Locational Strategy Needed for Philippine Power Development
David Celestra Tan
5 November 2014
If the Philippines were to continually develop its power supply to meet its growing needs it requires predictable and well planned generating capacity additions and a better planned proactive transmission development program.
Currently, private power generators choose their own locations based on their own parameters. Individually, they deal with the environmental and other permitting challenges in the local communities. The receptivity of local officials and militancy of cause oriented groups vary greatly. This makes for very unpredictable power project completions.
Transmission Development
On top of this, our transmission development plan is necessarily reactive in nature in compliance with the “non-discriminatory” access for transmission services mandated by the Epira Law. NGCP as the transmission service concessionaire has an obligation to build transmission lines to connect these new power projects to the grid. So in general the NGCP projects are three in nature. One, projects to upgrade old and inefficient installed facilities. Two, transmission lines to reduce congestion and or improve power reliability and redundancy. Three, transmission lines to connect new power projects to the grid. (of course there is a 4th which is to expand their coverage boundaries to increase their revenues).
The costs and guaranteed returns of NGCP on these projects are recovered from the consumers as part of the transmission tariff. If this trend continues, the transmission wheeling charges will continue to rise without really insuring that transmission lines are judiciously built and efficiently used.
As examples, due to a lack of locational strategy, new private power projects in the Visayan region are sprouting in “environmentally tolerant” islands like Panay, Cebu, and Leyte. Little is happening on Negros island. Hence, NGCP will need to build submarine cables which are very expensive. It is currently on a quandary to build an 80mw expansion of the Negros Panay submarine cable system whose costs do not actually justify the economic use. Happily for Negros Island there are private sector investors who are undertaking power projects using biomass technology that will utilize sugar cane industry thrash that abound on Negros island. Summit group, Metro Pacific we heard and even the Lucio Tan group. It would be cheaper to upgrade the overhead transmission lines on the island itself than to build inter-island submarine power cable systems.
NGCP is rushing a 138kv transmission line to connect a new mine mouth coal plant of San Miguel in Mindanao and they have been interconnecting the other big coal projects. On the island of Mindoro, NGCP is trying to connect it to Luzon at a cost of P11.9 billion to be paid by Luzon consumers. And the benefit? a theoretical 300mw coal plant project on the island that can supply Luzon. Our advocacy group, MSK, argued that it will be cheaper for Luzon consumers to buy that 300mw from Luzon power projects without need for a 11.9 billion investment in transmission facilities. We hope the ERC will listen to reason.
Not many consumers are aware of the significant impact to them of PEMC’s “line rental” charges which come from congestion in the grids which in turn can be better avoided with better planned locations for power generating plants.
Talking about Luzon, the transmission line corridor from Batangas, where a lot of power projects are proposed, to the load center of Metro-Manila is already congested. We cannot continually build lines. Concentrating such transmission capacity will also make the country’s power system vulnerable to natural calamities and disasters in one area.
It is time to balance the system by similarly building power sources from other directions like Quezon and the Bataan peninsula and Zambales. Instead of forcing the issue on locating the 600mw Redondo coal project in Subic, why not develop the old nuclear plant area in Morong as an energy zone and finally use that white elephant. There used to be a 230kv line from Morong to Hermosa but that has since been pilfered.
How about Quezon on the Pacific coast of the country? (Whatever is happening to the Laiban dam hydro project?)
Power Generating Zones
The government needs to show the way. A comprehensive study on where in the country should new power projects be developed must be conducted. Multilateral agencies would gladly help with this study like the ADB, JICA, and even World Bank. This will include the strategic thinking on the kind of fuel and technologies that can be used. Now, if we leave it up to the private sector, it will all be coal.
On the Island of Palawan, Palawenos have been aspiring to preserve their pristine environment partly because their tourism goals require it. Their people have been so against coal and even mining. Yet, a large Filipino conglomerate who owns millions of tons of low grade coal, had been insisting of building coal power plants in the islands in a display of insensitivity to local sentiments against coal. Its all about profit and there was apparently no concern that it can undermine the tourism aspirations of the whole island province. They won the bid because they offered cheaper coal knowing that the communities are against it. Inexplicably, the DOE and the local electric coop blessed the deal. The communities won’t budge despite the provincial government support and the 15mw coal project had been rejected by communities in two towns. Now the power development on the island had been set-back 4 years and the increased cost to the government in missionary subsidies is a staggering P500 million a year if we count the other island where a similar “win the bid with coal and install diesel” strategy was done and tolerated. The cost is passed on to the electric consumers. This unpredictability and high cost could have been avoided had there been a government strategy declaring Palawan as a clean energy zone to respect its desire for tourism development.
The challenge and costs of transmitting the power from the Solar and Wind projects under the governments Feed-In tariff program are perhaps being underestimated. Solar developers just choose their own sites and once again it will be up to NGCP to build the connecting lines. Should these RE power just be delivered to the adjacent electric distribution utilities via cheaper 13.2kv or 69kv line? Why is the DOE jumping from 50mw solar target under the FIT program to 10 times which is 500mw? Why not 250mw and then the 250mw is in rooftop solar which is not under FIT? Of course with this subsidized rate investors in solar will come in droves. It is the consumers paying for them. On top of the subsidy for RE, there is this added cost of connecting them to the grid which are all passed on to the consumers as part of the transmission tariff. In Luzon it is currently P1.00 per kwh. With all these additions, how much will that be in five (5) years?
Establishing energy zones will enable the country to develop power generating supply in more predictable timetables. Environmental requirements for those areas can be crafted to balance community concerns. These special zones can have facilitative rules and incentives similar to those provided to economic free zones. Winners of competitive biddings for long term power supply can reduce their risks and bid more competitively.
The Department of Energy under Secretary Petilla apparently has a program to work with LGU’s to develop their own power development aspirations. We are not sure about the effectiveness and sustainability of this approach. First of all, the power development is localized and not part of a comprehensive and rational whole. Second, LGU governments are elected every three (3) years so in many cases, power projects that require long gestation can face a changed attitude from the LGU and derail the project.
In our archipelagic country, an island by island energy development plan would be helpful. However, those have to be balanced by a national strategy that includes a sensible grid connection plan. For example, even if Panay island is very open to more power projects, connecting those generating capacity to Negros, Cebu, and the main grid will cost prohibitively in upgraded submarine cables. It would be more economical to encourage more generating capacity on the island of Negros itself. There are areas in the south of the island that can be receptive.
At some point the island of Mindanao will have to be connected to the Visayan and Luzon grids. There are so many coal projects under development in Mindanao island that it will soon become a power exporting island. We need to connect it to the Visayan Grid.
Systems Planning by Systems Operator must be separated from NGCP
A more independent System Operator is essential to rationalize a national power development plan. The conflict of interest between NGCP being both systems operator and transmission line concessionaire has to be eliminated urgently if this implementable master plan will truly happen.
It is time for a locational strategy in power generating and transmission development.
Matuwid na Singil sa Kuryente Consumer Alliance, Inc.
Email: david.mskorg@yahoo.com.ph
