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 total capacity of 405 MW, of FDC Utilities Inc.’s power facility in Misamis Oriental. The first unit’s commercial operation is targeted in June, followed by the second unit in September and the last unit in December

 Another 100 MW from SEC, with commercial operations set in November.

 A 25-MW hydro power project of Agusan Power Corp. is set for commercial operation in March.

 Also, a 10-MW biomass project of Lamsan Power Corp. and a 2.6-MW biomass project of Green Earth Enersource Corp.—both in Maguindanao—are expected to come on line in February and May, respectively. DOE data indicated that there is an additional 763.99 MW of power projects also lined up this year, but the agency has categorized these under “indicative power projects” because these have yet to undergo commissioning.

“Indicative because the power producers have yet to set the target testing and commissioning which are different from target commercial operation,” Energy Secretary Zenaida Monsada.

On track

The DOE, according to Monsada, continues to monitor if these power plants are really going to be commercially available as scheduled. She also said these are enough to ensure the stability of the region’s power supply. “We don’t see any problem because new power sources are coming in. Aboitiz is one. Conservation of water is also being put in place to address effects of El Niño.”

However, there is nothing the DOE can do if these power plants do not come on line as scheduled. It has no authority to penalize the power producers for failure to meet the target dates since they are the ones that set the schedule, not the DOE. Former Energy Secretary Carlos Jericho L. Petilla said there are no penalties imposed on power producers if they fail to meet their original target schedule. Any delays, Petilla said, would cause companies to incur financial losses.

“They do not want that happening, of course,” Petilla explained.

The power producers, for their part, said they would commercially deliver the power as scheduled.

“The second unit of TSI that’s 150 MW—is set for commercial operation by February 2,” Aboitiz Power President Antonio Moraza assured in a text message last week.

Alsons’s SEC Unit 1 is presently undergoing commissioning, Alsons Consolidated Resources Inc. (ACRI) Vice President for Project Development Joseph Nocos said in a text message.

“SEC Unit 1’s commercial operation is end-February, at the earliest,” said Nocos, adding that “latest (commercial operation) is mid-March.”

With SEC’s Unit 1 and TSI’s two units running by end-March this year, Nocos said the additional power-generating capacity “will plug the gap grid-wide.”

According to the DOE, the first unit of SCMPC’s coal plant in Davao del Sur and FDC’s first unit are on track to begin commercial operations as scheduled. “Based on the latest or last published outlook, yes, that is the timeframe,” Officer in Charge assistant Secretary Patrick Aquino said. UP Prof. Rowaldo del Mundo believes that the Mindanao’s power crisis will be solved this year as more power plants come on line very soon.

“Capacity reserve is at 83 percent of peak demand. This means that even if we have seasonable variation output of hydro plants, we have enough supply if these new power plants come in,” del Mundo said during the recent Energy Policy and Development Program conference held in Makati City.

Transmission constraints

But what good are these new power plants if transmission-related problems persist? Transmission lines are vital to the chain of power supply. Electricity can’t reach end-consumers with the absence of transmission lines.

There has been a series of bombing incidents involving the transmission towers managed by the National Grid Corp. of the Philippines (NGCP). Normally, when these untoward incidents happen, the grid operator can finish the repair and restoration of damaged facilities in a week or two, depending on the extent of damage.

Based on NGCP data, 19 towers were targeted in 2015. Of this figure, nine were toppled while seven were damaged. Moreover, three failed attempts were recorded. NGCP said improvised explosive devices were recovered in three towers. For this year, two NGCP towers have already been bombed.

More power projects are lined up beyond 2016, based on DOE data on indicative power projects. The DOE said the additional capacity, should these power plants are built, will be more than enough to cover the projected increase in demand for the years ahead. Hence, an oversupply could happen sometime in 2019 and beyond. An interconnection plan, which would help distribute excess power from Luzon and the Visayas to Mindanao and vice versa, has yet to be rolled out.

AboitizPower CEO Erramon Aboitiz, in an interview, could not stress enough the importance of these transmission facilities.

“What adds complexity to these power projects is not just building power plants, you have to combine it with transmission lines and too many other things. If there is no transmission line what happens to the plant? The plant loses money so at the end of the day it’s like the plant was not built at all,” he said.

Nocos said the situation facing the NGCP is “challenging,” but he believes it can be solved with the cooperation of the NGCP, the national and local governments, and the various stakeholders.

“In general, the Mindanao grid is capable of providing reliable transmission services to generators and off-takers on the island. I believe that whatever problems that NGCP is experiencing in some segments of the grid, while challenging, can be solved.

