Mindanao's power calvary

When President Benigno Aquino III declared yesterday that the people of Mindanao, which has been suffering from rotating brownouts for years now, will have to pay more for their power consumption, he is merely stating the inevitable and obvious. It is also and admission of failure of this Administration to address the lingering power problem in Mindanao as well as in the Visayas.

We have already said almost verbatim the same thing years back in a post. Reading my post again gives me goose pimples when I realized much of what I said then have come to pass.

“The power rates will go up in Mindanao because the choice is a higher power rate or no power. And many of those we’ve spoken to understood the necessity for higher rates, and they’re amenable to this, instead of no power at all,” he said during an ambush interview at a Pasay City bus terminal on Tuesday. What a message to Filipinos leaving to the provinces to observe the solemnity of the Lenten season.

No, I disagree that those whom he talked to are amenable to this. Are you?

Like good Christians we are more like submitting ourselves to bad governance and inadequate planning. We are carrying this cross of bad governance to our Calvary.

Pnoy was saying this in the context of DOE's plans to buy "modular" diesel-powered plants as a stop-gap measure until 2015 when the coal-fired plants start coming in. This was the plan presented by politician-turned-DOE secretary to Pnoy.

The idea is, the plants can be set up in as little as six months to at most one year. He also claimed, or rather being advised, that "[b]y 2015, we expect the problem to largely go away—by that time, we’ll have good surplus. That’s the time the (coal)  power plants go on line". Considering the procurement and setting up process alone, six months is a pipe dream. What about the permits and other bureaucratic requirements?

It seems that the president is ill-advised. The "solution" forwarded by Petilla is uncannily similar to what then DOE Secretary Rene Almendras proposed early 2012: sale of diesel-fueled power barges owned by the government. If that was a success, we won't be in dire situation today. Now how different is the current DOE secretary's proposal?

The numbers don't even add up. We even put a conservative 3% annual energy growth then (if we are to maintain the  economic growth at about 5.5 - 6, the energy demand would be nearer to 5 than 3%), and the power plants under advanced construction wouldn't put a dent on the demand.

The news report also quoted that at present, Mindanao has a power shortfall of 294 megawatts. The demand is at 1,157 MW while the actual supply is only 863 MW. But how much of this in dependable supply? The 300 MW to come online in 2015 quoted by the President is only enough to cover this shortfall at present. (For more of the coal plants coming on line, see this.)

How would we power the power-hungry new mines? New mines and sprouting subdivisions and malls if we are to believe in a peace dividend upon the cessation of political hostilities in Mindanao. We are not even factoring in the continuing siltation at Agus  or the aging diesel plants that are still in operation.

For a healthy economy to keep chugging along, the rule of thumb is, there should be a reserve supply of at least 30% more. Advanced and some developing countries have reserves of 40% or  more.

Just this afternoon, we have gained the coveted investment grade rating from Fitch. What it means is that the Philippines is safe enough to invest in. Imagine if a portion of the expected foreign  investment is poured into Mindanao.

At the very least, Aquino should refrain from recycling politicians into his Cabinet, especially like the sensitive and critical Department of Energy. How many DOE secretaries did we have in the last 5 years? Every time a new face sits at the DOE throne, all the pending and ongoing projects are delayed, scratched or "reviewed". We have not had any technocrat at the helm of DOE since the late Geronimo Velasco of Marcos' time, except probably Mr. Vince Perez.

In the meantime we can only shed tears and watch the people of Mindanao carrying the power shortage cross to Calvary. I don't want to see them nailed there.
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Note added on April 8: Napocor has warned that Mindanao power situation will get worse next month (May) due to decreasing water levels at Lake Lanao. The deficit is now 121 MW.

Arroyo forgets the fourth “E” in her SONA

Well, almost.

In her supposedly last State of the Nation (SONA) address yesterday before Congress, President Gloria Macapagal-Arroyo talked mainly in glowing terms, about her administration’s achievements since she first came into office in 2001.

