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.”

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.

We Lowered our Power Bill Despite Higher Consumption, Here’s How We Did It

Consumers are complaining of their energy bills these days after months of not receiving them. The mounting consumer complaints have compelled the Energy Regulatory Commission (ERC) to order the biggest power distributor, Manila Electric Company (Meralco) to explain how it billed its close to seven million customers, 92 percent of which are residential accounts.

According to Meralco, the high power bills of its subscribers are because of the higher usage of electricity at homes during the community quarantine. The summer season didn’t help in lowering power consumption either, the energy distributor says.

There’s also a problem with the meter reading. During the enhanced community quarantine (ECQ), Meralco did not send out its employees to conduct meter reading. Thus, the last three month’s average consumption was used as a basis for the billing during March and April.

There are various ways we could have avoided a bill shock.  The company says smart meters, which allows for remote meter reading, would have eliminated the need for meter readers to go door-to-door during the lockdown. Indeed, remote meter reading would have been beneficial for consumers. We are now developing a new technology that allows our personnel to read, connect, disconnect, and reconnect power remotely. We intend to roll-out this technology by year-end. 

While many consumers were shocked and left in dismay over their power bills, our household, on the other hand, has a different experience. I and other members of the family stayed at home like many Filipinos. Our power consumption is higher, too given multiple devices, gadgets, and appliances catering to our needs. But unlike most Meralco consumers, our power bill is lower despite our higher consumption. 

Fortunately, even before the lockdown, we have installed rooftop solar at our home. After all, as a renewable energy advocate, I knew that there are many benefits in investing in renewable power technologies. And indeed, our solar system installation came in very handy at a time when we all had to stay home and consume more energy for months.

Solar rooftop technology can cut electricity costs drastically. Many anti-renewables are always pointing out that the one-time investment in this technology is too expensive and might not be worth it. However, consumers have to consider that this system is a one-time investment. A household would only need to shell out money once, unlike getting electricity from a traditional distributor where they have to pay a monthly charge depending on their consumption and other pass-on costs. Consumers who don’t want to experience a bill shock would do well in installing a rooftop solar system. 

A rooftop solar system is also low maintenance since it merely requires proper cleaning from time to time, much like any appliance. There are no major maintenance costs involved in having rooftop solar at homes. Maintaining a car is way more expensive than the maintenance costs of using a solar rooftop technology.

Rooftop_Residential_Solar_Panels_Installation_Power_PV_XL_721_420_80_s_c1

In the U.S., solar panels can increase the value of a home property anywhere between 3 to 9.9%. Photo c/o Greentech Media

Solar rooftops also increase a home’s resale value. A study by Zillow, a real estate information company in the United States revealed that adding solar power at home increases the property’s sale value, similar to the effects of renovating spaces such as kitchens and basement. According to Zillow, solar panels can increase the value of a home property anywhere between 3 to 9.9%, depending on the property’s location.

Our solar rooftops are of great help at a time when we are all staying at home. This technology allows me and my family to use even high-consuming appliances like airconditioners without much guilt, knowing that our investment in rooftop solar panels is working for us. It is unfortunate that some who would like to have this technology such as those living in high rise buildings won’t be able to take advantage of this technology, for now, to help with their power bills. But for those who can, solar rooftop system is indeed a worthy investment.

A New Normal for Power Distribution Companies: Less Face-to-Face with Customers but More Digital Engagement

In my previous blog entries, I have talked about Utilities of the 21st century, discussing how competition among energy players should flourish and how we should move to distributed energy systems. This was before the COVID-19 pandemic happened.

When I entered the power distribution business, my main priority was to provide a customer-centric service, which means ensuring stable energy supply and finding ways to help electricity rates become more affordable. 

According to an article, COVID-19: How Energy & Utility Companies Can Soften the Blow, most Energy and Utility companies usually have set contingency plans in place to address the impact of natural disasters. But no company is fully prepared for the coronavirus. And I agree since this pandemic is a new challenge in the power distribution business as we must craft strategies to ensure our customers and employee’s safety in light of the coronavirus.

The same article said that several measures must be undertaken by energy firms to address the impact of the pandemic. These measures include increasing the digital contact center footprint where companies should beef up on their customer services to allow real-time and two way interactions. Other recommended strategies are offering digital payments and leveraging social media to proactively tackle customer concerns.

Fortunately for us at the power distribution company I’m working with, we already have invested our efforts and resources in technological solutions that will make the lives of our customers easier even before COVID-19. 

In our case, before COVID-19, many customers would pay their power bills in our offices. We have recently added more payment partners. Our recent addition is Xenpay, allowing customers to pay their bills in the sari-sari stores, which minimizes the risk of exposure to the virus given that there’s a sari-sari store practically in every corner in the Philippines. We also have our digital payment channel through G-Cash. Now customers can conveniently settle their bills at the comfort of their homes.

