Desperate times, desperate measures

HIDDEN AGENDA - Mary Ann LL. Reyes (The Philippine Star) - November 23, 2019 - 12:00am

Some may not realize it yet, but our country is on the verge of a major power supply crisis that could turn out to be far worse than that experienced in the ‘90s if left unaddressed.

According to data furnished by the Federation of Philippine Industries, the Luzon grid experienced about 50 yellow alerts this year, some during the cooler months of October and November, and already more than the total since the start of the current administration.

One report showed that the first yellow alert on March 5  saw peak demand for the day reaching 9,491 megawatts against the Luzon grid’s available capacity of 10,115 MW, or an operating margin of just 624 MW compared to the required contingency reserve of 647 MW.

There were 14 days of red alerts this year with rotational brownouts, more than the total in the last five years. The first red alert on April 10 occurred after power demand in Luzon outstripped reserves due to unscheduled outages.

A yellow alert notice is issued when the dispatchable reserve is fully used up and the system is already tapping into its contingency reserve, while a red alert notice means both dispatchable and contingency reserves are used up.

Unfortunately, around 72 percent of the 126 power plants in the Luzon grid alone as of end-2018 were already at least 16 years or older. Being older, they require more frequent maintenance and repairs and are more prone to unscheduled outages. Their efficiencies have also eroded through the years.

This scenario could have been avoided, of course, had there been more power plants available while others are undergoing shutdowns or maintenance. The better scenario, however, is for the country to have brand-new power plants that are more efficient that can last longer, utilize new technology, and can produce power at cheaper cost.

FPI emphasized that it has never been more obvious that the country’s growing demand for power requires additional capacity to the grid.

In a recent statement, the group called on the Department of Energy, as well as other industry players and stakeholders, to fast-track the next round of competitive biddings for the much-needed greenfield baseload capacity.

FPI stressed the need for new power plants, saying the next round of biddings should be solely for new power plants since these will best ensure reliable supply at the lowest cost possible.

It explained that the new power plants should not be made to compete with the older plants because right now, the priority is securing an oversupply in power generation to address the constant yellow and red alerts plaguing the nation.

FPI noted that new plants are crucial to system reliability, and given the 20-year term of power supply agreements or PSAs, brownfield or existing plants that have been in operation for several years are less likely to remain reliable and ensure delivery for the entire term, gravely affecting consumers.

In its statement FPI said the successful PSAs two months ago signed to supply Meralco 1,200 and 500 megawatts of capacity effective Dec. 26, should be followed as soon as possible by another round of competitive selection process (CSP) bidding immediately so as to start the construction of new power plants.

The group also asked DOE and the Energy Regulatory Commission to immediately approve the current PSAs, with FPI chairman Jess Arranza questioning the long timeline for the PSA approval process by the ERC.

FPI expressed support for the DOE circular requiring distribution utilities like Meralco and electric cooperatives to procure power through CSP, saying additional capacity to the grid will mean more reliable power supply at the lest possible cost which will directly benefit consumers.

Arranza also emphasized that the group supports and encourages the development of more greenfield power plants to address future demand and avert a power supply shortage.

For his part, House energy committee chairperson and Marinduque Rep. Lord Allan Velasco stressed that as a follow-up to Meralco’s CSP bidding last September, which successfully resulted in the award of PSAs that are very price competitive and lower than prevailing generation charges, the DOE as well as industry players and stakeholders should act swiftly on the next round of biddings for much-needed greenfield baseload capacity.

Velasco said that with the increasing demand for power projected for the coming years, the country urgently needs additional capacity to support the current administration’s golden age of infrastructure.

He also aired FPI’s plea that the record number of yellow and red alerts that plagued the Luzon grid consumers this year should not be allowed to recur in the coming years.

The solon said they look forward to the start of the next round of bidding for new baseload capacity as this is aligned with the administration’s goal of bringing down electricity cost and ensuring a steady and continued supply of power across the country.

He called on other DUs and electric cooperatives to expedite their own CSPs in strict compliance with the DOE’s CSP guidelines to support the building of greenfield power facilities, adding that both the public and private sectors must boost such crucial government initiatives in finding ways to provide adequate power supply at lower costs to the end-users which is in line with the Murang Kuryente Act.

But what is stopping proponents from building new power projects? In fact, during the CSP bidding conducted by Meralco for a 20-year supply contract for 1,200 MW of greenfield baseload capacity, there was only one bidder – Atimonan One Energy Inc. which is developing an ultra-supercritical coal-fired power plant, forcing the third party bids and awards committee to declare a failure of bidding.

According to the DOE and other sectors, common hurdles include licensing or permitting challenges, access to financial packages, and even bureaucracy in the local and national levels. One consumer group said the whole thing requires 359 signatures involving 74 agencies and bureaus covering 43 different licenses and contracts.

Then now, there are delays involving approval of PSAs by the ERC. Why is it taking so long for the ERC, for instance, to approve the PSAs for 1,700 megawatts which already underwent competitive bidding under strict supervision of the DOE? While the ERC is mandated under the EPIRA to review the bilateral power supply contracts entered into by distribution utilities, why should the approval process take months when the country is already experiencing a power crisis?

But all these should not prevent government from encouraging the building of new power plants instead of forcing distribution utilities to get part of their requirements from old existing plants.

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