Mindanao’s energy future (2)

Tuesday, 17 April, 2012 Written by Dean Tony La Viña


In continuing to make the case that Mindanao’s energy future should be bet on renewable energy I rely again, as I did last Saturday, on the arguments of Mr. Ramon C. Abaya, deceased Chairman of the Cagayan Electric Power and Light Company, Inc. and renewable energy visionary, who just before he died, sent me an article on why solar energy is affordable and the right choice for Mindanao. According to Abaya, arguing for Feed-in-Tariffs (FiTs) for solar energy:


FiTs are productivity based; each centavo raised hinges on each user’s consumption, thus incentivizing more production on the developer’s part; it is clearly the opposite of a take or pay scheme – whereby a minimum is paid regardless of consumption. Subsidies from the government hinge on tax rates and its collection performance. How stable and certain are those? How efficient has any government conducted its income transfers? Guess which system can potentially undermine the economy’s macro-economy, when deficits are exacerbated by imports with fluctuating prices outside of anyone’s control.


Solar hardly competes with base load plants running on coal; it competes with technologies that are available during the day, over and above base loads. In Mindanao, where supply is tight, solar will displace oil fired units forced to run even at the start of day, turning what are otherwise suppliers of energy at high costs into replenishing reserves. Compare solar’s rate impact of only 2.28 centavos to the variable costs of running an oil fired plant, now hitting more than 9 pesos per kwhr. Solar’s addition to blended rates is 2.28 centavos, while that of oil is estimated to be about 3x higher. In either case, solar wins hands down.


Under a feed-in tariff scheme, the subsidies are the difference between FiTs and the costs of units displaced (at 4.50 according to NREB). They are multiplied by solar’s generation, before they are spread over the country’s total consumption, resulting in what are known as retail impacts—the increase per kwhr that each customer pays. The volume produced (139 284 MWH) by solar—less than half a percent of total demand—is so small that when you blend it with total nationwide consumption (67,743,000 MWH), you turn the wholesale costs of 17.95 pesos to a mere 2.28 centavos at retail.


FiTs are not the same as FiT impacts; FiTs are wholesale rates, while impacts are at retail. FiTs are in terms of kwhr produced; while impacts in kwhr consumed. FiTs are the cost of production while impacts are the price of consumption. The contrasts are stark. Our experience in running oil fired units as standby in the past 16 years show that oil prices have been on a marked upward trend of about 9 % to 12% a year; but who is to say what they will be next year, or 4 years from now. You can be sure they will go up in the long term. And yet one of the complaints against renewable is that their rates are fixed for 20 years! They will decline in real terms.


You cannot repeat it often enough: solar’s impact on retail when 100mw shall have been reached within 3 years, is 2.28 centavos per kwhr. Solar’s retail impact is lower than those for wind (3.74), biomass (4.12) even if its FiTs are the highest. And there are other benefits as well: the taxes and fees that 400 million US dollar investments will add to the national treasury; and the number of new jobs generated, the benefits of clean air and a pristine environment, the dampening of extreme weather patterns, and the reduction in public health hazards. While these are hard to value, they are anything but trivial, and you ignore them at your and the future generation’s peril.


Energy independence, the use of inexhaustible resources, and economic growth without harming the environment: these are some of the Renewable Energy Act’s policy declarations. Are these goals still debatable? Isn’t it time to get on with the implementation?


Abaya’s call to implement the RE act is a good way to sum up this two-part column on the energy situation of Mindanao. To go renewable is not only environmentally sound but economically efficient; and yes, it is the ethical, right thing to do to secure the energy future of our great island.


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