With the increasing dependency on imports of energy resources, the country should enhance its policies on indigenous sources to ensure energy sources are sufficient for short to long-term use, the government’s think-tank researchers said.

In a policy note titled “Evaluating energy security in the Philippines: An indicators-based assessment”, researchers from the Philippine Institute of Development Studies (PIDS) said that energy resources must be developed while imported energy sources are diversified.

The researchers, using the Hirschman-Herfindahl Index to measure market competitiveness, said that the country’s dependency on Indonesia for coal reached a high of 0.954 in 2021.

This, they said, is a “risky situation, given Indonesia’s previous inclination to ban coal exports.”

Indonesia, one of the world’s largest producers and exporters of coal, suspended its exports in 2022 following low inventory levels of the fuel at its domestic power stations.

The ban was lifted in February 2022, with miners being obligated to sell 25 percent of coal in the domestic market, but was then again reimposed in August 2022 on coal firms that have not complied or reported their obligations with the country’s Energy Ministry.

Despite this, Energy Secretary Raphael P.M. Lotilla said last year that Indonesia agreed on a bilateral deal to ensure that the Philippines has continuous access to its reliable coal supply.

On the other hand, crude oil and refined petroleum were reported to be historically more diversified as the former was sourced from various countries, the researchers said.

“However, most of the country’s crude oil imports were from the Middle East (72.98 percent in 2020),” the PIDS researchers noted, “exposing the Philippines to market and geopolitical risks in the region.”

Energy reliability

The researchers also emphasized the reserve margin is enough, but also noted that there were instances when what was made available to the power grid was dangerously close to the peak demand.

“When the dependable capacity-based reserve margin was low, it exposed the country to energy insecurity,” they said

Reserve margin refers to the balance of electric supply and demand in a specific market region. It indicates how much extra supply is available in a given region above the expected peak demand.

Other measurements of energy reliability include the power system’s capacity to transmit and deliver electricity to end users with minimal interruption, the researchers stated, citing the System Average Interruption Frequency Index (SAIFI) and the System Average Interruption Duration Index (SAIDI) as its few indicators.

According to the Energy Regulatory Commission (ERC) data, the SAIFI in 2021 had an average of 46.01 power interruptions per customer, which is relatively higher than the standard of 25 interruptions per consumer each year if on-grid and 30 interruptions if off-grid.

Amendments on energy policies?

Given this, the researchers suggested that policies should be created to aid the regulatory framework for upstream activities as per Presidential Decree (PD) 87 and 1459.

The PD 87 or The Oil Exploration and Development Act of 1972 indicates that the government should “hasten the discovery and production of indigenous petroleum through the utilization of government and/or private resources, local and foreign.”

Recently, Lotilla proposed new legislation to clarify certain provisions of PD 87.

“The uncertainty over the interpretation of PD 87 allowing the service contractor’s corporate taxes to form part of the government’s 60 percent net share has hindered investments and rollout in this sector,” he stated.