Power failure

Last Wednesday, as if on cue, five or six power plants in Luzon stopped generating electricity, plunging the island back to the “dark ages.” And yesterday (Monday), the midterm elections were marred by outages in Batangas and parts of Laguna, reportedly due to a transformer malfunction.

President Aquino went on TV to explain that the recent power outages, including those in Mindanao, were being caused by antiquated facilities and spare parts—as was last week’s massive blackout. Why these problems are cropping up today, he did not explain.

And neither did the authorities concerned help any to clear the picture. The privately run National Grid Corporation of the Philippines said it was not its fault, “that [its] transmission lines are secure and fully functional [and] will dispatch available capacities once the power plants are restored and online.” In other words, the problem was in the power plants, which conked out all at the same time. But Energy Secretary Carlos Jericho Petilla had a different sense of the outage, saying that six power plants bogging down all at the same time was extremely unlikely. So it must have been the lines that caused the blackout, not the power plants.

Something is terribly wrong in the energy sector. The long-term plan is there, meticulously drawn up by the Department of Energy. Based on the Power Development Plan for 2012-2030, the annual demand growth of 4.8 percent for Luzon translates to a need for additional capacity of 10,500 megawatts until 2030, or about 600 MW annually starting 2016. This part is clear.

It is in the implementation that the country falters. There never seems to be a power plant project designed to run on traditional fuels (e.g., oil and coal) that is not met with opposition by environmental and other cause-oriented groups. A dragging case in point is the 600-MW coal-fired facility that a consortium led by businessman Manuel Pangilinan is putting up at the Redondo Peninsula in Subic, which will help meet the rising power demand at the freeport and the rest of Luzon. The Subic power project has run into roadblocks thrown in the way by certain environmental groups persistently refusing to accept assurances that the coal-fired facility will use state-of-the-art “clean” technology.

Even the environment-friendly renewable energy projects have fallen into controversy, in part following President Aquino’s appointment in November last year of a partymate from the Liberal Party, former Leyte Gov. Carlos Jericho Petilla, to head the Department of Energy. After goading prospective investors to consider putting their money in solar, wind and hydro power projects, the new energy chief “changed the rules in the middle of the game.” From the original plan to allocate incentives in the form of feed-in tariffs (FIT), Petilla shifted to a “first come, first served” policy. (Mandated under the Renewable Energy Act of 2008, FIT aims to spur the development of “green” power sources by guaranteeing developers additional income above market rates for every kilowatt of clean power they sell.) In short, the first companies to put up the facilities will get FIT, until the required supply is met. This is seen to favor the big players at the expense of the small investors.

Stable—and reasonably priced—power supply is an imperative in a developing country such as ours, and a power outage like the one that occurred last week is, to say the least, disturbing. It was particularly so considering the investment upgrades that the Philippines has been receiving, and which have generally been seen as big boosts to the economy.

Time and again it has been pointed out that credit-rating upgrades notwithstanding, investors would continue to hesitate in setting up businesses in the country unless they could be assured of adequate and steady power supply. Several focus group discussions with industry sectors have all pointed to power supply stability and quality as the major concern of businesses.

The European Chamber of Commerce of the Philippines has suggested that improving the supply, stability and quality of energy should be made a priority by President Aquino in the second half of his term. An energy forum later this month or early June provides a very timely venue to address once and for all the nagging issues plaguing the energy sector.