News Commentary

The energy sector needs our attention

Paco Pangalangan - Philstar.com
File photo of linemen fixing powerlines.
The STAR/Boy Santos, File photo

Anyone that uses electricity should understand how important the energy sector is. The energy sector is in charge of producing electricity by converting primary sources of energy such as coal, natural gas, or solar power into the electric power we use in our homes. We use electricity when we light our homes, watch TV, scroll through our smartphones, or work from home on our computers. 

At a national level, the energy sector is recognized as an essential driver of modern economic growth because many production and consumption activities involve energy as a primary input. Anything from brick-and-mortar factories to mushrooming online businesses cannot run without it.

Yet, it seems outside of the monthly ritual of paying for their electricity bills, energy sector concerns are not receiving the attention they deserve. For years, the country's energy outlook has teetered on the brink of a crisis.

In more recent news, developments with the Malampaya gas field, the country's only source of indigenous natural gas, are also cause for concern. The far-reaching implications that these developments have on the country's economy and on the daily lives of Filipinos should warrant more of the public's interest. 

For instance, before the pandemic, energy officials warned of a likely power supply shortage in 2020. The Independent Electricity Market Operator of the Philippines (IEMOP) reported that Luzon and the Visayas might face a shortage of up to 1,200 megawatts (MW) in May and June, and the National Electrification Administration (NEA) warned of rotating brownouts in Luzon between April and May 2020.

The rotating brownouts did not come to fruition that year, but only because of pandemic-induced economic slowdown. According to the International Energy Agency (IEA), global energy consumption for 2020 fell by 4%, the most significant decline since World War II and the largest ever absolute decline.

For 2021, however, with many countries lifting COVID-19 restrictions and with many economies recovering, energy demand is expected to rebound by 4.6%, surpassing pre-COVID-19 levels. 

Here in the Philippines, power demands started recovering in September 2020. As of May 2021, it has already surpassed pre-pandemic levels. As a result, despite the entry of new power generation capacity, the Luzon grid again saw itself facing red alert conditions in April, May, and June of this year.

The country's energy woes, however, are compounded by recent developments with the Malampaya gas field. Malampaya is the country's only indigenous supply of natural gas and fuels 30 percent of Luzon's electricity requirements, or about 20% of the entire country's power. However, Malampaya's natural gas reserves are rapidly declining, and full-scale production in the field is projected to end by 2024. 

Without natural gas from Malampaya, plants currently dependent on the gas field will have to switch to more expensive liquid fuel sources to continue meeting the country's demand for power.

We got a preview of this last month when Malampaya shut down for several weeks for scheduled maintenance. Without Malampaya, two plants shifted to liquid fuel, one shut down temporarily, and another operated at a reduced capacity. The IEMOP also noted that the average price on the wholesale electricity spot market (WESM) doubled when the Malampaya shutdown in October.
While there are plans to extend the life of Malampaya, a recent change in ownership and control over the gas field has sparked concern. Understandably, some are questioning how billionaire Dennis Uy, one of President Rodrigo Duterte's top campaign donors in 2016, was able to capture a controlling interest in the Malampaya and is now earning 1.15 million USD a day from it.

Afterall, Uy's takeover went through despite his firms questionable legal, technical, and financial qualifications—for instance, Uy's Malampaya Energy XP only had a paid-up capital of $100 or around 5,000 pesos, when it won the bid to purchase Shell Philippines Explorations stake in the Malampaya gas field.

Lawyer Rodel Rodis, who filed a legal case to void the deal, called it "the most incredible crony agreement" in the country's history. At the same time, Senate Committee on Energy Chairman Senator Sherwin Gatchalian warned against a possible midnight deal to extend the service contract of the Malampaya project now that Uy is in the picture.

With the questionable credibility and capacity of Malampaya's new owners shadowing over the country's already precarious energy situation, not to mention the inextricable link of our country's economic recovery with a reliable energy sector, there is a pressing need for us to pay closer attention to the country's energy sector.

With these circumstances as its backdrop, the Stratbase ADR Institute, in partnership with CitizenWatch Philippines, is organizing a virtual Town Hall Discussion (vTHD) entitled "Ensuring Power Supply Security for a Sustainable Economic Recovery", which will be held on Nov. 11, 2021, from 9:00 a.m. to 11:30 a.m. (Manila Time).

Open to public registration, this virtual forum seeks to bring together stakeholders of the electric power industry to discuss long-term solutions in addressing the country's reoccurring supply shortage issue. In addition, this would also serve as a platform for speakers to share their insights on where the industry is heading post-pandemic, the challenges to be faced by the next administration in tackling the supply issue, and possible energy policies to be enacted by the incoming government.

Paco Pangalangan is the executive director of think tank Stratbase ADR Institute.

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