July 11, 2018 | 9:12 pm By Bienvenido S.
Oplas, Jr.
Next week, the Energy
Policy Development Program (EPDP), a USAID-funded project implemented by the UP
Economics Foundation, will have its last lecture and the launch of a book that
incorporates conferences, lectures, and seminars the program has sponsored over
the last four years.
Among the EPDP lectures
that I enjoyed — all held at the UP School of Economics (UPSE) — were those
given by the private sector players. Here are some key points they made
followed by my comments.
1. “Natural gas:
Addressing the energy trilemma and powering our energy needs” by Mr. Giles
Puno, First Gen, August 2017.
“Government support
[is] crucial for LNG development… (1) Holistic and defined energy mix to direct
planning and investments, (2) Incentivize LNG through fiscal and non-fiscal
policies, (3) Secure LNG Off-take, similar to how Malampaya was underpinned.”
The first two points
sounded like they were seeking special treatment from government and this is
wrong. Setting the energy mix should be done by the market, not government.
Government should stay out of building or financing or guaranteeing the
construction of the LNG terminal and let interested private players put their
money where their mouth is.
2. “Retail Competition
and Open Access (RCOA): The Power of Choice” by Mr. Miguel Aboitiz, Aboitiz
Power, Sept. 14, 2017.
“Benefits of RCOA for
contestable customers: (1) they have more choices with respect to pricing and
contract structure, (2) they are not subsidizing other customers, (3) they can
choose the type of power they want or they can even decide to contract with a
financial entity instead of a power plant owner, (4) they can choose from a
variety different contract structures, (5) they are in full control of their
generation costs.”
True. RCOA is among the
best provisions of the EPIRA law of 2001. It liberalizes and allows the contestable
customers to move away from geographical monopolies (private DUs or electric
cooperatives) and allow them, to choose from three dozen or so retail
electricity suppliers (RES).
3. “Enhancing Fair and
Economic Competition” by Dr. Francisco L. Viray, Phinma Energy, Oct. 5, 2017.
“SUPPLY = DEMAND +
LOSSES.
Above must be balanced
in real time for the power system to be stable (Power System Stability), and it
is consistent with ‘Causer’s Pay Principle.’”
The above equation is a
big and explicit warning to advocates of “renewables only” lobbyists,
activists, and developers. Demand is high in the Philippines with its 106
million population that expands 1.7 million a year, net of death and migration.
Losses from scheduled maintenance shutdowns and unscheduled shutdowns can be
substantial, especially if the power plants are old and aging. So high demand
plus high losses would require high supply at stable, predictable capacity.
4. “Optimization of
Supply” by Mr. Chrysogonus F. Herrera, MGen, Oct. 26, 2017.
“Where do we go?
(1) Let the market
under EPIRA sort itself out (after all, it is working and gestating new
investments); (2) A mandated “Generation Mix Policy” is a straitjacket to be
avoided. It does not help reduce rates; (3) Coal is indispensable in keeping
rates low and supply reliable; (4) Cheap and reliable power secures economic
development and global competitiveness.”
Amen to Chris’ points.
The EPIRA, the Wholesale Electricity Spot Market (WESM), and RCOA are all
working and running full steam.
A government-mandated
power generation mix is wrong and often cronyism-inspired. Let the electricity
consumers decide what is good and desirable for them. Make sure that cheaper
and reliable electricity supply is available.
5. “Delivering Clean
and Green Energy to the Philippines” by Mr. Stewart Elliott, Energy World Group
(EWG), Nov. 23, 2017.
“Pagbilao LNG Hub
Terminal and 650MWCCGTpowerplant…”
Throughout his
presentation, Mr. Elliott never mentioned things like “government fiscal and
non-fiscal incentives for LNG terminal and development” at all. He just wants
stable long-term policies not subject to arbitrary changes midway. Amen to this
kind of investment attitude.
6. “Optimal Investment
Decisions in Generation” by Mr. Eric T. Francia, Ayala Energy, Feb. 8, 2018.
“Investment
Imperatives: (1) Diversify portfolio, (2) Further expand coal plants for
baseload needs, (3) Explore gas/diesel for intermediate, peaking and ancillary,
(4) Continue investments in renewables and build capabilities in storage, (5)
Geographic diversification, (6) Strengthen balance sheet and multiple sources
of funding, (7) Ensure cost competitiveness.”
This is practical
advice from one of the country’s biggest business conglomerates, the Ayala
Corp. It recognizes the practicality of coal and gas while pushing their
corporate advocacy for renewables with storage.
7. “Cheap Electricity
for a First World Philippines: The 24/7 Solar-Storage Revolution” by Mr.
Leandro Leviste, Solar Philippines, Feb. 22, 2018.
“Solar is now the least
cost for all peaking, mid-merit, and baseload requirements, and will thus
comprise the vast majority of additional power generation capacity from hereon
in the Philippines.”
Far out. If solar is
indeed the “least cost,” we should have abolished the feed-in-tariff (FIT)
scheme of guaranteed high price for 20 years for solar, from P9 to P10+/kWh
when coal-gas prices are only P4-5/kWh and can be reduced to P2/kWh at off-peak
hours.
The continued
demonization of coal — articulated explicitly by Mr. Puno and Mr. Leviste in
their presentations — is based on emotionalism and desire for government
partiality, for two reasons.
One, our coal use until
2017 remained small compared to our Asian neighbors, only 13.1 mtoe or less
than 1/2 of Vietnam, only 1/3 of Taiwan, 1/4 of Indonesia, 1/7 of South Korea,
1/9 of Japan, and 1/144 of China. And yet that small coal consumption provided
50% of total electricity production in the Philippines in 2017.
Two, even in developed
and “green” Asian economies like Japan, South Korea, and Taiwan, solar and wind
energy production remains very small, which speaks of their non-reliability and
non-dependability and may even be part of economic underdevelopment, if pursued
to the max.
The market and the
consumers, not government, not the environmental activists and renewables
developers, should set the appropriate energy mix. This is one of the important
lessons, explicit or implicit, that one will derive from attending or reading
the various lectures at EPDP.
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