Cusi’s policy play: Non-conformist or enabler? (Part I)

Published December 26, 2016, 10:01 PM By Myrna M. Velasco

http://business.mb.com.ph/2016/12/26/cusis-policy-play-non-conformist-or-enabler-part-i/

The new administration was just barely months into its reign when the energy sector was whipsawed on several fronts – either in the form of rolling brownouts (erm, the blackouts recurring in the months of July, August and November apart from the disaster-induced power interruptions) or the foreseeable electricity rate hikes. The consumers were clearly on harm’s way

And when ‘big business’ gets on the defensive, it’s still the consumers appearing to be of poor judgment – or lacking in sophistication – for complaining on the inferior quality of services they have been getting.

President Rodrigo Duterte’s anointed at the Department of Energy (DOE) was considerably a ‘newbie’ and somehow perceived an industry ‘non-starter’. Nevertheless, Energy Secretary Alfonso G. Cusi was aware that he was thrown into a sector too critical at underpinning the country’s economy. It, too, is a sector undergoing important structural reforms and plagued with issues that are complex and could go beyond business or economics – at times, the concerns may even be politically charged.

For his stand on issues, he had not been spared on the throes of criticisms and many media networks in the last six months have actually devoted a lot of ink and airtime to either corroborate, argue against or just plainly examine his policy propositions.

Policy plot twists

Given the magnitude of problems and policy works he had to focus on, Mr. Cusi knew he had less and less time on the learning curve – he was in a paradox where there is a need for speed and a need for reflection. Essentially, he had to reflect on issues and concerns with speed – that sounds like an oxymoron, but that is always a reality for an industry in shambles. Indispensably, he’s working for a sector way too demanding for immediate action on matters of public interest – so he has to be engaged with a lot of things that are happening at the same time, absorb a lot of information, multi-task and be able to rely on his instincts for prudent decisions.

While admitting that he isn’t a policy wonk, Mr. Cusi’s first service statement had been to serve the Filipino public taking it from his viewpoint as a ‘consumer’. Amid glaring cautionary promises, he said that he wanted to accomplish at least three major things:  To bring down electricity rates for Filipino consumers; streamline approval processes for businesses and investors; and improve or expand electricity access for the poorest of the poor.

All told, industry stakeholders still had expectation of ‘slow train’ on developments – but unfeigned surprises came when the new energy chief started unraveling what he had actually been working on at his policy toolbox.

He ruffled feathers when he ditched the previous administration’s energy mix metrics – the ‘holy trinity’ of equal percentage shares for coal, gas and renewables and the balance for other technologies. Mr. Cusi similarly ignited industry growls when he declared a stop to the feed-in-tariff (FIT) addiction of many renewable energy (RE) project sponsors – of course that was anchored on installations beyond the caps allowed by previously-set rules.

The biggest plot twist, however, was his unyielding declaration on the proposed repowering of the 30-year mothballed Bataan Nuclear Power Plant (BNPP), somehow a policy reversal to President Duterte’s earlier stance of “no nuclear power” on his tenure.

This apparently had taken many off the rails. Despite warning that he might be up into a wrong-headed policy track, Mr. Cusi is still bent on pursuing the nuclear facility’s revival – because to him, it is about “putting a closure” to a US$2.2-billion behemoth that had financially-burdened the Filipino people but had not yielded a single kilowatt-hour of electricity to their benefit.

Conversely, Senate Committee on Energy Chairman Sherwin T. Gatchalian set off an immediate counterweight to the BNPP repowering plan. He said “we cannot jump into nuclear energy on a piecemeal basis,” emphasizing that a conduct of comprehensive feasibility study will be “critical to objectively assess the merits of adding nuclear power to our energy mix.” The lawmaker sounded off the concerns of many – such as the need for established and sound policy and regulatory frameworks as well as the requisite human skills, safety and security parameters that are paramount to nuclear power operations. “We need to do our homework first before pulling the trigger on BNPP or any other nuclear project,” he stressed.

Mr. Gatchalian might have a valid reason to be concerned – because it seems that for now nuclear power advocates actually have more public relations people pushing for their policy wish than there are experts or technically-skilled engineers who can ensure safe operations for the BNPP. Definitely, that is one sphere that the country must seriously address and even the energy secretary is cognizant of that.

In a way, Mr. Cusi is ‘messianic’ when it comes to the country’s nuclear path. To him, this could be the answer to the country’s long-term quest for energy security and affordable electricity. Specifically, but not exclusively, he noted that “the country should have a clear position on nuclear power,” and “with all the new findings, technological advancements and successful experiences of countries around the world, nuclear energy holds much promise for the long-term.”

Brownouts: When facts are skewed

The bizarre thing about blackout predicaments being suffered by Filipino consumers had been that – when they happen – not one among the industry players would humbly admit that they are responsible for it.

In the second semester of this year alone, the country’s biggest power grid of Luzon had been tormented thrice with power interruptions – the first ones in July and August had been due to simultaneous scheduled maintenance shutdowns; and compounded by forced outages of power plants due to technical glitches triggered by running those generating units to the ground just to keep the lights on at the stretch of May’s election period. The latest was November 15 this year – wherein investigation and fact-checking traced  ‘incident zero’ on equipment explosion at the San Jose substation of system operator National Grid Corporation of the Philippines. That technical glitch subsequently triggered cascade of power plant shutdowns, thus, resulting in rolling power interruptions massively affecting the service area of the Manila Electric Company.

