Failing Miserably

According to the Bloomberg New Energy Outlook (NEO), renewable energy will lord over the power mix by 2050.

The NEO notes that since the 1970s, fossil fuels have dominated with 60 to 70 percent of the global power generation, but this would soon come to an end.

By 2050, almost 50 percent of total power globally will come from solar and wind technology. Together with hydro, nuclear and other renewables, the total contribution of zero carbon power will be 71 percent.In contrast, fossil fuels will only account for 29 percent, down from its current 63 percent contribution.

The shift to 50 percent renewable energy power scenario is driven by the falling prices of solar PV, wind, and battery technologies. The average PV plant costs will fall by 71 percent by 2050 according to experts. My own personal experience has shown that. Wind is also expected to drop to 58 percent.

Saltwater-Battery-feature-image

A major shift to renewable energy is possible due partly to falling prices of battery storage. Photo c/o Edgy Labs

Battery capacity will receive a total of $548 billion in investments, which will account for its expected price drop. One of my business partners has invested in the flywheel battery storage technology and is experiencing a surge in demand for his batteries.

Indeed, the world is heading towards greater use of sustainable energy. How I wish we can say the same for our country.

It is no secret that the Philippines seems to be heading towards the opposite direction as one of our senators pointed out recently. In fact, just recently the Department of Energy (DOE) has recommended the importation of dirtier fuel, Euro-2 compliant type of fuels. The Philippines is now importing Euro-4 compliant, a much higher quality fuel. Euro 2 is cheaper because its quality is poorer. You get what you pay for.

Senator Loren Legarda, a staunch advocate of renewable energy, has lamented that the Philippines is failing miserably in implementing the Renewable Energy law passed 10 years ago.

In a speech, she stressed that “While many initially thought that the adoption of the RE law in December 2008 represented a firm and decisive policy position on the country’s shift to cleaner and indigenous forms of energy, stakeholders, to date, continue to grapple with mixed signals from those charged with implementing the RE law.”

Legarda added that the Philippines had increased its coal imports at a yearly average of 12.8 percent from 1989 to 2015.

From 2015 to 2016, coal imports volume was even higher by 16% from 17.3 metric tons to 20 metric tons.

She also lamented the growth of installed capacities of coal-fired plants which climbed by 87% from 3,967 MW in 2005 to 7,419 MW in 2016. Another 10,423 MW is in the pipeline.

In contrast, there has been a decline in the renewables’ share in 2016 from 32% from 33.5% in 2005, while coal climbed from 25% in 2005 to 35% in 2016.

Time and time again, renewable energy advocates like myself openly call out to the government to take serious measures to fulfill what the RE law requires.

Other countries including neighbors such as India are making significant progress in their goals to shift to greater use of renewables. Unfortunately, the Philippines is nowhere near its goal of sourcing 30 percent of power from clean sources.

Legarda said it well when she reminded us that it had taken 18 years to pass the law, but it seems harder to implement it: “It was hard then, but even more so now, to convince naysayers on the importance of renewable energy in the country’s development agenda…To date, those charged with implementing these policy mechanisms seem to want to continue the debate on matters decided upon by legislators ten years ago.”

Hopefully, those in charge see the need of implementing the RE law swiftly. Our recent experience with the monsoon rains in the second week of August, which left Metro Manila and nearby areas flooded should convince us that we need to take care of the environment. This includes following laws intended to spare us from the effects of climate change. Plus, of course, we need renewable power for a more sustainable economic growth.

References:

New Energy Outlook 2018: https://bnef.turtl.co/story/neo2018?teaser=true

http://www.bworldonline.com/legarda-cites-slipping-renewable-energy-share/

Taking Action

All over the world, calls are being made to shift from traditional forms of energy to more sustainable ones in the hope of saving our environment and making energy available for all. In response, various sectors have taken drastic actions and are making great progress in their shift to renewable energy.

