging of these two sectors will usher in a new dawn for power consumers. Barangay -level power systems are cheaper in the long run and more resilient. Power restoration after a disaster will be faster with barangay level power systems.

There are also other technological tools we can utilize to increase disaster resilience.  

Currently many areas affected by Typhoon Odette are not only cut off from power supply but also from water supply. There’s this technology I’m now advocating to ensure continuous water supply using renewable energy. It’s a state-of-the-art desalination system running solely on solar power, and can be connected to tier the grid or the combination of solar and grid generator. It  can convert any lake, river, contaminated borehole and even floodwater into safe and clean drinking water. When fitted properly with a solar panel system, these desalination units can operate 24/7.

These are just some of the ways we can increase our resilience against natural disasters. We can take advantage of new advances in technology and our abundance in natural resources to mitigate the effects of natural disasters. We should also review our laws as they hinder disaster response.

It is very heartbreaking to see our countrymen begging for roofs, water, power and  food after losing their loved ones, their homes and livelihoods. Filipinos are naturally resilient and have a strong bayanihan spirit. But much like what many are saying, we shouldn’t rely solely on Filipino resilience but we should instead build more resilient communities. As we usher in a new year, it is my hope that we can find ways to build and support hazard mitigation and ensure proper and quick disaster response.