Energy chief now admits crisis real, action 'VITAL
Monday, January 31, 2005
"There is no looming power crisis for the country, contrary to speculations," he said then.
He was referring, in particular, to the prediction by Federico Lopez, president of the Meralco-affiliated First Generation Holdings, that a power crisis might happen as early as 2007.
Today, however, Perez seems to be reading from the same page as Lopez.
In an interview with the Inquirer and InqTV the weekend before he announced his resignation, he noted that supply in Luzon was sufficient until 2008, but that in Visayas and Mindanao it was "somewhat thin."
The one-page summary paper his office had prepared was even clearer. "Power crisis," its headline read. "The country is facing an imminent power supply shortage. Strategic power planning and coordinated action is VITAL in order to avert this potential economic disaster." (Emphasis in the original.)
DOE paper noted that Mindanao needed to build additional capacity "beginning 2005."
But in a briefing before Inquirer editors, Lopez effectively upped the ante, saying: "To us, a reserve crisis is already a power crisis."
He pointed to in-house projections which showed that, based on the assumption that the economy would grow by 5 percent a year, reserves would be insufficient by 2006.
Updated energy plan
The DOE's updated Philippine Energy Plan (PEP) for the 2005-2014 planning period is more specific. Luzon and Visayas will start needing additional capacity by 2008, while Mindanao is already short of capacity this year.
By 2008, the Luzon grid should have at least 150 megawatts (MW) of new capacity. In the six years after that, the grid will require more than 1,000 MW in additional capacity each year: 1,050 MW in 2009 and 2011-2013, 1,600 MW in 2010, and 1,200 MW in 2014.
The Visayas grid will require another 100 MW in new capacity in 2008 and 2012-2013 and 150 MW in 2011 and 2014.
As early as this year, the Mindanao grid will need 150 MW in new capacity. It will then require 100 MW in additional capacity in 2006-2007 and 2012 and 50 MW in 2008-2011 and 2013.
First Generation sees Luzon needing new capacity by 2007 or 2008, depending on the growth of the economy. At the same time, its in-house study shows that the Visayas and Mindanao grids are already experiencing sporadic and even rotating brownouts.
While, according to DOE forecasts, the Luzon grid will need 7,200 MW in new capacity in the next 10 years, the committed capacity in the country's biggest load center is a measly 65 MW: 25 MW from the North Wind Power Corp. wind power project in Bangui Bay, Ilocos Norte and 40 MW from the Philippine National Oil Co.-Energy Development Corp. (PNOC-EDC) wind power project also in Ilocos Norte. The two projects should come on stream by this year and the next.
The Visayas grid has more capacity commitments at 255 MW, but this amount still falls short of the 2005-2014 additional capacity requirement of 600 MW.
Of the 255 MW in committed capacity, 151 MW will come on stream this year: 110 MW from the transfer of the Pinamucan diesel power plant from Batangas to Dingle in Cebu, 3.4 MW from the Guimaras diesel power plant and 37.5 MW from Mirant Philippines Corp.'s diesel power plants in the main grid.
Another 60 MW from the optimization of PNOC-EDC's Northern Negros and Palinpinon geothermal power facilities and 24 MW from the Talisay bagasse co-generation plant in Negros will be added in 2007. The remaining 20 MW will come from the Bais bio-energy facility in Negros by 2008.
Capacity commitments in Mindanao are higher still at a total of 285 MW, but are still lower than the total additional capacity requirement of 850 MW in the 10-year planning period. The additional capacity will come from the transfer of power barges 101, 103 and 104 (75 MW) this year and from the 200-MW Mindanao Coal Corp. coal-fired power plant that will come on stream by 2010.
Hardly any investor interest
As if the imbalance between prospective demand and committed capacity over the next 10 years is not bad enough, there are hardly any plans on the drawing board right now to put up new plants.
Because setting up a power plant takes some four to five years, with the planning and financing that go with it, Lopez said there is no better time than now to start planning to build one.
Right now, the year when the crisis will start is secondary, he says. Planning and securing financing for and building the right kinds of power plants should be the focus of our time and attention if the crisis is to be averted.
A return to the vicious cycle of power crisis that the country experienced in the early 1990s is still a possibility if nothing is done now to stop it, Lopez warns.
If, for example, the rotating brownouts of the early 1990s-as many as 299 days in 1993-come back to haunt us, the need to build new plants will be so urgent that a lack of thorough negotiation of contracts may take place.
This will result in high electricity rates for a number of reasons: the contracts themselves, the possibility of overbuilding plants, which can lead to low capacity utilization, and the small number of players.
Return to rotating brownouts?
As with what has been happening these past years, any jump in rates invites consumer outrage. This outrage can and has actually pushed the government to exert extra effort to ensure that consumers do not remain outraged for long.
An unstable regulatory environment then develops, a major turn-off for potential investors.
With electricity rates not reflecting the true costs of power generation, demand will most likely outstrip supply in a short span of time. Which will bring the country back to the rotating brownouts that it is trying so hard to avoid.
"We don't have much time to meet the power capacity requirements. The sooner we move now, the more options we have,'' Perez said.
"Therefore, we'll be forced once again to bring in IPPs (independent power producers), and our negotiating leverage will be weakened because of the urgency of getting additional capacity,'' he added.
Reforms needed now
The birth of Republic Act No. 9136, or the Electric Power Industry Reform Act of 2001 (Epira), paved the way for a healthier and more stable power industry. Or, at least, that was the idea behind the law.
Many of the Epira's provisions, however, were not implemented. Some of these include the removal of different sorts of cross-subsidies three years upon the implementation of the law, the establishment of the wholesale electricity spot market within a year of the law's effectivity, and the implementation of retail competition and open access.
"Many of the reforms have been either delayed or stalled, and the power industry is not yet attracting the kind of investments we should be getting to keep the sector sustainable," says Lopez. "If we keep this up, sooner or later, we will run into a shortage. We should get the reforms back on track before time runs out."
posted by philpower @ 9:33 AM,
