"Before any real take-off could happen, we need to cut the bureaucratic red tape and build more power plants now."
The current pace of economic activity, deemed as “normal” and even “positive” by experts, is creating a growing gap in the country’s power supply. According to a recent report, the Department of Energy estimates for 2019 a 4 percent growth in the power demand is expected for Luzon peaking at 11.2 gigawatts from 10.8 GW in 2018.
DOE Assistant Secretary Redentor E. Delola said supply will be tight, the demand will be high, and the reserves will be just enough given the scheduled maintenance.
An additional “spot load” requirement of 300 megawatts sustained increase in demand prompted DOE’s to reset their forecast for 2018 to 10.8 GW from 10.561 GW.
Tight supply is also expected in the Visayas with peak demand estimates reaching 2.3 GW increasing by 9.5 percent.
“In the Visayas we are a bit tight so we need the Luzon-Visayas interconnection,” Deloda said.
A little reassuring is that they (DOE) do not expect any red alerts, just yellow alerts in the worst scenario.
In the meantime, the House of Representative recently passed (November 13, 2018) House Resolution No. HR0015, “URGING THE ENERGY REGULATORY COMMISSION (ERC) TO IMMEDIATELY RESOLVE THE SEVEN (7) POWER SUPPLY AGREEMENT APPLICATIONS OF THE MANILA ELECTRIC COMPANY (MERALCO), PROVIDED ALL THE REQUIREMENTS PRESCRIBED BY LAWS, RULES AND REGULATIONS HAVE BEEN COMPLIED WITH AND THE APPROPRIATE HEARINGS ON THE APPLICATIONS HAVE BEEN CONDUCTED”.
The resolution refers to the pending Power Supply Agreements filed before the Energy Regulatory Commission way back in 2016 to build coal-fired power plants with various generation companies.
The laudable resolution highlights the urgency and very pragmatic rationale for fast action on these badly needed power plants. Just remember the red and yellow alerts in 2017 because of the unexpected shut down and unscheduled maintenance operations causing power interruptions in Luzon.
We need new power plants that would use the most efficient and environmentally friendly technologies to replace outdated coal-fired plants that are prone to transmission failures. Since it takes at least seven to eight years to construct a power plant before it even becomes fully operational, we are already facing a looming power shortage because of these bureaucratic delays.
Strategically linked to the country’s economic growth is sustaining the Duterte administration’s ambitious infrastructure programs. This will require conscientious foresight, especially anticipating risks and threats. Economic planning requires being alert to warning signs, so they may be addressed before things become too late.
In an earlier column, I already pointed out that the country’s power situation demands perennial and immediate attention. In the five-year period between 2012 and 2017, the Luzon grid witnessed demand outpacing capacity. Demand grew by around 2,900 megawatts (MW) while supply only grew by 2,600 MW.
In the first half of 2018, additional installed capacity grew by a measly 3 percent compared to the 8.2 percent demand, resulting in seven yellow alerts compared to the three during the same period last year.
To reiterate, if this trend continues, this will have enormous repercussions in the context of ambitious economic forecasts. If the Philippine economy, as the administration has confidently predicted, is poised to take off, disruptions brought about by something fundamental as inadequate power supply are as disastrous as they are embarrassing. Studies have shown that stable power capacity and affordable rates are a requirement for any robust economy are interconnected.
The combination of resilient macroeconomic fundamentals and the Duterte administration’s determination to curb chronic underspending has led to bullish expectations about the Philippine economy. Power is an important part of this equation, and the government needs to act accordingly lest an already expensive and unstable power situation debilitate any sort of momentum that the economy gains.
Forecasts talk of robust, long-term growth around or even above the 6-percent mark over the 2016 to 2030 horizon. This would require an additional 7,000 MW of power generation capacity over the next five years. Regulators need to start acting on investments in order to move the power situation from sufficiency to surplus. Work also must be done in areas like the rationalization of taxes and the removal of bureaucratic barriers to spur more investments in the industry.
If our energy bureaucracy does not act fast on this situation, The economic momentum—not the least due to the Duterte administration’s Build Build Build program—will make our power situation more precarious.
I’ll say it again: Sustaining our economic gains will not be possible without a stable and affordable supply of electricity. Before any real take-off could happen, we need to cut the bureaucratic red tape and build more power plants now.