Yes, the GDP grew from $86 billion in 2001 to $187 billion as of last year, and we have had 33 quarters of uninterrupted growth. The figures are cast in stone, so it is almost impossible to dispute these. What is not mentioned though is that the GDP number for instance is puny compared to our neighbors’ and it does not tell anything about the distribution of wealth. Our growth rates are tepid at best compared to the sizzle at some of our neighboring countries.

The achievement, she says, were accomplished due to her administration’s focus on three E’s—economy, education and environment—which are considered pillars of the economic progress. What was given a casual mention was the fourth E—energy—which I would consider to be one of the basic infrastructures to be given priority if the country were to progress beyond mediocrity. The other two are transportation and telecommunications.

She touted the passing of the EPIRA—the Electric Power Industry Reform Act of 2001—as a cornerstone on the path of reform, but forgot to point out that after nine years, the promised benefits of the energy liberalization has not taken hold: the target level of 70% of the power asset privatization has not been achieved, while the assigning of Independent Power Producers (IPP) administration has not really budged from first base.

These two requirements have stymied the real opening of a competitive power sector.

She also mentioned the passage of two landmark pieces of legislation on energy—the Biofuels Act of 2006 and the Renewable Energy Act of 2008—as part of her crowning glory, but the situation on the ground is not that impressive.

True, the mandated biodiesel content of 2% and an ethanol mix of 10% have been implemented, but there’s not much push to higher biodiesel or ethanol mix. No, the motorists should not be compelled to use them; but they should be educated on the advantages and limitations of these fuels mix.

The RE Act on the other hand, was passed on the philosophy that if you build it, they will come. No such torrent of new investments in renewable energy sources could be felt. Intentions are there, but laying down upfront cash is altogether different.

Part of the reason is that the implementing rules and regulations (IRR) of the Act has only come out very recently—almost a year since the bill was enacted into law. Even then, the detailed IRR of two of the most important provisions, those of the feed-in tariff and the renewable portfolio standards (RPS), are sorely lacking. Without these, investments in renewable energy resources, in particular, solar and wind could not be expected to take off.

Arroyo claimed that with these twin Acts, the populace should expect lower electricity bills soon. It is not clear however, how this would come about. On the contrary, without an attractive feed-in tariff and a well-defined RPS, investments in renewable energy would in fact jack up the prices of electricity.

Perhaps the lack of firm commitment or a report card on energy is a tacit acknowledgment that much is still needed to be done on this sector, if the country is to leapfrog forward and not just nonchalantly chug along.

Perhaps omission of the fourth “E” in the SONA was deliberate.

Energy gets a paltry $60 million out of the $1.336 billion World Bank funding of RP development projects

Ten development projects for the Philippines totaling a combined cost of $1.336 billion have been proposed by the multi-lateral lender World Bank as part of its commitment to the country.

Of these, the biggest funding goes to the proposed $682 million Light Railway Transit (LRT) Line 1 South Extension project which will be implemented by The Light Rail transit Authority (LRTA).  This is followed by the $180 million Cavite-Laguna North-South Highway project to be implemented by the Department of Public Works and Highways.

The energy sector gets a paltry total of $60 million which consists of two projects: one, $40 million is allotted for Additional Financing for Rural Power project which is unspecified, but emphasizes renewable energy and mining and to be implemented by the Department of Energy; and two, the Ethanol Plant Wastewater Biogas project which is to be implemented by Roxol Bioenergy Corp, a private company.

Why, the seemingly lopsided bias against the energy sector?

The energy sector is one of the least developed infrastructures of the country which ought to receive considerable attention from out policy makers.  This underdevelopment is starkly manifested by a not so robust generation and transmission infrastructure and high cost of electricity which is the highest in the region next only to Japan.

The World Bank and other multi-lateral financial institutions count on the host country to provide the necessary input for them to fund the required development projects.

If so, are our energy policy makers blind to the needs of the energy sector?

