Government, private sector scramble to find a solution to Mindanao’s power woes

by Lenie Lectura – February 11, 2016

from Business Mirror

Power-hungry Mindanao is looking forward to having 1,000 megawatts (MW) of new power-generating capacity this year—assuming that all new power plants committed by power producers make good on their promise.

But, will this be enough to solve Mindanao’s power crisis?

Mindanao is beset by numerous problems. Topping the list is the region’s peace and order situation. However, resolving the power supply problem is equally as important as finding a permanent solution to end the conflict in Mindanao.

‘Inherited’ problems

President Aquino, whose term will end in a few months, is being criticized for failing to solve the Mindanao power crisis. Critics said the worst of Mindanao’s power woes happened during his six years in office Mr. Aquino, however, disputed this, saying the problem had already existed even before he assumed office.

“This was the situation that our administration inherited, and the results were clear: In recent years, Mindanao has had very little energy surplus,” the President, who was invited as guest of honor at the inauguration of Aboitiz Power Corp.’s coal power plant in Davao last month, told the crowd. He said the rotating brownouts in 2010 not only “frustrated our countrymen,” but also “stifled local economies.”

“This was a problem we had anticipated even before we took office, which is why, from day one, we made a stern commitment to foster an environment that would encourage the private sector to make massive investments in energy in Mindanao.

We knew, however, that even if we succeeded, these plants would not begin operations overnight. Even the most basic power plants, after all, take around three to four years before completion,” Mr. Aquino said.

Outgoing Economic Planning Secretary Arsenio M. Balisacan, in an interview, stressed the importance of Mindanao to the overall growth of the economy.

“The potential of Mindanao is huge,” Balisacan said.

In 2014 Mindanao’s contribution to GDP increased to 14.4 percent from 14.32 percent a year ago.

To sustain its growth, Balicasan said achieving peace in Mindanao is a key factor.

“To sustain it, it needs to have peace in the area. Security must be tightened. Infrastructure in Mindanao should be given a priority. Resolve the peace and order situation and, I think, everything else will be addressed,” he said.

The President briefly narrated how the power crisis in the region, in which more than half of the energy supply is sourced from hydroelectric plants, started. Mindanao has suffered several power crises primarily brought about by droughts that, because of its over dependence on hydro power, resulted in a shortfall of power with outages extending up to eight hours a day during the summer months. With the region’s economic growth over the years, the island’s need for additional capacity fell short because it was not feasible for private capital to put up the required capacity and compete with the National Power Corp.’s (Napocor) low selling price. As a result, power reserves in Mindanao dwindled, causing the power crisis to recur more often in recent years.

The Electric Power Industry Reform Act (Epira), meanwhile, forbids the government from putting up its own plants, and the private sector simply could not compete with the artificially low prices.

“The result: As the demand for electricity grew, the supply didn’t. In fact, the government-owned hydroelectric plants that were once abundant sources of energy suffered from a number of factors, including the lack of regular maintenance, the vanishing watersheds and the worsening effects of climate change,” Mr. Aquino said.

New power source

Mindanao was reeling from the power crisis when the private sector made a bold move to build new power plants—most of which use coal as this is cheaper—to reduce the region’s overdependence on hydro and plug the shortfall in power supply. It takes an average of five years to build new power plants. Just recently, Therma South Inc. (TSI), a subsidiary of Aboitiz Power Corp., inaugurated its 300-MW based load power plant.

The first 150-MW unit of the power plant started commercial operations in September 2015. The second unit is undergoing reliability tests and will be in full commercial operations this month. Aboitiz said it took the company five-and-a-half years to build the power plant at a cost of P35 billion. This plant’s dependable capacity is roughly equivalent to one-fifth of the Mindanao grid’s highest peak demand in 2015.

TSI’s new power plant is just one of the many new power plants that promise to end Mindanao’s power crisis. For this year, a total of 1,096.6 MW of power-generating capacity will be added to the Mindanao grid. Of this capacity, 1,059 MW will come from coal power plants, 25 MW from hydro, and 12.6 MW from biomass. The figures are based on Department of Energy (DOE) November 2015 data, the latest available information the agency has provided.

The following coal power facilities are expected to come on line this year:

 100 MW of Sarangani Energy Corporation (SEC), a unit of Alsons Power Corp., with commercial operations set next month

 150 MW of TSI a subsidiary of AboitizPower, with target commercial operation also next month

 150MW of San Miguel Consolidated Power Corp. (SMCPC) in Davao del Sur. The target commercial operation is in March

 Another 150 MW of SMCPC in June

 Three units, with a tot