The achievements of the private and public sector in transitioning to greener forms of power in recent years are significant. The numbers for 2017 alone are a testament to both sectors commitment to add and use more renewable energy.

Last year was a record-breaking year as renewable power generation capacity had its biggest annual increase of nine percent with an estimated 178 GW added capacity, according to REN21’s study, Renewables 2018 Global Status Report.

More renewable power was added than fossil fuels as renewables accounted for 70 percent of the overall combined global generating capacity. Investments in RE for 2017 reached $279 billion, up from the recorded $274 billion in 2016 as well.

The figures from corporate buying of renewable energy are admirable, too.

For one, the International Renewable Energy Agency report, Corporate Sourcing of Renewable Energy: Market and Industry Trends showed that firms across 75 countries sourced a total of 463 terawatt-hours from renewables in 2017. This volume is enough to power up a country equivalent to the total demand of France.

The report found out that half of the 2,400 large companies analyzed for the study are voluntarily and actively buying or investing in self-generation of renewable energy for their operations. Plus, 200 of these firms source at least 50 percent of their power needs from renewables. “Renewable energy sourcing has become a mainstream pillar of business strategy in recent years,” IRENA Director-General Adnan Z. Amin stressed.

Environmental and sustainability concerns, social responsibility, reputation management, and economic and financial objectives are the top reasons cited by corporations on why they are making the shift to renewable power. “While environmental concerns initiated this growing trend, the strengthening business case and price stability offered by renewables can deliver a competitive advantage to corporations, and support sustainable growth,” Amin added.

There’s definitely an increased appetite for renewable energy as other countries are also gearing up to accommodate more renewables such as in the case of Vietnam.

Recently, Vietnam Prime Minister Nguyen Xuan Phuc reiterated his country ’s commitment to shift to renewable power in an interview with Reuters.

He announced that Vietnam is set to increase electricity generated from renewable sources to 101 kWh billion by 2020 and to 186 kWh billion by 2030 from 58 billion kWh recorded in 2015. The country also aims to reduce the use of coal and petroleum products by 40 million tons by 2030.

Phuc said that the government has already prepared incentive mechanisms as well as policies to promote local and foreign investments into renewable energy development.

The chief executive stressed that this shift is needed despite the country’s push for more economic growth,“It is important that we will not pursue economic growth at the expense of the environment,” Phuc noted.

turkey

Soma Kolin power plant in Turkey’s western province of Manisa. Survey says more Turkish favor greener forms of energy despite the country’s dependence on coal
Photo c/o: http://www.aa.com.tr

There also seems to be greater awareness and appreciation for renewables among citizens in other countries. Turkish, for example, favor greener forms of energy than coal despite Turkey’s dependence on this form of power. The country sources more than 70 percent of power need from fossil fuels since the government named coal as its preferred fuel for the growing energy demand.

A survey conducted by climate information hub İklim Haber and research company Konda revealed that more than half of its citizen oppose the building of additional coal-fired plants as 75 percent of the participants are worried about climate change.

In the Philippines, our government claims to have the appetite for more renewables in our power mix. But that hunger is not correctly matched by government’s actions. It is highly likely that we will remain starved for cleaner forms of energy for now as we have moved down our renewable energy targets.

The Energy Department had announced the target of sourcing 35 percent of our overall power needs from RE by 2030. This goal, however, has been recently pushed back to 2040. This is not surprising as data from BMI report showed that there would be a 10 percent increase of coal in our energy mix in the next decade from below 50 percent in 2017 to more than 55 percent by 2027.

That is unfortunate since now is an excellent time for the Philippines to add more renewables and to take advantage of the falling costs of renewable power prices. Plus, of course, we need stable energy at reasonable prices as we try to industrialize. But then, again, we will remain hungry for cheaper and sustainable forms of power for now.