Off the head, one can recite a litany of projects in the energy sector that demand attention and funding:

·         Energy policy: We have just passed the Renewable Energy Law, yet the implementing rules and regulations as well as associated legislation have yet to be worked out. These are not easy projects. For example, putting in place a viable feed-in tariff or a renewable portfolio standards cannot be made overnight; much research and analysis need to be made. What about net metering and planning a distributed grid?

·         Wind energy: We don’t even have a reliable wind energy map. Shall we just depend on a study of the U.S. National Renewable Energy Laboratory (NREL) to guide us in developing our wind energy resources? A more detailed wind energy map would go a long way towards encouraging private investors to put up wind farms. What about local research?

·         Solar energy: Again, a map of the solar energy distribution in the country is at best, sketchy. What about the development of low-cost solar panels? How about helping the struggling researchers at Ateneo and U.P.?

·         Geothermal energy: While we take pride in being the second in geothermal power production worldwide and having produced local talent, these competitive advantages would easily vaporize into thin air without a sustained effort at continuously studying and developing these indigenous resources.

·         Energy efficiency: We only have a nascent energy efficiency movement.

And so on.

The World Bank cannot be blamed for putting dimes and nickels to our energy sector. We are more to blame of not getting enough financial support if we cannot articulate what needs to be done in the sector.

Making energy experts out of our legislators

The Senate has finally passed the renewable energy bill on the third and final reading after languishing for eons at the committee level. Now, it is up for Congress to reconcile both the Senate and House versions before the bill could be signed into law.

The news is a welcome whiff of fresh air; a respite from endless bickering among senators and parade of scandal accusations.

Why should our lawmakers take years to "read" important pieces of legislation? Due to delays in reading,  some bills are overtaken by events that they are no longer relevant. An example is the law dismantling the telecommunication monopoly years back. That law requires the new entrants to put up x kilometers of landlines if they wanted a piece of the action. Due to delays, the wireless revolution made many of these landlines virtually useless and nearly drowned those who did the mandatory roll out.

Nowadays in the U.S., energy issues occupy as much prominence and generate as much debate as Iraq and Afghanistan. In July for example, a bill to curb excessive speculation on oil was sponsored at the height of the oil price madness. This comes on the heels of a landmark passing of the energy bill of 2007. On the pipeline are a highly complex legislation on carbon emission through a cap-and-trade program and a carbon tax.

These pieces of legislation are highly involved and demand extensive research and voluminous background material.

What makes the U.S. energy lawmakers seemingly expert in this area whom I would imagine to be of similar breed as our local donkeys?

The September-October issue of EnergyBiz, a leading and award-winning publication in the energy sector, offers an explanation. On complex issues like futures trading, emission offsets and incentives to alternative energy developers, members of Congress usually turn to little-known Congressional Research Service (CRS) office.

Located across the Capitol, the CRS is one of the three major agencies that help Congress perform its job well; the other two being the Government Accountability Office (similar to our Commission on Audit) and the Congressional Budget Office which assists in determining the cost of legislation and other budgetary matters.

What makes it different from the energy committee staff for example, is that it is non-partisan and is not associated with any of the political parties or with the executive branch. The CRS listens to lobbyists but considers their position with healthy skepticism. It shifts through contradictory reports, verifies the veracity of data sources, and is ready to shoot down assumptions forwarded if need be.

For example, during the debate of the Clean Air Act of 1990, the CRS both examined the wide gap between the Environmental Protection Agency's cost estimate of $25 billion for the industry as against a claim of $80 billion by the National Association of Manufacturers.

We need a similar body to advise our honorable ladies and gentlemen in Congress on such matters as energy policies, alternative energy incentives, science development, consumer protection in the face of melamine and endosulfan scares, drugs policy and the like.

On energy, the Department of Energy can only do little, as it is beholden to its boss at Malacanang, and is subject to political machination come appointment time and budgetary allocation.

Like its U.S. counterpart, this proposed body should be composed of experts in energy, and doing full-time work in support of energy legislation. Its professionals should constantly monitor the radar screen of energy development, energy innovation and worldwide trends in energy policy.

