Year-end Report
by Myrna Velasco January 2, 2016
Globally, the call is to institute
policy fixes aimed at “greening” energy systems – but it must be a
transformation of the existing energy paradigm without necessarily resorting to
rapid and costly shifts in technology deployments.
But while traversing transition
phases, some markets have their own domestic problems to solve while fusing
with the world in pursuing a common objective of preserving a planet of which
resources we just literally borrowed from the next generations.
As human beings, there is a natural
tendency for us to desire having lives of fulfillment. But this has been the
experts’ cautionary word on that “ecological deficit frame”: There is a need
for efficient and sustainable utilization of energy resources and that a
“cleaner energy future is inescapable.” The clock, by far, has already started
ticking
LOCAL ENERGY SECTOR IN ‘JITTERS’
In the Philippines, the energy
sector in 2015 opened with fidgety prospects of probable rolling brownouts
because of extremely tight supply – and that it was anticipated to be
compounded by the shutdown of the main gas fuel source for major power plants
in the Luzon grid.
The Malampaya gas production
platform was scheduled for maintenance March to April, and that could cut off
gas supply to 2,700 megawatts of power capacity. Moreover, the shift to liquid
fuels (i.e. condensate) was seen adding financial burden to the consumers.
Nevertheless, with the “traumatic
yet heedful lessons” the industry had in the November-December 2013 awful
events of electricity price spikes, such eventuality had been crossed without
the anticipated adverse impacts. And so far even in the electric bills, there
had not been much dissent from the consumers’ end.
Taking off from those industry
episodes, the power industry in general had already turned more prudent on
scheduling power plant shutdowns and in optimizing their facilities’ operations
to minimize forced outages that can trigger power interruptions.
Oscar S. Reyes, President of Manila
Electric Company (Meralco), has opined that the same 2013 lessons must be kept
in the industry players’ mind as the country still faces “tight supply
scenarios” this 2016.
While there are capacity additions
coming on stream this year, they will not satiate yet the long-term reliable
power supply needs of the country given projections of relentless economic
growth moving forward.
THE ERA OF LOW ENERGY PRICES
Last year was predominantly a “chill
period” for the consumers’ pockets – with power bills trimmed down to a
six-year low in a particular month; while prices at the oil pumps had been
rolled back more often compared to them hitting uptrends.
Market analysts and watchers have
signified ‘mega-glut’ in oil supply that may persist even this 2016. But the
flipside had been: Many petroleum exploration investments and activities have
been halted resulting in job losses. Multinational oil giants (i.e. Shell and
Chevron) have resorted to multi-billion capital expenditure (capex) cuts as
they have been reeling hard from squeezed profits.
For the Philippines, the outcome of
its tender for new contracts under its 2015 petroleum contracting round had been
anemic – that even its expected “big league multinational players” had not
really advanced to bid submissions.
On the global sphere, Iran’s oil
flow to market – following the lifting of its sanction – will contribute to
“oversupply” in the market. Plus, the indecision of the Organization of the
Petroleum Exporting Countries (OPEC) on production cut had not been giving as
much prop to the collapsing oil prices globally.
Prolonged downslide in prices is
apparently a succor in the wallets, but isn’t this just delaying the bad news
for consumers again? In the boom-and-bust cycle of the industry, the next
episode after a “depressed state” is almost always fresh round of supply
tightness that can consequently drive up prices.
In the power sector, the drop in oil
prices and the concomitant collapse in coal prices had also pulled down
electricity rates. Throughout the year, power utility giant Meralco made more
announcements of monthly tariff reductions – a reversal of the distressing rate
hikes in previous years.
Other than the skidding fuel prices,
market measures such as the secondary cap in the Wholesale Electricity Spot
Market (WESM) had also tempered settlement prices that were subsequently
reflected in the bills.
LEADERSHIP CHANGEOVER
The transformative phase in the
domestic energy sector – had not only been in policies and regulatory
frameworks, but also in leaderships at both the Department of Energy and the
Energy Regulatory Commission.
With the retirement of Zenaida G.
Cruz-Ducut in July, former Justice Undersecretary Jose Vicente B. Salazar took
her place at the ERC. Almost the same time, former Energy Secretary Carlos
Jericho L. Petila handed over the DOE’s helm to career executive Zenaida Y.
Monsada.
Following the suspension and
eventual resignation of Emmanuel R. Ledesma Jr. as president of the Power
Sector Assets and Liabilities Management Corporation (PSALM), long-time vice
president Lourdes S. Alzona was also appointed later on by the company board to
take his place.
It is now in the shoulders of these
energy officials – along with those in the National Power Corporation, National
Electrification Administration and the Philippine Electricity Market
Corporation – to craft, re-write and/or enforce the policy guides, rules and
regulatory edicts for forward investments, projects and programs in the sector.
So far, the DOE is hitting the road
on injecting further “energy diversification” as the forthcoming capacity
additions in the power sector will chiefly be coming from coal plants.
Taking cue from her predecessor, Ms
Monsada has indicated that they will enforce the one-third rule in the power
mix – meaning: To balance the share of each fuel source: 30 percent for
renewables; 30 percent for coal; 30 percent for gas and the rest will be from
other technologies.
On the regulatory front, priorities
are set on clearing up ERC case backlogs; and bringing the restructured
electricity sector closer to the long-desired regime of full retail
competition.
Certainly for the country, preparing
for the next “disastrous event in an industry” will no longer be enough
especially if it wants to stay on track on its economic rise. Energy leaders
then must start shaping powerful arguments and urgent actions toward policy and
regulatory fixes and improvements.
And that call for action is now –
not tomorrow – when the stakes are already out of hand into the viable
solution-finding realm. (To be continued)
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