References:

Renewables 2018, Global Status Report, http://www.ren21.net/gsr-2018/
http://www.vir.com.vn/vietnam-well-positioned-to-develop-renewable-energy-says-pm-59892.html

http://www.climatechangenews.com/2018/06/05/83-turks-favour-renewable-energy-coal-survey-finds/

http://www.irena.org/newsroom/pressreleases/2018/May/Corporate-Sourcing-of-Renewables-Growing-Taking-Place-in-75-Countries

A Timely Reminder

Three years ago, Pope Francis made a strong appeal to the world to address the growing problem of climate change. In his 180-page encyclical, the pope stressed that “Climate change is a global problem with grave implications: environmental, social, economic, political and for the distribution of goods. It represents one of the principal challenges facing humanity in our day.”

Pope Francis recently made the same appeal with investors, oil executives and Vatican experts during an unprecedented conference at the Pontifical Academy of Sciences.

The pontiff had stressed that climate change must be addressed soon and the world has to use a power mix that will combat pollution, promote social justice, and combat pollution. “But that energy should also be clean, by a reduction in the systematic use of fossil fuels. Our desire to ensure energy for all must not lead to the undesired effect of a spiral of extreme climate changes due to a catastrophic rise in global temperatures, harsher environments and increased levels of poverty,” the pope said.

He reminded his audience that development must not come at the expense of the environment “Civilisation requires energy, but energy use must not destroy civilisation.”

The head of the Catholic Church has never wavered in his appeal to the world to make the planet a better place by saving the environment. His recent plea is also timely as studies and reports show that the world has to do more in fighting the effects of climate change.

The recent United Nation (UN), a yearly report entitled ‘The Sustainable Development Goals Report 2018” concluded that climate change along with inequality and conflict are the primary factors in growing hunger and displacement around the world.

The figures in the report showed that the world has a long way to go in combating the effects of climate change including the health hazards. After all, the World Health Organization once tagged climate change as “the defining issue for the 21st century.”

The UN study revealed that in 2016, around the world, 91 percent of the urban population were breathing dirty air or air that failed to meet the WHO Air Quality Guidelines. What’s worse is that more than half of the said population were exposed to air pollution levels that are at least 2.5 times higher than the safety standard. It is not surprising then that around 4.2 million people died due to high levels of ambient air pollution.

The same report showed that renewable power’s share in the final energy consumption had a moderate increase from 17.3 percent in 2014 to only 17.5 percent in 2015.

That’s a sad figure, especially when the more significant use of renewable energy can save lives. Let us remember that both coal and oil power have greater death prints, or what energy expert James Conca defines as the “number of people killed by one kind of energy or another per kilowatt hour (kWh) produced.”

In fact, the mortality rate of coal, which is derived by dividing the trillion kilowatt hour of use, is 100,000 when we get 50 percent or our energy needs from this source. Likewise, oil has a mortality rate of 36,000 for every eight percent of the energy it supplies.

Apparently, the growth of renewables in the world’s energy mix had been slow and more people are literally dying because of it. Clearly, more must be done to combat climate change, which includes developing and using more cleaner forms of energy.

Let us heed the Pope’s call, shall we?

References:

https://www.theguardian.com/world/2018/jun/09/pope-francis-tells-oil-bosses-world-must-wean-itself-off-fossil-fuels

http://sdg.iisd.org/news/sdg-report-2018-finds-conflict-climate-change-inequality-hindering-progress/

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

 

 

 

 

Shared Business View

Addressing climate change is the responsibility of all. Luckily, big global brands are doing their share and choosing to make the shift to cleaner forms of energy.

 For example, last April, tech giants Apple and Google announced that their operations are already running on 100 percent renewable energy. Fortunately, other firms are also stepping up and working double time to source their power needs from greener sources of energy.

 In fact, there are more than 100 influential global companies who have publicly committed to 100% renewable energy through the RE100 initiative. This collaboration of the world’s biggest brands, mostly tech companies was launched in 2014 and have ever since been working on achieving their goals of powering up their operations with renewables.

Last year, other influential non-tech companies have also joined the drive to use greater RE  such as General Motors, Kimberly Clark, General Mills, Starbucks and Target. In total, some 2.78 gigawatts worth of renewables were bought by the RE100’s members in 2017.