The many new power stations that are being built, added Nocos, are a testament to the confidence that the private sector has in the growth prospects in the grid and the capability of the NGCP to transmit power.

For his part, AC Energy Holdings Inc. President John Eric Francia said the grid constraint issue affects the whole of Mindanao. Therefore, the government must also assist in finding a solution to the problem. AC Energy is the development arm of the Ayala group in the energy sector. “In the past, when a tower is bombed, the NGCP can fix it in a few days. This time, however, the situation is different. We are not completely shielded from this issue,” Francia said in an interview.

The government did step in. A taskforce was formed.

“We are creating a taskforce, an interagency taskforce. The proposal is for the Executive secretary to head the task force,” Monsada said.

She said the participation of the Philippine National Police (PNP) and the Department of National Defense (DND) is extremely important in mapping out a security plan.

“Bombing is a security issue. So, we need the involvement of the DND and PNP. That will be the main thing to tackle,” Monsada said.

While the military is being tapped, government authorities through the involvement of local leaders are convincing the landowners to allow entry of NGCP maintenance personnel to restore the transmission towers.

The NGCP legally holds the right of way in the areas near and around the transmission towers and posts. The assets, however, are still government-owned.

Grid collapse

Balisacan also commented that the recent incidents involving destruction of transmission towers, lines, and poles are “quite disturbing.” The NGCP has even warned of a possible grid collapse should the remaining transmission line, which delivers power from the Napocor-owned Agus hydroelectric power plant, encounters a technical glitch.

By grid collapse, the NGCP meant that brownouts would likely happen. “It’s the kind that takes several hours to recover from restoration. It’s like restarting a smartphone. So, it takes time,” NGCP Spokesperson Cynthia Alabanza said in an interview. No one knows when the grid may collapse, but right now Alabanza said the grid is “vulnerable” and that enough supply may not solve the problem entirely.

“The possible grid collapse is not imminent but its vulnerability is something we are very much concerned of. It’s like driving without a spare tire. The network is one entire system. If you let one part remain damaged then the entire grid remains impaired. We are happy with all the new plants coming in, but we are not happy if not all portions of the grid are not operating at its full capacity,” the NGCP official stressed.

Balisacan, meanwhile, said the new power plants would “definitely help solve the problem,” but the “issue on vulnerability” of transmission facilities remains.

“As I’ve said, Mindanao has a huge potential. Aside from addressing vulnerability, the issue on affordability is also a concern. That’s why the peace and order situation there must be resolved at the soonest time possible,” he added. The Maramag-Bunawan 138-kiloVolt (kV) line is the remaining line that currently delivers power from the Agus Hydro Complex. If it is in any way compromised, no power will flow from the remaining Agus hydro facilites to south of Mindanao where the bulk of power demand is located.

Both Davao City and General Santos City are in the south, and are in real danger of being completely cut off from the bulk supply coming from the hydro facilities, the NGCP said.

Only one transmission line is operational because the NGCP has yet to repair the Agus 2-Kibawe 138-kV line.

Agus 1 and 2 hydro facilities are connected to the grid through Agus 2-Kibawe 138-kV line.

The NGCP has yet to restore bombed Tower No. 25 along the Agus 2- Kibawe 138-kV line in Ramain, Lanao del Sur, due to uncooperative land owners. The line has been unserviceable since Christmas Eve, when it was bombed by unidentified lawless elements.

The NGCP will shoulder the cost of repairing the damaged facilities, but this will eventually be passed on to the consumers as authorized by the Epira. The owners of the property where the tower is located, Johnny Sambitori, Intan Sambitori and Naguib Sambitori, refused NGCP entry to repair the damaged transmission facility. Negotiations with the Sambitoris were unsuccessful because the owners alleged that the government failed to pay their claims long ago, the NGCP said.

“Add to this Mindanao power situation is the toppling of transmission towers by lawless elements and the refusal by landowners to allow entry of NGCP maintenance personnel to cut tree branches that have grown and reached the high-voltage transmission lines. The result: electricity cut-off to urban and rural areas in southwestern Mindanao or in the Zamboanga peninsula,” Committee on Energy Chairman Rep. Reynaldo Umali of Oriental Mindoro said.

He said people in Mindanao are still suffering from brownouts because reserve capacity is still low or drops to almost zero, especially during instances of forced outages of the aging 200-MW Steag coal power plants in Misamis Oriental.

Umali believes that government can do something about it, “with its awesome power, failing which, no one else can.”

So Monsada was asked again if Mindanao’s power woes could be resolved soon, albeit other pressing issues, she confidently said, “Yes, of course. It can not be done overnight, but we will get there.”

The people in Mindanao, meanwhile, will just have to take her word for it.