By
Lenie Lectura - November 5, 2017
AN executive of the
power-generation arm of the Manila Electric Co. (Meralco) cited three key
points to achieve lower electricity rates.
Chrysogonus Herrera,
Meralco PowerGen Corp. (MGen) senior vice president for commercial and
planning, believes that unfolding a regime of low power rates is the
likely future scenario he envisions based on three key relevant points.
Herrera said the first
one is the ability of the Electric Power Industry Reform Act to unlock the door
to a pathway for lower power rates. To achieve this, transforming the power
industry from a sellers’ market and a government monopoly in generation to a
buyers’ market must be fully realized, he explained.
“Distribution
utilities’ [DUs] uncontestable customers must be empowered with competition and
choice, including the decision from whom and what to buy,” he added.
In addition, investors
must pursue least-cost power-generation alternatives, Herrera said.
“We have seen it
working with about P15 billion investments in generating about 7,500 megawatts
of new capacity addition until 2021.”
Second, Herrera said,
new power plants must be built to replace the country’s aging plants. This is
crucial to ensure the country has energy security to support future economic
expansion, he added.
About 60 percent of the
country’s operating power plants are older than 15 years, or more than half
their life span of 25 to 30 years. As power plants get older, they are no
longer capable of handling lifting operations.
“The future presents an
opportunity to replace them if they are no longer competitive in the Wesm
[Wholesale Electricity Spot Market], are not environmentally compliant or they
can no longer comply with the resiliency standards imposed by the Department of
Energy,” Hererra said.
Third, he added that,
while competition can lower power rates, this should be matched by strong
regulation and policy implementation.
The Philippines has one
of the highest industrial power rates in the region, with $9.91 per kilowatt-hour
(kWh), compared with Indonesia’s $4.82 per kWh and Thailand’s $5.33 per kWh. He
said the country’s high power rate is putting a serious threat on the
manufacturing sector and the nation’s overall GDP. Unless proactive reforms are
implemented to address the issue, the country will continue to lag behind Asian
neighbors in terms of socioeconomic development.
“The manufacturing
sector could have contributed to a higher GDP if not due to our high
electricity rates,” Herrera said. “We are at the bottom in terms of GDP growth
in Asia, and it is clear that we need to catch up with other countries, such as
Malaysia and China, which have achieved higher GDPs even though they are
producing higher carbon-dioxide emission.”
MGen is involved in a
number of coal-power projects that are in the pipeline. Citing a study, he said
there are many noncarbon or less-carbon emitting sources than coal, but these
cost more.
The study shows that,
when translated as a cost of removing carbon emission, the higher cost of
geothermal and impounding hydro, as well as solar and wind under Feed-in-Tariff
all exceed the social cost of carbon using them, therefore, Hererra said, it
would be tantamount to taking “a cure worse [sic] than the disease.”
He also commented that
the government’s generation mix policy by way of mandating the market to buy
specific fuel type is considered a “straitjacket” strategy that government must
avoid.
“It [mix policy] does
not help reduce rates and is more likely to increase it,” he said. “Coal
generation is still indispensable in keeping rates low and supply reliable.”
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