These large global brands remain relentless in their pursuit of achieving their targets. This year, members of RE100 are set to break their record by purchasing 1.96GW of renewables. If sustained, corporate RE buying could surpass the peak of 3.12GW recorded in 2015 as reported by the Business Renewable Center.

 One of RE100’s members, Microsoft also made the headlines this April by announcing the largest solar power deal in the US corporate history after buying some 315 megawatts from sPower. The purchase will power the tech firm’s datacenter and cloud business operation in Virginia. To date, Microsoft has already invested a total of 1.2 GW of RE, an amount that can light up roughly 100 million bubs

The declining costs of renewables and companies’ desire for a sustainable energy solution are what drive big business to commit and purchase cleaner forms of energy according to  Kevin Haley, marketing manager at the Rocky Mountain Institute’s Business Renewable Center. “The corporate renewables market is now seeing deals from all industry sectors…… they believe they need to be part of the sustainability solution.”

Addressing climate change is just one of the reasons why large global brands are signing up for more RE purchases. There’s another reason: cost-effectiveness.

These brands’ leadership recognize that sustainable sources of energy will save them money in the long run.  Business leaders understand that choosing to invest in RE will save them money as it eliminates the risk of price volatility of fossil fuels.

 For example,  Urs Hölzle, Senior Vice President, Technical Infrastructure of Google stressed that  “Electricity costs are one of the largest components of our operating expenses at our data centers, and having a long-term stable cost of renewable power provides protection against price swings in energy.”

Autodesk’s President and CEO, Lynelle Cameron echoes the view of Hölzle when she said: “By powering our business with 100% renewable electricity we will not only reduce our carbon footprint but give ourselves a competitive advantage as we protect ourselves against future rises in energy costs.”

For years, I have been trying to convince a great number of people that RE is not necessarily the more expensive energy option. It is refreshing to know that big businesses around the world share my views.

Sadly, many in the Philippines fail to recognize the benefits of renewable energy and still subscribe to the notion of the least cost option, which only considers the upfront costs. We are still caught in the belief of many energy planners and even our regulators that RE will cost us more, and refuse to realize that price spikes and depletion of fossil fuels will set us back.

Lowering energy costs while saving the environment are the two benefits of choosing greener power. Global companies and governments around the world are already seeing the potential of renewable energy and making big bets on cleaner forms of power as RE technology prices drop fast. What else can we do to convince many Filipinos that RE is the key to sustainable and cheap energy?

References:

 https://www.cnet.com/news/renewable-energy-solar-wind-lures-us-big-businesses/

 https://www.weforum.org/agenda/2018/04/microsoft-just-signed-the-largest-corporate-solar-agreement-in-us-history/

 ACCELERATING CHANGE: how corporate users are transforming the renewable energy market. RE 100 Annual Report 2017

 

 

Hampering Our Growth

Southeast Asian countries are at different stages of economic development and will have higher demand for energy. In fact, according to the Global Energy & CO2 Status Report published by the International Energy Agency or IEA, Southeast Asia (SEA) accounted for eight percent of global energy growth last 2017.

An earlier report released by the same agency, the Southeast Asia Energy Outlook 2017  revealed that the region’s energy demand is likely to grow by roughly two thirds and account for a tenth of the world demand by 2040. Installed capacity is set to increase from 240 GW in 2017 to 565 GW by 2040 with coal accounting for  40 percent of the growth. This will push Southeast Asia to become a major importer of fossil fuels by 2040. The IEA predicts that the region’s annual net import bill will be over $300 billion, which is equivalent to four percent of the SEA’s total gross domestic product.

The IEA, however stressed that the region can still avoid incurring such a huge net import amount if governments implement policies that will reduce the demand for energy and increasing the use of renewables. Based on IEA’s estimates, Southeast Asia can lower the import bill by $180 billion if  the region increases Renewable Energy’s share in the mix by 20 percent.

