THE PHILLIPINE POWER INDUSTRY, LOOKING AT THE PAST, MOVING FORWARD TO A GREENER FUTURE Pre-Xmas 2018 Edition

               THE PHILLIPINE POWER INDUSTRY, LOOKING AT THE PAST, MOVING
                                            FORWARD TO A GREENER FUTURE

Background:

The Philippine Power Industry over the last 50 years saw the changing role of what was once a competition between privately held corporations and the National Government through the National Power Corporation.  

The major cities were under the control of the private sector, while outside the urban centers, the National Power Corporation dominated.  On the plant types operated, the private sector, notably the Manila Electric Company (MERALCO) operated the fuel-fed thermal power plants, building power plants ahead of the load growth, while the National Power Corporation operated mostly Hydro power plants, which to this day are still operated efficiently albeit being dispatched away from its designed
capacity as baseload power plants.

After the declaration of Martial Law,  there was a forcible takeover of all MERALCO power plants by the government, giving the NAPOCOR a virtual power monopoly., but outside MERALCO, there was no takeover of the privately owned companies, provided they tow the line.

The oil crisis in the 1970’s started to alter the picture of the power industry, prompting President Ferdinand E. Marcos to pursue the Bataan Nuclear Power Plant, in order to wean the industry away from future oil price shocks.

When the Marcos Regime fell as a result of the EDSA Revolution, along with it was the mothballing of the BNPP and the abolition of the Ministry of Energy.  These twin moves spelled doom for the Philippine Power Industry and the whole economy as a whole, as there were no plant additions throughout the country, while the economy started to grow by leaps and bounds.

The ensuing Power crisis started in 1989 and lasted until 1993., where Luzon started with 1 hour daily brownout in 1989 and peaked into 12 hour blackout in 1993.

This was solved with a band aid solution by the importation of the so-called GAS TURBINE power plants to bridge the gap between Demand and Generation supply., the Independent Power Producers supply contracts with SOVEREIGN GUARANTEES sealed the Higher Priced electricity rates that we all are paying for to this day., under the Stranded Debts and Stranded Contract Cost portion of the UNIVERSAL CHARGES portion of our electric bill

THE EPIRA LAW and its consequences:

After the government sealed the IPP power supply contracts., the ASIAN FINANCIAL crisis wreaked havoc in the country’s economy, resulting into a drastic drop in energy demand, largely unanticipated by the government, this led to the bleeding of the NAPOCOR., and the only way out was for the government to sell the power plant assets to the private sector to pay of its debt which have balloon into almost Php 800 Billion at that time, ( it is quite a wonder however, that today 15 years after, the Debts have run up to over Php 1 Trillion ).

The EPIRA LAW was designed with an end view of lower power rates starting on the 10^th year of implementation, when there would be a free and open market in the generation sector which the frame workers envisioned that with the private sector control over the generation sector, there will be open competition which will ultimately bring down generation charges.

The simulated competition in the power sector proved that the objective of the EPIRA cannot be achieved at all, in the Luzon Grid, it was only during the year 2015 where power consumers saw a consistent reduction in power rates, notably by Meralco until today., while in Visayas there was hardly a dent.

The whole reversal was, and still is being felt in the Island Grid of Mindanao.

THE MINDANAO GRID POWER SITUATION:

The Mindanao Grid was entirely dependent on the Agus-Pulangi Hydro Power Complex for its power needs, and consequently cheaper power rates.  This was evident in the 1980’s where a number of Industries relocated to Mindanao to avail of cheaper power rates, notably National Steel Corp. (the former Phil Blooming Mills), Mabuhay Vinyl Corp. among others.  When power costs in Mindanao started to rise, they also packed up or folded up, as in the case of National Steel Corporation.

With the loss of National Steel Corporation’s 300 MW load., there was a stable power supply until the year 2005, and the projected crisis in 2007 was averted by the operation of the 210 MW STEAG Power Plant.

Things changed however in 2010, as increasing load growth was not met with the construction of new base-load power plants.  The Mindanao Power Crisis 2010 election year was the forerunner of the Mindanao Power Crisis 2016 election year.  The El Niño in 2010 was coincidentally followed by 2016 edition.