As the article said, there’s a need to ramp up a company’s digital contact center footprint. For us, this means changing customer engagement from face-to-face interactions to social media. This is necessary given experts’ prediction that a vaccine for the coronavirus won’t be available for the next 18 to 24 months. In the meantime, distribution firms should find ways to minimize the need for our customers to go to our offices for official business.

For years now, companies are using social media to reach out to their customers more. But corporate social media accounts should do more than re-post news or carry announcements. While these are useful to customers, social media account should add more value. These days, power distributors must leverage social media more especially since studies show that people are spending more time in their social media accounts while confined at home. A Consumer Welfare Office that engages with consumers via Facebook messaging is useful.

medium.com

By this time, energy and utility firms should be working on additional digital assets to lessen face-to-face interactions with customers in light of the coronavirus pandemic. Photo c/o medium.com

By this time, energy and utility firms should be working on adding to their digital assets that will be utilized for mass knowledge dissemination, necessary to empower our customers. Using customer analytics to proactively identify and address customers’ concerns coursed through social media is a must these days.

Our company is working on an app that will let customers report power outages via social media, which in turn will alert our line-men in real-time, thanks to their GPS-enabled radios. This will allow our linemen to respond quickly to outages.

Relying on social media to minimize in-person interactions makes sense in this digital world. More so for the Philippines since according to a report on social media and digital trends, Filipinos spend an average of nine hours and 45 minutes online per day, making us the most active social media users around the world. This annual study by the creative agency, entitled, entitled Digital 2020, revealed that Filipinos spend an average of three hours and 53 minutes daily on social media.

The energy distribution sector is undergoing a massive transformation, thanks to technology. Before COVID-19, we were absorbed with cutting system losses, studying decentralizing power distribution systems, and technological solutions that will disrupt the sector. Now, we must also prepare for the new normal, a consumer-centric service delivery with limited personal interactions between consumers and power distribution company employees. Fortunately, we have the tools and human resources ready for digital engagement.

 

Is Weather Too Hot? Soon the World Will Be Unlivable

 

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

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

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

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

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

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

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

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

 

ecoworld

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Still Renewables in a Post COVID-19 Economy

There’s been a strong clamor for cleaner energy sources long before the COVID-19 pandemic. Securing loans from financial institutions for thermal coal power plants has become difficult in recent years, thanks to the increasingly negative public opinion and falling demand for this energy type.

Just recently, Citigroup, the third-largest bank in the United States announced that it will quit providing underwriting and advisory services as it aims to eliminate exposure to the sector entirely by 2030. “Citi recognizes that emissions from fossil fuel sectors, in particular, must be drastically reduced in the coming decade,” the bank noted.

Citi’s move comes after the similar announcements made by other large financial institutions such as Sumitomo Mitsui Banking Corporation of Japan, South Africa’s ABSA bank, and Mizuho Financial Group.

The enforcement of lockdown, shelter at home, circuit breaker, or what we refer to as the Enhanced Community Quarantine in the Philippines will result in a global economic recession. And with this, we can expect many to advocate for the halting or slowing down of clean energy transition around the world. More so since oil prices are in negative territory and there’s slow demand for coal given the lower energy consumption

But as many experts stress, the COVID-19 pandemic and its effects on the economy is not a reason to back out on commitments to shift to renewable power. On the contrary, the pandemic is a wake-up call to push forward in meeting our environmental commitments, recognizing that the development of RE will help us become more climate-resilient and aid in reviving the economy in a post-COVID 19 world.

For one, a recent report by the International Renewable Energy Agency revealed that accelerating investments in renewable energy could fuel an economic recovery from the COVID-19 pandemic by spurring the global gross domestic product (GDP) by almost $98 trillion between now and 2050. Speeding up investments in RE would provide returns of $3 to $8 for every dollar invested, too.

The landmark report entitled “Global Renewable Outlook” also noted that heavy investments renewable power would also quadruple the number of jobs in the sector over the next three decades, thus improving global health and welfare scores globally.