The agency stressed that the increasing energy demand both pose as a challenge and an opportunity as governments can opt to go for affordable policy and technology options. ” The rapidly declining cost of wind and solar PV provides an opportunity to help meet growing electricity demand in a cost-effective and sustainable manner  while also helping spur local manufacturing industries.”

IEA also noted that attracting investments in RE will be crucial to meet the region’s energy requirements as Southeast Asia will need some $2.7 trillion to $2.9 trillion in investments by 2040.

For his part, International Renewable Energy Agency or IRENA director-general Adnan Z Amin noted that Southeast Asian countries should do a better job in attracting higher investments for RE development.

He stressed that despite the falling costs of RE technologies around the world, financing for RE in SEA countries remain a challenge given the lack of clear policy and regulatory frameworks for investors. He urges SEA countries’ leaders and regulators to come up with clear and reliable long-term policies to attract financing for the sector: “Basically what we’re lacking right now is a sense of government resolve and a sense of adequate, reliable policy framework that allows the private sector to come in…The market opportunity has to be created by policy and regulations.”

 

eco business

Southeast Asia can save $180 billion if more renewables are used by 2040. Photo c/o www.eco-business.com

 

Unfortunately, the observation of the IRENA president reflects the state of our policies and regulatory environment of the energy sector in the Philippines. The regulations here in the country are far from friendly to RE developers and do scare potential investors.

For one, the foreign ownership restriction in our constitution prevents investors from coming in to help us build more RE plants. As I have suggested in the past, it is time for us to consider allowing foreign investors to provide the equipment and technologies needed convert our resources into power while limiting their ownership on the natural resources. After all,  building RE power plants is an expensive undertaking and there are very few local businessmen who can afford to develop RE.

Aside from our problem in the foreign ownership, our regulators and even some of the players in the sector fail to realize the importance of renewables on the economy.  As I have been discussing thoroughly in this blog, we need to realize that the concept of least cost– where we only look at the upfront cost of building our power plants– hinders RE from becoming mainstream in the country.

We seem to forget that the risks of foreign exchange fluctuations, global fossil fuel prices and other market conditions will cost us more in the future. Our country cannot fully realize the benefits of RE unless we appreciate  the crucial role it plays in ensuring both energy security and equity. This is unfortunate for us as our country has been blessed with natural resources we can tap to help us achieve equitable economic growth.

Plus, the world is heading towards distributed generation and smart grids with the advancement of technology and yet the Philippines still rely on central generation. Unfortunately, we still lack rules on distributed generation and remain focused on distribution monopoly controlling the development of embedded generation. This hampers the development of RE.

Our government should pave the way for a more flexible design of a distribution system that can immediately supply the power demands and at the same time deliver the preferred sources of power to the customers.  Our distribution companies should have intelligent systems capable of accommodating renewable energy sources. We need to take a good look at our distribution system and make some drastic changes if we are serious in our desire to bring more renewables in our energy mix.

These are just are some of the problematic  issues that the sector needs to address and there are more.  Around the world, developments are taking place to accommodate greater use RE, and unless our country and regulators are able to address the myriad of problems hounding the energy and hampering more investments in renewable development, then the Philippines will surely be left behind by the rest of the world.

References:

Southeast Asia Energy Outlook 2017: https://www.iea.org/southeastasia/

Global Energy & CO2 Status Report
The latest trends in energy and emissions in 2017:https://www.iea.org/geco/

https://www.businesstimes.com.sg/asean-business/clear-reliable-policy-direction-in-asean-needed-to-attract-renewables-investment

Everyone Is Reaping The Benefits of Lower RE Prices, But What About Us?

The International Renewable Energy Agency (IRENA) says that all renewable energy technologies will be at par with fossil fuel costs by the year 2020.

In its report, Renewable Power Generation Costs in 2017, the organization noted the significant drop of prices from 2010 for both solar photovoltaic (PV) power, which dropped by 73 percent and onshore wind by 23 percent.

