PHILIPPINE ENERGY CRISIS: MORE OPPORTUNITIES, LESSER BARRIERS EXCEPT FOR POLITICS

By Paul Pastrano Gangoso

Editor in Chief, Western Times News

June 29, 2010

Civil society organizations and environmental networks have been continually questioning the country’s current level of dependence to coal-based energy sources. Over the years, there have been no concrete measures being undertaken by the national government to venture alternative energy sources even after the passage of the Renewable Energy Law of 1998. As a consequence, massive power shortages during the El Niño season have affected most parts of the country thereby upsetting the nation’s business climate. But the alternative energy industry, despite the lack of attention given by the previous administrations, is becoming more and more active in widening its role in the country’s power sector and is seeing the current energy crisis an open door for lots of investment opportunities.

Currently, energy demand in the Philippines is continuously increasing at an average of 4.5 percent each year. Even the Philippine Energy Department admits that the country’s total demand on 2008 has reached 9,054 megawatts. Mindanao, the source of the country’s major energy supply, is slicing 13.29 percent at 7.97 million megawatt-hours with Visayas taking 12.9 percent at 7.53 million megawatt-hours and Luzon claiming 73.7 percent at 45.31 million megawatt-hours of the total energy system demand. In Luzon particularly, energy generated has increased by 5 percent. It is therefore not surprising that the energy sector continues to enjoy a constantly increasing investment returns whatever conditions beset the national economy.

When power supply in the Mindanao which primarily depends on hydro-electricity has reduced during the first quarter of the year due to reduced rainfall levels brought by the El Niño phenomenon, what power providers do to protect their profits is passing the burden of transmission costs to consumers. On July 3, the National Grid Corporation of the Philippines has announced another power rate hike for ancillary services of 14 centavos in addition to the current 8.63 pesos per kilowatt-hour. Citing the reducing water level at Maria Cristina falls in Iligan City and its main tributary the Lake Lanao, the National Grid Corporation of the Philippines justifies its current plan of power hike to its acquisition of additional electricity from power barges 117 and 118 in Agusan and Compostela Valley respectively. In Luzon, the Manila Electric Corporation (MERALCO) has imposed a 1 peso per kilowatt-hour increase. Manila consumers are now paying 6.7699 pesos per kilowatt-hour.

As power rates increase so do government expenditures because the government, if not the major, is one of the biggest energy consumers. But even without any clear intent of addressing the power issue by the national government, many local government units have been finding and implementing ways to reduce expenditures for energy consumption. In the Municipality of Taytay, Rizal for instance, the local government unit opts to utilize solar energy for its energy consumption. Since its implementation, the municipal government has recorded a tremendous reduction of their electric bill charges. From the usual average of 1 million pesos every month, the Municipality of Taytay now enjoys a much plummeted expenditures for energy consumption at 200 thousand pesos each month. It saves them 9.6 million pesos annually. It is no surprising what benefits power-based electrical supply can give to Filipinos. With a country located near the equatorial line, tapping solar energy as an alternative source of electricity will go a long way.

In Mindanao, several hundreds of villages mostly far-flung and those which cannot be accessed by the current supply lines have already enjoyed continuous lighting systems for homes and small industrial plants but with a much lesser cost compared to those supplied by the National Grid Corporation of the Philippines. Some programs initiated by non-governmental organizations like AMORE and SPOTS have been giving highlanders the access to power supply through solar energy systems. In Polilio Island, Quezon Province 14 villages have been provided power supply through solar system. With China-made solar panels coming in at the Philippine market, Filipinos can now access cheap and easy-install solar energy systems. A small panel system costing 18,000 pesos will be enough to power up traffic lights or water pumps or appliances for eight straight hours. But with high initial costs for the installation of solar systems at the household or commercial levels, energy consumers and businesses have not yet fully opened its doors for the sunlight industry. Unless the Philippine government takes the lead role in promoting the use of alternative energy as a national policy, the Philippines will remain practically ignorant of the solar technology and its long-term economic benefits.

Wind energy too is taking one step after another into claming a major role in the Philippine energy industry. Recently, more than 3 billion dollars worth of investments are being eyed to pour in for the wind energy sector. But wind energy developers such as the Wind Energy Development Association of the Philippines or WEDAP have been begging for more reasonable feed-in tariffs for wind energy generation projects. The group which consists of 14 wind energy developers believes reasonable tariff rates can cover up the initial cost of investments in the construction and operation of wind farms.

At present, the Philippine government has been providing concessionary treatment to fossil-fuel based power providers. The cost of climate change and pollution has not been computed in the current tariffs of these polluting power generation systems. There is no tariff scheme yet for renewable energy-based power generation. In the Philippines where transmission lines are solely controlled by the National Grid Corporation of the Philippines (NGCP), wind power suppliers are in dire need for concrete markets of its intermittent output. The sites of wind power facilities also require transmission lines to reach. Thus if the Energy Department will tap its resources to facilitate the further development of the wind energy sector, the renewable energy industry will soon compete with the non-environment friendly power suppliers. Not only can the wind energy sector development generate at least 1,000 megawatts of power supply, it can also provide jobs to an estimated 15,000 individuals needed to address the necessary technical support to operate wind power facilities.

The group said the Philippines has good wind sites that the Energy Department continues to award wind farm applications with renewable energy service contracts that give exclusive development rights in windy locations all over the country. The Philippine landscape feature several windy sites favorable for the development of wind farms according to developers. With wind farms in place, power energy from the wind can address current power outage. The Bangui Wind Farm in Ilocos Norte as an example is currently producing 33 megawatts of power and has also been attracting tourists with the scenic wind farm views. The tourism factor is just an added benefit though. What is more important is for the Philippine government to seriously consider wind energy as an alternative and sustainable source of power.

But how serious really is the national government in its global stance on climate change and its domestic problem of power outage? Without the political will to implement policies concerning renewable energy, it is unlikely that the Philippines can deliver its commitment to address climate change concerns. It is truly clear that politics alone especially during the previous Arroyo administration has kept the power problem afloat. As a matter of fact, the Energy Department instead of seriously imposing the provisions of the Biofuels Act, it is now considering reducing the blending ratios of fuel and lifting the importation ban on ethanol. If it happens that the country will begin importing ethanol, the local ethanol industry will suffer a premature breakdown. The cost of pollution in the use of carbon-emitting fuels is crucial in measuring the extent of blending ratios. Once the ratios are reduced according to the Energy Department’s plans, the Philippines will lag in climate change adaptation in comparison to its neighboring countries. Current demand for ethanol is around 20 million liters and the maximum production capacity of all local ethanol plants is still at 80 million liters. As ethanol development in the country has just begun a couple of years ago, investors are still wary of recovering their expenses. Thus, importing ethanol from other countries will literally kill the local ethanol industry. ROXOL Bio-energy, San Carlos Bio-energy and Leyte Agricultural are some of the major ethanol producers in the country today. Sugar remains their raw material. Some more plants will start producing ethanol next year. These include the Pampanga Biofuels in Floridablanca, Cavite Biofuels in Magallanes and Green Future Innovations in Isabela. These firms have foreign partners. And if the national government wavers in strictly implementing the law on biofuels, foreign investments may dwindle in the near future and the Philippines can never achieve independence in biofuel supply.

Recently though, with the barrage of criticisms coming in from the business sector, the new administration under President Noynoy Aquino is likely to consider renewable energy a significant solution to the power crisis. With this posture, renewable energy development in the country- be it wind or power or bio-ethanol- means good business today. And there seems to be a brighter tomorrow for the renewable energy sector.

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