It has not been formally declared but it seems we are now in a water rationing regime. Scheduled supply interruptions have been announced because of sheer lack of water supply.
A similar regime of rationing might be imposed on electricity supply through scheduled supply interruptions. This will be disastrous for our economy.
Our energy infrastructure is vulnerable. Reserves are thin. Aging power plants are prone to breakdowns, especially during the hot months when energy demand is highest. Our inputs for energy production such as oil and coal are constantly beset by supply and price issues.
Our energy industry has many moving parts. We have base load and merchant plants whose business models vary. Some rely on power contracts with distributors and others benefit from selling to the higher priced spot market.
Our transmission grid does not link the entire archipelago. Recently, a very public spat has broken out between the owner of the grid and the energy regulator over the former’s provision of ancillary services – basically independently secured power contracts used to keep supply stable throughout the grid.
In addition, there has been constantly recurring suspicion that energy prices have been manipulated by generating companies faking supply shortages and selling their output to the spot market for better profit margins. Since the spot market is driven by constantly changing supply and demand configurations, energy prices could fluctuate wildly.
Both the Department of Energy (DOE) and the Energy Regulatory Commission (ERC) do not seem to have the capacity to enforce transparency throughout the industry. More work has to be done in this regard.
The Electricity Power Industry Reform Act (EPIRA) moved our energy industry into a deregulated regime. This is better than having a state-controlled power sector that proved prone to accumulate huge operating losses and politicized pricing decisions that added to our indebtedness.
There is absolutely no reason to return the power industry to state control. That will further diminish investor appetite for investing in power generation and stifle recent innovative investments in renewable power. But the deregulated regime does require a higher standard of regulation – one that has not been sufficiently achieved by the DOE and the ERC.
The higher interest rate regime could add to the challenge of attracting new investments into the power sector. The cost of money raises the barriers for efficiency and profitability.
When he assumed the chair of the Senate energy committee, Sen. Raffy Tulfo boldly declared he would call for public hearings and solve, once and for all, the problems besetting the power sector. Not one hearing has happened yet in the nine months since he assumed the critical post. Many groups wanting to air their views on the problems plaguing the power sector are anxiously waiting for Tulfo to begin public hearings. The precarious power supply this time of the year provides a perfect setting for such an inquiry.
Perhaps Tulfo is still educating himself on the complexities of the power situation. In his initial statements, the senator appeared to blame the electricity cooperatives for high power costs. These cooperatives are merely distributors of the commodity. They price electricity based on what power generators and the transmission company charge, in addition applying VAT charges on what they charge consumers. Whatever the failings of our cooperatives, they are just the tip of the iceberg.
Hopefully, the senator is now better acquainted with the many problems of the power sector, including the quality of regulation, to lead a public discussion of how our consumers might be better protected from greed or inefficiency.
BESS
Yesterday, President Marcos graced the inauguration of the 1,000 megawatt Battery Energy Storage System (BESS) in Limay, Bataan. The facility is the first of 30 planned across the archipelago by San Miguel Corporation.
The BESS is a concrete and innovative solution to some of our power problems. Using cutting edge battery storage technology, this facility could store base load capacity produced during off-peak hours and sell the supply to the grid during the hours of high demand.
Heretofore, electricity generated during off-peak hours is simply wasted because it could not be stored. That adds to power costs since pricing for the commodity is determined by the total generation cost. We cannot turn on and turn off power plants like we do our light switches. Starting today, the unconsumed energy could be stored and delivered as needed.
Since the power generators can now store the supply they generate during off-peak hours, their cost structure changes. They may now charge less for the power they sell the market. This will benefit our consumers.
The BESS will also be helpful to our emerging renewable energy sector. The problem with renewable energy such as solar is that the supply it can deliver is fluctuating according to the strength of the wind or the hour of the day. When their “harvest” of power is good, the renewable energy companies could deposit their excess supply with the BESS. The availability of this facility should help encourage more investments in our renewable energy sector.
San Miguel’s investment in BESS is a forward-looking one, harnessing cutting edge developments in power storage technology to enhance the over-all efficiency of our energy industry. Immediately, this will help reduce the pressure to ration power. It will certainly help us avoid the wastage that we were once technically unable to avoid.
There are many more good things advances in technology could help us solve. But we all need companies like San Miguel to make the investments that are both profitable and helpful.