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Electricity supply-demand and climate

MACROVECTOR / FREEPIK

The indefinite, no timetable lockdown policy of the government continues to pummel many businesses, and restrictions in economic activities are reflected in the continued decline in the country’s electricity demand.

Data from the Independent Electricity Market Operator of the Philippines (IEMOP) shows that average demand in the Luzon-Visayas grids this year grew moderately at 4.3% in the first quarter (Q1) compared to the same quarter in 2019, then contracted -14.6% in Q2, -2.6% in Q3, and -6.8% in Q4. In comparison, the Philippines’ GDP contracted -0.7% in Q1, -16.9% in Q2, and -11.5% in Q3.

With a decrease in demand while the supply remains high, prices at the Wholesale Electricity Spot Market (WESM) also decreased. The effective spot settlement price (ESSP) this year contracted from -21% to -71% while the load weighted average price (LWAP) contracted from -13% to -64% (see Table 1).

The decline in prices though cannot be fully reflected in the generation charge in our monthly electricity bills because spot quantity is only about 10% of all WESM electricity trading this year and 90% via bilateral contract where prices have been set for many years between gencos and distribution utilities (DUs) and electric cooperatives (ECs) as the distributors want insurance that they will get the power when they need it.

There are four stories and Opinion pieces in BusinessWorld that I want to comment on:

1. “PHL coal-fired power capacity seen increasing by 135% despite moratorium on new projects” (Dec. 2).

2. “Worst case for continuing with PHL coal projects seen at P372B in long-term costs” (Dec. 12).

3. “Forging collaborative pathways for a decarbonized and regenerative future,” Part 1 (Dec. 1) and Part 2 (Dec. 8) by Federico “Piki” R. Lopez, Chair and CEO of First Philippine Holdings Corp.

4. “ERC to enforce new rules on allowable outages of power plants” (Dec. 19).

Reports 1 and 2 cite the studies by Clean Air Asia (CAA) and Center for Research on Energy and Clean Air (CREA), respectively. Both studies complain about more coal power, CREA even goes wild and irrational in projecting 26,000 premature deaths in the Philippines because of those coal plants.

The rise in coal share to total power generation in the country especially in 2018 and 2019 (see Table 2) coincided with high GDP growth of 6.2% and 6% respectively. It also coincided with the rising life expectancy of Filipinos to 71.1 years in 2018 from 69.8 years in 2010.

When there is a rising supply of cheap, stable, reliable electricity, there is also rising potential for the economy and people live wealthier, healthier, and longer, not shorter. The anti-coal NGOs are peddling the usual energy disinformation and fake news.

On #3, Mr. Lopez wrote in his Acceptance Speech as “MAP Management Man of the Year” award on Nov. 23:

“Today our way of life has set us on a trajectory of 3 to 4 degrees C of warming by 2100… this year travel and transport reductions and the economic slowdown from COVID-19 is expected to reduce carbon emissions by 7-8%. In other words, we need a COVID-scale crisis every year till 2050 just to keep the planet livable!”

With this kind of alarmist projections and statements, it may help to remind people that all gloom-doom projections in the past of climate catastrophe did not happen, all were false. See these four reports for instance:

1. “UN Predicts Disaster (by 2000) if Global Warming Not Checked,” June 30, 1989, https://apnews.com/article/bd45c372caf118ec99964ea547880cd0.

2. “Last chance to save the planet?” May 30, 1992, https://www.newscientist.com/article/mg13418235-100-last-chance-to-save-the-planet/.

3. “Arctic summers ice-free by 2013,” Dec. 12, 2007, http://news.bbc.co.uk/2/hi/science/nature/7139797.stm.

4. “Gore: Polar ice cap may disappear by summer 2014,” Dec. 14, 2009, https://usatoday30.usatoday.com/communities/ondeadline/post/2009/12/gore-new-study-sees-nearly-ice-free-arctic-summer-ice-cap-as-early-as-2014/1/.

On report number 4, this is problematic for three reasons: One, the generation sector continues to be very competitive with 135 gencos in Luzon-Visayas alone as of September 2020 from only 114 in 2018, so why harass these players? Two, ERC could be making arbitrary values on what is allowable and not allowable and hence to be penalized. Three, gencos would lose money, not gain, if they have frequent or prolonged shutdowns, scheduled or unscheduled: they cannot sell at WESM, they must buy replacement power normally at higher price to fulfil their supply contracts with DUs and ECs.

The ERC should stay away from additional regulations that can discourage more gencos coming in, and existing ones to further expand. The environmental NGOs should be more truthful, be more factual and not emotional.

 

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers

minimalgovernment@gmail.com

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