IRENA Director-General Francisco La Camera stressed that “Governments are facing a difficult task of bringing the health emergency under control while introducing major stimulus and recovery measures. By accelerating renewables and making the energy transition an integral part of the wider recovery, governments can achieve multiple economic and social objectives in the pursuit of a resilient future that leaves nobody behin.,”

Perhaps to better understand the transformative power of RE, we could take a look at the case of the Caribbean region as discussed in an editorial entitled “Coronavirus: The Caribbean is the First Domino to Fall, but There is Hope”

The region, unfortunately, relies solely on tourism, a volatile sector, which is at a standstill. The region’s economy is near an economic collapse that will take time to rebuild. Just how bad is the economic effects of the pandemic? In a single day, Saint Lucia alone lost 13,000 jobs or equivalent to 16% of the labor force.

renewEconomy

According to experts, a clean energy transition is key in rebuilding the economy of the Caribbean post COVID-19 . Photo c/o RenewEnergy

According to the authors, transitioning to a resilient economy via renewable power and with the help of multilateral stimulus is the only way to rebuild the economy of the Caribbean. A clean energy transition should be fast-tracked for a variety of reasons. First, the Caribbean countries have some of the highest power rates in the world because of their dependence on a centralized fossil fuel system. Second, the region is highly vulnerable to natural calamities which are becoming prevalent, thanks to climate change. And third, is the underutilized renewable energy sources. All these points to the fact that the Caribbean region has great potential to be the world’s first RE economy.

The economic recovery of the region hinges largely on affordable and sustainable power. And clean energy is the key to reducing operating costs and lowering of power rates for households and businesses. Renewable power will pave the way for new private investments outside tourism, namely in the manufacturing, agro-business, manufacturing and other high energy-consuming sectors A new resilient and green electricity infrastructure will create new jobs and stimulate economic activities, too.

A Rocky Mountain Institute (RMI) study showed that capital required to source 90% clean energy by 2030 of the 31 countries for the Caribbean will require $80 billion. In return, realizing the investment would mean a $9 billion savings annually in fuel costs and offsetting 240 million metric tons of CO2 per year.

There’s another reason why the Caribbean must develop modern energy systems, particularly micro-grid systems that allow the integration of renewables. The authors stressed: “When modern software controls and battery energy storage are added into micro-grid systems, renewables produce and store power flexibly, shifting effortlessly from heavy demand scenarios to low demand, where cheaper renewables are stretched even further.”

The case of the Caribbean region is highly similar to the Philippines. Not that we rely solely on tourism but rather, because, we are one of the countries that would benefit the same way with a quick shift to renewable power. After all, our country has one of the highest power rates in the world, we are one of the most vulnerable to natural disasters and we have underutilized renewable energy sources.

But the authors warn against arguing that fossil fuel power is the ‘cheaper option’. The sharp decline in crude oil prices, driven by oversupply and decreasing demand, will be short-lived as demand returns. It is expected that at current lows, many high-cost producers will shut down operations and some may go out of business. In a post-COVID world, with increasing global demand and a reduced number of suppliers, there will be upward pressure on oil prices.”

The same can be said of coal prices as demand has been falling even before COVID-19 was declared a pandemic. Plus, coal exports could be limited should Indonesia decide to close down their ports. As I have been saying, our reliance on fossil fuel power sources comes with a lot of risks, particularly volatility of global prices and foreign exchange fluctuations with costs being shouldered by consumers. And just like with the recommendations of the authors of the report, the Philippines should put their money on renewables to hedge against these risks. Our country would also benefit from more construction jobs brought about by higher investments in renewable power.

Evidence to debunk the myth that fossil power has the “least cost” has been available for many years, but have largely been ignored here in the Philippines. Contemplating our future with the effects of COVID-19 in mind also means securing our energy transition. Ignacio Galán, the chairman and CEO of the Spanish renewables giant, Iberdrola, which owns Scottish Power, said it best: “A green recovery is essential as we emerge from the COVID-19 crisis. The world will benefit economically, environmentally, and socially by focusing on clean energy. Aligning economic stimulus and policy packages with climate goals is crucial for a long-term viable and healthy economy.”

References:

https://stockhead.com.au/resources/nearly-130-financiers-are-now-refusing-to-back-thermal-coal/

https://www.theguardian.com/environment/2020/apr/20/green-energy-could-drive-covid-19-recovery-international-renewable-energy-agency

https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/Apr/IRENA_GRO_Summary_2020.pdf?la=en&hash=1F18E445B56228AF8C4893CAEF147ED0163A0E47

http://newenergyevents.com/

Opportunities for the RE Sector In The Time of COVID-19

Global renewable energy capacity increased by 176 gigawatts (GW) last year, reaching a total of 2,537 GW. According to the International Renewable Energy (IRENA), renewables accounted for 72% of all power expansions last year with solar and wind power providing 90% of the growth.

These numbers were promising and it looked like renewable energy’s growth trajectory was likely to continue in 2020. But this all changed with the COVID-19 pandemic.

Just like with many industries, renewable power is taking a hit with the construction of new power plants being halted due to the imposed lockdown around the world. There’s also the growing fear that the pandemic will likely affect clean energy investments negatively given the depressed prices of fossil fuels in the market.

