As summer starts, PH faces power shortage

(First of two parts)

Excluding the output from power plants that are committed to come online, the deficit for 2015 for the entire country will rise to 711 MW. FILE PHOTO

On the average, Zamboanga City is without electricity for eight hours a day, broken down into two-hour segments and rotated among different sections of western Mindanao’s biggest city and economic hub.

That is considered a good day.

“But on bad days, it can extend to 10 to 12 hours or more,” businessman Pocholo Soliven lamented. “And to make matters worse, there is very little predictability as to when the power will be turned on or off.”

Soliven owns department stores, restaurants and other establishments across the city. He complained that the compressor of one of his restaurant’s chillers conked out recently because of the power interruptions, which seem to be happening frequently and at random.

He said appliances were breaking down because the business establishments did not know when to plug or unplug air conditioners and freezers to protect against the power surge, which usually comes with the erratic restoration of the supply.

“All of these add to the costs of doing business and we can’t even pass these on to our customers,” said Soliven, who also heads the city’s chamber of commerce.

Given this backdrop, the margins of many companies based in Mindanao are being squeezed to the point of losing profits. But Soliven counts himself among the fortunate who are able to afford expensive generator sets to meet their power needs during outages. Many other less affluent are not as lucky.

“Everyone is affected adversely by the power situation,” he said. “But it is really the micro, small and medium enterprises that are hit the hardest. They are entirely dependent on electricity from the grid.”

Soliven’s story is by no means unique. It is heard in almost all cities around Mindanao and, to a growing degree, in some cities across the Visayas.

According to the Department of Energy (DOE), the summer months will be particularly challenging. Energy Secretary Carlos Jericho Petilla has warned that Luzon, the Visayas and Mindanao would face periods of tight supply or outright deficit.

Luzon

Electricity demand in Luzon is expected to peak around May at about 10,300 megawatts to 10,400 MW, possibly rising to as high as 10,500 MW when factoring in outages.

DOE documents showed that the available capacity for that period would be about 10,500 MW and only one committed project might go online before peak demand kicks in.

The P3.5-billion, 20-MW Maibarara geothermal plant in Sto. Tomas town, Batangas province, is expected to augment grid capacity this month. This means that supply will be very tight.

Visayas

In the Visayas, peak demand is expected to hit 1,781 MW around May before tapering off sometime in June and rising again in September onward.

While available and committed capacity is expected to reach 1,833 MW within the year, a big chunk (132 MW) may go online in June onwards, leaving the grid with a deficit of about 80 MW sometime in May.

Mindanao

Mindanao’s situation is the worst, already having a 200-MW deficit. Peak demand is expected to reach 1,760 MW this summer up to July, but it may breach 1,800 MW come December. So far, available and committed capacity has stood at 1,536 MW, which means the deficit could be between 224 MW and 264 MW.

And it gets worse. Excluding the output from power plants that are committed to come online, the deficit for 2015 for the entire country will rise to 711 MW. This includes 406 MW for Mindanao, which will still show a shortfall of 173 MW even when the promised facilities are on-stream.

Yet, it cannot be said that the present power situation—a peak deficit of 323 MW for the Visayas and Mindanao for this year alone—was unexpected.

Warning of shortage

For years, power industry officials and businessmen, apprehensive over the growing demand for electricity brought by the booming economy, have warned of a looming shortage.

Neither the National Economic and Development Authority (Neda) nor the DOE has come up with rules-of-thumb in assessing how closely related power supply is to economic growth.

However, DOE documents said that economic activity tended to spur electricity demand. For the Luzon grid, for every 1-percent growth in gross domestic product, electricity consumption rises by 0.6 percent. For the Visayas, it’s 1 percent and for the Mindanao grid, 0.8 percent.

Economist Benjamin Diokno of the University of the Philippines said the lack of power—its high costs and unreliability—had a serious impact on investment decision and the level of economic activity.

A starting point of analysis, he explained, was the “power coefficient” of an economic activity or the power inputs to produce a unit of output.

“For example, I know of a cement firm with a plan to build a plant but decided to postpone the project because of the high cost of power and its unreliability,” Diokno said.

“The industry is power-intensive. With the impending Asean (Association of Southeast Asian Nations) integration and with power costs much lower in our Asean neighbors than in the Philippines, the cement firm’s owners figured that it might be better to [cope with] … the unmet demand by importing cement from abroad than investing in a cement plant at home.”

“The uncertainty is most serious in areas where power outages last for hours, as for example, in Mindanao,” he said. “Investment decisions are postponed, which affect long-term growth.”

The dangers are clear. Over the short run, the shortage is an inconvenience to millions of Filipinos, especially in the Visayas and Mindanao, many of whom lack the means to mitigate the effects on their daily lives.

Over the long run, an insufficient supply of electricity could take the wind from the sails of Philippine economic recovery, stunting growth as investors are turned off by the unpredictable supply outlook.

(To be concluded)

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