At present, onshore wind power average cost is at $0.06 per kilowatt-hour (kWh) while solar is to $0.10. These amounts are close to the cost of electricity generation from fossil fuels, which is somewhere between $0.05 to $0.17 per kWh.

The study predicts that solar prices will trim down by as much as 50 percent by 2020 and that in the next couple of years, both RE technologies are likely to cost $0.30 per kWh.

For the director general of IRENA, these falling costs are an indication that significant changes are about to sweep the energy sector: “These cost declines across technologies are unprecedented and representative of the degree to which renewable energy is disrupting the global energy system,” he noted.

The report also stresses that soon the RE sector will flourish even without subsidies and will continue to do so with the proper government support: “Already today, and increasingly in the future, many renewable power generation projects can undercut fossil fuel-fired electricity generation, without financial support. With the right regulatory and institutional frameworks in place, their competitiveness should only further improve.”

 

solar prices

Solar prices will trim down by half by 2020. Photo c/o http://www.wsj.com

 

Fortunately for the Philippines, we have access to plenty of sunlight. In fact, one study showed that the country could generate as much as 16.17 watts per square meter of solar power. However, our regulatory framework and support for the RE sector are weak. This means we cannot hope to lower down the costs of our renewables unlike what is happening in other countries.

We have to keep in mind that traditional sources of energy continue to dominate our energy mix and will continue to do so in the next 10 years. A BMI Report said that the share of coal is likely to increase by 10 percent over the decade, “The share of coal [is]actually increasing over our 10-year forecast period—from just under 50 percent in 2017 to over 55 percent by 2027,” BMI noted.

The Fitch-owned BMI also sees that RE will contribute around 20 percent of the total power mix in 2020 and a decrease to 16 percent in 2027.

Now, those figures are alarming since the above numbers do not reflect our government’s commitment to shifting to greater use of renewables, to as much as a third of the power mix. This is a point stressed even by BMI: “However the country has released few details on how they intend to reach its target, particularly given the dominance of coal in the project pipeline,”

So, while other countries around the world are enjoying lower costs of power because of RE, the Philippines is not only being left behind but will also have to endure the complete opposite of lower costs of energy: the higher cost of power.

As I have been saying again and again in this blog, our dependence on traditional sources of power comes at a high cost because we import our raw materials, particularly coal from other countries.

The BMI estimates that the Philippines imports around 75 percent of its coal supply from Australia and Indonesia. We pay for these imports in dollars.

Let us not forget that experts predict that the Philippine Peso will be the worst performing currency in Asia this year. The head of trading for the Asia Pacific at Oanda Corp. in Singapore, Stephen Innes even described the Philippine peso as “ the local whipping boy in the region.” Just in the middle of February, the Philippine Peso hit an 11-year low as it fell to P52.12 against the United States dollar.

And as the peso falls against the dollar, we can expect higher power rates. Last February, the biggest power distributor in the country, Meralco has announced a rate hike of P1.08 per kilowatt hour (kWh). This means that the average household consuming 200 kWh per month will need to shell out additional P216 for their monthly bill for January partly because of the depreciation of the peso against the greenback.

That’s just the problem with relying heavily on coal power plants. The Filipino people end up paying more for their power consumption for things beyond their control such as the peso depreciation or increase of costs of imported coal because these two are passed on costs to consumers. We could help alleviate the plight of the Filipino consumers if we can tap our natural resources and rely heavily on them for our energy needs instead.

It is ironic and sad that the Philippines, a country that has natural resources available for more development and use of RE, has to rely on imported coal for our energy needs. Clearly, something must be done about it to help alleviate the suffering of Filipino consumers.

