SATURDAY, 08 JANUARY 2011 18:44 PAUL ANTHONY A. ISLA / REPORTER
Even with only a few power projects planned to be done within the year, energy supply is still projected to remain stable all throughout 2011. But what worries the Department of Energy (DOE) are the thinning reserve generating capacities the country will have to do with when the supply and demand gap begins to widen.
“Energy supply in the Luzon grid is really going to be exciting this 2011. Everybody knows we’ve declared that the reserves capacity is going to be short by 300 megawatts [MW],” Energy Secretary Jose Rene Almendras said.
In the Luzon and Mindanao grids where no new generating capacities are expected to set in until the period between 2013 and 2015, maintenance or upgrade works on a few power plants, at the very least, are the only ones expected to help augment supply.
For the Luzon grid, according to the energy chief, demand is projected to reach 7,900 MW this year. “If temperatures don’t get that warm, then we won’t be hitting the projected demand levels,” he added.
Almendras pointed to, however, the declaration last week by the Philippine Atmospheric, Geophysical and Astronomical Services Administration (Pagasa) that there might be rains and storms in the first quarter. While the prospect of disaster risks has been raised with this forecast, the “plus side” is that, “on the temperature side…demand for power will not go as much as last year” during the first quarter, he explained.
Almendras also noted that at least 2,700 MW of generating capacity from coal-fired power plants is expected to be set up between 2013 and 2015, which will be enough to address demand at that time.
“With the looming shortage, we have to invite people to build and build fast, and they’re building coal. According to my calculations, 2,700 MW of coal-fired generation is coming between 2013 and 2015. Hopefully, by 2014, we’ll have at least 300 to 400 MW of coal-fired plants in Mindanao,” Almendras said.
Global Business Power Corp., AboitizPower Corp., DMCI Power Corp., TeaM Energy Corp., Conal Holdings Corp., San Miguel Energy Corp. and GN Power Corp. are some of the companies that have expressed an interest to develop coal plants.
Almendras admitted, though, that the Mindanao grid, on the other hand, is going to be challenging. With Mindanao-based power-generation facilities mostly dependent on hydro, Almendras said there’s not much that can be done. “Although the dam levels are still very good, there are a few maintenance works that are needed to be done. Demand for power in Mindanao is expected to peak by March and June this year, based on the data we have,” he said.
Energy Undersecretary Josefina Patricia Asirit said contingency measures are now being considered to be put in place, for the Mindanao grid, in case the gap between supply and demand widens.
Asirit said the National Grid Corp. of the Philippines (NGCP) was able to contract as an ancillary service only 50 MW and another 50 MW or 100 MW from Therma Marine Inc.’s Mobile 1 and 2 power barges. It (Therma Marine) still has another 100 MW that it can still contract out to prospective suppliers, she added.
But of the 100 MW left, according to Asirit, 55 MW has already been contracted to various cooperatives. “In that sense, you have available generating capacity, we are facilitating that they be converted into bilateral contracts” in order to ensure stability of supply.
She also made it clear that there will only be supply problems for Luzon, in terms of the reserve requirements, and only during the peak and summer months. “The 300 MW projected shortfall in reserve capacity for the year is only for the peak and summer months,” said Asirit, adding that this will not happen if the maintenance outages of power plants of generating companies are planned well and are in-sync with the Grid Operation and Management Program (GOMP) of NGCP.
Asirit said they considered the GOMP as not having been complied with last year, with a lot of unplanned and forced outages affecting the generating capacity, which was supposedly available to supply the demand.
Dr. Francisco Viray, former Energy secretary and president of Trans-Asia Oil and Energy Development Corp., said investments in the power industry will probably come in this year, such that the plants can be ready by 2013 or 2014, or in time for the requirements of the Luzon grid.
The Visayas grid is good until 2016, and for the Mindanao grid AboitizPower Corp. and its partners in STEAG State Power Inc. will expand the 232-MW coal plant by another 150 MW; another coal-fired power plant is being built by Conal Holdings Corp.
“Though the projection assumes there will be no additional capacities, the additional will come on time. The outages will be occasionally similar to what happened during summer of 2010,” he added.
RE project developers still await incentives
Over the past few years, the DOE has also signed and awarded billions of pesos worth of renewable-energy projects, which have yet to start even at the construction phase pending the release of the Feed-in Tariff (FIT) and Renewable Portfolio Standards (RPS).
Almendras said the contribution of renewable energy to the generation mix will drop instead of moving forward in the direction of going more green or renewable. “It [percentage of contribution] is falling back, but we’re hopeful that new renewable-energy projects will be put up to increase its share in the generation mix soon,” he said.
Despite the Renewable Energy Act of 2008 being in place, the development of renewable energy-based power plants have yet to materialize owing to the delays in the setting of the Renewable Portfolio Standards [RPS] and the Feed-in Tariff [FIT].
The RPS, on one hand, assures RE developers that a certain amount of their output will be sold to power suppliers. The FIT, on the other hand, refers to guaranteed payments over a definite period of time to developers of wind, solar, run-of-river hydro, biomass and ocean as sources of energy.
A lot of renewable-energy projects remain on hold as developers still wait for the FIT and RPS to be put in place.
Northpoint Wind Power Corp, a subsidiary of NorthWind Power Development Corp., has opted to defer its 40-MW wind project in Cagayan as it waits for the FIT to be put in place and approved by the government.
