Roughly 6,000 to 7,000-megawatt (MW) capacity ramp up is expected in the next two years, yet grid development is still stuck in the slow lane and woefully unprepared to handle the influx. Now, the government wants to pass the burden to power producers, especially the renewable energy (RE) investors—but how ready are they to gamble with such added investment risks?
At a recent Asia CEO Forum, Energy Secretary Raphael Lotilla bluntly declared that “the private sector needs to step up, too,” pointing out that the unspoken truth is: “the lack of transmission facilities.”
The Energy Secretary didn’t hold back when he said, “The private sector needs to take responsibility for the transmission system to connect power plants to the market,” adding that “if the private sector is a full partner, it needs to take full responsibility.” Uh oh, that’s the warning shot—and the real headache for power producers is just about to hit full force.
By now, power industry players know the investment arena is about to change—two prospective executive orders (EOs) are expected to be issued by the President. One will require GenCos to cough up the cash for transmission infrastructure to wheel their generated electricity to the grid; and the other will open the door for third-party investors to step in and build the crucial transmission lines the country desperately needs.
The bigger possible plot twist: will President Marcos make a major announcement on grid solutions in his forthcoming State of the Nation Address (SONA) in July?
In what the Energy chief calls a “shared burden,” GenCos, primarily the RE investors, may soon be on the hook to build transmission lines themselves, advancing the capital outlay while banking on cost recovery petitions filed by the grid operator to the Energy Regulatory Commission (ERC). Translation: they spend now, wait later, and hope the red tape doesn’t strangle the payback.
And if that plan doesn’t fly, the fallback play calls for roping in a third-party investor to bankroll grid capacity expansion investments; or having the government step in with build-operate-transfer (BOT) arrangement to break that chokehold of capacity limitations in the system.
The Makati Business Club (MBC) is rallying behind the BOT scheme as a remedy to the grid’s growing pains, urging that an EO from President Marcos could be the power move needed to turn that recommendation into concrete action. The business group forthrightly laid down: allowing third-party investors—be it private firms or GOCCs—to take the reins on transmission builds could jumpstart long-stalled grid development, a make-or-break strategy to deliver those RE capacities to various areas in the country where they are rightfully needed.
The grid’s identity crisis: is it overcapacity or lack of capacity?
Just last week, NGCP fired back with a press statement claiming the system is far from getting maxed out—insisting that the grid is still running in overcapacity mode and still has room to absorb a whopping 10,000 MW more from incoming power plants.
Citing its own numbers, NGCP claimed there’s still 10,260 MW of breathing room across the grid —pointing out that with a total system capacity of 34,797 MW versus 24,537 MW of dependable generation, it confidently pegs transmission “overcapacity” at more than 10,000 MW.
It broke that down with these numbers: for Luzon, grid capacity availability still stands at 6,573 MW; then Visayas grid’s free capacity hovers at 2,281 MW; while Mindanao could still absorb 1,406 MW capacity additions.
Hmm, the math gambit might look good on paper, but in the real-world physics of grid development, it’s far from that simple—you don’t just play subtraction games with system capacity versus dependable output; you need to map exactly where those plants are located and whether the transmission lines are actually built to carry that power where it’s warranted to be delivered.
No wonder power investors are raising red flags, worried their megawatts will be stranded with no grid path to ride on.
As the grid dilemma drags on without a clear solution in sight yet, major questions are raised: who’s going to bear the brunt of this mess? And what crucial pieces have we overlooked in solving the bottleneck that’s choking the power system?
From the get-go, power industry investors have been sounding the alarm on grid integration issues as capacity grows—and the government could still have enough room to learn from the mistakes of other markets; particularly Vietnam, where curtailments on RE capacities struck them hard. The explosive rise in its RE installations between 2019 and 2021—primarily in the solar space—outpaced its transmission development, and that exacerbated its already congested and aging transmission infrastructure.
The Philippines is in the same precarious situation—riding high on aggressive green energy auctions (GEAs) to flood the market with renewable investments across technologies; but Vietnam’s painful lessons on grid constraints should have been the “trouble signal” we badly needed to learn. However, it seems we’re barreling down the same flawed path and we’re now heading straight to that same breaking point.
Good luck with the massive surge in RE capacity coming our way—because all that power is going to hit a brick wall if the grid can’t carry it to our homes and businesses. And how long do we have to wait for a fix? Investors and consumers are running out of patience, and they’re not just waiting for answers—they’re demanding them, now!
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