Inter-Connecting Palawan and Mindoro to the Luzon Grid – Tightening the Loose Ends to Make Them Happen (Part 2)

Part 2

David Celestra Tan, MSK
26 July 2020

If inter-connecting Palawan and Mindoro islands to the Luzon grid is an official DOE Policy and NGCP, the concessionaire, has the interest and the resources to build them, why hasn’t it happened? In both attempts, NGCP appeared to be left alone groping for ways to justify the 230kv inter-connection.   In our observation, there is a lot of loose ends that need to be tightened to achieve that goal. 

A need for Clearer Mandate from the DOE to Inter-Connect 

To start, the mandate of the NGCP that is coming from the DOE should be more directional and complete instead of just a general marching order to connect those two islands to the Luzon Grid. It is not enough to have it written in the DOE programs and transmission development plans. NGCP had struggled with the justification and needs more definitive and a comprehensive guidelines to implement successfully. And there are many aspects that need to be addressed that are beyond NGCP’s mandate to resolve. At the DOE, the implementation of this policy seemed to be on autopilot, an aspiration to be expressed, and it has been its’ EPIMB Bureau that has been pushing it as part of a “carryover” policy from the previous administration.

Mandate for Inter-Connection

In NGCP’s last attempt at getting ERC approval to implement a Palawan-Mindoro inter-connection under ERC Case. 2019-022RC, there was no reference to any DOE or Transco order for it to implement the inter-connection. Instead, they referred to Section 9(d) of the EPIRA law as directing “NGCP to submit any plan for expansion of improvement of facilities to the ERC”.  This seems inaccurate. It was the TRANSCO that was directed by Section 9(d). If NGCP was given this power under their concession rights, then it should be the NGCP concession law that must be referred to.  In any case, we believe the inter-connection implementation must be mandated by the DOE or TRANSCO as the planning authorities for power transmission and missionary electrification development.

DOE’s inter-connection order, if one is issued, needs to provide the eco-technical grounding for the projects, the resolution of the regulatory aspects, and a clear and realistic timetable and transition plan. Towards those, let us go over the loose ends. 

1. Independent Feasibility studies 

All stakeholders will probably be on board in implementing the inter-connections if a qualified third party consulting and engineering firm is asked to undertake the studies for the inter-connection of the two islands. Perhaps even the government owned Transco can commission the study. 

NGCP suffers from an inherent conflict of interest. As a profit oriented private enterprise, to them the bigger and more extensive the project the more their concession expands and the more is added to their rate base and hence revenues and profits. We are not saying that it is a wrong business objective. We just need to be clear that as a result, there is no assurance that the right kind of inter-connection will be conceptualized, designed, and built. 

For an inter-connection, the NGCP has only one answer which is 230KV, an industrial level power line. As a Transmission company, NGCP’s credo is centralized generation and high voltage transmission facilities because that is what they do. To them, it is a technical and concession question. If you ask a tractor company to move a pot of plants, he will bring a tractor. 

2. Power Inter-Connection is a means to an end 

Power inter-connection is not just about electricity. It must be rooted on economic development objectives for an island. For the government, it seems prudent to start with the basic questions towards defining its’ end and purpose. What is the economic development strategy for these islands like Palawan? What do the locals want? What are they capable of? Is it to develop it as a tourism island with a vibrant commercial sector? Is it aspiring to be a clean nature enclave as part of its destination narrative? Or are we trying to develop it into an industrial island? Should they not hold a referendum? What is our development timeframe?

For whose benefit are we building the inter-connection facilities? Is it for the island or for the benefit of Luzon? Also, is it for a program to reduce missionary subsidies for the long term? 

The answers to these basic questions will determine what kind of power voltage capacity should be brought to the island. 230KV is much more expensive and intrusive than 132kv or 69KV. NGCP typically will say, this will be for the long term. Yes right. Except it will be 15 to 20 years before any major industrial development goes to Palawan if at all. So the 230kv line will be deteriorated before they are really needed. Meanwhile, the Filipino consumers will be paying NGCP for it all those years. 

