DOE, other experts see power shortage by 2010 or earlier
Sunday, July 30, 2006
BY RENE Q. BAS, Sunday Times Editor
Is the Philippines, or at least Luzon, headed for a power crisis after 2010—or even earlier?
There are conflicting ideas on the issue on the so-called power-supply "thinning reserves" situation.
Some claim (most of these are green and leftist militant organizations) that there is in fact an over supply. Industry experts, including government people, have been warning of a very tight supply situation.
Some of these experts say that the Philippines will suffer a nationwide electricity-lack crisis in within two years,
First Generation Holdings Corp. President Federico Lopez has warned the electric industry was not attracting enough investments to ensure added power supply. This in effect might lead to very serious consequences.
Investments needed
Lopez said the country needs to attract these investments. "There is a need to fix the power industry as a workable model so investors will know where their capital will go and what returns they will get from their investments."
The country would need billions of dollars to build power generation plants. New power plants take at least four to five years to finance and build.
In a presentation, Lopez said Luzon would likely encounter a power shortfall by next year, earlier than the government-projected 2008 or 2009.
The supply shortfall is already felt in the Visayas and Mindanao. Both island groups are already experiencing lack of actual supply and transmission problems.
The daily power brown-outs—and the blackouts that lasted at least half a day or sometimes two days—helped wreck the Philippine economy during the Cory Aquino presidency. The bad effects of these outages, some analysts say, surpassed the damage caused by the Honasan-led coup attempts.
Right after President Fidel Ramos took office in 1992, he allowed international private firms to build new plants and supply power barges. Until these independent power producers (IPPs) came into being, the state-owned and managed National Power Corp. was the country’s only supplier of power. The NPC contracts with these power plants led to what is now known as the "take or pay provision" which eventually led to the much maligned and hated Purchased Power Adjustment (PPA).
Supply and demand
A power crisis is likely to happen again if both the government and the power sector do not cooperate.
Whenever there is a shortfall, power producers are more likely than not to raise the price of the electricity they provide. That is consistent with the law of supply and demand.
The existence of adequate power supply and reserves in the coming years can only come from a conducive investment climate. This is what the industry as a whole badly needs. And the whole economy for that matter.
At the Wholesale Electricity Spot Market (WESM) which had its initial operation in June, reports have been circulating that the Luzon grid is increasingly getting exposed to the danger of "thinning reserve." The supply- to-demand ratio is apparently affirming the warnings some have been giving: that in fact the power supply reserve has become precariously too little.
An industry insider who spoke on condition of anonymity told The Times, "We do not have a comfortable reserve to stand on and there appears to be a lack of generation reserve. If one or two major power plants conk out, then I am afraid we will indeed be in a very tight situation. Given an uncomfortable power supply reserve, even expensive power plants will be commissioned immediately and these are usually the fuel guzzling power barges whose costs are very very expensive. The need to act on putting up new power facilities is now. A further delay in this initiative may plunge the country into what we all dread—a crippling power shortfall."
DOE action
Last February, amid warnings from "crisis-sooner-than-you-think" experts like Lopez, the Department of Energy was still insisting that Luzon will have enough reserved power capacity—but only until 2010.
By mid-July, however, DOE Secretary Raphael Perpetuo M. Lotilla was announcing that his department had restudied the country’s power development plan and as a result was starting to do something about beefing up the Luzon grid’s reserves.
"In the past, we have had thinning reserves like when Typhoon Caloy hit the Ilijan plant. This resulted in damage to the main transformer and is undergoing repair for almost a month. These are the things we are attending to right now," Lotilla has noted.
The energy secretary admitted that the "structural problems" have "whittled down, and at times even halted" power industry reforms demanded by the EPIRA, or the Electric Power Industry Reform Act.
With thinning reserves, the consumers will end up paying more for their electricity, something that should worry the Arroyo administration, which does not only need to ensure stable and plentiful electricity to nourish industry and commerce. It also needs to prevent brownouts and blackouts that will arrest the decline of its unpopularity and make coup plotters bolder in launching anti-Arroyo schemes.
This is probably why Lotilla has been assuring the public that new generating stations as planned will surely come on stream by 2011—unless, he stipulated, some serious blows of bad luck suddenly come.
Masinloc deal
Definitely, the collapse of the Masinloc deal was something like this hit of bad luck he feared in February 2006.
By July 16, however, Lotilla and his DOE experts were more definitely certain that additional generating capacity would have to be installed to avert the crisis Lopez and many others have been warning about.
The rise of demand is of course based on the notion that all the Arroyo administration’s plans and activities will result in the government’s impressive economic performance carrying on and that foreign and local investors themselves will generate more industrial and commercial movements that will then require more electricity.
The DOE reported that the Luzon grid must build additional generating capacity of up to 2,290 megawatts (MW) by 2014. This is needed because of expected increased demand and also because several of the power plants supplying the Luzon grid are too old and will break down soon.
Peak demand
Peak electricity demand in the Luzon grid is expected to grow annually by six percent until 2014.
The country’s system peak demand in 2005 was about 8,629 megawatts and 74 percent of this demand (6,443 megawatts) was in the Luzon grid.
By 2010 the Luzon grid will have a peak demand of about 7,878 MW, escalating to 9,397 MW by the year 2014, the DOE says.
The Luzon grid’s total capacity is supposed to be 12,128 MW. This includes power generation by plants that need to be retired. The DOE now wishes to make sure that all projects included in so that the "Power Development Plan" of the government be carried out so that new plants become operational by 2010. Otherwise, DOE says, the Luzon grid will face a power shortage.
Visayas and Mindanao
Apparently, the Visayas also needs more capacity—and way before 2014. Panay Island now needs additional supply reserve capacity.
And Mindanao also faces a problem right now. Some 75 MW of power in barges was supposed to be received by Mindanao this year. This has not happened, as only 50 MW arrived.
Why are the so-called militants’ opposed to building added power capacity?
Most are worried that building and installing more generating units costing billions will only be milked by corrupt officials. Some are additionally worried about the environmental impact of power plants and the industrial and commercial growth a stable and plentiful power supply will engender. Perhaps others just don’t want to see their part of the Philippines advance from the rustic age to the messy post-atomic era!
posted by philpower @ 3:27 PM,
