SOLAR PARA SA BAYAN MINI-GRID FRANCHISE IS A TROJAN HORSE (Part 1)

David Celestra Tan
8 October 2018

Part 1

When the Congressional Committee on Legislative Franchises swiftly passed House Bill 8179 that is intended to give the Leviste owned Solar Para Sa Bayan (SPSB) corporation a nationwide franchise to set-up electric distribution micro-grids based on hybrid solar technologies, even empire builder Manuel V. Pangilinan smelled a horse dung that he reportedly quickly fired an 18 page position paper prepared by the illustrious law firm Sycip Salazar arguing against the approval. The Meralco honcho expressed concern that “the proposed franchise appears to permit SPSBC to conduct the allowable activities in the proposed franchise in any area in the Philippines, whether unserved or not”. MVP continued “it appears to permit SPSBC to engage in all the parts of the power industry chain – beyond the scope of Meralco’s own capacity”. (It takes one to smell one?) In other words, MVP fears a threat to his Meralco market monopoly.

The Solar Para Sa Bayan Mission

1. SPSB wants to bring “cheap, clean, reliable electricity, to improve the lives of Filipinos through solar-battery Mini-Grids at zero-cost to the government”. “The bill is explicitly non-exclusive, incurs zero-cost to the government, and mandates SPSB charge least cost and be subject to regulation. This gives Filipinos alternatives from traditional utilities, and encourages other companies to apply for the same, to increase competition in the power industry”

Is the Solar Para Sa Bayan franchise intended only to be an altruistic provider of cleaner and cheaper solar based energy in the unserved communities or is it a trojan horse for a grander scheme to become a master franchisee for a nationwide mini-grid distribution utility?

2. SPSBC claims they will use clean energy. Their website said “traditional utilities are sourcing 80% of their energy from coal, which threatens the health and environment of local communities and contributes to climate change. Mini-grids can utilize solar panels and battery storage to maximize the percentage sourced from renewable energy, to make the Philippines the global leader in clean energy while remaining lower cost than fossil fuel.”

3. Lean Leviste said “ what the bill does is give us the right to offer the Filipino people an alternative to their current providers – which is unsurprisingly why these providers must be so alarmed. Solar Para sa Bayan already has mini-grids in 12 towns to benefit 200,000 Filipinos, the first time a company has invested in such areas without any government subsidy. We would be glad if others would emulate instead of block these projects, so we can bring affordable, reliable electricity to every Filipino as fast as possible.

4. Solar is now the lowest cost in the Philippines with rates even below P3.00 per kwh (without batteries) but Filipinos are unable to benefit from this because of reliance on fossil fuel. New options will allow Filipinos to choose the lowest cost, and encourage even traditional utilities to lower their rates to be competitive.

5. “Mini-grids provide superior service by using the latest technology and de-centralized solution for each town. Filipinos suffer brownouts from traditional utilities due to the use of poorly maintained and outdated technology and the limits of centralized generation.”

6. Traditional utilities depend on a grid that is vulnerable to disasters and shortages of imported fossil fuels. Localized mini-grids dedicated for each town and using indigenous resources ensure our energy security and mitigate the risk of power interruptions.

7. “Affordable, reliable electricity enables students to study at night and use computers at school, hospitals to power equipment and refrigerate medicines, households to use appliances, and police to patrol lighted streets. “

8. Leviste assures they can supply the mini-grid with 24 hour electricity. Solar panels produce electricity in the day. Batteries charge with excess electricity produced in the day to be consumed at night. (Diesel or Gas)Generation set covers any shortfall of solar battery output.

9. “Granting franchises to mini-grids to operate independently of traditional utilities, and proving the viability of these pioneering projects, will encourage other companies to enter these markets and apply for their own non-exclusive franchises.”

10. SPSBC, owned by 25-year old Leandro Leviste, will effectively challenge the monopolies of the “traditional utilities” like the nations 121 electric cooperatives but include such giants as Meralco and Visayan Electric of Cebu, and Davao Light, the foundations of the MVP and Aboitiz groups market power that enable them to also cartelize the power generation sector.

What’s good for the goose is good for the gander and Meralco’s NIMBY.

Now you understand why even the all powerful MVP is concerned. Lean Leviste’sSPSBC will monopolize the value chain of electricity supply in all his mini-grids. From generation, distribution, metering and billing. (Hmmm isn’t that Just like Meralco monopolizing distribution, cartelizing generation, and eventually even fuel supply?)The proposed SPSB Franchise has no apparent limit on where he can set up, even in the bastion territories of Meralco, Aboitiz, and electric cooperatives.

Ironically, Meralco President Oscar Reyes himself announced in May 2018 thatMeralco will go into setting up mini-grid systems outside its current franchised area. The communities that Meralco is looking at are off-grid communities where it could introduce a “hybrid” system such as solar energy with battery storage, or solar together with a small power generation set” said Reyes who also was quoted saying “We’ve identified some (areas) but we’d rather keep quiet because others might beat us to those communities,”.

Well, we say “what’s good for the goose is good for the gander! “. It is another version of “Nimby”, not in my backyard.
Some consumer groups are very supportive of SPSBC and we can’t blame them. These “traditional utilities”, specially the private ones, have let down its consumers with high rates, bad service, and unashamed profit making in this public service. In the Electric Coop regions, a lot of areas and islands in our far flung archipelago remain unelectrified and mini-grids without need for long distribution and transmission lines may just be the cost effective and logistical answer.

“Selling the Sizzle not the Steak”

Leviste tries to disarm oppositors by always emphasizing that the franchise is non-exclusive, that the rates will be least cost, that there will be no funding or subsidy from the government, that anyone can apply for a similar franchise, and that he cannot unload the franchise. And technically he is speaking the truth.

