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Let there be light

We have all heard the news that Luzon will again face an energy crisis in 2015 even as the Visayas and Mindanao have been suffering rolling blackouts on a regular basis. The estimates are that we will have a shortage of 400 to 600 megawatts assuming that all existing power plants remain online—which is a best-case scenario.

A stable and secure supply of power is, of course, critical to the interests of the Philippines as power is one of the key drivers of our economic growth. With our desire to be a destination for foreign investment, we cannot afford to be a nation with inadequate power supply. It is imperative that we immediately formulate policies to address this shortage, or risk increased prices for consumers and losses for businesses.

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The problem we are encountering—inadequate supply in the face of strong and growing demand—is exacerbated during the summer months. These are when more electricity is consumed and power from hydroelectric plants is severely restricted, when major power plants are under maintenance, or when natural disasters destroy transmission lines. The immediate need is to come up with practical solutions covering both supply and demand. While the national government seeks congressional authority to contract additional generating capacity under the Epira (Electric Power Industry Reform Act), we in the business sector are ready to do our part.

One commendable initiative is the Manila Electric Co.’s Interruptible Load Program (ILP). Last Sept. 8, the Makati Business Club hosted a forum in which Meralco briefed the business community on the ILP, which is aimed at decreasing aggregate demand from the grid during the peak hours of 10 a.m. to 3 p.m. by having corporations with large loads voluntarily run their generator sets subject to just compensation. So far, 118 MW of capacity have been committed to the ILP by such companies as SM Prime Holdings Inc. and Robinsons Land Corp. Another 42 potential customers representing 48 MW of capacity have indicated interest as of this week.

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We remain hopeful that we can significantly increase these commitments in the coming weeks. I encourage other corporations with substantial generating capacity to also sign up. While the current scheme of the Energy Regulatory Commission does not fully compensate corporations for running their generators, the alternative of forcibly running their generators without compensation during a power outage should not escape notice. It is also in everyone’s best interests for the government to seriously consider a fair compensation scheme that will induce owners of generator sets to operate these during peak hours. This is a program where the wholehearted support of the private sector is absolutely needed and most welcome!

A massive and well-designed energy conservation program involving highly practical solutions—such as switching to inverter-type

air-conditioning, raising air-conditioning thermostat levels by two degrees, and widespread use of LED light bulbs—is another program that private business will be very happy to support.

On the supply side of the equation, there is more that the private sector can do with adequate government support—for example, more power supply agreements to add more capacity to the grid during periods of red alert by selling to Meralco to offset short supply. JG Summit and Shell are ready to consider 60 MW and 20 MW, respectively, for such an arrangement.

Another practical approach is to review and carefully plan the maintenance shutdowns of power plants. As we anticipate a shortage during the summer months, everything in their power must be done by the Department of Energy and National Grid Corp. of the Philippines to ensure that any planned maintenance should be scheduled outside of that period. The government must also act decisively when it comes to rehabilitating the Malaya Thermal Power Plant as it can reportedly supply as much as 300 MW to the grid as soon as February. Time is of the essence, and adding 300 MW of supply will go a long way toward preventing rolling blackouts.

In the long term, what we really need is an environment that encourages investment in this sector. Bringing a power plant onstream is very challenging in the Philippines. In some cases, as many as 160 permits are required in order to build and operate a power plant. Imagine how much easier it would be to invest in this sector if the various regulatory requirements are aligned and streamlined. Additional investments should also make the market more competitive, and could result in lower electricity prices for consumers. However, a lack of investment in power plants will result in this problem occurring over and over again.

We in the private sector will do what we can, and we are prepared to work closely with the government to address these issues and develop a viable, long-term plan for energy security.

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I remain very hopeful that the economic growth that the Philippines is enjoying will be sustained. The eyes of the world are on us. It will be a shame if our failure to adequately address the energy crisis today leads our nation into pitch darkness tomorrow. We must all do our part to make regular blackouts a thing of the past.

Ramon R. del Rosario Jr. (rrdelrosario @gmail.com) chairs the Makati Business Club.

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TAGS: Business Matters, Electricity, energy crisis, Epira, Luzon, Meralco, Mindanao, opinion, power crisis, Power supply, Ramon R. del Rosario Jr.
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