References:

Renewable Power Generation Costs in 2017, IRENA

http://www.manilatimes.net/coal-top-55-ph-power-mix-2027/377594/

https://www.rappler.com/business/196059-philippine-peso-weakest-p52-us-dollar

http://www.manilatimes.net/meralco-hike-rates-p1-08-kwh-feb/378957/

https://www.bloomberg.com/news/articles/2017-12-21/philippine-peso-seen-as-asia-s-laggard-for-2018-as-deficit-grows

 

UTILITIES OF THE 21st CENTURY Introducing Competition in the Power Distribution Sector

Around the world, changes in the energy sector, particularly in the distribution segment are taking place given technological advancements as well as the world’s worry over climate change

For example, in the United States, utilities are beginning to take the threats of climate change more seriously. New York’s Reforming the Energy Vision, a plan to “rebuild, strengthen, and modernize New York’s energy system” was initiated in 2014 partly because of the devastation brought by Hurricane Sandy in 2012. This is the most comprehensive utility proceeding today with its main idea of changing the utility model so that third party service providers can come in to serve the utility’s customers by moving away from the traditional utility model and going towards a Distribution System Platform (DSP) provider

The DSP model transforms the traditional utility into something like an air traffic controller that coordinates and facilitates the deployment of distributed energy resources (DERs). This becomes the focus of the utility, which is a far cry from the traditional concept of a monopoly. The staff of the Public Service Commission (PSC) stressed that “Under the customer-oriented regulatory reform envisioned here, a wide range of distributed energy resources will be coordinated to manage load, optimize system operations, and enable clean distributed power generation.”  The primary goal of this model is to make the utility customer-centric as “Markets and tariffs will empower customers to optimize their energy usage and reduce electric bills, while stimulating innovation and new products that will further enhance customer opportunities.”

This bold move by the New York City should not surprise us since electricity experts point out that significant transformations are causing a revolution in the way electricity is produced, distributed, and marketed. They stress that technology is giving consumers more autonomy and choice. These experts argue that we “have entered an age in which the technology-powered push and the customer-driven pull have beneficially collided.

In fact, as early as 2000, the United Kingdom (UK), already started introducing competition in the power distribution business through the Independent Connection Providers (ICPs) and licensed Independent Network Operators (DNOs), thus allowing customers to use an alternative provider for some connections work known as “contestable work.” These include but are not limited to, designing, purchasing materials to form the connection, reinforcement of the connection, and even directly connecting to the network. These tasks can be done by an Independent Connections Provider (ICP).

Indeed, change in the energy sector has already arrived where the customer’s choice has become the paramount objective of industry players by making room for more competition in the power distribution trade. The services at the retail level become less integrated by letting the customers choose his/her source of power, battery storage, Heating, Ventilating and Air Conditioning (HVAC) energy efficiency systems, and other similar value services.

The innovation will come from the ability of technology to combine customer data to Smart grids, microgrids, local generation, and storage, among others. Experts assert that the primary distribution channel for services will be online and the energy retailing price will hinge on innovative digital platforms.  In their view, these are the developments and trends that are coming and they will be coming soon.

For David Cane, former CEO of NRG Energy, the confluence of green energy and computer technology, deregulation, cheaper natural gas, and political pressure, is threatening the existing utility system. His opinion is that the grid will increasingly become irrelevant as customers move towards decentralized homegrown energy. Home automation will become king. Crane further argues that “When we think of who our competitors or partners will be, it will be the Googles, Comcasts, AT&Ts who are already inside the meter.”

Given all these developments, it, therefore, no longer inconceivable to think of two, or even more distribution utilities in one geographical area in the Philippines. These utilities need not perform the same functions.  As distribution services have been unbundled, e.g., metering as separate business units, distribution utilities can compete on which among them can connect the fastest and cheapest to the distribution grid.

It is no longer impossible to have two, or even more distribution utilities in one geographical area in the Philippines

The utilities can also compete on how much each supports home automation or distributed generation like rooftop solars. As pointed out recently by Google’s Chief Technology Advocate, Michael T. Jones, companies like Google can develop the service where “all electronic devices (to) talk about their power needs to an aggregator, and you can have a power auction for each one.”

