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Perspectives from Mindanao, Philippines: The planning imperative and sustainable energy

Published 30th October 2010 - 0 comments - 1883 views -

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Weighing Mindanao’s power problems: The case for renewable energy

BenCyrus G. Ellorin, September 15, 2010

CAGAYAN DE ORO CITY, Philippines— Monday’s 9-hour brownout in southern Mindanao and parts of northern Mindanao was part of the power problem of Mindanao, the incompatibility of the transmission system between these two regions of the island.

More than 10 years ago, we have argued that to solve the immediate power problem in the island, a power plant needs to be put up in southern Mindanao and the upgrade of the Mindanao grid transmission system should be done in earnest.

Solid economic growth in southern Mindanao anchored on the two growth areas in Davao City and the Socksargen area (South Cotabato, Koronadal, Saranggani, General Santos) has made it a net importer of power from northern Mindanao, which hosts the powerhouse of the island, the Agus hydroelectric complex cutting across Lanao del Sur and Lanao del Norte and the Pulangi IV hydroelectric plant in Bukidnon.

The context of our argument at that time is the timeliness and location of the 200-mw Mindanao coal-fired power plant in Villanueva, Misamis Oriental which was proposed then.

For starters, bringing in power to southern Mindanao from the Mindanao grid hub in Lanao del Norte is very costly as it needs the use of expensive transformers, not to mention the high power dissipation rate caused by reducing power from the 230-kilovolt transmission lines in northern Mindanao to the 130-kv transmission lines in the southern part of the island.

It is like transferring water from a 12-inch pipe to an eight-inch pipe.

But upgrading Mindanao grid’s power transmission lines is just one of the issues of the Mindanao power problem. The bigger problem is what to put in those transmission lines from generating plants.

About 10 years ago, we argued that Mindanao does not need the 200-mw Mindanao coal-fired power plant in Villanueva, and even pointed out that the plant, one of the controversial contracts signed with Independent Power Producers (IPP) at the close of the Ramos administration, is not necessary.

In 2003, we come up with a study arguing that the Philippine Energy Plan of the Dept. of Energy (DOE-PEP) covering 1995-2004 was faulty and that the projected power shortage in the island was not coming in the next six to 10 years.

Moreover, with climate change and upward volatility of fossil fuel prices in the world market (i.e. crude, coal, diesel), there is still enough time to build renewable energy sources like hydro electric power plant, work on the expansion of the Mt. Apo Geothermal Complex and the Leyte-Mindanao inter-connection which would primarily tap the surplus energy generation capacity of the Leyte Geothermal complex.

The study commissioned by the World Wildlife Fund’s (WWF) Powerswitch campaign done by economist Maitet Diokno agreed with our critique of the DOE-PEP energy demand forecasting method which was based on the elasticity of aggregate economic indicators.

They computed the medium-term demand based on projected Gross Domestic Production (GDP). For its 1995-2004 medium-term energy planning, the DOE used the 9-percent projected GDP growth + 1 (elasticity) to come up with the projected increase in energy consumption.

This formula is very defective on at least two counts: 1) the 9% average GDP growth for the planning period is “overbullish;” and 2) an increase in GDP does not necessarily result in increased power consumption.

Even Ramos’ NEDA director general Dr. Cielito Habito agreed with us when we had a “Power Forum” to present our critique of the faulty DOE energy planning methodology, at Xavier University in 2004. He admitted that they tended to do “over bullish economic growth forecasting” in order to create the impression on the international community that the country has sound economic fundamentals.

And if you look at the actual economic growth rate in the 1995-2004 period, the GDP was actually just between four and six percent.

Measuring consumption patterns based on aggregate economic indicators like GDP has been very tricky. We were taught by the books and in economics classes that economic growth, as measured by GDP and GNP for example directly influences per capita consumption which in turn results in increased use of energy.

But this is not the case for export-oriented, import dependent economies like the Philippines. In fact, one economist noted that a percentage point increase in GDP actually redounds to an eight- to nine-percent increase in real poverty rate. (Gonzales, Ernesto, 2005)

In our research on actual installed generation capacity in Mindanao from 1990 to 2001, we found out that it was only in the later part of 1993 to the early part of 1994 that there was an actual shortage of power in Mindanao. This was used by President Ramos in declaring a power crisis and signing expensive IPP contracts.

Although the 200-mw Mindanao coal-fired power plant of the Steag only went on full operation in Nov. 15, 2006, the power plant was originally planned to fill in power gaps in the 1995-2004 period.

Having said this, in the last 15 years or so, no significant power generation plant entered the Mindanao Grid except the Mindanao coal-fired power plant.

The Need for Renewable Energy Generation Plants

Defined, renewable energy is:
“n. any naturally occurring, theoretically inexhaustible source of energy, as biomass, solar, wind, tidal, wave, and hydroelectric power, that is not derived from fossil or nuclear fuel.”

At the height of the power shortage this summer, I struck a conversation with a worried pregnant mother working in one of the coffee / internet shops in Cagayan de Oro’s Divisoria. A mother of two, and seven months pregnant, she was very anxious as her salary, very meager to start with, has been slashed to half for the simple reason that they only operated half-day because of the rotating brownouts.

That to me is the face of the power crises in Mindanao.

The 19th Edition of the Mindanao Business Forum which will convene in Cagayan de Oro on Sept. 18-19 will once again tackle the Mindanao power problem.