For some time, the brownouts had been the ‘center ring’ of discourse – information being fed to the media had always been up for debate – especially to the industry players being pointed to be at fault. Mr. Cusi, himself, was not comfortable at the endless ‘finger-pointing’ of the parties involved – so before he moved on “cutting the fingers” of those entities propagating unverified claims, he ordered a probe of the incident – with the outcome due after two weeks – or on November 30.

The investigation result of the joint DOE and National Transmission Corporation (TransCo) team was summed up this way: “the explosion of San Jose Capacitor Bank No. 1 Power Circuit Breaker CB04 (8XC01SJO) is deemed the root cause of the Luzon grid power outage.” The report further stipulated “the system fault resulted (in) severe voltage and frequency anomalies causing simultaneous trippings of several generating power plants in the North and South Luzon regions and consequently resulting to automatic load dropping (ALD) and manual load dropping (MLD) to stabilize the system frequency.”

Yet even a government-sanctioned official report of power outages’ investigation could not be totally given credence and stand out as ‘the acceptable truth” for some parties being indicted. When counter-checked with DOE Spokesperson and Undersecretary Felix William Fuentebella, he proffered that “no one is at fault because many of the systems in the power grid are not synchronized” – not the power plants, not the load networks of distribution utilities and not the system operator.

Alas, but ‘not guilty’ does not necessarily mean “innocent” – facts shall always matter. Certainly, there’s something running afoul in this whole mess. The bigger question is: how can you engage relevant parties and concerned industry players to really improve on their systems and ensure that such regrettable incident will not happen again – if there is no one at fault?

As noted by Senator Gatchalian, a one-hour brownout across Luzon grid could redound to R3.3 billion worth of economic losses – add to that would be the ‘social anguish’ that each consumer would be experiencing on such ‘dark episodes’ of a day. At least, for the lawmaker, he would want ‘transparency of information’ upheld and that the penalties and rules against brownout-causing industry players be increased and tightened.

Energy mix: Why ‘coal’is still not the ‘tech king’ to go

Even on his day one in office, Mr. Cusi was already clear about his track of reviewing the energy mix policy thought out by his predecessors – response to policy gaps had been sternly demanded from him from then. Forthrightly, he had to come up with a ‘plan B’ that runs deeper than a letter in the alphabet and must come without sacrificing the symbolic need to pretend that the country is skidding into that ‘ecological deficit’ panacea.

And so recently, he came up with this policy prescription: that instead of putting in rigid numbers for each technology that shall become part of the country’s energy mix, he wants his formula “to thrive on flexibility” – the equation is predicated on having 70-percent baseload, 20-percent mid-merit and 10-percent peaking capacities – the mix he reckoned as prudently required to reliably and sparingly operate an electricity system. He further declared that there should be no quota or caps imposed on any technologies – in lieu of that, the energy chief wants various technologies to compete in the market-driven power sector so consumers could benefit not just from reliable electricity supply but on having affordable rates.

Some groups were not exactly happy. Critics claim that the energy department’s revised ‘energy mix metrics’ would be changing “some facts on the ground” especially on the country’s pledge under the Paris climate change diplomacy deal on carbon footprints reduction.

To environment advocates and the other energy technologies getting sidetracked, coal is still the jealously guarded technology option – as they opined that the new policy still hails it a clear winner in the investment milieu. But Mr. Cusi is unperturbed. He said the concern of abating climate change risks is not just an interest of one developing country like the Philippines, it is a sine qua non or concerted effort for the world. He also laid down a pretty strong argument why he wants competition to thrive in the country’s energy sector and why the cheaper source of power must still get their way into the mix– either that would be coal, nuclear, gas, hydro or geothermal  – for the baseload capacity.

“The country is still in the process of industrialization. We must therefore use whatever energy resources are available and affordable for power generation…the country will implement an energy policy that meets our specific economic requirements,” he said. On record, the economic growth and job creation aspirations being steered by the Duterte administration would be anchored on expanded manufacturing sector base.

The energy secretary qualified he is equally concerned of the environment’s state of degradation and the dangers of unchecked climate warming – but he said, fortunately for the Philippines, environmental demagoguery can’t still triumph over hard facts especially when validated studies would show that the country’s carbon emissions contribution compared to the developed countries is still very marginal at 0.3-percent. And for the longest time in its energy history, the Philippines relatively had its very high share of renewables (of the proven and conventional technologies like hydro and geothermal) in its energy mix.

Taking his cue from that, he claims that his cautionary approach is to be circumspect about just blindly following trends or policies because they can be misleading. While he recognized what science has been signaling for the environment, the energy chief insisted that ‘we will chart our own course in so far as energy is concerned to ensure energy supply security considering that developing countries like the Philippines have low carbon emissions.” Onward, he said the energy mix must not turn out expensive to the individual consumers – and shall bear no adverse impact on the economy’s competitiveness.

Re-writing policy shifts, he said, would just be a process not an end in itself – its validation may only happen if it can continually attract capital for the country’s future energy needs. (To be continued)