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Increasing Philippine demand straining power supply

The Build, Build, Build program is stretching the energy supply in the Philippines unless the government steps up efforts to fill in what could be a looming gap in the near horizon. 

Increasing Philippine demand straining power supply
Renewable energy developers have expressed interest to step in and address the increase in power demand, but industry officials said the grid could not afford too much intermittent supply. ​
The Department of Energy has expressed readiness to support the mammoth infrastructure program but stakeholders this early have expressed concern the increased higher demand could impact on future supply. 

“We can say it’s more stable, yes, we have a more stable supply now, enough to meet the present demand. We are building our capacity for the future requirements, like these future requirements under the Build, Build, Build and our GDP (gross domestic product) growth,” Energy Secretary Alfonso Cusi said.

The critical infrastructure projects are seen to spur the growth of the country and increase power demand. 

Cusi said the Philippines by 2022 would need an additional power capacity of 10,000 MW “from January last year to make sure we will not have a crisis.” 

Cusi said Executive Order No. 30, signed by President Rodrigo Duterte in June last year, created the Energy Investment Coordinating Council that would help streamline the regulatory procedures affecting energy projects of national importance.

By declaring the energy projects of national significance, government agencies concerned are required to act upon and issue their respective permits within a 30-day period upon submission of complete documents.

“The EO will help to meet the timeline... Now power is more stable and we would like to continue improving that and we are inviting investors into energy both local and foreign, and we want to have a wider, more investors in the field,” he said. 

Cusi said the best solution to maintain a stable and robust energy industry under the Philippine Energy Plan (2017 to 2040) was through a “technology-neutral and competitive business environment.”

“Using reliable data, coupled with adequate industry analysis, the DoE is dedicated to adhere to the point of view and sentiments of the consumers in addressing the challenges of the dynamic energy sector, particularly in its policy and decision-making initiatives,” Cusi said. 

DoE data showed the Philippines had an installed generating capacity of 22,728 megawatts as of end 2017, with the bulk, or 8,049 MW, coming from coal-fired power plants. Renewable energy followed at 7,079 MW and oil at 4,153 MW and natural gas at 3,447 MW, respectively.

The country’s dependable generating capacity in 2017, however, was much lower at 20,515 MW. Power consumption reached nearly 95 million gigawatt-hours in 2017, up four percent from 90.798 million gWh in 2016.

Residential customers had the highest consumption at 26.792 million gWh last year, followed by industrial customers at 25.573 million gWh and commercial at 22.767 million gWh.

Luzon generated the highest power supply with a capacity of 68.512 million gWh,  Visayas with 14 million gWh and Mindanao at 11.8 million gWh.

Luzon’s power reserves were placed at 3,337 MW as of August 11, 2018, around 30 percent of the system capacity of 11,348 MW. 

An adequate power capacity has helped bring down electricity costs through market competition. Power rates offered by generators have gone down to below P3 per kWh, while prices at the Wholesale Electricity Spot Market, the country’s trading floor of electricity, hovered at the same level.

ERC vacuum

Industry players, however, are wary that the turmoil at the Energy Regulatory Commission could affect future power supply.

Four commissioners of the ERC were suspended by the Office of the Ombudsman until October. Two of the commissioners have since retired, and the Office of the President has not announced their replacements.

The suspended ERC commissioners, as a result have not acted on the pending power supply agreement applications of Manila Electric Co. with seven generators that offered over 3,000 megawatts of supply. These PSAs have been pending since 2016. Power plants, according to industry estimates, take three to five years to build.

If the construction of pending plants are approved in the next two years, the power sector must find a replacement to fill in the capacities to address rising demand.

“We are seeing a surge in demand for power, which is happening as well for other goods and services, putting an increasing strain on our electricity distribution and generation infrastructure,” Manuel Pangilinan, chairman of Manila Electric Co., said. 

Renewable energy developers have expressed interest to step in and address the increase in power demand, but industry officials said the grid could not afford too much intermittent supply.

Renewable energy such as solar, in addition, cannot run for 24 hours. Solar also requires more land compared with other technologies.
AC Energy Inc., a unit of conglomerate Ayala Corp., in contrast, sees an oversupply as reserve margins stay above the 20 percent requirement.

“Barring any force majeure event, this is more than adequate for the system. With over 3 GW (gigawatts) of power plants currently under construction all over the country, our supply should be enough to meet the growing demand for the next 4-5 years,” AC Energy chief executive officer Eric Francia said.

GE Philippines chief executive officer Jose Victor Emmanuel De Dios said power supply today was “still healthy,” but expressed concern about the new capacity that should come in in the next few years.

De Dios said no new major plants were being built “because there are no new PPA’s being approved.” 

“My view is that the greater the reserve margin the better since it can easily take five years to develop large-scale power projects. Some of our Asean neighbors have much greater reserve margins than the Philippines, ensuring energy supply security,” De Dios said.

Topics: Build Build Build program , Department of Energy , Secretary Alfonso Cusi , President Rodrigo Duterte , Energy Investment Coordinating Council
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