And I do agree that what we need now are new power plants. Some maybe surprised by this stand now, knowing that I had lead the community opposition of the last base load power plant that went online in the Mindanao grid, the Mindanao coal-fired power plant of Steag in Villanueva, Misamis Oriental a few years ago.

As memory refresher though, we were not saying then that power plants are not needed. We argued that the coal-fired power plant which they were rushing in order to fill the so called power shortage in 2002-2003 was not necessary and we argued then that there was still a window to tap clean and cheap renewable energy.

Based on 2005-2014 PEP, our energy generation will be negative compared to demand starting in 2012 and would reach a 500-megawatt deficit in 2014.

I reviewed the computations of the DOE and found out that unlike the high nine percent average GDP projection for the medium term planning period of 1995-2004, the current PEP used the average four percent GDP growth projection for the 2005-2014 planning period.

In the upcoming Minbiscon, I am sure that on the options menu to be offered to investors will be at least three coal-fired power plant.

There is no doubt, Mindanao needs new power generation plants. Aside from the fact that energy demand is increasing and no new power plant project was started in at least the last 10 years, our existing workhorses, the Agus and Pulangi hydro electric power complexes, are already aging. (Although the Steag coal plant started full operation in Nov. 2006, the project was started in 2000.)

I am sure spinners of the 200mw Conal coal-fired power plant in Maasim, Sarangani and another 300mw coal-fired plant being planned to be put up in Surigao City by Korean investors will make their pitch in the business conference. And I would not be surprised if the expansion by another 150mw the generation capacity of the 200mw Steag Mindanao coal-fired power plant in Villanueva, Misamis Oriental will also be presented, with Aboitiz Corp. as its would-be investor.

Already, Aboitiz owns 34 percent of the Steag coal plant. Aboitiz company by the way, is in an investment frenzy in the energy sector. They already acquired the power barges in Nasipit, Agusan del Norte and Maco, Compostela Valley with a total capacity of 100mw.

We should take note that the acquisition of the power barges, former baseload power plants of the National Power Corporation (NPC), by the Aboitiz-owned Therma Marine Inc. which now operates as ancillary service providers in cahoots with the National Grid Corporation of the Philippines (NGCP), has been blamed for the almost 100-percent increase of power rates in Mindanao at a time that power supply service was at its worst.

But there should be no mistaking about these things, Mindanao really does not need those expensive and dirty fossil fuel-based power plants. It has vast renewable energy reserves with over a thousand megawatts from hydros, about 400mw from wind and unexplored potential in solar power.

In the pipeline are at least two big hydro power plant projects, the 300mw Pulangi V in the boundary of southern Bukidnon and North Cotabato and the 132mw Bulanog-Batang run-off the river (no dam) power plant in the Cagayan de Oro river. Several smaller hydro plants are being planned in Bukidnon, Compostela Valley and Zamboanga Sibugay.

Lately, non-government organizations (NGOs), among them the Freedom from Debt Coalition, have questioned the claim of power shortage in the island. It would be interesting to browse over the data set they are using to come up with such a claim.

But judging from their arguments, they seem to be echoing the arguments we were using in opposing the Mindanao coal-fired power plant about 10 years ago. Well, I do not want to be presumptuous but they owe it to the public to explain fully how they came up with those conclusions. Otherwise, we can surmise that they are just unnecessarily rabble-rousing.

I understand, they are using the argument of defective energy demand projection to boost opposition to the proposed power plants like the 300mw Pulangi V.

This is dangerous to say the least, as unlike in the 1998-2003 period when we campaigned against the building of the Steag Mindanao coal-fired power plant, we are now having load-shedding, proof of actual power crises.

Even Mayor Romy Tiongco of Damulog, Bukidnon is saying that framed on the greater interest of Mindanao, the Pulangi V project is very necessary. He also believes that the social issues levied against the Pulangi V project can be and should be mitigated. Those who know the mayor, a former priest and still a social activist even as a local politician, will have no doubt that he had thought of his stand quite thoroughly with the interest of the lumads and other communities to be affected in mind.

I do propose however for an inclusive and informed dialogue on the Pulangi V issue. It still remains to be seen if those who are opposing the project which have external support from NGOs like the Legal and Natural Resource Center (LRC) are willing to sit down to a dialogue with other power stakeholders.

I have met with officials of Pulangi V proponents in at least two occasions, during the power consumer forum organized by the Apostolate for Good Governance of the Archdiocese of Cagayan de Oro sometime last June and in the Alumni Homecoming of the St. John Vianney Seminary and I am of the impression that they are willing to reach out to all power stakeholders in the island.

Early on, I would have to ask the opposition of renewable energy projects like the Pulangi V if they have the same argument against the proposed 200mw coal-fired power plant in Maasim, Sarangani, the 150mw expansion of the Mindanao coal-fired power plants and the one planned in Surigao City?

On the other hand, saying that coal is cheap is false. Like crude oil, it is not insulated from the volatile price behavior of crude oil.

At the height of the crude oil price rise in 2008, reaching up to U$147 per barrel, the price of coal also rose from below U$50 per ton to over U$100 per ton.

This reality should prod our decision makers and power stakeholders to seriously pursue renewable energy development in Mindanao. And for businessmen to realize that investing in renewable energy is good not just for their profit bottomline but also to their social and environmental bottomlines.

Supporting renewable energy serves the long term interest of the consumers and business which will enjoy cheaper energy rates and addresses issues of climate change mitigation.

Renewable energy simply means cleaner, healthier and more productive Mindanao.

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