Last week, the National Capital Region (NCR) was greeted by news that it would be subjected to rotating brownouts. This was painful news given the oppressively high temps that Filipinos were suffering from. Not to mention the expected disruptions to work – and learn – from home routines. A more critical concern, too, was how to assure that vaccines would not spoil if their refrigerated storage units powered down. And, of course, there was the inevitable anxiety of business concerns – especially manufacturing – regarding sustaining their operations in the event of power failures.
The rolling brownouts were attributed to equipment failure that supposedly resulted from lapses in preventive maintenance during Enhanced Community Quarantine (ECQ). The claim is that technical experts could not travel to the Philippines and that the supply of spare parts was similarly disrupted. The Energy Regulatory Commission (ERB) is investigating the matter.
Electricity is one of the most essential production inputs. Consistent access to power is crucial for the economy to sustain its growth. In the decade of 2010’s, the Philippines was experiencing a remarkable rise in Gross Domestic Product (GDP), about 6 percent annually. Although the country is heavily weighted in favor of services, manufacturing still contributes significantly to GDP.
Power generation and distribution capacity should have been expanded to meet the growing appetite for energy. Based on reports it seems that installed capacity is adequate to meet ongoing demand but may be challenged to cope with peak demand, especially during summer. From 2016 to 2020, four new power generation plants went on line and added about 3,000 megawatts of capacity. Capacity may not be critical as yet but with the expected return to economic expansion, the need to grow generation capacity becomes more compelling.
Access to electricity is important but so is the price of power. A 2018 study by an Australian think tank found that the Philippines ranks among the top five in Asia with the highest power rates. Japan was the highest, followed by the Philippines, Singapore, Hong Kong and Thailand. The manufacturing sector laments the price of power as one of the factors that drives production costs in the Philippines higher, making it more difficult to compete with counterpart production bases across Asia. This makes it difficult to encourage new manufacturing companies to set-up operations in the country.
The good news is more power generating plants are on the way. It was reported that up to 2,000 megawatts will be added to the grid in the short to mid-term. In addition to meeting the projected rise in demand, the installation of more modern and technologically advanced plants will make power generation and distribution more efficient, thus driving prices lower. Unlike other Asian countries – like Thailand, Indonesia, Malaysia, Korea and Taiwan – the Philippine government does not subsidize power rates. While prevailing rates might be higher, this reflects the true cost of power and free market forces will eventually drive prices down.
Outside of the rise in energy consumption by industry, another potential contributor to an increase in demand is the apparent shift in automobiles from the traditional internal combustion engine to pure electric drive trains. This shift – in the Philippines, at least – does not appear imminent although global car manufacturers are unanimous in their view that the future of mobility is electric. Almost every car-maker has declared that they will have a fully electrified vehicle line-up within 10-15 years. This transition to electric vehicles will surely place added demands on the power grid.
In the case of automobiles, though, the shift to electric is in response to increasing vehicle emission standards being imposed by governments. There is, therefore, the added dimension of the quality of electricity generated. At this time, over 70% of our electricity is from fossil-fuel. In order for the auto industry to fulfil its mission of reducing tail pipe emissions, power companies have to reduce fossil fuel-fired power generation.
As such, the energy sector has to explore and expand its use of alternate energy sources like solar, nuclear, hydro or wind. Unless this happens then the increase in electric vehicles on the road will not deliver on oil-well to car-wheel carbon emissions standards. The crucial consideration in this equation is the higher production costs of renewable energy.
Ultimately, whatever the future of electric supply – and its attendant cost – the consumer will have to pay. This is, after all, the price we have to pay for a better quality of life.