To convince everyone, Leviste has taken a page from a textbook marketing strategy, ”Sell the Sizzle not the Steak”! We had heard all the sizzle. So now let us look at the steak.

What does the HB 8179 really say?

1. The Franchise
An Act granting Solar Para Sa Bayan Corporation a franchise to construct, install, establish, operate and maintain Distributable Power Technologies and Mini-Grid systems throughout the Philippines to improve access to sustainable energy.

2. Reach of services
Section 1 also authorizes SPSBC to engage in ancillary business and any related businesses which maximize the utilization of its assets. The grantee shall have the right to open and non-discriminatory access to any transmission and distribution system and shall be eligible to become a member of the wholesale electricity spot market, subject to compensation and existing regulations.

3. Scope of Technologies
Distributable Power Technologies refer to devices, assets, facilities, and other technologies of any capacity that may connect directly to customers or end-users, or may interconnect with transmission, distribution systems, or mini-grid systems such as (hold your breathes!) but not limited to roof-top or ground mounted solar panels, wind turbines, hydrogen fuel cells, backup gensets, hybrid power systems, wires, controllable loads, metering, communication equipment, electric vehicle charging stations, and energy storage.

Wow that’s a whole catalog of power delivery systems! No wonder everyone in the power industry including the renewable industry groups is in uproar. Is there anything SPSBC is not allowed to do? Anywhere they are not allowed to go?

4. Scope of Service Connection

Mini-grid systems refers to an integrated group of loads and devices, assets, facilities, and other technologies of any capacity, including DPT’s, that may operate either independently from or in conjunction with the transmission or distribution systems, or other mini-grid systems, and is distinct of a distribution system or a generating facility.

Wait let me catch my breathe!

5. Aspects we agree with in The SPSBC vision.

a) Rural, Isolated, and Unserved Area Electrification

SPSBC’s narrative of clean and cheaper energy for the people would resonate wonderfully, despite its grandiosity, if the whole package, its devices, and rights, desire, and implied financial capability and commitment for deep geographical penetration, applies to rural and isolated area electrification.This is a God sent for our isolated area countrymen who have been living in the dark ages up to now in the digital age.

Even electric cooperatives will eventually concede that at the end of the day, we should not deny our countrymen and children in their unserved areas the blessings of electricity….now. (the SPSBC technology is not new though. Solar and battery storage have been demonstrated in many islands and the electric coops have themselves to blame for not pursuing them after decades. Now someone else wants to do it in that grand scale and we should not stop them)

SPSBC’s proposal that this will be done without government funding or subsidies is a breath of fresh air and should be embraced by everybody for the unserved, underserved, and expensively served areas. (Hello Meralco and Veco!)
But are those distant micro-grids really the target of the young Leviste and Senator Loren?

b) Expensive Centralized Generation

We agree with SPSBC that the era of centralized generation and long transmission and distribution lines, at least for unserved areas, have been made obsolete by now affordable array of technologies and devices that SPSBC is trying to brand as Distributable Power Technologies.
“Centralized generation” that guided our national power development policy for the last 60 years is based on its supposed economics compared with distributed generation. That’s how NPC justified the building of expensive inter-island submarine cable systems in the Visayas instead of distributed on-island generation. But now distributed generation technologies and their economics have come of age and powered by those in-area energy resources called the sun, wind, run of river, biomass, and combinations called hybrid systems, that we now know collectively as Renewable Energy.

(See our previous article on archipelagic generation strategy for an archipelagic country)

c) Exclusivity and Monopoly of Traditional Distribution Utilities

We agree with SPSBC’s brave challenge of the commonly held belief that franchised distribution utilities like Meralco, Visayan Electric, Davao Light, Panay Electric, Other private distribution utilities, and the 121 electric coops nationwide, have exclusive rights to sell power to their areas. Meralco’s franchise bill RA 9209 expires in 2028.

Technically, someone can put solar systems on their roofs or vacant property and sell power to his neighbors as long as he is not using the Meralco distribution lines.(of course Meralco will try to intimidate anyone who tries absent any official government framework for such arrangement) In fact in MSK’s previous articles we have espoused that if this neighborhood solar systems can be developed and enabled, we will see an explosion in solar and even wind energy deployment in our whole country.

We also agree that good service and least cost power to electric consumers should be primordial.

d) Wayward Subsidies for Missionary Areas and high power rates

We agree that the unchecked rising subsidies for missionary areas is problematic and needs serious government attention. The universal charge to consumers is now P0.1561 per kwh and NPC is saying this is not enough and will ask for more.Cost competitive mini-grids and village electrification systems in these missionary areas is one answer.

We wholeheartedly agree that traditional utilities specially the big private ones like Meralco have let down its consumers with high distribution rates and uncompetitive generation charges. And they seem to be determined to expand their monopoly to generation and pass on fuel charges. We can no longer ignore the national outcry over the high power costs and now the desire of 80% of our people for alternative suppliers of electricity.

Distributed power systems and mini-grids are available methods of providing electricity to the people cost effectively and the time for its expanded deployment has come.

Next: Our Concerns on HB8179 and Suggested Refinements to a Mini-Grid Law

MatuwidnaSingilsaKuryente Consumer Alliance Inc.
matuwid.org
david.mskorg@yahoo.com.ph

David Celestra Tan is a CPA by education and a practicing utility economist. He is a pioneer in the private power generation industry and a founder and former President of the Philippine Independent Power Producers Assn in early 1990’s. As co-convenor of the MatuwidnaSingilsaKuryente Consumer Alliance Inc, he has been a consumer advocate since 2011 for reforms in energy policy and regulation with focus on opening the market to true competition and reducing power costs.