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Business

Power shortage too?

DEMAND AND SUPPLY - Boo Chanco - The Philippine Star

Duterte appointed a politician with no background in the sector as secretary of energy. Six years of neglect is starting to haunt us. Two weeks ago, the National Grid Corporation of the Philippines or NGCP declared two yellow alerts and a red alert in the Luzon power grid.

Seven power plant units with a combined nameplate capacity of 4,509 megawatts (MW) went on forced outage, while three others are running on derated capacities. NGCP said the available capacity in the grid hovered perilously at 10,693MW; while the demand was 9,933MW. We were that close to a widespread rotating brownouts.

According to the NGCP, the power plants that went on forced outage were the 668-MW Unit 1 of the GNPower Dinginin (GNPD) in Bataan, 300-MW Calaca Coal Fired Power Plant II in Batangas, 344-MW SMC Masinloc Power Partners Co. Ltd. (MPPCL) Coal Unit 2 and 335-MW Masinloc Unit 3 in Zambales, Unit 1 and 2 of 647-MW Sual Coal-Fired Power Plant (SCFPP) and 647-MW Sual Coal-Fired Power Plant (SCFPP) in Pangasinan, 460-MW Quezon Power Phils. Ltd. (QPPL) plant, and 47-MW Avion 1 plant in Batangas. Except for Avion, all are coal-fired power plants.

Some power plants were already on scheduled outage at that time, including Angat Main Unit 4 (50MW), Angat AUX Unit 1 (6MW), Angat AUX Unit 3 (6MW), SLTEC I (123MW), Makban 4 (63MW), SLPGC 1 (150MW), with a total capacity of 398MW. These are hydro and geothermal plants.

Complicating matters was the tripping of NGCP’s Nagsaag-Bolo lines 1 and 2 as well as the 1,200 MW Ilijan Power Plant which went on an unscheduled shutdown. The tripping of the transmission line caused an automatic shutdown of the power plants using it.

It doesn’t look good. What happened showed the fragility of the main Luzon Power grid. Many of those coal plants are over 30 years old and their reliability is questionable.

So, why aren’t we investing in new power plants? For one thing, we don’t have a serious energy program. If we did, we should have planned for new power plants way ahead of the time we actually need to replace the older plants. Then again, it’s complicated.

First of all, the government cannot invest to put up power plants under EPIRA or the law governing our power sector. This is a prerogative assigned to the private sector.

Ask the private sector why they are not investing and the industry points back to the government for making it difficult for them to do so. Getting the permits to build a power plant can take over five years before the power company can go to a bank to finalize financing. So, minimum six years to break ground.

The enthusiasm of banks to finance power projects is diminished by uncertain government policies on a lot of things including pricing. There is no certainty that the power plant proponent can recover investment over a definite time frame.

Then there is the uncertainty over government policy on coal and renewables. The Energy department even issued a policy that they will not approve new coal plant projects. Yet, coal-fired power plants are needed to provide for baseload demand.

Despite all these, the situation in the Luzon grid could have been better if the submarine cable connecting Mindanao to the Visayas grid was done earlier. There are underutilized coal plants in Mindanao which could have helped prevent those yellow and red alerts from happening. NGCP says the interconnection will happen soon.

The other issue is the non-compliance of NGCP to the order of government regulators to contract firm ancillary services. Guidelines in contracting firm reserves have been given by the energy department since October 2021.

So, NGCP president Anthony Almeda continues to promise to improve their efficiency and collaborate further with energy stakeholders, reciting his usual script. The thing is, NGCP which is partly owned by the State Grid of China, is happy to figuratively print money and take no real risk in the business. Their capital expenses such as new submarine cables are eventually paid for by us, the consumers.

Where do we go from here? Rep. Joey Salceda had some ideas which he presented last week in a conference on climate change mitigation efforts.

Cong Joey pointed out that we have immediate problems (like having sufficient power capacity and rising fuel cost) and long term, how to merge concerns for climate change with dependable power sources at the right prices.

Cong Joey called attention to the dramatic rise in coal prices early last year, from $70/MT to $400/MT. That’s why San Miguel’s power unit is in deep trouble. They have suffered P15 billion in losses due to the abrupt rise in coal prices.

Coal prices were at the $60 level when San Miguel signed a power supply agreement with Meralco. They absorbed over P10 billion in losses last year when coal hit an average price of $176 per MT. They are now asking the ERC for price relief for this year’s losses now at about P5 billion and still rising as coal prices zoomed up to over $440 per MT due to Russia’s invasion of Ukraine.

But moving forward, Cong Joey thinks renewable energy is the answer. He cites the case of Germany where despite the Russia-Ukraine war, German electricity spot prices still reached 80 euros/MwH (from 720 euros in August 26) due to wind production surplus.

Says Cong Joey: “Truly variable prices in the spot market due to RE or renewable energy allow for opportunities to buy very cheap power to offset periods of high prices.

“Rapid, inclusive growth requires cheap renewable energy. Cheap energy can come from a combination of dependable baseload, a surplus of renewable energy, and setting aside legacy issues for a fresh start.”

Cong Joey suggested a review of EPIRA in the light of current oligopolies, WESM (spot market) abuses, aging energy infrastructure and the current energy mix that is susceptible to external shocks.

Here is another shortage that could become a crisis very quickly. Congressman Salceda is offering a strategy to mitigate its negative impact on all of us. But will Junior listen, understand and act decisively?

 

 

Boo Chanco’s email address is [email protected]. Follow him on Twitter @boochanco

POWER SHORTAGE

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