If one observes a senate session during those few times when its members are actually talking about sensible legislation, much of the time is spent on points of clarification simply because our lawmakers are not well-grounded on the subject at hand. All the finer points of legislation should have been resolved even before a proposed legislation is brought before the members of a committee--not during a plenary session.

One cannot just pull out an academic teaching heat transfer and declares him a resource person and an expert on energy efficiency. Or hire a fresh graduate in science and ask her to research on energy policy.

Creating meaningful energy legislation cannot be relegated to the same level as the congressmen's favorite bills of renaming streets and towns in honor of their deceased forebears.

DOE plans yet another energy plan extending to 2030

THE GOVERNMENT, through the Department of Energy, is at it again.

In a recent briefing, Energy Secretary Angelo T. Reyes told the media that the Philippine Energy Plan (PEP) would be extended to 2030 as the 2005-2014 plan was "not applicable to some regions" which can be interpreted as an oblique admission that the original plan was full of holes, to put it kindly.

We are only three years into the original plan, yet we are effectively dumping it in the guise of extending it far into the future when nobody wouldn't, or couldn't, validate the plans.

The 2005-2014 PEP targets a 60% energy self-sufficiency level by 2010 and pursues effective reforms in the power sector. In effect, these aims are no longer valid.

The major problem of such a plan is not so much on the length of time, but on the soundness of the content. If one looks back at the 2005-2014 PEP plan, some are bordering on the grandiose bereft of solid fundamentals. Even a simple assessment of the electricity supply and demand situation for the next few years was off the mark.

Some aims were more of motherhood statements than concrete plans. For example, the plan aims to make the Philippines the number one producer by 2014 I believe, yet no rigorous verification was made whether such listed areas were in fact capable of producing the indicative MW outputs. If one were to compare our geothermal program with those of others such as the US and Indonesia, the gap between our production with US will widen by a huge margin, and we would be eating the dust of Indonesia even if we only count the committed and ongoing geothermal projects of the latter. We will surely slide to third, or even fourth worldwide.

For another example, the plan declares that we would be the premier wind energy producer by the end of the period, yet there is not even a comment whether the infrastructure to achieve such aim is in place. The Department cannot even push for the passage of a renewable energy bill which could be a springboard of a nascent renewable energy industry to significantly grow. The renewable energy bill itself, which is pending in congress for ages, does not have much substance.

The Department even relies on a study by the U.S., National Renewables Energy Laboratory (NREL) for the inventory of our own wind energy resources.

What the Department could do for example, rather than making yet another grand plan that stretches far into the future, is to set down and carefully study the implications of the renewable energy bill's provisions.

The end product could be white papers on renewable portfolio standards, how to set up the net metering infrastructure, or even the pros and cons of a feed-in tariff system which jumpstarted the wind and solar power industries in many areas of the world, but did not merit any mention at all in the RE bill.

Our legislators are too busy politicking to come up with really outstanding pieces of legislation that could help shape our energy policy. At the very least, the Department could pitch in to educate our lawmakers. Whatever comprehensive energy policy we have, if any, would now be sorely antiquated.

In the meantime, the international energy industry is in a swirling vortex, with energy and commodity prices in a wild roller coaster ride, and all our policy makers could do is watch helplessly in the dust, and wonder what has happened.

Capital intended for energy infrastructure around the world has been zigzagging across national boundaries, looking for worthwhile projects, but most are bypassing the country. Why, the DOE should ask.

Trading of carbon credits and other energy related financial instruments has been swelling at a blistering pace for the last two years, with the voluntary carbon market-- as opposed to the regulated carbon market-- tripling each year in value with hardly anyone from our energy policymakers noticing. The generators of these trad able instruments come mostly from renewable energy projects from developing countries, the Philippines included, only if we have put the right infrastructure in the first place.

There are many other worthwhile projects for our DOE other than crafting yet another nebulous energy plan.