                THE RADICAL SHIFT FROM RENEWABLE ENERGY TO FOSSIL FUEL 
                                                ( COAL FIRED POWER PLANT )

There was a mad rush among power producers to locate their coal-fired power plants in Mindanao, as there was little or no opposition from Mindanao due to the perennial power shortages, to the credit of our current President Rodrigo Duterte, then sitting as the Vice Mayor of Davao City., ordered a Water Study to determine the availability and sustainability of ground water to satisfy the requirement of the boilers at 1500 cubic meters a day, after the proponents initially failed to present the required ground water supply for the 300 MW CFB Thermal Power Plant.

Yes, water is a vital requirement for thermal power plants, in the production of electricity, except for diesel  fuel fired power plants.

In 2010 the Mindanao Grid was composed of 51 percent hydro, 6 percent geothermal, 18 percent coal, and 25 percent fuel fed power generation.  Today the radical shift has occurred.  Coal fired power generation now comprise 47 percent, hydro power plant mysteriously low at 25 percent, fuel fed at 19 percent with geothermal and embedded generation for the balance at 4.5 percent each.

WEEKLY OUTLOOK FOR MINDANAO
Period Covered (Saturday, October 08, 2016 to Friday, October 14, 2016 )
As of Friday, October 07, 2016
Note: Daily Update is Monday to Friday only
	SAT	SUN	MON	TUE	WED	THU	FRI
Capacity (MW)	2271	2271	2291	2291	2291	2291	2291
Coal	1080	1080	1080	1080	1080	1080	1080
Diesel	434	434	444	444	444	444	444
Geothermal	92	92	92	92	92	92	92
Hydro/Renewable	580	580	580	580	580	580	580
Embedded Generators	85	85	96	96	96	96	96
Solar	0	0	0	0	0	0	0
System Load (MW)	1480	1370	1534	1566	1583	1570	1555
Gross Reserve/Deficiency (MW)	791	901	758	726	709	722	736
Required Regulating Reserve	59	55	61	63	63	63	62
Required Contingency Reserve	150	150	150	150	150	150	150
Required Dispatchable Reserve	150	150	150	150	150	150	150

The primary objective in the approval and operations of the Coal Fired Power Plants was to replace 
the capacities provided by the Diesel fired Power Plants, this was not the actual case as can be found in the updated chart of the National Grid Corporation for the current week.

The capacity displaced by the operation of the coal fired power plants turned out to be the Hydro power plant output, which lost an effective 300 MW capacity considering that we are in the middle of the wet season period.

The following updated weekly update for Mindanao further bolsters Mindanao Stakeholder's apprehensions of further spikes...

WEEKLY OUTLOOK FOR MINDANAO  Covered ( Saturday, November 10, 2018 to Friday, November 16, 2018 ) As of 1:52 PM, Friday, November 9, 2018 Note: Daily Update is Monday to Friday only
MW	SAT	SUN	MON	TUE	WED	THU	FRI
Capacity (MW)	2260	2211	2183	2183	2163	2163	2263
Coal	1118	1069	1069	1069	1069	1069	1169
Diesel	389	389	389	389	389	389	389
Geothermal	95	95	95	95	95	95	95
Hydro/Renewable	571	571	541	541	521	521	521
Embedded Generators	87	87	89	89	89	89	89
Solar	0	0	0	0	0	0	0
System Load (MW)	1680	1620	1760	1759	1771	1785	1770
Gross Reserve/Deficiency (MW)	580	591	423	424	392	378	493
Required Regulating Reserve	67	65	70	70	71	71	71
Required Contingency Reserve	132	132	132	132	132	132	132
Required Dispatchable Reserve	132	132	132	132	132	132	132

The economic implication of this anomalous situation is quite alarming, this will derail the objective of the current administration to entice investors to come and invest in Mindanao.

For how could we invite additional investments when Mindanao Power Rate are already equal or higher than Meralco Rates ?

HOW TO BRING BACK RENEWABLES :
                                   

The Philippine government should restore the level of Agus-Pulangi Hyrdo power complex back to its dependable capacity of 880 MW, to account for 34 percent of total Generation capacity.  With new technology available for SOLAR HYBRID GENERATION, 200 MW capacity will bring the generation mix to at least 50 percent.

The Duterte Administration still owes a campaign promise to lower the cost of electricity throughout
the country, specially in the Mindanao Grid in the light of surplus generation capacity.

If the installed capacity is to be considered, yes we have more than 1,000 MW of Excess Capacity