Viray’s Trans-Asia has also put on hold its wind-farm project in Guimaras, up until the FIT levels are submitted by the National Renewable Energy Board for approval to the Energy Regulatory Commission (ERC).
The DOE, according to Almendras, is still trying to understand what the best ways are for the RPS and FIT. “The idea is to really try to find the best possible way to encourage the investment into RE that’s needed without overdoing it by punishing the consumers. There’s a good economic balance that’s being looked into,” he said.
Almendras, at last year’s Renewable Energy Conference, said the draft of the RPS and the proposed FIT rates are to be done by the second quarter of 2011.
The challenge for renewable energy developers, he said, is to put up a total of 8,000 megawatts (MW) of generating capacity by 2030. But in the near term, 2,000 to 3,000 MW of renewable energy generating capacity is needed to be set up between 2015 and 2016, he added. “We will try our very best to meet those deadlines as best as we can. Those targets are very reasonable,” he added.
“So as a target, we’ve asked all renewable developers to take seriously the challenge. Hopefully by 2016 the energy shortage that we have will be solved, and then power sourced from renewable energy power plants should have a larger percentage. I think we can reasonably hit 65 percent of power sourced from renewable energy or even more by 2020,” Almendras said.
Love-hate relationship with nuke
The widening gap between power supply and demand, and skyrocketing cost of conventional fuel for power systems were enough reason for the government, particularly the Aquino administration, to set aside its decades-long love-hate relationship with nuclear energy. The Government was even generous enough to earmark P100 million for the DOE to take the lead and to look into creating a new nuclear-energy development program this year.
Almendras said a study on the safety standard of nuclear energy will be started this year, where foreign and local nuclear power experts will be invited to join the energy department. It could take 18 to 24 months before the panel fully understands new nuclear-energy technologies, he added.
Based on the Department of Energy’s Philippine Energy Plan (PEP) 1998 to 2035, the Philippines plans to start up its first 600-MW nuclear power facility by 2025, which is expected to contribute 0.885 million ton oil equivalent (MTOE) to the projected energy mix and reach up to 3.54 MTOE by 2035.
The DOE’s PEP also projected that additional nuclear capacities of 600 MW would be in place by 2027, 2030 and 2034.
The DOE PEP noted that the total capacity from nuclear could reach 2,400 MW by the end of the planning period (2035).
Despite its openness to adopt a nuclear-energy development program, the Aquino administration was also firm in saying that reviving the mothballed 600-MW Bataan Nuclear Power Plant (BNPP) was out of the question, citing safety reasons, particularly claims that it lies above an active fault.
However, Dr. Carlos Arcilla, director of the University of the Philippines-National Institute of Geological Science (UP-NIGS), earlier belied long-standing claims that the BNPP lies on top of an active fault. “There is no geological basis [for] closing the BNPP,” he said.
Arcilla said his conclusions were based on data he gathered using scientific methods by the UP-NIGS such as electric resistivity survey, seismic survey and geochemical survey using radon gas.
“By definition, an active fault must have superficial manifestation and if there was an active fault beneath the BNPP, surface manifestation such as breaks would have been observed within the period [that] it has been mothballed up to now,” he said.
More than geological reasons, Arcilla surmised that the BNPP was shut down for political reasons. “As a geologist, if it was shut down due to a geologic reason, then that’s fine. But if it’s not geological, then please admit it’s a political reason rather than blaming geology. It deserves serious consideration for opening,” he said.
Fuel prices to remain volatile
The energy department expects oil prices to remain volatile this year. Almendras said there will still be a lot of pressure on international oil prices unless the Organization of Petroleum Exporting Countries (Opec) decides to increase production this year.
“Everybody is reporting increased demand. China, India and Indonesia are anticipating and talking about supply tightness in the Asian Region. So there’s a lot of pressure. Not to mention the political situation in the North Asia side is aggravating such a situation also,” Almendras said.
To date, according to the DOE Monitoring, the price of Dubai crude increased to $91 a barrel this month from $89 a barrel in December last year.
It added that the price of unleaded gasoline at the Mean of Platts Singapore (Mops) also increased by $2 to $104 a barrel this month from $102 a barrel in December, while the price of Mops-based diesel also increased to $106 a barrel this month from $104 a barrel in December last year.
Meanwhile, in view of the possible oil price hikes in the horizon, the Bagong Alyansang Makabayan (Bayan) has again appealed to the government to scrap the Value Added Tax (VAT) on oil to give both motorists and consumers relief from high petroleum prices.
“The VAT on oil is one of the worst economic legacies of the Arroyo government. Why has the Aquino government not abandoned this burden on the people in the light of worsening economic conditions? The removal of the VAT on oil products will provide huge relief for thousands of motorists and household consumers,” Renato Reyes Jr., Bayan secretary-general, said.
Reyes said eliminating the VAT on oil may bring down pump prices by as much as P4 to P5 a liter. This is a huge benefit for more than 426,000 jeepney drivers nationwide.
Removing the VAT on LPG can also benefit some 8.6 million households nationwide. The removal of the VAT on oil products is an urgent and doable measure,” Reyes added.
Current oil prices are almost approaching the price range during the April to May 2008 levels, which was the year oil prices were at their historic high. “A drastic reduction in fuel prices can prevent jeepney and taxi fare increases and thus spare commuters additional burdens,” according to Reyes.
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