It’s all about (power) reserves

November 10, 2014 at 09:41

Peter Wallace

Philippine Daily Inquirer

2:49 AM | Thursday, November 6th, 2014

There seems to be some misunderstanding of the power situation. Let me try to clear it up.

First, and most fundamental: This possible power crisis would not have loomed if new power plants had been built as planned. They weren’t, and government must take responsibility for this. The investment climate was not made attractive enough, the bureaucracy hindered, instead of facilitating, approval of new plants; environmentalists and NIMBY (Not In My Backyard) oppositors were allowed to block new plant constructions—and the courts supported them with writs of kalikasan or temporary restraining orders. Indeed, too many cooks (DOE, ERC, NGCP, WESM, PSALM) spoil the broth—if you don’t know what the acronyms stand for, don’t worry. I doubt some of the people in those offices do.

In other words the energy sector is in a mess, a mess created over many years. Energy Secretary Jericho Petilla inherited this mess and is now being lambasted for it. But the fact is, the mess predates his assumption as energy secretary. I’ve met with him several times and I’ve been impressed at how he picked up and understands the issues. Have those lambasting him understood the issues as well? Now he must do something about it, as must his boss.The first thing to do: Address the opposition and get the 600-MW Subic plant built. Just do it. Tough decisions are needed, swift action is demanded. President Aquino must step in and use his immense powers to ensure we get enough power supply.

Secondly, the problem now, and the short-term solution to it. From what I can gather there is enough power to get us through the second quarter of next year, which is the critical period. But that is, if nothing goes wrong, and if demand doesn’t grow faster than predicted. As Robert Burns said, “The best laid schemes o’ mice an’ men, gang aft agley (often go awry).” And they certainly do in the Philippines. Maybe, he was thinking of the Philippines when he wrote that. Old plants breakdown unexpectedly. All plants, regardless of age, must shut down for annual maintenance. And natural calamities and international disruptions of fuel supply can take many megawatts out of the system.

So, almost certainly, our power supply could fall short of demand. By how much? In the worst-case scenario, it could be anywhere from 300-1,200 MW. So it makes very good sense to have that ready, just in case it would be actually needed. Brownouts are, after all, not desired. For those in business, they’re catastrophic. They mean lost business. And it could be permanent loss.

Earlier President Aquino, on Petilla’s recommendation, asked Congress for emergency powers to lease or purchase generators. He asked for a budget of P6 billion for this. (Please, remember that number.) It’s a solution, but it should be the last option—only if all else fails.

“All else” refers to four things: The ILP (Interruptible Load Program); the rehabilitation of the Malaya facility and finding a way to get enough fuel to it; fast-tracking of committed capacities; and all of us using less power. The latter costs next to nothing, it just requires us all to do our bit. For instance, if everyone raised the temperature of their aircons by just one degree, it could reduce demand by close to 150 MW. Let’s all do it.

I believe the ILP can meet whatever is needed. Already Meralco has committed around 530 MW (from companies that have signed up or about to be signed up for the program). And with over 1,000 MW in ILP, it’s possible to secure the required supply. I note the Henry Sy-led SM Prime Holdings, which owns the country’s largest shopping mall chain, has committed to use their standby generators—that means an astonishing 58 MW. (News reports, quoting the energy department, say that the SM Group has some 130 MW of back-up generating capacity). The company will also help by raising mall temperature and reducing opening hours; this should translate into a few more “MW savings.” Other mall operators have committed another 56 MW. I hope all will join in.

Hotels, large condominium blocks, offices and factories with their own generators can all help. And there are three base load facilities that should be on line by the second quarter. These plants can provide around 150 MW.

But here’s where I want government to help. I want government to pay ALL COSTS over and above their normal grid cost. No messing around, no nickel-and-diming, just pay. Remember government is prepared to spend P6 billion for undesirable emergency facilities. The cost of this option will be a fraction of that P6 billion. Maybe, even nothing if there would be no breakdowns. But it would encourage more companies to join. So use a little of that P6 billion and pay (it’s our money, after all).

And, as an aside, stop messing around and pay the court-ordered $371 million (P16.7 billion) to Piatco for Naia-3. Do it now. The government’s refusal to pay this obligation has tarnished the Philippines’ reputation and entangled it in international shame.

Secretary Petilla is right: We need more generating capacity. However, I don’t think power barges, or whatever, are the way to go. In fact, can’t be the way to go now. You need at least six months to put in place these units. We no longer have that space, so that idea is out.

Building new base load plants—FAST—is what is truly needed. So this is where the emergency powers the President is asking could be used—to bypass all the bureaucratic roadblocks and override objections, and just order and negotiate for new plants. Like what President Fidel Ramos did. Ah, well, the model is there. Now this President has to act just as fast. The time for plans and promises is long past. It’s now time for action.


  All rights to the stock images are owned by Getty Images and its image partners and are protected by United States copyright laws, international treaty provisions and other applicable laws.
Getty Images and its image partners retain all rights and are available for purchase by visiting gettyimages website.

Arangkada Philippines: A Business Perspective — Move Twice As Fast | Joint Foreign Chambers of the Philippines