The European Chamber of Commerce of the Philippines (ECCP) has proposed a five-point strategy aimed at averting a looming power shortage in Luzon by summer of next year.

ECCP Executive Vice-President Henry J. Schumacher, in a text message over the weekend, said the business group wrote a letter to Energy Secretary Carlos Jericho L. Petilla last Friday which listed five “concrete, constructive recommendations to address the evolving power crisis [which] can be implemented administratively.”

Mr. Petilla last month warned of a potential supply deficiency of as much as 200 megawatts (MW) in Luzon by May next year. The National Grid Corporation of the Philippines estimated on Sunday, which typically has the lowest demand in any given week, that Luzon had 2,430 MW in reserves, with system capacity of 8,981 MW against peak demand expected at 6,551 MW.

The looming power shortage is made more significant by the fact Metro Manila, the Cavite-Laguna-Batangas-Rizal-Quezon (Calabarzon) region, and Central Luzon had the biggest shares in the Philippines’ total output last year among the country’s 17 regions at 36.3%, 17.4% and 9%, respectively, according to data the Philippine Statistics Office released last Thursday.

Moreover, Metro Manila and Calabarzon were the biggest contributors to the 7.2% national gross domestic product growth rate posted in 2013 at 3.2 and 1.2 percentage points, respectively.

Mr. Petilla has asked President Benigno S.C. Aquino III to allow the government to contract additional generating capacity. Mr. Aquino, the Energy chief said following a meeting in Malacañang, is “open to anything at this point.”

In its letter, the ECCP said that short-term measures to acquire generation capacity are “super expensive” and will drive the price of power further up.

In an e-mail, Mr. Schumacher said the group instead urged government to immediately streamline the process of approving construction of new power plants.

“It takes a minimum of three years in other countries, but in the Philippines, with all the 162 environmental and other clearances, more than five years are required to get a good-sized power plant ready for hook up to the grid,” the e-mail read.

“It is essential that the number of permits and signatures be reduced so that investors can move ahead in building the plant or plants now.”

Power price caps in the electricity spot market, which the ECCP said were a disincentive for the private sector given their distortive effects, should also be abolished to allow market forces to dictate prices.

“[S]uch artificial market manipulation is a disincentive for the private sector to invest in future power generation development. In particular, it is a disincentive to invest in the higher priced ‘avoided cost’ (marginal cost) types of generation such as peaking power plants that run on higher priced diesel fuel, and perhaps LNG (liquefied natural gas) in the future,” the organization said.

“The most effective and sustainable policy to lower prices for the Filipino electricity consumer is to utilize basic economic supply-demand forces and create competition. Allow market forces to dictate the price of power. More attractive electricity prices will incentivize the private power sector to invest in the development of greenfield and brownfield power plants.”

The business group also urged the government to develop a “sustainable energy mix policy and FIT (feed-in tariff) implementation.”

“For feed-in tariff to be a successful instrument, the feed-in tariff allowance universal charge needs to be passed and awarded to RE (renewable energy) projects that have achieved the required commercial operation. And to lessen ambiguity and doubt, additional MW allocations to the solar and wind FIT and their related FIT rates need to be formally declared by the DoE (Department of Energy),” the ECCP said.

The group added that the Philippine National Oil Co.’s banked gas that is enough to power a 200-MW plant and Malampaya’s expected additional gas that can provide similar power should be “tendered as one block to enable construction of a more efficient 400-MW mid merit plant on stream by 2016 instead of two small 200-MW plants.”

Source: Business World, 04 August 2014