David Celestra Tan, MSK
4 September 2016
All these confusion in the energy development strategy for the country happens because the Philippines does not have a long term energy development plan. Every time there is a new government, new energy committee chairmen in the Senate and in the House and everytime there is a new energy secretary we tinker with an energy mix, power cost reduction, power supply procurement for pass on charges to consumers, clean energy, renewable energy, climate change, grid system reliability.
It is time that we learn the realities of power, its development, and rates.
1. Power Development and Strategy is so important to the country, its industry and economy, and well being of consumers that it needs focused attention and clear direction from a very qualified government agency with consistent stewardship.
2. Power projects and solutions require advance planning and implementation. Economical and clear power require 3 to 4 years to build and quick power sources are both dirty and expensive.
3. Power supply is imbued with public interest and the people will hold the government responsible, regardless of privatization and deregulation, whenever there are power problems: shortages, rates spikes, environmental damage. The government cannot cop out and wash their hands and say it is sorry it cannot do anything because the sector is privatized and deregulated. The sooner we all realize this the better.
4. It cannot be left totally in the hands of the private sector that naturally will gravitate towards what’s faster and what’s more profitable and investment safe.
Power Planning and the Department of Energy
Currently the task of preparing a Philippine Energy Plan, the closest we have in terms of energy planning, is with the Department of Energy as mandated under Section 37 of the Epira Law.
The DOE is required to “prepare and update annually a Power Development Program and integrate the same into the Philippine Energy Plan. The PDP shall consider and integrate the individual or joint development plans of the transmission, generation, and distribution sectors of the electric power industry which are submitted to the Department.”
The DOE will also “develop and update annual the existing Philippine Energy Plan. It shall include a policy direction towards the privatization of government agencies related to energy, deregulation of the power and energy industry, and reduction of dependency on oil-fired plants.
Said Plan shall be submitted to Congress not later than the fifteenth day of September and every year thereafter.
Annually the Department of Energy goes through the ritual of complying with this mandate. Every year it dutifully submits a beautiful and colorful glossy book bound Plan.
The DOE even goes on a road show in various regions of the country to present their plan, actually their hopes and dreams. The DOE Secretary for his part uses the plan for his policy statements. Everyone including the local government officials come away from those presentations expecting that these are the direction for the future and what they should be expecting including energy mix. The precepts of the plan are even used as the justification by the DOE and ERC for the approval of projects.
However, by this time, power industry practitioners know two realities of this plan:
1) The proposed power projects were nothing more than a tally of projects that are being pursued by the private sector;
2) The Department only use persuasion and has no real enforcement teeth to force the private sector to follow the plan.
As an example, the DOE has been announcing that it targets an energy mix of 30% coal, 30% natural gas, 30% clean energy, and 10% others. In total disregard of this energy mix, Meralco signed 4,100 mw of coal projects that will tie up the largest distribution utility of the country for the next 25 years. That means coal will be about 90% of the Energy needs of Meralco and that’s easily 56% of the coal energy for the next 25 years. If we add the coal projects outside the Meralco area in Mindanao and the Visayas, the national share of coal would be easily 80%.
The Competitive Selection Process (CSP) policy of the DOE and ERC that was supposed to be implemented starting on November 6, 2015 was going to give the DOE its long missing opportunity for enforcement of its energy mix policy. Until the CSP was inexplicably postponed by the implementation agency the ERC, paving the way for the signing and filing of seven (7) midnight contracts that will evade the CSP.
Some parts of power development planning specially transmission development is performed by the Grid Management Committee of the ERC that is staffed with power professionals. But then their work and ideas are limited to grid issues and not much in power supply development.
Power Development is a three-legged tower. Adequate supply, fair and reasonable rates, and environmentally responsible. We also need an archipelagic generation and transmission strategy that is best suited for our 10 major islands. Lastly, the country must decide whether low cost power would be a national policy as part of our industrial and commercial strategy. Remember Asian integration is here and import tariff barriers are coming down. Our industries will be slaughtered by foreign competition because all of Asean has lower costs by as much as 40% than the Philippines. We don’t even have a national economic plan to give Philippine companies chances versus the incoming foreign competition. Such neglect.
The drug problem is important but there are so many areas in the country with even larger and urgent implications that need government attention.
Ironically, a lot of sensible power and energy development plans have been donated to the Philippines by the World Bank and the Japan International Cooperation Agency and maybe even by the Asian Development Bank. They are just on the shelves, drawers, and archives.
When government officials and the private sector only talk about adequate supply and when threats of power shortages are emphasized, you know that the other two will be jettisoned. It requires a well thought off long term plan that is implemented consistently by competent and incorruptible people to create a truly sensible and holistic power development.
It is time now that the country remedies the short term and revolving nature of energy policy and planning at the DOE and create a Philippine Energy Planning Commission. We can use as models the Energy Planning Commissions of California and other American states and adopt it to Philippine conditions.
Energy Planning has been a crying need for the country.
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