But experts also warn that it’s too early to predict the extent of the impact of the Coronavirus on energy markets. They also stressed that there are opportunities for clean power to flourish in spite of the global economic slowdown caused by stay-at-home orders or lockdown, or what we call the Enhanced Community Quarantine in the Philippines.

The Global Head and Managing Director, Cleantech Coverage of Standard Charter, Sujay Shah points out that 70% of the world’s energy investments are driven by governments. With the stimulus packages being offered by governments, a total of USD7 trillion and counting, provide a “once in a generation opportunity for all industry participants including developers, investors, and financiers to shape this spending to accelerate the energy transition and low-carbon agenda.”

There are also opportunities, too for Southeast Asia (SEA) renewable energy market, which has one of the fastest energy growth rates in the world with a yearly 6% growth according to the International Energy Agency (IEA). SEA’s power demand has grown by 80 % since 2000.

Daine Loh, power and renewable analyst for Fitch Solutions as quoted by a Channel News Asia article says that there is a downside risk to the completion of new large scale-thermal and hydropower projects over the medium term, which will probably result in delays or cancellation of government-funded RE projects.

But she also stresses that the weakened power demand for this year due to the slowdown in economic activities could reduce pressures to peak demand outputs, thus freeing up some policy space for government to pursue their energy transition plans. “(It) may put pressure on governments to amend regulations to boost private sector investment in renewables in an effort to support growth in the market over the longer term.”

It also helps that getting financing for traditional power sources has been difficult in recent years. Loh says financial pressures could further weaken investments in fossil fuel power projects and give momentum for RE project financing.

Speaking of financing, access to capital is likely to be cheaper, too with interest rates dropping. The cost of borrowing for capital-intensive RE projects could be attractive.

The RE sector could benefit from the rebuilding of economies since increased construction activities would provide more jobs. As the economy recovers, countries will also have higher energy demand, and governments anticipating this demand may turn to renewable power that can provide more affordable power rates say Krib Sitathani, a project manager with the United Nations Development Programme in Thailand. “There is also the possibility that many governments to take this opportunity to manage their risks to stabilize their energy costs through increasing renewable energy production to not only stabilize their power production but also to ensure a more predictable cost,” he said.

For the Philippines, one of the possible negative scenario of the COVID-19 crisis is that Indonesia, where we source 90% of our coal closes down all its ports. We are okay as of today because there’s a drop in demand.  So I presume we have a lot of coal inventory already in the Philippines. But if this crisis worsens and Indonesia will have to close all its ports, then we are in for an insurmountable problem. 

Weforum.org

The RE sector could benefit from the rebuilding of economies as increased construction activities would provide jobs. Photo c/o http://www.weforum.org

 

To mitigate this threat, our government should order the immediate development of indigenous sources of energy: solar, wind, and geothermal.  To do this, the power sales procurement rules should be amended. Ultimately this is where the development of RE will have to depend unless the government adopts more draconian measures like requiring a much higher percentage of RE in all the portfolios of the distribution utilities. 

The current rules in evaluating PSAs do not differentiate between indigenous and imported energy.  Technically, this should be differentiated because from a risk perspective these are two different types of energy sources.  However, the current evaluation rules and, in fact, the evaluation skills of the utilities will not allow this differentiation. 

To enforce this policy, the Energy Regulatory Commission (ERC) should require utilities procuring power to testify that there are no indigenous resources within its immediate vicinity, or franchise area, or that it has not received any offers from indigenous energy source within the country. This testimony must be made in public and under oath, which will then be submitted together with the application for PA for the signed PSA. This means that utilities must bid or negotiate with indigenous sources of energy providers before doing any procurement from imported-energy sources.

The implication of this policy will be the development of indigenous energy of the country thus reducing risks of non-supply such what we are facing today.  The traditional economic analysis of imported versus local (if it is cheaper to import, import) can no longer stand the scrutiny of today’s reality.

The COVID-19 pandemic is causing so much uncertainty for the whole world. For us, in the renewable energy sector, we can take comfort that the world sees the value in investing in clean energy and that many governments know that RE is the way forward to providing affordable and reliable power. Thus, while there may temporary setbacks due to the virus in 2020, as with almost all industries, there remains high optimism for the long-term growth of the RE sector.

References:

https://www.channelnewsasia.com/news/asia/covid19-southeast-asia-renewable-energy-nuclear-asean-12617520

https://www.sc.com/en/trade-beyond-borders/covid-19-clean-energy-challenges-and-opportunities/

https://www.cnbc.com/2020/04/06/the-coronavirus-is-hitting-renewable-energy-supply-chains-factories.html

Burning Fossil Fuels Equals Big Losses

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

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

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

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

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

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

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

deadly coal

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

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

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

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

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

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

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

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

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

References:

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

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

PH could attract $20-B renewable energy investment