Reliable power needed for ‘Build, Build, Build’ agenda

By Hector Zabala – November 16, 2019 at 07:20 pm

Despite assurances from the Department of Energy of ample electricity supply, businessmen are worried over an impending power crisis.

Reliable power needed for ‘Build, Build, Build’ agenda

Last month, the Luzon grid experienced yellow alerts for two consecutive days, bringing the number of yellow alert days this year to 45. That’s more than the total of 39 yellow days since the start of President Rodrigo Duterte’s administration, from mid-2016 to 2018.

Representatives from the real estate and business process outsourcing sectors, two of the country’s booming industries, expressed concern over the possibility of less than steady supply of electricity in the future, noting that investors and buyers in the former, as well as the 24-hour operations of the latter, are dependent on power as a crucial component of the government’s “Build, Build, Build” infrastructure program.

The BPO industry relies on reliable power to maintain a high level of competitiveness as more firm providers widen their portfolio of non-voice services in new growth areas outside Metro Manila, according to Santos Knight Frank, a real-estate service provider in the Philippines.

“BPO operations need steady electricity supply, including backup sources—this, and the Philippines’s demographics are the ‘secret sauce’ of the BPO industry’s growth,” said Rick Santos, chairman and CEO of SKF.

The real estate sector, one of the economy’s consistent growth drivers for the past decade, looks forward to the impact of more stable and reasonably-priced power for their property developments, with the recently successful conduct of the competitive selection process.

“Reliable sources of power keeps prices of real estate developments stable for consumers, and adds value to the concerned project,” Jeffrey Ng, president of Cathay Land, told the Manila Standard. “This serves as an inspiration, or benchmark, to future projects from developers of all scales.”

Antonio Jaime Jose Fernandez, strategic management consultant of Menarco Development Corp., said: “Power is important for developers…this is what our customers want. If the government and private sector can deliver on this, this would be an ideal scenario.”

Red alerts

Last summer, during the height of daily yellow and red alerts, the DOE issued a statement that the public should not worry about yellow alerts.

But only two new generating plants started operating this year—SMC Consolidated Power, with a capacity of 150 megawatts and San Buenaventura Power with 500 MW, for a total of 650 MW.

This falls short of the 1,665 MW that the DOE in December 2018 said was needed by 2019 to assure stable supply and price.

Three others plants—AES Masinloc Power Partners, 300 MW; GNPower-Dinginin, 600 MW; and Solar Philippines-Tarlac—are in various stages of licensing, construction or commissioning. Due to red tape, it took San Buenaventura seven years to start up. The question in the minds of business stakeholders: when will the rest finally be cleared to run?

Infrawatch PH, an infrastructure-oriented think tank, warned last week that at650 MW, the two new generators translate into only 4-percent increase in capacity. Yet DOE forecasts demand to grow 4.9 percent a year till 2040, based on NEDA’s GDP projections.

Delayed approval

Terry Ridon, an Infrawatch PH convenor, warned that a power crisis could dampen the holiday season due to red-tape delays in the energy sector.

Ridon claimed that there had been a delay in the approval of six power supply agreements in the Manila Electric Company’s concession area.

The former House energy committee member said the CSP certifications required by the Energy Regulatory Commission have not yet been issued.

The DOE should issue the certifications “in the soonest time,” Ridon said.

What were the DOE’s solutions to address the looming power crisis? One is emergency power supply agreements with selected power plants. Another is to get big factories to disconnect from Meralco, Luzon’s largest distributor, and run their own small generators. Both are expensive propositions, industry observers noted.

Meanwhile, there are reports of delayed generation plant startups from non-issuance of permits by the ERC. Plants are reportedly rejected for regulatory evaluation due to differences between DOE and ERC.

Ridon lamented the “regulatory foot-dragging and finger-pointing” between the two agencies.

“With more than a month since the CSPs in the Meralco concession area, the DoE should be reminded that the President’s 30-day timeline for cabinet-level regulatory approvals had already been breached,” Ridon said.

Industry stakeholders have not missed the irony of a looming power crisis with committed plants that are either still under construction, or commissioning tests, waiting at the wings while the DOE and ERC are acting on the applications.

Despite its growing economy, they point out that the Philippines will have the same problems next summer, and possibly the succeeding summers, with the middling generational capacity in Luzon totaling only 16,133 MW.

Economic ruin

A group of consumer welfare advocates also blame the indecision of regulators, and the courts, on applications and cases related to new power plants.

Laban Konsyumer president Vic Dimagiba noted that petitions were pending for years in the ERC and the courts, particularly for baseload power plants—generators that run round the clock—that would have added capacity to the grid.

Industry stakeholders have called for the DOE and ERC to step up efforts to avert a full-blown power crisis. Dimagiba proposed that the DOE revisit the comprehensive Power Action Plan for the Philippines that was developed by Japanese experts and presented to Manila by Japan’s Ministry of Economy, Trade and Industry in March 2017.

The said plan aims to help solve electricity problems in the country by improving power-generation efficiency through the upgrading of existing coal-fired and hydroelectric plants and the use of the country’s abundant natural resources such as geothermal, wind and coal, among others.

The question for electricity stakeholders: is the government serious about building new power plants?

If not, the Philippines could be on the road to economic ruin because of a power crisis.