Technology is now available to connect reading and billing of meters to bills payment through the mobile phone.  All these services have developed because of technology.

Even in constructing power grids in the distribution sector, one can have overhead wires, or underground ones, depending on the requirements or needs of the customers. Smart transformers connected to a Supervisory control and data acquisition (SCADA) platforms can fine tune the needs of customers.

Unfortunately, unless competition is introduced in the Philippines distribution sector, it will take a long time for the Filipino consumers to enjoy the benefits of the 21st Century.  The distribution sector has long been in the abyss of lethargy induced by a monopolistic structure, running counter to the cornerstone of Energy Power Industry Reform Act (EPIRA), which was crafted to introduce competition within the power sector. In particular, a guiding principle of the Distribution Sector is that it is a business affected with public interest. This objective of competition and guided by the principle of public interest required the unbundling of business activities as provided in Rule 10 of the Implementing Rules and Regulation (IRR) of the EPIRA.

It has traditionally been thought that because of the nature of the distribution business, this sector, and the Transmission Business, are natural monopolies. This was probably true in the past, but technologies have developed over the past few years thus making this view no longer true. As argued above, technological change has brought in innovation, creativity, and access to the masses. It has also brought down costs – the mobile business is a clear example. It is not, therefore, a theoretical argument that technology will bring down cost. That is a fact.

We cannot reach the goal of empowering the Filipino power consumer unless change comes in now. Distribution utilities’ vision should always be proactive and aligned with the varying needs and load profile of a dynamic consumer.  This may be reflected in the flexible design of a distribution system that instantaneously addresses the power demands and delivers the preferred sources of power to the customers. A sophisticated consumer-centric designed system encourages the proper management of electricity usage, which translates into savings on prices and resources.

To illustrate this point, let us take the case of a distribution utility and how it handles system loss. Currently, the task of managing systems loss at almost 20% seems like an insurmountable challenge. However, the introduction of smart meters and automated billing and payment systems can bring this down to a more manageable level at about 14% thus bringing down rates for the consumers, which translates into savings of about PHP 0.15/kWh. And this is just the initial and rough calculation.

The above is just an example how a much better equipped, and better-financed utility can bring down costs of the electricity consumer. In the medium term, replacement of aging wooden poles and overworked transformers will further push down systems loss and thus power rates. Finally, because of a strong balance sheet and excellent knowledge of the power market, the cost of generation can also be brought down.

Plus, competition is always beneficial for consumers because more players in the market will always result in cheaper goods and services.  Hence, consumers should be able to choose between service providers like distribution companies so that distribution companies can no longer just “pass on” any cost that they think they are traditionally entitled. While the Energy Regulatory Commission (ERC) will approve the rates, ultimately it will be the consumer who will choose.

Opening up our distribution system for more competition will also pave the way for more use of cleaner forms of energy. It would be ideal to have distribution companies who will have intelligent systems to accommodate renewable energy sources. Such a move will then give the consumers a choice to go for greener forms of power and help us in our goal of saving our environment. After all, making our power grids responsive to climate change will be another area of transformation and competition.  With typhoons becoming an even more frequent phenomenon in the country and elsewhere in the world, change has to come in designing, building and managing power distribution networks.

Making drastic changes in the way we distribute our energy locally is a win-win solution for all of us. We give consumers autonomy and more choices, we lower our electricity bills, and we help save our environment by paving the way for more RE use.

Indeed, significant changes are needed. And we need them soon.

References:

Institute for Local Self-Reliance, https://ilsr.org/u-s-power-grids-days-numbered/

https://www.utilitydive.com/news/are-recent-disasters-enough-to-spur-utilities-to-take-climate-change-seriou/517373/

https://www.utilitydive.com/news/rev-in-2016-the-year-that-could-transform-utility-business-models-in-new-y/412410/

Schwieter, N, and Flaherty T., “A Strategist’s Guide to Power Industry Transformation,” https://www.strategy-business.com/article/00355?gko=9fa18