The Philippines is not a manufacturing country 

Let us not forget that the Philippines economy has not been considered to be an industrial country. If we look at the growth of the industrial sector in the Meralco franchise area, the nerve center of commerce and industry in the whole Philippines, the industrial sector had not grown much in the last 20 years. In fact many of them left for Thailand. Vietnam and Indonesia are beating us in attracting manufacturers leaving China. So if Luzon and Cebu are not in the global manufacturing radar, what makes us think Palawan and Mindoro would be? 

We are happy with our growth in the service sector, knowledge industries, and foreign employment. So let us not automatically build industrial grade power lines to these islands. Especially since it is the electric consumers who will be paying for their costs. 

3. Palawan’s Power Problems 

The electric service problems of Palawan cannot be solved by just throwing in a 230kv power connection. Their problem is not even contracted power supply. It is badly contracted supplies. For their 50mw demand, the local coop Paleco has power supply contracts totaling 75mw, a 50% reserve. Still, they have problems.

Instead, the task force findings of the Department of Energy, after the President Duterte incident, showed that 1/3 of the power outage in mainland Palawan was due to the distribution line problems of the local coop, 1/3 due to the outdated and improperly maintained transmission lines of NPC, and the other 1/3 is due to the unreliable power equipment of one IPP who had put in temporary generators while trying to convince the people of Palawan to accept Coal power in their island paradise that has been aspiring to project a clean and unspoiled image to the world for tourism. The coal plant was already rejected in two towns and more than 8 years still had not won community acceptance.

The nautical distance from Mindoro to Palawan is 475 kilometers. Palawan island itself is 434 kilometers long. Of mainland Palawan’s demand of 50mw, about 65% is in Puerto Princesa, midway in the island. Should a 230kv line be built from Puerto Princesa to Bataraza in the south, about 250 kilometers away where along the route the power demand is less than 20mw? (For the readers’ perspective, a 230kv line can efficiently transmit 1,000mw of power).

Those problems need to be addressed first. A 230kv inter-connection is not necessarily the solution. 

4. Mindoro Island 

Mindoro island is much closer to Luzon and the basic needs for the inter-connection can be different from those of Palawan. Here the government’s decision on what to do with this island will determine what kind of power supply it needs. 

It is also different from Palawan in that Mindoro has a lot of developed renewable energy resources. The local electric coop has about 25mw of mini-hydro power supplies, a 10mw wind power, and a 4mw biomass. That’s 39mw of RE for its 50mw demand. The problem is the output of the mini-hydro plants drop by 80% three (3) months out of twelve (12) during the dry months of March to May. Wind also has been unreliable and disrupts the power stability. Finally, Mindoro is the exit point of many typhoons hitting the Philippines every year and may not be that attractive for hectares and hectares of solar.

If they want the island to essentially remain as a main producer of rice and agricultural products and some tourism, then it does not need a 230kv line intruding its beautiful landscape. 69KV line will do. 132kv at most.

Do we want to turn it into an industrial island? If we do, let us build a super bridge and a 230kv power line, maybe together so we can save on infrastructure costs. Again, should the country gamble on investing in an industrial power infrastructure if foreign manufacturers are not even coming to Luzon? 

Does the DOE want to turn Mindoro Island into an energy generation center to serve Luzon? Do the people of Mindoro want that? That is not to say it is entirely up to the DOE. Locating big power plants on Mindoro Island to serve Luzon will most likely be decided by the Meralco group and its cartel members. For now, they have enough projects to serve Meralco for the next 25 years and they are all in Luzon.  Besides, there is already in imbalance in the supply of power to the Meralco load center. Too much power is already coming from the south and congesting the transmission lines from Batangas to Manila. 

The argument can be made that we need a 230kv line in Mindoro if we want power to be transmitted efficiently onwards to Puerto Princesa, 475 kilometers away. So while Mindoro actually only needs a 69kv line, are Luzon consumers going to be asked to pay for an P11.9 billion 230kv connection from Batangas to Mindoro so that we can also connect Palawan? 

It is not as simple as asking NGCP to inter-connect the two islands to Luzon. 

Next: The inter-connection solutions

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